HAMILTON, Bermuda–(BUSINESS WIRE)–Argo Group International Holdings, Ltd. (NYSE: ARGO) today announced financial results for the three months ended March 31, 2019.
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2019 First Quarter Recap |
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Net Income Per Diluted Share
$2.63 ↑ 270.4% from Q1 2018 |
Adjusted Operating Income Per Diluted Share (1)
$1.18 ↑ 12.4% from Q1 2018 |
Gross Written Premiums
$760.8M ↑ 7.1% from Q1 2018 |
Combined Ratio
94.8% ↓ 100 basis pts from Q1 2018 |
Book Value Per Share
$55.23 ↑ 8.0%(1) from Q4 2018 |
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“Our strong first quarter 2019 results demonstrate our focus on delivering value to shareholders. Our annualized ROE of 20.1% in the first quarter is an outstanding achievement. The 9.1% annualized operating ROE for the quarter, a 100 basis point improvement year-over-year, reflects strong momentum toward our run rate objective of 10%. In addition, book value per share increased 8.0% from the beginning of the year,” said Mark E. Watson III, CEO. “These results were enabled by a 7.1% increase in gross written premiums, with a 10.2% rise in the U.S. Operations, an improvement in our expense ratio, and a 26.6% increase in our underwriting income. We expect our strategy to continue to deliver superior and sustainable returns to shareholders.” |
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| HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2019 |
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Net income was $91.2 million or $2.63 per diluted share, compared to net income of $24.8 million or $0.71 per diluted share for the 2018 first quarter, an increase of 270.4% compared to the 2018 first quarter. The 2019 first quarter net income included pre-tax net gains related to changes in the fair value of equity securities of $54.2 million, compared to pre-tax net losses related to changes in the fair value of equity securities of $30.9 million in the 2018 first quarter. These changes in fair value are included as a component of Net Realized Gains and Losses on the income statement. |
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Adjusted operating income(1)(2) increased 12.6% to $41.1 million or $1.18 per diluted share, compared to adjusted operating income of $36.5 million or $1.05 per diluted share for the 2018 first quarter. Underwriting income (1), a component of adjusted operating income, increased 26.6% to $21.9 million, compared to $17.3 million in the 2018 first quarter. As previously discussed, for purposes of calculating adjusted operating income, effective January 1, 2019, the company prospectively decreased its assumed effective tax rate to 15% from 20%. This change is in response to ongoing tax planning strategies implemented following the 2018 change in U.S. corporate tax rate from 35% to 21%. |
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Gross written premiums grew 7.1% to $760.8 million, compared to $710.5 million for the 2018 first quarter. U.S. Operations grew 10.2% to $410.7 million, compared to $372.8 million for the 2018 first quarter. International Operations grew 3.7% to $350.1 million, compared to $337.7 million for the 2018 first quarter. |
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The combined ratio was 94.8% compared to 95.8% for the 2018 first quarter. The loss and expense ratios for the 2019 first quarter were 56.6% and 38.2%, respectively, compared to 57.2% and 38.6%, respectively, for the 2018 first quarter. The current accident year, ex-CAT combined ratio was 94.1%, compared to 95.3% in the 2018 first quarter. |
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Catastrophe losses were $5.5 million, compared to $4.3 million for the 2018 first quarter. |
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Net favorable prior-year reserve development was $2.5 million, compared to favorable prior-year development of $2.0 million in the 2018 first quarter. |
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Net investment income decreased 5.8% to $33.9 million, compared to $36.0 million in the 2018 first quarter. Net investment income on the core portfolio increased 17.2% to $32.0 million, compared to $27.3 million in the 2018 first quarter. This increase was primarily due to an increase in the invested asset base and higher investment yields. Alternative investments, which are reported on a lag, contributed $1.9 million in the 2019 first quarter, compared to $8.7 million in the 2018 first quarter, a decrease of 78.2%. This decline was primarily due to the volatility in the securities market during the 2018 fourth quarter. |
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The quarterly cash dividend was increased by 15% to $0.31 per share. Since 2010, cash dividends have increased by approximately 300%. The Company did not purchase any shares of its common stock during the 2019 first quarter. |
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Book value per share increased 8.0%(1) to $55.23 at March 31, 2019, compared to $51.43 at December 31, 2018. |
| Notes | |
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All references to catastrophe losses are pre-tax. |
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Point impacts on the combined ratio are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and associated reinstatement and other catastrophe-related premium adjustments. |