A.M. Best Affirms Argo Group Ratings
Ratings agency A.M. Best Co. has affirmed the financial strength rating of A [Excellent] and issuer credit ratings of “a” of Argo Re Ltd. and its subsidiaries. A.M. Best also has affirmed the ICR and debt ratings of “bbb” of the parent holding company, Bermuda-based Argo Group International Holdings, Ltd.
Concurrently, A.M. Best has affirmed the ICR of “bbb” and the debt 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 the Argo Group. The outlook for all ratings is stable.
A statement from the ratings agency said,”The rating affirmations reflect Argo Re’s solid overall capitalization, management’s product expertise in niche focus areas, historically strong operating performance and favorable reserve development.
“The ratings also consider Argo Group’s profitability in 2012 and in the first half of 2013, its conservative financial leverage [total debt-to-total capital] and the financial flexibility that Argo Re derives from 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.
“Partially offsetting these positive rating factors is the execution risk associated with Argo Group’s expansion into new territories such as Brazil. A.M. Best recognizes that management has been addressing this risk and that the integration of acquisitions and re-engineering of related businesses is complete.
“Management’s ability to continue to execute on this strategy without significantly disrupting its current operations will be considered in A.M. Best’s future rating evaluations. Additional offsetting rating factors include competitive pressures, low new money investment yields, the effects from weak economic conditions and Argo Group’s elevated expense structure.
“A.M. Best believes that Argo Re and its subsidiaries are well positioned at their current rating levels. Key drivers that could lead to downward rating movement include material deterioration in the organization’s underwriting and/or operating performance, material adverse loss reserve development and/or a material decline in risk-adjusted capital.”
