Argo Group International Holdings Ltd’s former chief executive officer Mark Watson is set to place $2.2 million of his shares into an escrow account, to be used to reimburse Argo if an investigation finds that certain personal expenses of his were paid for by the company.The Bermudian-based company announced Mr Watson’s immediate retirement as CEO on Tuesday.That announcement came amid an investigation of Argo Group by the US Securities and Exchange Commission regarding disclosure of certain compensation matters. Argo said it is fully co-operating with the SEC investigation.Meanwhile, the company’s independent directors are continuing to conduct their review of governance and compensation matters.Argo’s credit ratings were placed under review with negative implications by AM Best last night. The agency said that when it affirmed Argo’s ratings a month ago it had been unaware of the SEC subpoena that had been issued to Argo “some time before”.In a statement, it said: “The ‘under review with negative implications’ status considers the serious nature of the aforementioned SEC inquiry and the diminished credibility among Argo stakeholders in light of the board’s actions to keep this inquiry confidential while undergoing an extensive internal investigation on compensation governance matters related to Argo and its former chief executive officer.”It added: “Perhaps of most concern to AM Best are the pending conclusions of the SEC investigation and the potential for this inquiry to extend beyond Mr Watson.”Argo was involved in a proxy battle earlier this year with activist investor Voce Capital Management LLC. The San Francisco-based hedge fund, which is the beneficial owner of 5.8 per cent of the shares of Argo Group, attacked what it called a “spendthrift culture” and “inappropriate corporate expenses” at Argo. At the time, Argo responded that the claims were poorly researched and had “little regard for the truth”.Voce pushed to have a number of Argo’s directors replaced, but withdrew its nominations just before the company’s annual meeting in May.After the announcement of Mr Watson’s retirement, Voce repeated its call for changes to the company’s board.In a statement it said it does not believe the board of directors can deliver the company from the “crisis that now engulfs it”, and said the retirement of Mr Watson did not resolve its concerns about the company’s operations, strategy and corporate governance.Voce stated: “Until this board is reconstituted, there will be no fundamental change at Argo.”It questioned why Mr Watson is being given a “windfall” for retiring “under clouded circumstances”.This was in reference to a filing by Argo on Tuesday regarding a binding term sheet that will form the basis of a separation agreement between Mr Watson and the company, to be negotiated and finalised in the near term.In a brief description of the term sheet, Argo said Mr Watson will continue to be paid his base salary while serving as a full-time, non-executive employee until the end of the year.When the separation agreement becomes fully enforceable and binding, Mr Watson is set to be paid an amount equal to $2.5 million. He must place 35,296 of his restricted shares, valued at $2.2 million based on the November 1 closing price of $63.04, into an escrow account. Some or all of the shares will be used to reimburse the company for certain personal expenses of Mr Watson that were paid for by the company, should an investigation find that such reimbursement is required.AM Best said it had placed under review with negative implication a string of ratings related to Argo Group and its subsidiaries, including the A (excellent) financial strength rating and “a” long-term issue credit ratings of Argo Re Ltd and its subsidiaries, and the long-term ICR of “bbb” of Argo Group International Holdings.The agency said that also in question “is the potential for further shareholder discontent, which could lend itself to management and board distraction, the emergence of class action lawsuits and renewed shareholder activist activity”. It added: “Argo estimates that the cumulative amounts of the charges are not expected to be material and the company has put into escrow a portion of Mr Watson’s restricted shares to cover ultimate reimbursement costs as part of his separation agreement”.AM Best said its ratings of Argo are likely to remain under review pending follow-up discussions with management and the conclusion of the SEC inquiry and its findings.Meanwhile, Argo has revealed it made a loss of $25.2 million, or 73 cents per share, in the third-quarter. Its combined ratio jumped 11.7 points to 111.4 per cent between June and the end of September.“We are clearly not satisfied with losses we experienced in the quarter,” Kevin Rehnberg, interim CEO, said in comments that accompanied the earnings statement on Wednesday. He said he was optimistic about the future of the company and the potential for “much stronger results”.In the same quarter last year, Argo made a profit of $40.6 million, or $1.17 per diluted share.The company said its net loss included pre-tax charges of $51.8 million related to current and prior accident year losses of $10 million and $41.8 million, respectively.Argo also said there was approximately $3.7 million of expenses from activities associated with proxy solicitation efforts, which included costs related to the independent directors’ review of governance and compensation matters.