Brookfield Re takeover of Argo on track for end of year close
Re/insurer Argo Group and Brookfield Re have received a majority of the required regulatory approvals for their $1 billion merger, Argo has said.
Bermuda-based Argo, which is expected to be taken over by Brookfield Re by the end of the year, made the announcement has it reported a third quarter loss of $49.5 million compared to a loss of $51.4 million in the same period in 2022.
Gross written premiums dropped from $751 million to $528 million in the period while net earned premiums were $342.7 million, down from $455 million.
The company’s combined ratio rose from 101.1% to 115.8%.
“We were pleased to receive a majority of the required regulatory approvals for the merger with Brookfield Reinsurance,” said Argo executive chairman and chief executive officer, Thomas A. Bradley. “As we wait to receive the remaining required regulatory approvals, we continue to work diligently with Brookfield Reinsurance on integration planning and anticipate an orderly transition for our customers and business partners once the transaction is completed.
“Argo’s third quarter performance benefited from disciplined expense management and increased investment returns. We are encouraged by the progress of our ongoing efforts to optimise the business to deliver improved profitability moving forward and believe the company is well positioned to capitalize on its enhanced future growth prospects as part of Brookfield Reinsurance.”
Argo announced in February it was being bought by Brookfield Re, also based in Bermuda, for $1.1 billion.
Argo said it had reduced losses from $299 million to $281 million and had cut administrative and general expenses from $161 million to $116 million.
Total catastrophe losses were $24.7 million or 7.2 points on the loss ratio compared to 23.4 million or 5.1 percentage points on the loss ratio.
Net adverse prior year development was $51 million or 14.9 percentage points on the loss ratio.
Net investment income of $40.4 million marked an increase of $6.4 million or 18.8% from the prior year third quarter. The increase was driven by higher interest rates and improved returns on alternative investments, the company said.
Argo said its expense ratio of 33.8% improved 1.6 percentage points and was driven the change in business mix resulting from the sale of Argo Underwriting Agency and its Lloyd's Syndicate 1200.
The sale of Syndicate 1200 to Westfield marked one of a series of asset sales including Contract Binding P&C and US Specialty Property in 2021, Brazilian and Maltese businesses in 2022 and Italian and US grocery and retail businesses in 2023.
Argo’s US operations recorded a drop of $37.5 million to $463 million or 7.5%, primarily because it took “proactive actions” taken in certain lines to prioritise improving profitability. Argo reported that it had experienced double digit decreases in its commercial D&O business, while its remaining businesses reported single digit increases.
Net adverse development was $46.6 million primarily due to businesses the company has exited and professional lines.
In its international segment, Argo reported gross written premiums of $65.3 million, a decrease of $185 million from $250 million and there were also adverse reserve developments of $4.4 million compared to a favourable development of $4.4 million a year earlier.