A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Argo Re Ltd. (Argo Re) (Hamilton, Bermuda) and its subsidiaries. A.M. Best also has affirmed the ICR of “bbb” and debt ratings of the parent holding company, Argo Group International Holdings, Ltd. (Argo Group) (Hamilton, Bermuda) (NASDAQ: AGII). The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

The rating affirmations reflect Argo Re management’s product expertise in niche focus areas, historically strong operating performance and solid reserving practices. Argo Re also remains very well capitalized despite incurring over $200 million in catastrophe losses in 2011. The ratings also consider Argo Group's first quarter 2012 earnings, its conservative financial leverage (total debt-to-total capital) and the financial flexibility that Argo Re derives from Argo Group. Over the near term, A.M. Best expects that Argo Re’s underwriting and operating performance will be positively influenced by actions that its management has undertaken to reduce its worldwide property exposure and improve overall operational efficiencies.

Partially offsetting these positive rating factors are the losses generated from its international units and the strategic risk associated with Argo Group’s continued international expansion. While Argo Group’s recent expansion into the Dubai, Brazil and European Union markets further diversifies the organization’s insurance and reinsurance platform, there is considerable execution risk associated with these endeavors. Management’s ability to execute on this strategy without significantly disrupting its current operations will be integral in future rating evaluations.

Additional offsetting rating factors include Argo Re’s participation in a highly competitive environment characterized by significant price competition and the effects from adverse economic conditions.

A.M. Best believes that Argo Re and its subsidiaries are well positioned at their current rating levels. Key drivers that could lead to downward rating movement include deterioration in the organization’s underwriting and/or operating performance and a decline in risk-adjusted capital.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for Argo Re Ltd. and its following subsidiaries:

  • ArgoGlobal SE
  • Argonaut Great Central Insurance Company
  • Argonaut Insurance Company
  • Argonaut Limited Risk Insurance Company
  • Argonaut-Midwest Insurance Company
  • Argonaut-Southwest Insurance Company
  • Colony Insurance Company
  • Colony National Insurance Company
  • Colony Specialty Insurance Company
  • Rockwood Casualty Insurance Company
  • Select Markets Insurance Company
  • Somerset Casualty Insurance Company

The following indicative debt ratings available under the shelf registration have been affirmed:

Argo Group International Holdings, Ltd.—

-- “bbb” on senior unsecured debt

-- “bbb-” on subordinated debt

-- “bb+” on preferred stock

Argo Group Statutory Trust—

-- “bb+” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology , which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best’s Ratings”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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