Argo Group’s investment in a digital infrastructure and new growth earned a vote of confidence from Standard & Poor’s, which raised its outlook for the specialty insurer and reinsurer to positive from stable.
“Over the past couple of years, Argo has undertaken key initiatives to spur growth and improve profitability, and results are starting to show,” S&P Global Ratings said in its release. “The investments in its digital infrastructure, along with development of predictive analytics and risk-based pricing tools, are providing increased opportunities for disciplined organic growth and expense efficiencies, especially in its U.S. business.”
Standard & Poor’s also credited the company with “acquiring talent, underwriting expertise” and platforms such as Maybrooke Holdings S.A. (known as Ariel Re) to help support an international expansion and “build out its overall underwriting portfolio.”
Argo’s strategy earned more kudos from Standard & Poor’s: Its focus on beefing up its enterprise risk management technology and embedding its processes into its strategic planning. With these strategies in hand, the company has tried to improve its primary U.S. business in recent years and is now using similar approaches to do the same thing internationally and at its Lloyd’s syndicate, S&P noted.
Those approaches are not without risk, but Standard & Poor’s said that Agro Group stands to improve its returns if they work.
Standard & Poor’s points out that Argo’s consolidated ratio from 2013 to 2018 averaged 98.4, which is in line with the industry average. But Argo’s own expense ratio of about 40 during the same period landed at the higher end of its peer group “and has been a drag on the company’s overall underwriting performance.”
If Argo’s long-term growth plans work, S&P said that the company’s operating platform can support a higher level of premium volumes. As the platform grows and more investment increases expense efficiencies, S&P said that the expense ratio should get better over the next few years.
Standard & Poor’s, meanwhile, affirmed its “BBB-” long-term issuer credit rating on Argo Group U.S. and its “A-” long-term financial strength and issuer credit ratings on the company’s core operating subsidiaries.
Source: Standard & Poor’s Global Ratings