Argo Group International Holdings, Ltd. (NYSE:ARGO) Q3 2019 Earnings Conference Call - Final Transcript

Nov 08, 2019 • 11:00 am ET

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Argo Group International Holdings, Ltd. (NYSE:ARGO) Q3 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Jay S. Bullock

while spreads remain flat. And while major equity indices were up modestly, certain exposures to energy and small-cap value stocks led to a small negative mark.

Finally, the strength of the U.S. dollar had a small positive impact on the portfolio and a small overall negative impact on the balance sheet as the dollar rallied against euro, sterling and Brazilian real, which are relevant to our business and portfolio.

In our core bond portfolio, the current yield is approximately 3.1% and reinvestment opportunities are currently 70 to 80 basis points above treasuries or approximately 2.5%. Our risk portfolio, which is a mix of equities, high yield debt and alternatives was down 1% for Q3, but up 11% year-to-date.

Equities continue to be the strongest driver in performance, offset by illiquid debt, which includes emerging markets, special situations and bank loans. As it relates to net investment income, alternatives contributed $7.3 million in the quarter. Interest and dividend income increased year-over-year due to roll-off of the portfolio. With the significant rally in U.S. Treasuries, meaning, of course, reduced yield, the future reinvestment rate just mentioned is lower as maturities roll-off of the portfolio, which will negatively impact the interest income portion of that investment income.

Book value per share stands at $55.18 per share at the end of the third quarter. Book value per share growth plus dividend is up 9.1% during the year-to-date period. For the nine months ended September 30, our annualized return on average equity was 70% and our adjusted operating return on average equity was 3.2%. While these results are certainly lower than our expectations, we expect improvement as our corrective actions to take shape.

Operator, that concludes our prepared remarks, and we're now ready to take questions.