Argo warns that Q3 figures will be hit by loss items
Argo Group International Holdings has warned that its results for the third quarter of 2019, which will be released on November 7, will be adversely affected by several loss items, primarily related to its international operations.
“The adjustments made to our current and prior accident year loss expectations over the last two quarters are related to large loss activity, business we have previously exited or where we have taken aggressive underwriting actions to improve profitability,” said Argo Group CEO Mark Watson. “These charges are a result of increased loss occurrence and a more challenging claims environment in some classes of business.
“Despite these challenges, we continue experiencing strong results in our US operations, and we are seeing rate improvement across several key lines of business both in the US as well as in our international operations.”
The company added that key items affecting the third quarter include catastrophe losses of approximately $19 million pre-tax, or 4.3 points on Argo’s consolidated loss ratio for the third quarter. These catastrophe losses were primarily related to Hurricane Dorian, Typhoon Faxai and flood losses in the US.
Other items include prior accident year losses of approximately $42 million or 9.3 points on Argo’s consolidated loss ratio for the third quarter. Reserve increases were related to the company’s Bermuda insurance business unit, as well as European and London operations within Argo’s international operations and were the result of new information received in the quarter relating to the resolution or notification of several large losses, as well as a continued review of International business currently in run-off. The losses were partially offset by a modest net reserve decrease within Argo’s US operations.
Argo also said that the quarter would include current accident year losses of approximately $10 million, or an additional 6.4 points when compared to the second quarter 2019 year-to-date current accident year loss ratio for international operations. The losses are primarily related to property, liability and marine lines within international operations. The adjustment reflects a change in actuarial estimates based on a more frequent occurrence of large losses and the recalibration of the current year based on prior year adjustments.
Finally Argo pointed out that it performs an internal review of run-off reserves during third or fourth quarter annually. At the end of the third quarter the review of the reserve position was ongoing, and while information received to date is consistent with management’s expectations, Argo expects to conclude the review during the fourth quarter. As previously disclosed, Argo is also reviewing possible reinsurance alternatives to address the run-off reserves.
