Q2 investment loss sinks Argo Group earnings
Bermudian-based Argo Group International Holdings Ltd has reported a net loss attributable to common shareholders of $18.9 million for the second quarter of the year.
That compares to net income attributable to common shareholders of $67.1 million for the second quarter 2021.
Annualised return on average common shareholders' equity was minus 5.4 per cent, compared to 15.6 per cent in the prior year second quarter.
The net loss included pre-tax net realised investment and other losses of $40.4 million, of which $21.3 million was attributable to a loss on the sale of the company's Malta operations, ArgoGlobal Holdings.
In comparison, net income attributable to common shareholders in the prior year second quarter included $24.7 million of pre-tax net realised investment and other gains.
The second quarter net loss also included $15.6 million of non-operating expenses, which were mainly attributable to non-operating advisory fees and severance expenses. In comparison, the prior year second quarter reported $10.8 million in non-operating expenses.
Total catastrophe losses were $2.5 million, reflecting Argo’s strategy to reduce catastrophe exposure despite continued industry catastrophe losses this quarter.
While net earned premiums decreased 3.4 per cent from the prior year second quarter due to exited businesses, net earned premiums from ongoing business grew approximately 12 per cent primarily attributable to business lines where Argo retains more of the risk on a net basis.
Expense ratio was 35.4 per cent for the second quarter, improved 2.3 percentage points from a year ago, driven by reduced general and administrative expenses.
“The company’s second quarter results reflect our focused approach to profitable growth as we successfully target the most attractive business lines,” said Argo executive chairman and chief executive officer, Thomas A Bradley.
“We are pleased with the success in executing on our strategic priorities, particularly, managing expenses and reducing volatility. Ongoing cost reduction efforts significantly lowered the expense ratio from the prior year second quarter and our commitment to reducing volatility in the underwriting results has driven improvement in year-over-year catastrophe losses for five consecutive quarters.
"Through six months, operating earnings increased four per cent from a year ago, primarily due to significantly higher underwriting income. We are also encouraged by increasing interest income from our fixed income portfolio.
“The meaningful increase in underwriting income more than offset the lower contribution from alternative investment income. Looking ahead, we believe the company continues to be well-positioned to deliver profitable growth."