A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of "a" of Argo Re Ltd. (Argo Re) (Pembroke, Bermuda) and its subsidiaries. A.M. Best also has affirmed the Long-Term ICR of "bbb" and the Long-Term Issue Credit Ratings (Long-Term IR) of the parent holding company, Argo Group International Holdings, Ltd. (Argo Group) (Pembroke, Bermuda) [NASDAQ:AGII]. Concurrently, A.M. Best has affirmed the Long-Term ICR of "bbb" and the Long-Term IR of "bbb" on $143.75 million 6.5% senior unsecured notes due 2042 of Argo Group US, Inc. (Argo US) (headquartered in San Antonio, TX). These senior notes are fully and unconditionally guaranteed by Argo Group. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and ratings.)

The rating affirmations reflect Argo Re's solid capitalization, historically strong operating performance and robust enterprise risk management program. The ratings also reflect the diversified insurance and reinsurance platforms within the Argo group of companies and the financial flexibility afforded by its publicly traded parent, Argo Group.

Argo Group announced its acquisition of Ariel Re (Holdings) Limited (Ariel Re) on Nov. 13, 2016, for $235 million in cash. The transaction is expected to close in the first quarter of 2017. The potential effect of the transaction and the related integration plans were considered in the rating decision.

These positive rating factors are partially offset by execution risk related to international expansion, and in particular, the future integration of Ariel Re. Also partially offsetting the rating strengths is potential volatility in the group's underwriting results due to weather-related losses, as well as competitive pressures and the effects from sluggish economic conditions, which includes low investment yields.

Argo Re utilizes demonstrated product expertise in niche focus areas, proven solid underwriting fundamentals across numerous lines of coverage and a strong business profile focused on writing surplus lines and specialty commercial business. These are managed holistically with respect to capital, investment strategy and market presence. The acquisition of Ariel Re is expected to enhance the group's presence in the Lloyd's market.

Key drivers that could lead to upward movement in the ratings over the long term would be the ability to further enhance the underwriting and operating results of Argo Re with an accompanying increase in risk-adjusted capital.

Downward pressure on the ratings or a revision of the rating outlooks to negative could result if there is material deterioration in the organization's underwriting performance due to material adverse loss reserve development or outsized losses in relation to its peer group that results in a material decline in risk-adjusted capital.

The FSR of A (Excellent) and the Long-Term 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
  • ARIS Title Insurance Corporation
  • Colony Insurance Company
  • Peleus Insurance Company
  • Colony Specialty Insurance Company
  • Rockwood Casualty Insurance Company
  • Select Markets Insurance Company
  • Somerset Casualty Insurance Company

The following indicative Long-Term IRs available under various shelf registrations have been affirmed:

Argo Group International Holdings. Ltd. --- "bbb" on senior unsecured debt-- "bbb-" on subordinated debt-- "bb+" on preferred stock

Argo Group US, Inc. --- "bbb" on senior unsecured debt-- "bbb-" on subordinated debt

Argo Group Statutory Trust --- "bb+" on preferred stock

The following Long-Term IR has been affirmed:

Argo Group US, Inc. --- "bbb" on $143.75 million 6.5% senior unsecured notes, due 2042

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings .

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

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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