Argo Group International Holdings Ltd
Argo Group International — Proxy Contest (November 2022)
39 slides from Argo Group International's proxy contest presentation, Nov 18, 2022
Slide 1: Advancing Argo
INVESTOR PRESENTATION November 18, 2022 ADVANCING ARGO
Slide 2: Summary of Key Messages
2 SUMMARY OF KEY MESSAGES Introducing the New Argo • Argo has successfully transformed into a leading U.S. specialty insurer • Since its strategic repositioning in late 2019, Argo has significantly optimized its business mix • The current business position is set for growth and strong returns Board
Slide 3: Table of Contents
3 TABLE OF CONTENTS Introducing the New Argo 1 Board - Led Actions Creating a Stronger Platform 2 Board Overseeing Thorough Strategic Review Process 3 Argo Has the Right Governance Profile and Board in Place 4 Election of Capital Returns’ Nominees Would Remove Superior Talent and Critical Skills Fro
Slide 4: Introducing the New Argo
INTRODUCING THE NEW ARGO 1
Slide 5: Argo is a diversified specialty P&C insurer with access to attractive niche segments
5 Note: Metrics as of YE 2021 unless otherwise stated. 1 Actual headcount as of June 2022 adjusted to reflect pending sale of Syndicate and Dubai. 2 Estimated based on FTE in underwriting functions Level 4 and above. ARGO IS A DIVERSIFIED SPECIALTY P&C INSURER WITH ACCESS TO ATTRACTIVE, NICHE BUSINE
Slide 6: Portfolio actions timeline 2020-2022
6 U.S. Operations 2020 2021 2022 Announced Syndicate 1200 Reinsurance - To - Close, 2017 and Prior Years Exited Reinsurance Business / Ariel Re (~$320mm of GWP) Exited U.S. Grocery & Retail (~$30mm of GWP) Exited European Underwriting Outside of Lloyd’s (~$95mm of GWP) Completed sale of Brazilian Op
Slide 7: Pro forma impact of Syndicate 1200 and U.S. LPT transactions
7 Liability 44% Professional 23% Specialty 17% Property 15% U.S. 83% International 17% PRO FORMA IMPACT OF RECENTLY ANNOUNCED SYNDICATE 1200 AND U.S. LPT TRANSACTIONS Pre - Transactions Pro Forma 1 Pre - transaction U.S. / International based risk based on YE 2021. Q2 2022 LTM GWP: $3.1bn Liab
Slide 8: Argo has significantly optimized its business mix
8 ARGO HAS SIGNIFICANTLY OPTIMIZED ITS BUSINESS MIX Business Optimization ◼ March 2021 Investor Day premiered Argo’s U.S. - focused strategy, which was developed through collaboration with the Board ◼ Recently announced sale of Syndicate 1200, focusing Argo on core U.S. specialty market ◼ Recently c
Slide 9: Argo has transformed its business over the past three years
9 Argo Has Transformed its Business Over the Past Three Years Simplify Reduce Eliminate Operating and organization structure to create a more focused company Volatility and unwanted risks associated with the core business segments Business lines that do not support Argo’s strategic goals 2019 Busine
Slide 10: Board-Led Actions Creating Stronger Platform
BOARD - LED ACTIONS CREATING STRONGER PLATFORM 2
Slide 11: Board-led actions creating stronger platform for Argo
11 BOARD - LED ACTIONS CREATING STRONGER PLATFORM FOR ARGO Business transformation is substantially complete with reduced risk exposures 5 Robust balance sheet with high quality investment portfolio 6 Highly experienced, industry - respected management team leading a deep bench of underwriting talen
Slide 12: Diversified specialty insurer operating in profitable business segments
12 Note: Includes ongoing businesses only. ¹ Segment known as Argo Pro 2 Segment known as U.S. Specialty Programs 3 Alternative Risk Solutions (Argo’s fronting business) 4 Segment known as Rockwood 5 Segment known as Trident DIVERSIFIED SPECIALTY INSURER OPERATING IN PROFITABLE BUSINESS SEGMENTS Arg
Slide 13: Re-underwritten portfolio provides path to improved margins and ROEs
13 1 Combined ratio excluding PYD and Catastrophe losses. Ongoing vs. Reported Combined Ratio 1 3 RE - UNDERWRITTEN PORTFOLIO IN ATTRACTIVE FRANCHISE BUSINESS LINES PROVIDES A CLEAR PATH FOR IMPROVED MARGINS AND ROES Argo has optimized its portfolio to focus on profitable and scalable businesses 94.
Slide 14: Achieved targeted expense saving initiatives
14 21.5% 20.7% 20.2% 17.0% 16.8% 16.6% 38.5% 37.5% 36.8% 2019A 2020A 2021A Non-Acquisition Expense Ratio Acquisition Expense Ratio ACHIEVED TARGETED EXPENSE SAVING INITIATIVES WITH ADDITIONAL SAV INGS EXPECTED Business Rationalization Other General Expenses On track to achieve target expense ratio o
Slide 15: Business transformation substantially complete
15 Argo Pro - Forma and Exited / Sold Net Catastrophe Losses ($mm) vs. Insured Industry Losses 2 ($bn) Strategic focus on reducing the volatility of underwriting results through exiting and divesting non - core businesses is evident in catastrophe loss results in 2021 1 1 Includes losses related to
Slide 16: Robust balance sheet with high quality investment portfolio
16 ◼ Average rating of A1 / A+ ◼ 61% of investment assets in Core portfolio ◼ Average duration of 2.8 years (3.0 years excl. cash) Note: Metrics as of September 30, 2022, unless otherwise stated. 1 Pro forma for pending sale of Syndicate 1200 and U.S. LPT. 2 Pro forma for U.S. LPT. Strong Balance Sh
Slide 17: Highly experienced, industry-respected management team
17 HIGHLY EXPERIENCED, INDUSTRY - RESPECTED MANAGEMENT TEAM LEADING A DEEP BENCH OF UNDERWRITING TALENT 7 Name / Position Background ◼ Currently serves as Chief Administrative Officer after joining Argo in 2018 as U.S. General Counsel ◼ Previously served as CEO of Syncora Holdings and began career a
Slide 18: 2022 portfolio actions create U.S. specialty platform vs. peers
18 Argo Proxy Peers 2 ARGO’S 2022 PORTFOLIO ACTIONS CREATE A U.S. SPECIALTY PLATFORM WITH FAVORABLE GWP GROWTH AND COMBINED RATIO 2019 – 2021 GWP CAGR Source: SNL Financial. 1 Reflects ongoing business, which excludes businesses that have been sold (or in process of being sold) or are no longer writ
Slide 19: Relative stock price performance driven by legacy challenges
19 25.7 % 8.1 % 90 % 100 % 110 % 120 % 130 % 140 % 150 % 160 % 7-Sep-2022 29-Sep-2022 22-Oct-2022 14-Nov-2022 Argo Proxy Peers Performance (%) Since 7-Sep-2022 Argo 25.7 % RenaissanceRe 24.7 Arch 22.1 RLI 14.8 Selective 14.7 Hiscox 9.5 Hanover 7.3 Beazley 6.1 AXIS 1.4 Enstar (0.2) James River (4.3)
Slide 20: Board Overseeing Thorough Strategic Review Process
BOARD OVERSEEING THOROUGH STRATEGIC REVIEW PROCESS 3
Slide 21: Overview of significant transactions from strategic review
21 September 8, 2022 Relaunch of buyer outreach OVERVIEW OF SIGNIFICANT TRANSACTIONS RESULTING FROM ONGOING STRATEGIC REVIEW PROCESS 1 Purchase price will vary up / down based on tangible book value at closing relative to the $107mm level. Excludes transaction r elated costs. Summary of Transactions
Slide 22: Loss portfolio transfer of U.S. casualty reserves
22 LOSS PORTFOLIO TRANSFER OF PORTION OF U.S. CASUALTY RESERVES TRANSACTION OVERVIEW Key Points Accelerates Argo’s Derisking Plans ◼ Enstar will reinsure a number of Argo’s direct U.S. casualty insurance portfolios, including construction, relating to the accident years 2011 to 2019 ◼ Provides prote
Slide 23: Pending sale of Syndicate 1200 business
23 1 Purchase price will vary up / down based on tangible book value at closing relative to the $107mm level. Excludes transaction r elated costs. PENDING SALE OF SYNDICATE 1200 BUSINESS TRANSACTION OVERVIEW Key Points Transaction Summary ◼ On September 8, 2022, Argo entered into a definitive agreem
Slide 24: Board is undertaking comprehensive strategic review process
24 BOARD IS UNDERTAKING A COMPREHENSIVE STRATEGIC REVIEW PROCESS Outreach Summary Overview ◼ Since the exploration of strategic alternatives was announced on April 28, 2022, Argo has progressed significantly under the Board’s Strategic Review Committee — Executed on strategic transactions with Westf
Slide 25: Argo Has the Right Governance Profile and Board in Place
ARGO HAS THE RIGHT GOVERNANCE PROFILE AND BOARD IN PLACE 4
Slide 26: Argo's board is not one that needs additional change
26 ARGO’S BOARD IS NOT ONE THAT NEEDS ADDITIONAL CHANGE AT THIS TIME Best - in - Class Governance Profile 1 Highly Skilled and Independent Directors 2 Significant Recent Refreshment of the Board 3 Highly Engaged and Responsive Board and Management Team 4 Capital Returns’ Nominees Do Not Offer Skills
Slide 27: Argo possesses a best-in-class governance profile
27 Independent Leadership and Oversight Shareholder - Friendly Bye - Laws and Charter Management Compensation Aligned with Shareholder Interest Embedded Sustainability Focus into Our Board Decision Making ARGO POSSESSES A BEST - IN - CLASS GOVERNANCE PROFILE ✓ Fully independent Board (except CEO) ✓
Slide 28: Argo's nominees bring deep experience and the right skills
28 ARGO’S NOMINEES BRING DEEP EXPERIENCE AND THE RIGHT SKILLS TO DRIVE VALUE CREATION UNDER THE NEW ARGO Bernard C. Bailey President, Paraquis Solutions Jodie McLean CEO & Director, EDENS Thomas O’Toole Clinical Professor of Marketing, Kellogg School of Management Independent Director since 2020 Lea
Slide 29: Board has undergone significant director refreshment
29 BOARD HAS UNDERGONE SIGNIFICANT DIRECTOR REFRESHMENT TO ASSEMBLE ITS CURRENT MIX OF SKILLS AND EXPERIENCES ~43% of the Directors Joined over the Past 3 Years Source: Company filings Current Board Is Led by Highly - Qualified Directors with the Relevant Skills and Experience to Provide Robust Over
Slide 30: Management and board highly engaged and responsive to Capital Returns
30 ARGO MANAGEMENT AND BOARD HAVE BEEN HIGHLY ENGAGED AND RESPONSIVE TO CAPITAL RETURNS Engagement with Capital Returns ◼ Capital Returns first reached out to management in the fall of 2021 ◼ Over the past year of interactions between Argo and Capital Returns, Capital Returns has repeatedly requeste
Slide 31: Election of Capital Returns' Nominees Would Remove Superior Talent
ELECTION OF CAPITAL RETURNS’ NOMINEES WOULD REMOVE SUPERIOR TALENT AND CRITICAL SKILLS FROM THE BOARD 5
Slide 32: Board determined Capital Returns' candidates do not offer needed skills
32 Ronald D. Bobman David W. Michelson Public Board Experience O Superior Specialty Insurance Experience 1 O ~ Sufficient Time for Commitment ~ O Claimed Skills & Experience “Investment and leadership experience in the insurance industry” “Leadership and board experience in the insurance industry” B
Slide 33: Election of nominees would remove superior talent and critical skills
33 ELECTION OF CAPITAL RETURNS’ NOMINEES WOULD REMOVE SUPERIOR TALENT AND CRITICAL SKILLS FROM THE BOARD An exchange of Mr. Bailey and / or Mr. Ramji for Capital Returns’ nominees would result in a loss of superior talent and experience and a degradation in the quality of Board dialogue just as it e
Slide 34: Nominees would bring no additive skills and reduce diversity
34 ELECTION OF CAPITAL RETURNS’ NOMINEES WOULD BRING NO ADDITIVE SKILLS & WOULD REDUCE THE BOARD’S DIVERSITY Source: Public filings Bernard C. Bailey Al - Noor Ramji ◼ Mr. Bailey’s career spans over three decades of business and management experience, including his role as a public company CEO, alon
Slide 35: Mr. Bobman's claims vs. reality
35 1 Per Capital Returns’ letter to Argo’s Board of Directors on 13 - Sep - 2021. MR. BOBMAN’S NAÏVE CLAIMS VS. REALITY Claim REALITY “Errors in judgment” ➔ Citing Mr. Bradley’s appointment as CEO as an example of a lack of succession planning is misleading given the Board had that succession plan i
Slide 36: Claims vs. reality: piecemeal asset sales
36 Claim REALITY “Piecemeal asset sales” ➔ What Capital Returns would attempt to portray as “piecemeal” asset sales is actually a direct result of a thorough and probing review process where Argo listened carefully to bidders and its advisors; the result of those transactions allowed Argo to restart
Slide 37: Key Messages
KEY MESSAGES 6
Slide 38: Summary of Key Messages
38 SUMMARY OF KEY MESSAGES Through the actions of this Board and the dedicated management team, Argo has successfully transformed into a U.S. specialty insurer Board has taken decisive actions to strengthen the U.S. specialty insurance business and those actions are demonstrating positive results Bo
Slide 39: Vote FOR all of Argo's director nominees on the BLUE proxy card
VOTE “FOR” ALL OF ARGO’S EXTREMELY QUALIFIED DIRECTOR NOMINEES ON THE BLUE PROXY CARD TODAY
Argo Group International Holdings — Proxy Contest (November 2022) on 6ix