Annual
Report
2015
Corporate Profile
Argo Group International
Holdings, Ltd.
(NASDAQ: AGII)
is an international underwriter of specialty
insurance and reinsurance products in areas
of the property and casualty market.
Through its operating subsidiaries, Argo Group offers
a comprehensive line of products and services designed
to meet the unique coverage and claims-handling needs
of its clients in four business segments: Excess & Surplus
Lines, Commercial Specialty, International Specialty
and Syndicate 1200. Argo Group is headquartered
in Bermuda.
1
Annual Report 2015 Letter to the Shareholders
2015 was a year of many
changes and no surprises.
Having said that, we stayed true to our
strategy of being a specialty insurer with
multichannel distribution and global
reach. We made wide-scale changes
to our systems and processes, built a
stronger, more focused team, invested in
technology and innovation, introduced
new platforms and products and, above
all else, spent time getting to know our
customers and developing better solu-
tions for their risk needs.
Our purpose all along has been to help
businesses stay in business. We do that
by mitigating the risks inherent in what
they do. Argo is a specialty insurer, and
our customers have remarkably different
needs and ambitions. The products we
provide them must be highly targeted,
and the underwriters who serve them
must have deep domain expertise in a
broad variety of disciplines. This year, we
began simplifying how we do business;
we still have a lot of work to do. We also
continued making the sweeping improve-
ments that allow us to be leaner, smarter
and more profitable. We believe these
changes will put a team in place with
better tools than ever before.
The strength of our underwriting results
and our record underwriting profits for a
second consecutive year prove the merit
of our efforts. We grew our premiums
to more than $2 billion in 2015, another
record for our company. We achieved this
growth even as we deliberately exited
several lines of business during the year.
As such, we now have evidence of solid,
underlying growth within most of our
business segments. Our overall under-
writing income grew from $51.5 million
the year prior to $66.2 million this year, a
28.5% gain and a record level for Argo. We
achieved a net income of $5.72 per diluted
share and operating earnings per share
of $3.70. To you, our shareholders, we
delivered a return on average shareholder
equity just shy of 10% for the third con-
secutive year.
2
The most important factor in that
achievement was risk selection and un-
derwriting discipline. In 2015, we posted
a combined ratio of 95.2%, just a hair off
a goal we set in 2012 of delivering five
points of underwriting profit. A signifi-
cant contributor was the companywide
program of systems and process improve-
ment — a global effort to simplify the way
we operate. Our mandate was to abandon
any procedure or step that does not
produce something our customers need,
want and value. And as I mentioned earli-
er, simplification was also key to lowering
our expenses, an achievement reflected in
our improved expense ratio of 39.4%.
Excess & Surplus
In our Excess & Surplus Lines business,
gross written premiums were up 11.9% for
the year. We achieved growth in our casu-
alty unit, our largest business by volume
within E&S, of 22% against a backdrop
of a market with slow to no growth. This
is due in great part to our investment in
technology and overall process improve-
ment. We also benefited from growth ini-
tiatives in our professional lines business
Argo Pro, which is an area we’ve been
focusing on for the past few years.
Commercial Specialty
2015 was a year of improvement in most
businesses within our Commercial Spe-
cialty segment. Overall, premiums were
up 5.8% in the calendar year, driven by
our program and public-entity businesses.
While we continue to see growth in our
underwriting results, strong competition
made it impossible to achieve the rate
increases we would have liked. We contin-
ue our focus on profitable relationships
in this segment, driving results through
deeper customer knowledge, particularly
with our policyholders.
Syndicate 1200
Our Syndicate grew modestly in 2015
with gross written premiums up 3.8%
as competition remained robust in the
Lloyd’s market. This year, we stayed
focused on expanding our core business
while establishing new products in areas
where our strengths should serve us well.
We did this by building on our strong rela-
tionships with our brokers, continuing to
attract new trade capital, and by pursuing
new Lloyd’s business around the world.
Positive growth came from the North
American property account and new spe-
cialty classes of risk added in recent years,
including international casualty treaty
and the launch of our platform in Asia.
Looking ahead, we see additional oppor-
tunities to grow by collaborating with
other Argo Group business segments,
in particular the U.S. to deliver unique
solutions to meet customer needs.
International Specialty
Performance in our International Spe-
cialty segment showed a decline of 3.9%
over that in 2014. Part of this reflects the
challenging economic environment in
Brazil, including weak local currency. In
response to market conditions, we made
selective changes to the business and
are beginning to see positive results. For
example, the combined ratio in this seg-
ment improved to 84.9%, a consequence
of lower losses and loss adjustment
expenses. International Specialty contin-
ued to explore new technologies aimed
at helping to identify and capitalize on
underwriting opportunities more quickly
and easily. We continued advancing our
Protector platform as an innovative online
offering that taps into new segments for
us. We also launched a digital product
platform for our directors and officers
liability insurance product in Western
Europe. Despite the challenging market,
we believe our business is positioned for
growth in 2016.
Our team
Our team gets better every year, and this
year we were pleased to welcome Stuart
Boyne as Senior Vice President and Chief
Human Resources Officer. Stuart will
take a leading role in modernizing our HR
function, giving our teams the support
they need to be efficient and innovative.
Alex Hindson joined as our Chief Risk
Officer to spearhead a wide-reaching pro-
gram of enterprise risk management with
a goal of building on our strong set of risk
management processes and enhancing
Annual Report 2015 “After 12 consecutive quarters of
deliberate, solid, consistent growth,
we are confident and inspired to do
better. I offer my sincere gratitude
to the Argo team for a year of
extraordinary effort. The work is
paying off.”
— Mark E. Watson III,
President and Chief Executive Officer
our risk-aware culture. Phil Vedell will
serve as Chief Operating Officer, respon-
sible for overseeing operations in the U.S.
And David Lang was appointed to serve
as Chief Operating Officer at ArgoGlobal,
leading an ambitious growth agenda for
our Syndicate 1200 business in 2016.
Of culture and community
Even as company operations undergo
deep changes to ensure that Argo stays
innovative, responsive and profitable,
many aspects of our culture remain
unchanged. An important example is the
commitment of our team members to the
communities in which they live and work.
This year our Argo Foundation in Bermu-
da and Community Relations Committees
in London, San Antonio and Richmond
provided more than 70 local community
organizations with Argo funding. Else-
where, the Team Argo Employee Volun-
teer Program rallied Argo professionals in
project-specific groups to assist in com-
munity development around the world.
And once again, our Argo Matching Gift
Program supported the causes of greatest
personal interest to our team by matching
their donations with funds paid directly to
charities. We are proud of the responsibil-
ity shown by our employees last year and
remain committed to encouraging and
supporting them in their efforts.
Confident and ready to improve
This year’s comprehensive program to
bring simplification, automation and
unwavering customer focus into every
corner of the company is elemental to
our strategy. We continuously improve
the way our company operates. As such,
we will go on making tough decisions,
confident that the reasons we were better
this year are the same reasons we can
continue improving.
Our investments in business processes,
technology and people allow us to serve
our clients better, faster and easier. We
can now better select risk and better
manage our portfolio mix. Our invest-
ment in people has built a more nimble
team than we had even three years ago.
By outsourcing all but core functions,
that team now has the time to focus on
making better decisions. We have a better
distribution platform today and better
business processes to support everything
we do.
After 12 consecutive quarters of delib-
erate, solid, consistent growth, we are
confident and inspired to do better. I offer
my sincere gratitude to the Argo team for
a year of extraordinary effort. The work is
paying off.
Mark E. Watson III
President and Chief Executive Officer
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3
Annual Report 2015 Gross Written Premiums
$2.012 billion
$1.905 billion
$1.888 billion
2015 at a Glance
“We’re optimizing and improving our
existing businesses with real, demon-
strable results at the bottom line. I’m
optimistic about each and every one of
our businesses.”
— Jay Bullock, Executive Vice President
and Chief Financial Officer
Total Assets
Combined Ratio
Book Value Per Share
$6.63
$6.36
$6.59
billion billion billion
97.5% 96.2% 95.2%
$53.60
$58.22
$59.74
2013
2014
2015
2013
2014
2015
2013
2014
2015
4
Annual Report 2015
A.M. Best Rating | ‘A’ (Excellent)
For the Years Ended December 31
(in millions, except number of shares and per share amounts)
2015
2014
2013
Gross written premiums
Net written premiums
Net earned premiums
Net investment income and realized gains
Total revenue
Net income
Net income per common share:
Basic
Diluted
Combined ratio
Total assets
Shareholders’ equity
Return on average shareholders’ equity
Weighted average number of shares outstanding:
Basic
Diluted
Book value per share
$ 2,012.1
$ 1,905.4
$ 1,888.4
1,402.1
1,371.9
112.7
1,484.6
1,367.9
1,338.1
180.6
1,518.7
1,351.3
1,303.8
171.3
1,475.1
$ 163.2
$ 183.2
$ 143.2
$ 5.84
$ 5.72
95.2%
$ 6,630.1
$ 1,668.1
10%
28.0
28.5
$ 6.39
$ 4.85
$ 6.27
$ 4.67
96.2%
97.5%
$ 6,356.3
$ 6,591.0
$ 1,646.7
$ 1,563.0
11%
28.7
29.2
9%
29.5
30.7
$ 59.74
$ 58.22
$ 53.60
NOTICE
The financial highlights herein are a summarized version of Argo Group’s audited consolidated financial statements and do not contain sufficient information to allow as
full an understanding of the financial position, results of operations, changes in financial position or cash flows of Argo Group as would be provided by the complete
financial statements of Argo Group. A registered shareholder of Argo Group receiving these summarized financial statements may notify Argo Group in writing that they
elect to receive the complete financial statements for the period for which the summarized financial statements are prepared, or for subsequent periods, or both.
Percentage of Gross Written Premiums
by Business Segment
29%
34%
14%
23%
Excess & Surplus
Commercial Specialty
International Specialty
Syndicate 1200
28.5%
Increase in pretax
underwriting income,
from $51.5 million in 2014
to $66.2 million in 2015
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Annual Report 2015 Excess & Surplus Lines Client Profile
Partners Specialty Group
Stamford, Connecticut
“The team at Argo Group
makes us look good because
of their responsiveness,
good communication and
good product.”
— Maureen Caviston,
President
A broad embrace of apartment living in major U.S.
cities is driving the construction business — and
keeping phones ringing at the 14 offices of wholesale
broker Partners Specialty Group (PSG), which does
considerable business in the industry.
“We handle challenging risks,” says PSG President
Maureen Caviston. “Retail brokers that come to us
expect a fast solution, a broad solution, and it’s how
we differentiate ourselves.”
PSG often receives last-minute opportunities. “When
we get a call from customers late in the day, asking for
something immediately, that is where a responsive
underwriting team is really important to us.” Caviston
says Argo Group’s Colony Specialty team has been
critical in helping PSG uphold its reputation. “They
make us look good because of their responsiveness,
good communication and good product.”
Colony Specialty and PSG have partnered since 2006.
The shared book of business has steadily grown,
particularly in the environmental, health care and
casualty specialties. “Our business is exciting
because no two days are alike,” Caviston says.
“We do business with over 100 insurers, but
Argo Group’s in our top tier.”
6
Annual Report 2015 Excess & Surplus Lines Client Profile
Partners Specialty Group
Stamford, Connecticut
Excess & Surplus Lines
Our Excess & Surplus Lines segment insures risks typically not underwritten by the standard market. Colony Specialty underwrites
property and casualty risks. Argo Pro underwrites small- to medium-size professional liability risks.
Fast, smart, eager. These fundamental
tenets of Argo Group’s business
philosophy were on prominent display
in our Excess & Surplus Lines segment
in 2015. Colony Specialty’s casualty line
and Argo Pro’s professional liability
lines turned in particularly strong
performances.
Launched in 2013, Argo Edge enables us to
more quickly and accurately identify the
most attractive pieces of business and
then make faster, smarter underwriting
decisions. We anticipate further efficiency
improvements from this system as we
continue to reinvest in and refine the
underlying technology.
Casualty, our most profitable Excess &
Surplus Lines division and also one of our
fastest-growing lines, saw gross written
premiums jump 22%. Gaining access to
new business has never been an issue in
the hypercompetitive casualty market.
Instead, our challenge has been to find
the best business from the wealth of
possibilities — without simply throwing
more staff at the task. Today we’re doing a
much better job of that thanks to
improvements in our business processes
and the maturation of our underwriting
system, Argo Edge.
Argo Pro, another of our faster-growing
lines of business, saw gross written
premiums increase thanks both to organic
growth and the acquisition of OneBeacon
Insurance Group’s Lawyers’ Professional
Liability book of business in December
2014.
We recorded a smaller but notable
success story in our transportation
business, which shrank significantly in
2015 following our exit from the bulk of
that market in 2014. However, the
business we retained was, on average,
more profitable. Today our transportation
business is focused on the garage market,
where in 2015 we saw increases in gross
written premiums, earned premiums and
underwriting income.
Overall, our Excess & Surplus Lines
segment enjoyed an 11.9% increase in
gross written premiums in 2015. Gains in
our casualty and Argo Pro businesses
were offset in part by reduced writings in
Colony Specialty’s transportation,
contract and property lines.
Excess & Surplus Lines
Gross written premiums
Earned premiums
For the Years Ended December 31
(dollar amounts in millions)
Gross Written Premiums
(dollar amounts in millions)
2013
2014
2015
$ 594.2
$ 607.2
$ 679.5
$ 460.2
$ 485.2
$ 525.3
$594.2 $607.2
$679.5
11.9%
increase
from 2014
Losses and loss adjustment expenses
244.0
248.0
291.8
Other reinsurance-related expenses
Underwriting, acquisition and insurance expenses
Underwriting income
Net investment income
Interest expense
4.9
157.2
54.1
42.2
(6.9)
—
161.6
75.6
36.7
(6.3)
—
166.7
66.8
35.2
(6.0)
Income before income taxes
$ 89.4
$ 106.0
$ 96.0
Loss ratio
Expense ratio
Combined ratio
53.6%
34.5%
88.1%
51.1%
33.3%
84.4%
55.5%
31.8%
87.3%
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Annual Report 2015 Commercial Specialty Client Profile
TRX Insurance Services, Inc.
Valley Forge, Pennsylvania
“Argo Group solved
an issue not only for
us, but for an entire
class of business.”
— Rick Metz,
President
Few companies want to insure taxis.
Most are fleet-owned and driven by
different drivers, multiple shifts, in all kinds
of conditions, says Rick Metz, President of
TRX Insurance Services, Inc.
TRX takes a different approach, focusing on
independently owned taxis — in other words,
taxi drivers who own their cars and their
businesses.
When Metz approached Argo Group about
insuring this particular niche, “they recognized
that by segmenting the industry they could
underwrite the class of business at a fair price
and in a way that’s profitable for them and
affordable for the policyholder,” he says. “Argo
Group solved an issue not only for us, but for
an entire class of business at a time when
insurance was very expensive for them and
available on a very limited basis.”
Metz says his relationship with Argo Group
comes down to three things. “First and
foremost is their ability to give us a set of
underwriting principles we can follow that
provide quick service to our clientele. Second
is the pricing they’ve arranged for us to
underwrite with. Last, and not least, is Argo
Group’s ability to handle claims on a timely
basis — and on a fair basis.”
Which is good for TRX — and for its clients.
Says Metz: “Argo Group probably made a
thousand policyholders happy.”
8
Annual Report 2015 Commercial Specialty Client Profile
TRX Insurance Services, Inc.
Valley Forge, Pennsylvania
Commercial Specialty Lines
Commercial Specialty serves niche industries and businesses through six risk-bearing divisions: Argo Insurance, Argo Surety,
ARIS, Commercial Programs, Rockwood and Trident. In addition, our Alteris division operates non-risk-bearing agency and
brokerage businesses.
The Commercial Specialty segment
turned in another strong performance
in 2015, highlighted by the ongoing
turnaround of our Trident public entity
business and the continued growth and
profitability of our Argo Surety
division.
Trident returned to profitability following
two years of extensive structural and
managerial changes within the division.
These changes included strengthening
the division’s talent base across all
disciplines and upgrading the analytical
tools available to the team. The results
can be seen in Trident’s improved
retention rates and profitability. In 2015,
Trident booked more than $100 million in
gross written premiums, while reducing
its combined ratio. We anticipate
continued improvements in this division
in 2016.
Built from scratch beginning in 2008,
Argo Surety is a testament to Argo
Group’s ability to achieve organic growth
by identifying and exploiting new
business opportunities. In 2015, Argo
Surety’s new Hamilton, New Jersey, office
became fully operational, and the division
is now contributing in a meaningful way
to the company’s bottom line. Gross
written premiums grew and underwriting
profit increased. The division’s combined
ratio also improved.
Overall, gross written premiums for the
Commercial Specialty segment increased
5.8% in 2015. Gains in the commercial and
surety lines were offset in part by declines
in the grocery and retail units and in the
segment’s mining unit, where customers
and potential customers continued to be
pressured by a persistent slump in
commodities prices.
Earned premiums ticked modestly lower
in 2015, falling less than a percentage
point. However, a reduction in losses and
loss adjustment expenses, plus lower
underwriting, acquisition and insurance
expenses, led to a sharply improved
combined ratio of 93.8% versus 100.2% a
year earlier. The decline in expenses was
attributable primarily to an increase in
the fronting fees we received, coupled
with reduced accruals for premiums taxes
and other assessments as the result of a
revised accounting estimate.
Commercial Specialty
Gross written premiums
Earned premiums
For the Years Ended December 31
(dollar amounts in millions)
Gross Written Premiums
(dollar amounts in millions)
2013
2014
2015
$ 419.1
$ 440.2
$ 465.7
$ 299.0
$ 291.9
$ 290.1
$440.2
$419.1
$465.7
5.8%
increase
from 2014
Losses and loss adjustment expenses
194.0
189.1
179.3
Other reinsurance-related expenses
Underwriting, acquisition and insurance expenses
Underwriting income (loss)
Net investment income
Interest expense
Fee and other expense, net
Impairment of intangible assets
0.9
97.4
6.7
22.8
(3.8)
(4.3)
—
—
103.5
(0.7)
18.7
(3.2)
(2.5)
(3.4)
—
92.7
18.1
18.5
(3.2)
(3.5)
—
Income (loss) before income taxes
$ 21.4
$ 8.9
$ 29.9
Loss ratio
Expense ratio
Combined ratio
65.1%
32.7%
97.8%
64.8%
35.4%
100.2%
61.8%
32.0%
93.8%
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Annual Report 2015 International Specialty Client Profile
MDS Insure
São Paulo, Brazil
“If I need something, I know
that, as quickly as possible,
Argo Group will get it done.”
— Jacques Goldenberg,
International Director
As Argo Seguros continues to expand in Brazil, so
does business with international brokerage firm
MDS Insure.
MDS began selling Argo Seguros professional lines,
property and surety products in 2014. Much of the
business is in the cargo and marine sector, providing
freight insurance for shippers and carriers. “Argo
Group is a good partner,” says Jacques Goldenberg,
International Director of MDS. “They are very clear
in managing their business and telling us when
there is the possibility to do business or when
something is absolutely out.”
The Argo Seguros team’s turnaround time on the
phone also simply outpaces the competition,
Goldenberg says.
Recalling a time when a shipping client called with a
unique need for extended coverage of freight sitting
idle in a warehouse, Goldenberg says he was
impressed by the team’s fast response: “I could see
they used all their knowledge and contacts to
provide a solution,” he says.
“It’s a mutual attraction between us,” Goldenberg
continues. “If I need something, I know that, as
quickly as possible, Argo Group will get it done.”
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Annual Report 2015 International Specialty Client Profile
MDS Insure
São Paulo, Brazil
International Specialty Lines
International Specialty underwrites property catastrophe reinsurance and other risks worldwide from offices in Bermuda, Dubai and
Malta. Argo Seguros underwrites cargo and marine, property and engineering, and financial lines in Brazil and other Latin
American markets.
The International Specialty segment
continues to explore new technologies
that can help identify and capitalize on
underwriting opportunities more
quickly and easily.
In 2015, we created an online digital
platform in Europe — ArgoGlobal
Business Connect — for our directors and
officers liability insurance product. The
platform makes it easier for customers,
especially small- to medium-size enter-
prise customers, to do business with us.
ArgoGlobal Business Connect will be
available in Germany in mid-2016.
Meanwhile, we already operate a similar
online platform — Protector — in Brazil. It
gained additional traction in the market-
place last year, although our results in
that country were pressured by the
unsettled economic climate there and the
subsequent deterioration in the value of
the Brazilian currency, which had a
negative impact on our results when
translated to U.S. dollars. In response, we
have made select changes to our business
there and are beginning to see positive
results.
Our Bermuda-based casualty and
professional insurance team, established
in 2009, increased net earned premium
by 18% in 2015. Gross written premiums
remained flat due to rate reduction and
changes to the mix of business. The
results were primarily achieved through
collaborating with clients on product
development and continued marketing
initiatives.
Elsewhere, to further boost production in
our International Specialty segment, we
will transition our Argo Re operation in
Dubai to our Syndicate 1200 segment in
2016. This will allow the Dubai operations
to take advantage of the licensing and
platform efficiencies available through the
Lloyd’s of London market.
The segment’s property catastrophe
reinsurance business continues to be
pressured by fierce competition, not only
from established players but also from
new players outside the insurance
industry, primarily hedge funds. In
negotiating this rapidly shifting land-
scape, Argo Re’s relatively small size has
allowed us to operate nimbly, moving
quickly into the market as attractive
opportunities present themselves and
pulling back when pricing becomes
unattractive.
Despite the downturn in gross written
premiums in 2015, earned premiums
increased slightly. The improvement was
attributable primarily to a reduction in
the segment’s ceding percentages,
coupled with modest changes in our
business mix, including a tactical pullback
in the surety sector.
Losses and loss adjustment expenses also
fell in 2015, highlighted by a reduction in
loss reserves due to favorable develop-
ments on prior-year business. The
segment also sustained slightly lower
catastrophe losses.
Owing to the improvement in losses and
to roughly flat expenses, International
Specialty’s combined ratio improved to
84.9% in 2015, down from 89.2% in 2014.
For the Years Ended December 31
(dollar amounts in millions)
Gross Written Premiums
(dollar amounts in millions)
International Specialty
Gross written premiums
Earned premiums
Losses and loss adjustment expenses
Other reinsurance-related expenses
Underwriting, acquisition and insurance expenses
Underwriting income
Net investment income
Interest expense
2013
2014
2015
$ 290.6
$ 290.2
$ 278.9
$ 142.4
$ 148.3
$ 148.7
79.9
6.2
50.1
6.2
8.4
(3.3)
77.8
—
54.5
16.0
8.2
(3.1)
72.8
—
53.4
22.5
11.8
(3.0)
$290.6 $290.2
$278.9
3.9%
decrease
from 2014
Income before income taxes
$ 11.3
$ 21.1
$ 31.3
Loss ratio
Expense ratio
Combined ratio
58.7%
36.7%
95.4%
52.5%
36.7%
89.2%
49.0%
35.9%
84.9%
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Annual Report 2015 Syndicate 1200 Client Profile
Arthur J. Gallagher & Co.
London, England
“ArgoGlobal is always
ahead of the game.”
— Darren Rowe,
Client and Markets Director
At Lloyd’s of London, quickness wins
every time.
The success of brokers is built on their
ability to find attractive risk solutions for
customers’ needs. But a challenge for
many of them is connecting with the
underwriters who price the risks.
“In the good old days, the underwriters
would sit in their box, and brokers would
come in and transact business,” says
Darren Rowe, Client and Markets Director
for Arthur J. Gallagher & Co. “But the
model is changing.”
Increased competition and the ease of
doing business across time zones means
decisions often need to be made outside
of trading hours. “Risks of all different
natures are thrown at us all the time,”
Rowe says. “What stands out for me about
ArgoGlobal is the innovative and flexible
approach to solving problems.”
For Rowe, ArgoGlobal’s approach makes
it possible to work through challenging
scenarios in short order. “It’s the forward
thinking,” Rowe says. “ArgoGlobal always
looks at ways to do it, reasons to write
the business rather than not to write
the business, which is what we need.
“They’re answering the second question
before we finish the first question,” Rowe
continues. “ArgoGlobal is always ahead
of the game.”
12
Annual Report 2015 Syndicate 1200 Client Profile
Arthur J. Gallagher & Co.
London, England
Syndicate 1200 Lines
Syndicate 1200 underwrites worldwide property, specialty and non-U.S. liability insurance within the Lloyd’s of London global
franchise. It operates through five divisions: property, liability, marine and energy, aerospace, and specialty.
In line with Argo Group’s commitment
to continuous improvement, Syndicate
1200 focused its activities in seven key
areas in 2015.
We worked to expand our profitable lines
of business while also establishing new
products in areas where we believe our
strengths will serve us well.
We are pleased to report progress in all of
these key areas. Operating in one of the
insurance industry’s most competitive
markets, four of Syndicate 1200’s five
divisions wrote more premiums in 2015
than they did in 2014. In just its eighth
year as a member of Argo Group,
Syndicate 1200 solidified its position as a
core contributor to Argo Group’s results.
We sought to strengthen and broaden our
already strong relationships with London
brokers and to support the Lloyd’s
platform in London and outposts around
the world.
We continued to pursue capital from
other members of the Lloyd’s market.
We partnered with colleagues in other
Argo Group business segments to meet
customer needs. We worked diligently
to attract new talent. We also continued
development of a data warehouse that
will allow us to meet the reporting
requirements of the European Union’s
Solvency II Directive.
The bulk of the segment’s growth in 2015
was driven by its North American binder
business; by new classes of risk added in
recent years, such as international
casualty; and by the launch of the
segment’s platform in Asia. The only
division to post lower gross premiums
was marine and energy, operating in a
sector where results were pressured
industrywide by a continued dramatic
slide in oil prices.
Looking ahead, we see additional
opportunities for Syndicate 1200 to grow,
in part by collaborating with other Argo
Group business segments to deliver
solutions that would be difficult to
provide independently. These efforts will
be overseen by a largely new leadership
team, including David Lang, who in 2015
was named Chief Operating Officer of
Syndicate 1200.
Overall, Syndicate 1200’s gross written
premiums grew 3.8% for the year.
Earned premiums fell modestly — by just
less than 1% — largely because the
segment reduced its participation
percentage in its Lloyd’s syndicate to 68%,
down from 75% in 2014. This had the
offsetting effect of boosting fee income.
Underwriting income declined 32.1%, due
in part to increased catastrophe losses,
including $3.5 million attributable to the
port explosion in Tianjin, China, in
August. Nonetheless, Syndicate 1200 was
able to post a combined ratio of 94.1%, in
part by shrinking fixed expenses to
offset increased commission and
broker expenses.
Syndicate 1200
Gross written premiums
Earned premiums
For the Years Ended December 31
(dollar amounts in millions)
Gross Written Premiums
(dollar amounts in millions)
2013
2014
2015
$ 583.9
$ 566.2
$ 587.5
$ 401.7
$ 411.1
$ 407.4
$583.9
$587.5
3.8%
increase
from 2014
Losses and loss adjustment expenses
208.6
208.1
213.6
$566.2
Other reinsurance-related expenses
Underwriting, acquisition and insurance expenses
Underwriting income
Net investment income
Interest expense
Fee and other income (expense), net
6.7
156.2
30.2
11.0
(3.3)
(0.6)
—
—
167.8
169.9
35.2
10.2
(3.2)
1.9
23.9
9.2
(2.6)
3.3
Income before income taxes
$ 37.3
$ 44.1
$ 33.8
Loss ratio
Expense ratio
Combined ratio
52.8%
39.6%
92.4%
50.6%
40.8%
91.4%
52.4%
41.7%
94.1%
’13
’14 ’15
13
Annual Report 2015 The Team Argo Difference
Argo Group’s success is built on the intellect, commitment and enthusiasm
of our team members. We invest substantially in our employees’
ideas and ambitions, as well as the communities where they live and work.
“Our leadership is
definitely willing to
help you achieve your
goals. I love that we
are all part of the
continued growth at
Argo Group.”
Our Customer Focus
Team Argo includes more than 1,300
incredible employees, located at 32
offices worldwide. Our team members
don’t just want to fit into a company,
they want to transform our company.
“If you’re the type of individual who
enjoys a challenge, wants to push
yourself, stretch your boundaries,
and try to be the person that you’ve
always thought you can be in a
business context, Argo Group is the
right place to be,” says Stuart Boyne,
Senior Vice President and Chief
Human Resources Officer.
Angel Smith
Corporate Purchasing Analyst
“The culture here at Argo Group is very
open. You feel like you can reach out and
talk to anyone, whether they are just one
desk down from you or across the ocean.”
“There’s a willingness to make investments where
they need to be made and an understanding that
technology will help propel us into the future. I’m
excited to see where that takes us.”
“I like the sense of the camaraderie,
the feeling of a team working
together for common objectives.”
Adalberto “Beto” Camarillo
Vice President, Enterprise
Portfolio Management
Leah Ohodnicki
Senior Vice President – Head of Marketing
and Producer Management, Colony Specialty
and Argo Pro
David Lang
Chief Operating Officer, Argo Global
1
2
3
5
Our Local Community
Involvement
Team Argo was out in force again in 2015.
Our employees proudly volunteered
hundreds of hours to secure the future of
the communities where we live and
work. Employees also made financial
contributions, which the company
matched at 150%, to more than 175
nonprofit organizations.
1. Argo Group President and CEO Mark
Watson joined an employee-organized
day of sailing for students affiliated
with the Royal Bermuda Yacht Club.
2. Members of Argo Group’s internal
audit team in San Antonio helped
Habitat for Humanity build two
houses.
3. Argo Group employees volunteered
time and financial support to families
who utilize services of The Family
Centre in Bermuda.
4. In March, Argo Group employees in
Richmond shaved their heads to
raise $7,500 for the St. Baldrick’s
Foundation, which funds research
on cures for childhood cancers.
5. In November, employees handed out
250 Thanksgiving baskets to San
Antonio-area families in need.
4
15
Annual Report 2015
Report of Independent Registered Public Accounting Firm
on Condensed Consolidated Financial Statements
The Board of Directors and Shareholders of
Argo Group International Holdings, Ltd.
We have audited, in accordance with the standards of the Public Com-
pany Accounting Oversight Board (United States), the consolidated
balance sheets of Argo Group International Holdings, Ltd. (the Company)
at December 31, 2015 and 2014 and the related consolidated statements
of income, comprehensive income, shareholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2015 (not
presented separately herein) and in our report dated February 26, 2016,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated financial statements as of December 31, 2015
and 2014 and for each of the three years in the period ended December
31, 2015 (presented on pages 17 through 20) is fairly stated, in all material
respects, in relation to the consolidated financial statements from which
it has been derived.
Executive Leadership
We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness
of the Company’s internal control over financial reporting as of December
31, 2015, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February
26, 2016 (not presented separately herein) expressed an unqualified
opinion thereon.
February 26, 2016
Board of Directors
Gary V. Woods
F. Sedgwick Browne
H. Berry Cash
Hector De Leon
Mural R. Josephson
Chairman of the Board (1) (3) (4) (5) (6)
Kathleen A. Nealon
Director (2) (3) (5) (6)
Director (3) (4) (6)
Director (1) (2) (3) (6)
Director (2) (6)
John R. Power, Jr.
John H. Tonelli
Mark E. Watson III
Director (2) (6)
Director (2) (3) (5) (6)
Director (3) (4) (6)
Director (1) (4) (6)
(1) Member of the Executive Committee of the Board of Directors
(2) Member of the Audit Committee of the Board of Directors
(3) Member of the Human Resources Committee of the Board of Directors
(4) Member of the Investment Committee of the Board of Directors
(5) Member of the Nominating Committee of the Board of Directors
(6) Member of the Risk & Capital Committee
Senior Management
Argo Group International Holdings, Ltd.
Mark E. Watson III
mark.watson@argolimited.com
Jay S. Bullock
jay.bullock@argolimited.com
President and Chief Executive Officer
Executive Vice President and
Chief Financial Officer
Stuart Boyne
stuart.boyne@argolimited.com
Senior Vice President and
Chief Human Resources Officer
Michael Fusco
michael.fusco@argolimited.com
Senior Vice President and
Chief Actuary
Alex Hindson
alex.hindson@argolimited.com
Chief Risk Officer
Nigel Mortimer
nigel.mortimer@argolimited.com
Executive Vice President,
Strategy & Business Development
Anastasios Omiridis
andy.omiridis@argolimited.com
Senior Vice President and
Chief Accounting Officer
Jeff Radke
jeff.radke@argolimited.com
Mark H. Rose
mrose@argogroupus.com
Axel Schmidt
axel.schmidt@argolimited.com
Susan Spivak Bernstein
susan.spivak@argolimited.com
16
Head of Global Operations
Senior Vice President and
Chief Investment Officer
Group Chief Underwriting Officer
Senior Vice President,
Investor Relations
Argo Group US
Kevin J. Rehnberg
Frank Mike-Mayer
Mark Wade
Arthur Davis
Joshua C. Betz
Andrew Borst
Rooney Gleason
Kurt Tipton
Ronald Vindivich
International Specialty
Nigel Mortimer
Pedro Purm, Jr.
Matthew Wilken
Syndicate 1200
David Harris
Bruno Ritchie
David Lang
President, U.S. Operations
Chief Underwriting Officer
Chief Claims Officer
President, Excess and Surplus Lines
President, Argo Surety
President, U.S. Specialty Programs
President, Argo Insurance – U.S. Retail
President, Rockwood
President, Trident Public Risk Solutions
President, Argo Insurance Bermuda
President, Argo Seguros
President, Argo Re
Managing Director
Underwriting Director
Chief Operating Officer
Annual Report 2015 ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Summary of Significant Accounting Policies
Business. Argo Group International
Holdings, Ltd. and subsidiaries (collectively,
“we” or “Argo Group”) is an international
underwriter of specialty insurance and
reinsurance products in the property and
casualty market.
Basis of Presentation. The condensed
consolidated financial statements of Argo
Group have been prepared in accordance
with accounting principles generally
accepted in the United States (“GAAP”). The
preparation of financial statements in
conformity with GAAP requires manage-
ment to make estimates and assumptions
that affect the reported amounts of assets
and liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during
the reporting period. Actual results could
differ from those estimates.
The information in the Condensed Consoli-
dated Balance Sheets, the Condensed
Consolidated Statements of Income and the
Condensed Consolidated Statements of
Cash Flows, shown on pages 18 through 20,
is derived from the information in the
Consolidated Balance Sheets, the Consoli-
dated Statements of Income and the
Consolidated Statements of Cash Flow in
Argo Group International Holdings, Ltd.
2015 Form 10-K. For complete financial
statements, including notes, please refer to
the Consolidated Financial Statements
beginning on Page F-1 of Argo Group
International Holdings, Ltd. 2015 Form 10-K.
See also Management’s Discussion and
Analysis of Financial Condition and Results
of Operations and other information in the
2015 Form 10-K.
The financial statements include the
accounts and operations of Argo Group. All
material intercompany accounts and
transactions have been eliminated.
10% Stock Dividend. On February 17, 2015,
our Board of Directors declared a 10% stock
dividend payable on March 16, 2015, to
shareholders of record at the close of
business on March 2, 2015. On May 7, 2013,
our Board of Directors declared a 10% stock
dividend, payable on June 17, 2013, to
shareholders of record at the close of
business on June 3, 2013. For the years
ended December 31, 2014 and 2013, all
references to share and per share amounts
in these condensed consolidated financial
statements have been adjusted to reflect
the stock dividends for all periods
presented.
Investments. Investments in fixed
maturities at December 31, 2015 and 2014
include bonds and structured securities.
Equity securities include common stocks.
Other investments consist of private equity
funds and limited partnerships. Short-term
investments consist of money market funds,
funds on deposit with Lloyd’s as security to
support the corporate member’s capital,
United Kingdom short-term government
gilts, U.S. Treasury bills, sovereign debt and
interest-bearing cash accounts. Short-term
investments, maturing in less than one year,
are classified as investments in the
consolidated financial statements.
Goodwill and Intangible Assets. Goodwill
is the result of the purchase prices of our
business combinations being in excess of
the identified net tangible and intangible
assets. Goodwill is recorded as an asset and
is not amortized. Intangible assets with a
finite life are amortized over the estimated
useful life of the asset. Intangible assets
with an indefinite useful life are not
amortized. Goodwill and intangible assets
are tested for impairment on an annual basis
or more frequently if events or changes in
circumstances indicate that the carrying
amount may not be recoverable. If the
goodwill or intangible asset is impaired, it is
written down to its fair value with a
corresponding expense reflected in the
Consolidated Statements of Income.
Goodwill and intangible assets are allocated
to the segment in which the results of
operations for the acquired company are
reported.
Amortization expense incurred in 2015, 2014
and 2013 associated with assets having a
finite life was $7.5 million, $5.6 million and
$6.1 million, respectively.
Earned Premiums. Premium revenue is
recognized ratably over the policy period.
Premiums that have yet to be earned are
reported as “Unearned premiums” in the
Condensed Consolidated Balance Sheets.
Reserves for Losses and Loss Adjustment
Expenses. Liabilities for unpaid losses and
loss adjustment expenses include the
accumulation of individual case estimates
for claims reported as well as estimates of
incurred but not reported claims and
estimates of claim settlement expenses.
Reinsurance recoverables on unpaid claims
and claim expenses represent estimates of
the portion of such liabilities that will be
recoverable from reinsurers. Amounts
recoverable from reinsurers are recognized
as assets at the same time and in a manner
consistent with the unpaid claims liabilities
associated with the reinsurance policy.
Income Taxes. Deferred tax assets and
liabilities are recognized for the estimated
future tax consequences attributable to
differences between the financial statement
carrying amounts of existing assets and
liabilities and their respective tax bases.
Deferred tax assets and liabilities are
measured using enacted tax rates in effect
for the year in which those temporary
differences are expected to be recovered or
settled. The effect on deferred tax assets
and liabilities of a change in tax rates is
recognized in net income in the period in
which the change is enacted.
(Further information on our accounting
policies can be found in Argo Group’s 2015
Form 10-K: in the Critical Accounting
Policies section of Management’s Discussion
and Analysis and also in Note 1 to the
Financial Statements).
17
Annual Report 2015 ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Condensed Consolidated Balance Sheets
(in millions, except number of shares and per share amounts)
ASSETS
Investments:
Fixed maturities, at fair value:
Available-for-sale (cost: 2015 - $2,971.0; 2014 - $2,817.2)
$ 2,927.3
$ 2,840.7
As of December 31
2015
2014
Equity securities, at fair value (cost: 2015 - $349.7; 2014 - $324.8)
Other investments (cost: 2015 - $499.6; 2014 - $488.9)
Short-term investments, at fair value (cost: 2015 - $211.2; 2014 - $258.3)
Total investments
Cash
Premiums receivable and reinsurance recoverable
Goodwill and other intangibles, net of accumulated amortization
Current income taxes receivable, net
Ceded unearned premiums
Other assets
Total Assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Reserves for losses and loss adjustment expenses
Unearned premiums
Ceded reinsurance payable, net
Senior unsecured fixed rate notes
Other indebtedness
Junior subordinated debentures
Deferred tax liabilities, net
Accrued underwriting expenses and other liabilities
Total liabilities
Shareholder’s equity
Common shares - $1.00 par, 37,105,922 and 36,889,386 shares
issued at December 31, 2015 and 2014, respectively
Additional paid-in capital
Treasury shares (9,181,644 and 8,606,489 shares at
December 31, 2015 and 2014, respectively)
Retained earnings
Accumulated other comprehensive income, net of taxes
Total shareholders’ equity
Total liabilities and shareholders’ equity
18
463.9
513.7
210.8
4,115.7
121.7
1,525.6
225.5
11.6
250.8
379.2
503.8
495.1
258.3
4,097.9
81.0
1,350.8
230.8
14.9
207.6
373.3
$ 6,630.1
$ 6,356.3
$ 3,123.6
$ 3,042.4
886.7
312.4
143.8
55.2
172.7
23.6
244.0
4,962.0
37.1
964.9
(331.1)
985.7
11.5
1,668.1
817.2
178.8
143.8
62.0
172.7
53.0
239.7
4,709.6
34.3
836.3
(301.4)
969.4
108.1
1,646.7
Please see accompanying “Summary of Significant Accounting Policies” on page 17.
$ 6,630.1
$ 6,356.3
Annual Report 2015
ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Condensed Consolidated Statements of Income
and Comprehensive Income
(in millions, except number of shares and per share amounts)
Premiums and other revenue:
Earned premiums
Net investment income
Net realized investment and other gains
Total Revenue
Expenses:
Losses and loss adjustment expenses
Other reinsurance-related expenses
Underwriting, acquisition and insurance expenses
Interest expense
Fee and other expense, net
Foreign currency exchange gain
Impairment of intangible assets
Total Expenses
Income before income taxes
Provision for income taxes
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
As of December 31
2015
2014
2013
$ 1,371.9
$ 1,338.1
$ 1,303.8
85.6
27.1
1,484.6
766.1
—
539.6
19.0
0.7
(18.3)
0.0
86.6
94.0
1,518.7
747.4
—
539.2
19.9
0.6
(7.8)
3.4
100.0
71.3
1,475.1
742.0
19.2
510.8
20.2
4.9
(1.7)
0.0
1,307.1
1,302.7
1,295.4
177.5
14.3
216.0
32.8
179.7
36.5
$ 163.2
$ 183.2
$ 143.2
$ (6.0)
$ (4.1)
$ (2.8)
Defined benefit pension plans net (loss) gain arising during the period
0.1
(2.4)
1.3
Unrealized gains on securities:
(Losses) gains arising during the period
Reclassification adjustment for gains included in net income
Other comprehensive (loss) income, net of tax
Comprehensive income
Net income per common share:
Basic
Diluted
(89.8)
(0.9)
(96.6)
(12.5)
(20.7)
(39.7)
0.2
(40.4)
(41.7)
$ 66.6
$ 143.5
$ 101.5
$ 5.84
$ 5.72
$ 6.39
$ 4.85
$ 6.27
$ 4.67
Cash dividend declared per common share:
$ 0.80
$ 0.63
$ 0.54
Weighted average common shares:
Basic
Diluted
Please see accompanying “Summary of Significant Accounting Policies” on page 17.
27,972,962
28,690,306
29,536,472
28,533,299
29,212,848
30,656,483
19
Annual Report 2015 ARGO GROUP INTERNATIONAL HOLDINGS, LTD.
Condensed Consolidated Statements of Cash Flows
(in millions, except number of shares and per share amounts)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Amortization and depreciation
Share-based payments expense
Excess tax expense from share-based payments arrangements
Deferred federal income tax provision (benefit), net
Net realized investment and other gains
Loss on disposal of fixed assets, net
Impairment of intangible assets
Change in:
Receivables
Reserves for losses and loss adjustment expenses
Unearned premiums
Ceded reinsurance payable and funds held
Other assets and liabilities, net
Cash provided (used) by operating activities
Cash flows from investing activities:
Sales, maturities and mandatory calls of investments
Purchases of investments
Change in short-term investments, foreign regulatory
deposits and voluntary pools
Settlements of foreign currency exchange forward contracts
Other, net
Cash (used) provided by investing activities
Cash flows from financing activities:
Payment on note payable
Redemption of trust preferred securities, net
Activity under stock incentive plans
Repurchase of company’s common shares
Excess tax expense from share-based payment arrangements
Payment of cash dividend to common shareholders
Cash used by financing activities
Effect of exchange rate changes on cash
Change in cash
Cash, beginning of period
Cash, end of period
20
For the Years Ended December 31
2015
2014
2013
$ 163.2
$ 183.2
$ 143.2
38.7
29.1
(0.6)
8.3
(27.1)
0.2
—
(182.6)
94.3
76.5
157.2
(74.6)
282.6
37.2
19.6
(0.1)
27.6
(94.0)
—
3.4
256.7
(182.0)
39.1
(163.9)
3.7
130.5
39.6
23.3
(0.2)
3.8
(71.3)
0.2
—
86.7
(8.9)
51.4
(246.4)
(21.6)
(0.2)
1,811.8
(2,034.1)
1,585.0
(1,736.8)
2,248.1
(1,975.8)
49.6
(10.1)
(10.8)
(193.6)
—
—
1.8
(29.7)
0.6
(22.7)
(50.0)
1.7
40.7
81.0
96.5
(1.1)
(64.9)
(121.3)
(0.1)
(18.0)
4.6
(50.8)
0.1
(18.2)
(82.4)
(3.2)
(76.4)
157.4
(153.0)
(3.9)
5.4
120.8
—
—
2.6
(46.5)
0.2
(15.8)
(59.5)
0.5
61.6
95.8
$ 121.7
$ 81.0
$ 157.4
Please see accompanying “Summary of Significant Accounting Policies” on page 17.
Annual Report 2015 Shareholder Information
Stock Listing
Argo Group International Holdings,
Ltd. common stock trades on
NASDAQ under the symbol AGII.
Stock Transfer Agent
Questions regarding stock
registration, change of address,
change of name, or transfer should
be directed to:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
www.amstock.com
T. 800.937.5449
e-mail address: info@amstock.com
Corporate Office
Argo Group International
Holdings, Ltd.
110 Pitts Bay Road
Pembroke HM 08
Bermuda
T. 441.296.5858
Internet
www.argolimited.com
Shareholder Services /
Investor Relations
Mailing address:
Argo Group International
Holdings, Ltd.
Shareholder Services/Investor
Relations
PO Box HM 1282
Hamilton HM FX
Bermuda
T. 441.296.5858
Investor Relations Contact
Susan Spivak Bernstein
Senior Vice President, Investor Relations
(212) 607-8835
IR@argolimited.com
Corporate Secretary
Craig Comeaux
Vice President, Secretary and
Corporate Counsel
(210) 857-0412
ccomeaux@argogroupus.com
Forward-Looking Statements
Disclosure
This report contains certain
statements that are “forward-looking
statements” within the meaning
of Section 27A of the Securities
Act of 1933 and Section 21E of the
Securities Exchange Act of 1934,
as amended. Such statements are
qualified by the inherent risks and
uncertainties surrounding future
expectations generally and also may
differ materially from actual future
experience involving any one or
more of such statements. For a more
detailed discussion of such risks
and uncertainties, see Argo Group’s
filings with the SEC. The inclusion
of a forward-looking statement
herein should not be regarded
as a representation by Argo Group
that Argo Group’s objectives will
be achieved. Argo Group undertakes
no obligation to publicly update
forward-looking statements, whether
as a result of new information, future
events or otherwise.
21
Annual Report 2015