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Argo Group Announces 2012 Second Quarter And Six Month Results

Argo Group International Holdings, Ltd. (NasdaqGS: AGII), an international underwriter of specialty insurance and reinsurance products, today announced financial results for the three and six months ended June 30, 2012.

"It was another solid quarter in terms of profits and growth,” said Argo Group CEO Mark E. Watson III. “Each of our four business segments generated top line growth in the quarter and three of our four businesses reported an underwriting profit. It’s good to be heading in the right direction.”

HIGHLIGHTS FOR THE SECOND QUARTER ENDED JUNE 30, 2012:

  • Gross written premiums were $474.2 million, an increase of $67.5 million or 16.6% over the second quarter of 2011.
  • Pre-tax income was $25.0 million compared to $30.7 million in the second quarter of 2011.
  • Pre-tax operating income 1 was $17.9 million compared to pre-tax operating income 1 of $2.6 million in the second quarter of 2011.
  • Net income was $24.0 million or $0.92 per diluted share compared to net income of $21.6 million or $0.78 per diluted share in the second quarter of 2011.
  • Net operating income 1 per diluted share was $0.55 compared to net operating income 1 per diluted share of $0.08 in the second quarter of 2011.
  • Estimated pre-tax catastrophe losses, net of reinsurance and estimated reinstatement premiums, were $3.9 million compared to $31.9 million in the second quarter of 2011.
  • The combined ratio was 102.5% compared to 109.3% in the second quarter of 2011. The combined ratio was negatively impacted by 1.5 and 11.7 loss ratio points, respectively, for the first three months of 2012 and 2011.
  • Book value per share (BVPS) was $58.74 at June 30, 2012, an increase of 5.6% from $55.60 at Dec. 31, 2011.

1 – Results are before net realized investment gains (losses) and foreign currency exchange (gains) losses.

HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2012:

  • Gross written premiums were $870.5 million, an increase of $116.0 million or 15.4% over the first six months of 2011.
  • Pre-tax income was $53.1 million compared to a pre-tax loss of $66.0 million for the first six months of 2011.
  • Pre-tax operating income 1 was $35.8 million compared to a pre-tax operating loss 1 of $86.8 million for the first six months of 2011.
  • Net income was $43.6 million or $1.66 per diluted share compared to a net loss of $72.5 million or $2.64 per diluted share for the first six months of 2011.
  • Net operating income 1 per diluted share was $1.09 compared to a net operating loss 1 per diluted share of $2.69 for the first six months of 2011.
  • Estimated pre-tax catastrophe losses, net of reinsurance and estimated reinstatement premiums, were $8.0 million compared to $144.9 million for the first six months of 2011.
  • The combined ratio was 102.9% compared to 126.8% for the first six months of 2011. The combined ratio was negatively impacted by 1.5 and 27.2 loss ratio points, respectively, for the six months ended June 30, 2012 and 2011.

1 – Results are before net realized investment gains and foreign currency exchange (gains) losses.

OTHER QUARTER HIGHLIGHTS:

  • During the second quarter, Argo Group repurchased $17.4 million or 602,046 shares of its outstanding common stock at an average share price of $28.76. During the first six months of 2012, the company repurchased $27.4 million or 940,922 shares of its outstanding common stock, which represents 3.6% of shares outstanding at Dec. 31, 2011.

FINANCIAL RESULTS

For the three months ended June 30, 2012, Argo Group reported net income of $24.0 million or $0.92 per diluted share. In the second quarter of 2012, the company produced net operating income after tax of $14.3 million or $0.55 per diluted share. These results were impacted by second quarter 2012 pre-tax catastrophe losses, net of reinsurance and estimated reinstatement premiums, of $3.9 million. By comparison, the second quarter of 2011 produced net income of $21.6 million or $0.78 per diluted share. In the second quarter of 2011, the company produced net operating income after tax of $2.2 million or $0.08 per diluted share. Second quarter 2011 results were impacted by pre-tax catastrophe losses, net of reinsurance and estimated reinstatement premiums, of $31.9 million. The difference between net income and net operating income for the three months ended June 30, 2012, reflects $2.7 million of pre-tax realized investment losses associated with the company’s investment portfolio and a $9.8 million pre-tax foreign currency exchange gain. (See the complete reconciliation in the attached tables.) Included in the results for the three months ended June 30, 2012 was favorable prior year loss development of $4.1 million versus favorable prior year loss development of $1.1 million for the three months ended June 30, 2011.

Gross written premiums for the three months ended June 30, 2012 and 2011 were $474.2 million and $406.7 million, respectively. Total revenue for the three months ended June 30, 2012 and 2011 was $318.0 million and $336.4 million, respectively. Earned premiums for the three months ended June 30, 2012 and 2011 were $290.2 million and $271.7 million, respectively. Net investment income for the three months ended June 30, 2012 and 2011 was $30.0 million and $32.9 million, respectively. For the three months ended June 30, 2012, the Company reported net realized investment losses of $2.7 million versus net realized investment gains of $31.5 million for the same three-month period in 2011.

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