Argo Shares Jump: News Of Repurchase Plan
Shares in Bermuda-based Argo Group International Holdings, Ltd. were up by four percent on Friday [Feb. 18] after its board of directors s authorised the company to repurchase $150 million of Argo Group common stock. The new share repurchase authorisation supersedes the previous authorisation announced on November 13, 2007.
Company officials also said its board of directors had declared a quarterly cash dividend of 12 cents per share on the company’s common stock. The dividend will be paid on Tuesday, March 15, 2011, to shareholders of record on Tuesday, March 1, 2011.
Since 2007, when the board approved the previous share repurchase authorisation, Argo Group has repurchased approximately $125 million or 3.6 million shares of its outstanding common stock.
Shares will be repurchased from time to time under the new authorisation in open market transactions or privately negotiated transactions at Argo Group’s discretion, subject to market conditions and other factors.
Argo is an international underwriter of specialty insurance and reinsurance products which operates out of offices on Pitts Bay Road.
I guess time will tell whether these companies are making the right move buy doing these buybacks. As they buy the stock at a discount to book they simultaneously lower their total book value and raise their book value per share. With the new lower book value or net equity they will achieve a higher ROE from earnings from this new lower equity base. The question I have is whether this is the tortoise and the hare approach as the next time they need more capital, under a lower equity market environment or a big event loss, will it be more expensive to raise capital in the debt and equity markets. Consensus is usually wrong and the markets have a way of making people short of cash at the wrong time. Maybe lower current ROE would lead to higher long term ROE without so much buyback?