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Appeal to Argo shareholders in proxy battle

Message sent: Argo Group’s headquarters on Pitts Bay Road. The company’s independent directors have written to shareholders asking for their support in a proxy battle ahead of the insurer’s annual general meeting next month (File photograph)

Independent directors who sit on the board of Bermudian-based Argo Group International Holdings Ltd have written to the company’s shareholders asking for their support in an ongoing proxy battle with activist shareholders Voce Capital Management.

The 3,144-word letter has been filed with the Securities Exchange Commission in the United States.

Argo’s annual general meeting of shareholders will be held May 24.

Writing that Voce’s principal, J. Daniel Plants has “put forward a series of poorly researched claims with little regard for the truth”, Argo’s independent directors appealed to shareholders for support to “prevent the short-term interests of an activist hedge fund from disrupting the steady growth and superior shareholder returns you have come to expect”.

Voce Capital Management is a San Francisco-based hedge fund that owns about 5.6 per cent of Argo. Last month it attacked what it called a “spendthrift culture” at Argo by citing what it called “inappropriate corporate expenses”.

Among examples given were the use of corporate aircraft, housing allowances and sponsorships, with Voce claiming that company resources were being used to support the lifestyle of Mark Watson, Argo’s chief executive officer, at the expense of shareholders.

Voce has put forward a slate of five directors for consideration at the annual meeting. It has also claimed that two director appointments made by Argo are invalid under company bylaws and Bermuda law. Argo addressed those claims in an earlier filing with the SEC.

The letter to shareholders outlines Argo’s shareholder returns for the one, three and five-year periods ending on February 1, 2019, “the last trading day before Voce Capital made its campaign public”.

In the letter, the directors wrote: “As part of our engagement with our shareholders, we are correcting Voce Capital’s misrepresentations, careless errors and outright falsehoods.

“The company did not build, nor have we ever had, a penthouse apartment above our New York offices.

“While we do, on occasion, allow our executives to arrange for use of corporate aircraft for personal trips, they do so at their own expense, in which case no incremental cost is incurred by the company.

“Contrary to Voce Capital’s uninformed claims, the company did not use corporate aircraft to transport our CEO to all of the destinations described by Mr Plants in Voce Capital’s initial press release.

“Like so many other assertions in its initial press release, Voce’s representations to shareholders on this topic are rife with material misstatements of fact and demonstrate either a reckless disregard for the truth, gross negligence in fact-checking, or a combination of both.”

According to the directors, the firm’s sponsorships “are effective marketing tools that provide exceptional client relationship-building opportunities at a modest cost”.

The directors claimed the board had twice offered to meet with Voce’s director nominees, but in both instances Voce Capital refused to allow its nominees to meet with the board.

Through the letter, the directors asked shareholders to vote wit the “white” proxy card “to end Voce Capital’s destructive and distracting campaign”, adding: “We urge you to discard any and all blue proxy cards sent to you by Voce. If you have already returned a blue proxy card, you can change your vote by signing, dating and returning the white proxy card. Only your latest-dated proxy card will be counted.”

Argo shareholders of record as of the close of business on March 11, 2019 will be entitled to vote at the annual meeting.

The full letter can be seen on the Argo website at www.argolimited.com. Click on “Investors” and see “Press releases”