A.M. Best Affirms Argo Group Ratings

September 24, 2017

A.M. Best has affirmed the Financial Strength Rating of A [Excellent] and the Long-Term Issuer Credit Ratings of “a” of Bermuda-based Argo Re Ltd. and its subsidiaries.

A statement from the rating company said, “A.M. Best also has affirmed the Long-Term ICR of “bbb” and the Long-Term Issue Credit Ratings [Long-Term IR] of the parent holding company, Argo Group International Holdings, Ltd.

“Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb” and the Long-Term IR 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 of these Credit Ratings [ratings] is stable.

“The rating affirmations reflect Argo Re’s solid capitalization, historically strong operating performance and an enterprise risk management program that is supportive of its risks. 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.

“This rating also takes into consideration management’s preliminary views that loss potential from Hurricanes Harvey and Irma should remain within Argo’s risk tolerance. This view integrates consideration of Maybrooke Holdings Limited [Ariel Re], which the Argo Group acquired in February 2017.

“Argo Re benefits from its demonstrated product expertise in niche focus areas and proven solid underwriting fundamentals that span numerous lines of business and territories. Argo Re also maintains a business profile with broad global reach that complements Argo’s longstanding U.S. presence in the excess and surplus lines sector and specialty admitted markets.

“These are managed holistically with respect to capital, investment strategy and market presence. The acquisition of Ariel Re is another example of Argo’s desire to broaden its business profile and enhance the group’s presence in the Lloyd’s and Bermuda markets.

“These positive rating factors are offset partially by the potential earnings volatility inherent in the group’s underwriting operations [via catastrophes exposure], competitive pressures in and outside of the United States and the effects from sluggish economic conditions worldwide. Argo’s desire to grow through acquisitions is another concern. However, management’s success thus far lessens this concern.

“Key drivers that could lead to upward rating movement over the long term would be the ability to further enhance the underwriting and operating results of Argo Re with an accompanying increase in risk-adjusted capital.

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

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