Argo Group International Holdings, Ltd. (NASDAQ:AGII) Q4 2018 Earnings Conference Call Transcript

Feb 12, 2019 • 10:00 am ET

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Argo Group International Holdings, Ltd. (NASDAQ:AGII) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Argo Group 2018 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Susan Spivak with Investor Relations. Please go ahead.

Executive
Susan Spivak Bernstein

Thank you, and good morning. Welcome to Argo Group's conference call for the fourth quarter and calendar 2018. Last night, we issued a press release on earnings, which is available in the Investor section of our website, at www.argolimited.com. Presenting on the call today is Mark Watson, Chief Executive Officer; Mark Rose, Chief Investment Officer; and Jay Bullock, Chief Financial Officer. As the operator mentioned, this call is being recorded.

As a result of this conference call, Argo Group management may make comments that reflect their intentions, beliefs and expectations for the future. Such forward-looking statements are qualified by the inherent risks and uncertainties surrounding future expectations generally, and may materially differ from actual future results involving any one or more of such statements.

Argo Group undertakes no obligation to publicly update forward-looking statements as a result of events or developments subsequent to this conference call. For a more detailed discussion of these risks and uncertainties, please see Argo Group's filings with the SEC.

With that, I'll turn the call over to Mark Watson, Chief Executive Officer of Argo Group. Mark?

Executive
Mark E. Watson

Good morning, and welcome to today's call to discuss our fourth quarter and year-end 2018 earnings. We achieved meaningful progress in 2018. We optimized our platform to reduce exposure to catastrophe events by more effectively leveraging our risk management and capital structure. We made progress toward driving down our expense ratio. We grew top line by 10% and we focused our efforts on the businesses with the best loss ratios. We continue bringing technology into our US business, creating significant efficiencies, driving down costs and enhancing customer service.

Importantly, ROE is headed in the right direction. Excluding the recent accounting change to incorporate the change in fair value of equity securities, the ROE was 8.3% for 2018. The current accident year, excluding catastrophe losses in both the US and international businesses, improved in 2018. The expense ratio in both the US and international business has also improved, moving us towards our long-term ROE target of 700 basis points above the risk-free rate, which currently approximates a 10% ROE.

All of this was accomplished in a challenging environment for both insurance and financial markets underscoring the resilience and agility of our business. There is no doubt our business is performing solidly and shareholders have been rewarded as a result. However, we still have much work to do. At the end of the day, we're confident that we're continuing to build a unique and differentiated business, one that is best-in-class and delivers strong returns for shareholders.

With that, let's dive into the details of our results. Last night, we reported adjusted