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Activist shareholder criticises Argo senior management

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Activist investor Capital Returns Management LLC has called on Argo Group International Holdings Ltd to hold its annual general meeting in May as it dismissed claims by the company that it had made significant progress since its strategic repositioning in 2020.

The call by Capital Returns comes a day after Bermudian-based Argo Group issued a statement in response to the nomination by Capital Returns of two director candidates for election to the Argo board of directors.

Capital Returns has nominated Ronald Bobman, Capital Returns’ founder, president and chief investment officer; and David Michelson, president of DWM Consulting.

David Michelson, president of DWM Consulting

The activist investor said: “Argo's press release yesterday demonstrates why we believe that the board must urgently be augmented and reconstituted.

“The company would have shareholders believe that Argo has made ‘significant progress’ since its ‘strategic repositioning’ and contemporaneous board refreshment and leadership transition in early 2020.

“We disagree and we believe that the facts clearly indicate that the company's attempt at transformation has failed: Argo has continued to underperform its peers and the relevant indices since every point in early 2020 that could reasonably mark the beginning of a supposed transformation.

“It is worth noting that the company never once used the term ‘strategic repositioning’ in any public communication during 2020, when the supposed transformation was initiated. In our view, Argo is belatedly attempting to create an appearance of progress and strategic change in order to convince shareholders that further board refreshment is unnecessary.”

It added: “We will not be fooled by Argo's attempts to rewrite the past. The current board has been given ample opportunity to create value at Argo, and the claimed ‘strategic repositioning’ in 2020 has resulted in further destruction of shareholder value. We believe that the board must be urgently enhanced if Argo is to reach its potential.

“We call upon the company to hold its annual meeting in early May, in keeping with its historical practice, so that shareholders can have the opportunity to elect new directors without delay. We also caution the company against any unilateral and late-stage board refreshment; such tactical manoeuvres will only serve to confirm our view that this board, as currently comprised, is more interested in self-preservation than in rebuilding trust with shareholders.

“We look forward to engaging with our fellow shareholders and sharing more of our perspectives regarding the value creation opportunities at Argo over the coming weeks.”

The Argo statement read: “The Argo board of directors and executive leadership team have made significant progress to strengthen the company.

“Our strategic repositioning of the company, undertaken in 2020, continues to focus on growth in earned premium, reducing volatility, expanding our margins, generating higher earnings and improving return on common equity.

“These actions will help position us to deliver sustainable and profitable growth to drive shareholder value.

“Argo benefits from a highly qualified, experienced and refreshed board that provides independent oversight and guidance on the execution of the company’s strategy.

“The board is comprised of nine accomplished directors, eight of whom are independent and all of whom bring significant relevant expertise to the company.

“Since the beginning of 2020, we have had seven directors step off the board and four join, three of which joined in co-operation with Voce Capital Management LLC, our largest shareholder.

“The board and management has benefited from both the fresh perspectives brought by our newer directors, as well as the industry and Argo-specific expertise of our longer-tenured directors.

“The board remains open to considering qualified candidates and has procedures in place for the evaluation of its composition and director nominations.

“As such, Argo’s nominating and corporate governance committee has interviewed and is in the process of evaluating Capital Return’s nominees pursuant to established policies.

“The board will present its director nominations in the company’s proxy statement for its 2022 annual general meeting of shareholders. The 2022 annual general meeting has not yet been announced and no shareholder action is required at this time.

“While the company does not comment on discussions with specific shareholders, it is important to note that members of Argo’s board of directors and executive leadership team have engaged with Capital Returns numerous times to better understand its perspectives.

“We remain confident in the company’s strategy for continued growth and will continue to execute our strategic plan and evaluate opportunities to enhance shareholder value.”

Capital Returns, a major institutional shareholder in Argo, last September called on its board of directors to commence a strategic alternatives process and objectively consider a sale of the full company.

New York-based Capital Returns said then that it believed that such a sale could yield a price of $80 per Argo share, or more, based on a sum-of-the-parts analysis and comparable trading multiples.

Argo is trading on the New York Stock Exchange in early afternoon today at $41.34 per share.

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Published March 16, 2022 at 7:54 am (Updated March 16, 2022 at 7:54 am)

Activist shareholder criticises Argo senior management

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