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Argo Group (AGII) Q4 Earnings & Revenues Beat Estimates

Zacks

Argo Group International Holdings, Ltd. AGII reported fourth-quarter 2016 earnings per share of 65 cents that beat the Zacks Consensus Estimate by a couple of cents. Earnings decreased about 17% from the year-ago quarter.

Behind the Headlines

Gross premiums written increased 11.8% year over year to $499 million on higher premiums written across all segments.

Net investment income grew nearly 27% to $25.5 million.

Operating revenues jumped 6% year over year to $392 million due to higher premiums and investment income. Revenues surpassed the Zacks Consensus Estimate by 1.9%.

Total expense increased 8.9% year over year to $358.4 million as losses and loss adjustment expenses and underwriting, acquisition and insurance expenses escalated.

Argo Group’s underwriting income plunged 77% year over year to $4.2 million. Combined ratio deteriorated 430 basis points (bps) to 98.8%.

2016 Highlights

Operating income per share came in at $3.92, up 14% from 2015. Operating revenues of $1.6 billion improved 7% year over year.

Argo Group International Holdings, Ltd. Price, Consensus and EPS Surprise

Argo Group International Holdings, Ltd. Price, Consensus and EPS Surprise | Argo Group International Holdings, Ltd. Quote


Segment Result

Excess and Surplus Lines: Gross written premiums improved 6% to $129.8 million on better performance at casualty lines and rate increases in certain specialty classes. Underwriting income of $10.8 million dipped 1.8% from the year-ago quarter. Combined ratio deteriorated 40 bps to 91.1%.

Commercial Specialty: Gross premiums written in the quarter rose 15.2% year over year to $177.7 million on strong performance at program, surety, and professional lines businesses. Underwriting income skyrocketed 145% year over year to $21.8 million. Combined ratio improved 1220 bps year over year to 77.8%.

Syndicate 1200: Gross written premiums were up 15% year over year to $145.3 million. Underwriting loss of $7.5 million compared unfavorably with the year-ago income of $7.8 million. Combined ratio deteriorated 1040 bps year over year to 107.2%.

International Specialty: Gross written premiums increased 8.7% year over year to $$46.2 million in the quarter. Growth in Bermuda insurance business was offset by decline in reinsurance business amid a competitive rating environment. Underwriting income was down 55% to $2.7 million. Combined ratio deteriorated 870 bps year over year to 92.3%.

Financial Update

Argo Group exited 2016 with cash and investments of $4.4 billion as against $4.2 billion at year-end 2015.

Shareholders' equity was $1.8 billion at year-end 2016. This was higher than $1.7 billion at the end of 2015.

As of Dec 31, 2016, diluted book value per share was $59.73, up 10% year over year. Notably, Argo Group has grown book value per share by more than of 10% on a compounded annual basis over the last 15 years.

Return on equity was 8.5% in 2016, down 130 bps from 2015. The company’s return on equity averaged 9.8% in the last four years.

The company spent $47.1 million in 2016 to buy back 0.8 million shares.

Zacks Rank

Argo Group presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among the other players from the same space that have reported their fourth-quarter earnings so far, the bottom line at Progressive Corp. PGR and The Travelers Companies Inc. TRV and RLI Corp. RLI beat their respective Zacks Consensus Estimate.

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