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Argo Group Announces 2012 Fourth Quarter And Full Year 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 twelve months ended December 31, 2012.

"Notwithstanding Hurricane Sandy's impact on the fourth quarter, we made significant progress towards our strategic, operational and financial goals," said Mark E. Watson III, CEO of Argo Group. "Three of our four business segments produced premium growth and operating profits for the year, and we continue executing on internal initiatives to enhance operating efficiency and profitability. We have more work to do, but I'm optimistic overall about what we can achieve."

HIGHLIGHTS FOR THE FOURTH QUARTER ENDED DECEMBER 31, 2012:

  • Gross written premiums were $389.7 million, an increase of $47.9 million or 14% over the fourth quarter of 2011.
  • Pre-tax operating loss 1 was $7.4 million compared to a loss of $11.0 million in the fourth quarter of 2011.
  • Net loss was $4.7 million or $0.19 per diluted share compared to net income of $1.4 million or $0.05 per diluted share in the fourth quarter of 2011.
  • The combined ratio was 109.6% compared to 112.5% in the fourth quarter of 2011.
  • Estimated pre-tax catastrophe losses, net of reinsurance and estimated reinstatement premiums 2, were $47.9 million, all due to Hurricane Sandy. This compares to $36.1 million of catastrophe losses in the fourth quarter of 2011.

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

2 – All subsequent references to catastrophe losses are pre-tax and net of reinsurance and estimated reinstatement premium.

HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2012:

  • Gross written premiums were $1.7 billion, an increase of $200.9 million or 13% over 2011.
  • Pre-tax operating income was $47.5 million compared to a pre-tax operating loss of $107.6 million for 2011.
  • Net income was $52.3 million or $2.01 per diluted share compared to a net loss of $81.9 million or $3.02 per diluted share for 2011.
  • The combined ratio was 104.6% compared to 119.8% for 2011.
  • Estimated catastrophe losses were $69.8 million in 2012, compared to $207.8 million of catastrophe losses and $9.3 million aggregate reinsurance cover losses in 2011.
  • Book value per share was $60.75 at December 31, 2012, an increase of 9.3% from $55.60 at December 31, 2011.

OTHER HIGHLIGHTS:

  • During the quarter, the Company repurchased $7.0 million or 211,404 shares of its common stock at an average share price of $33.18, representing 0.8% of net shares outstanding at September 30, 2012. During 2012, the Company repurchased $44.6 million or 1,488,308 shares of its common stock, representing 5.7% of net shares outstanding at December 31, 2011.
  • The Company incurred one-time pre-tax debt extinguishment costs of $2.2 million due to the call premiums paid on redemption of certain capital trust securities.

FINANCIAL RESULTS

Three Months ended December 31, 2012

For the three months ended December 31, 2012, Argo Group reported a net loss of $4.7 million or $0.19 per diluted share and a net operating loss after tax of $5.9 million or $0.24 per diluted share. By comparison, the fourth quarter of 2011 produced net income of $1.4 million or $0.05 per diluted share and a net operating loss after tax of $9.3 million or $0.35 per diluted share. The difference between the net loss and net operating loss in the quarter reflects $7.0 million of pre-tax realized investment gains, a $1.5 million pre-tax foreign currency exchange loss and $2.2 million of pre-tax debt extinguishment costs. (See the complete reconciliation in the attached tables.)

Gross written premiums for the three months ended December 31, 2012 and 2011, were $389.7 million and $341.8 million, respectively. Total revenue for the three months ended December 31, 2012 and 2011, was $350.7 million and $318.6 million, respectively. Earned premiums for the three months ended December 31, 2012 and 2011, were $314.7 million and $278.0 million, respectively.

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