A.M. Best Affirms Ratings Of Argo Group

October 27, 2015

A.M. Best has affirmed the financial strength rating [FSR] of A [Excellent] and the issuer credit ratings [ICR] of “a” of  Bermuda-based Argo Re Ltd. and its subsidiaries.

A.M. Best also has affirmed the ICR and the issue ratings of “bbb” of the parent holding company, Argo Group International Holdings, Ltd.

Concurrently, A.M. Best has affirmed the ICR of “bbb” and the issue rating of “bbb” on $143.75 million 6.5% senior unsecured notes due 2042 of Argo Group US, Inc.. These senior notes are fully and unconditionally guaranteed by Argo Group. The outlook for these ratings is stable.

Additionally, A.M. Best has assigned an FSR of A [Excellent] and an ICR of “a” to ARIS Title Insurance Corporation. The outlook assigned to both ratings is stable.

A.M. Best said, “The rating affirmations reflect Argo Re’s solid risk-adjusted capitalization, historically strong operating performance utilizing demonstrated product expertise in niche focus areas, proven fundamentals across numerous lines of coverage, a strong business profile as one of the leading organizations focused on writing surplus lines and specialty commercial business, and solid liquidity.

“The specialty U.S. operations represent the majority of Argo Group’s premium writings. These are managed holistically with respect to capital, investment strategy and market presence. The ratings also reflect the diversified insurance and reinsurance platforms within the Argo group of companies and the financial flexibility afforded by its publicly traded parent, Argo Group.

“Over the near term, A.M. Best expects that Argo Re’s results should continue to be positively influenced by actions management has undertaken to reduce its worldwide property exposure and improve overall operational efficiencies. These positive rating factors are partially offset by competitive pressures, low new money investment yields, the effects from sluggish economic conditions and Argo Group’s elevated expense structure.

“A.M. Best also remains somewhat concerned with recent unfavorable loss reserve development patterns in certain operating entities. Nonetheless, the outlooks reflect A.M. Best’s expectation that operating performance and capitalization will continue to support the ratings.

“The ratings assigned to ARIS Title are based upon the explicit support provided by two affiliates and its affiliation with Argo Group. The explicit support provided primarily by Argo Group’s lead insurer, Argo Re Ltd., and an affiliate, Argonaut Great Central Insurance Company, is in the form of an intercompany quota share agreement.

“A.M. Best believes that Argo Re and its subsidiaries are well-positioned at their current rating levels. Key drivers that could lead to upward rating movement or an enhancement in the rating outlook over the long term would be the ability to further enhance the underwriting and operating results of Argo Re encompassing all core business segments.

“Downward rating pressure or a negative change in the rating outlook could result if there were material deterioration in the organization’s underwriting performance due to material adverse loss reserve development or outsized losses in relation to its peer group that results in a material decline in risk-adjusted capital.”

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