Argo Group International Holdings, Ltd.

Good day, everyone, and welcome to the Argo Group second quarter 2021 earnings call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one. Please note that this event is being recorded. I would now like to turn the conference over to Brett Sheriffs, head of investor relations. Please go ahead.

Thanks, and good morning. Welcome to Argo Group's conference call for the second quarter of 2021. After the market closed last night, we issued a press release on our earnings, which is available in the investor section of our website at www.argogroup.com and was filed with the SEC. Presenting on today's call is Kevin Renberg, Chief Executive Officer, and Scott Kirk, Chief Financial Officer. As the operator mentioned, this call is being recorded. As a result of this conference call, ARGO 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 call. For more detailed discussion of such risks and uncertainties, please see Argo Group's filings with the SEC. Also note that we will be referencing certain non-GAAP financial information. More information regarding these non-GAAP measures are provided in our earnings release. I will now turn the call over to Kevin Renberg, Chief Executive Officer of Argo Group.

Kevin Renberg Good morning. Thank you for the introduction, Brett. Welcome to everyone on the call. I'm happy to be able to speak to everyone today about a strong quarter on many fronts. The key areas I will focus on during the call are our strong earnings, accelerating growth results, attractive market conditions, and our progress on reducing volatility. As we dive into these areas a little deeper, we will describe how we are delivering on objectives we laid out earlier this year. All of this is with focus on our long-term financial objectives and creating value for shareholders. From an earnings perspective, we reported our best quarterly operating income in more than 10 years. I'm pleased that we had strong contributions from both underwriting and investment results. Our loss ratio of 57.7% for the second quarter reflects lower catastrophe losses, favorable reserve development, and an improved underlying loss ratio. The underlying loss ratio improved modestly from the second quarter of 2020, even though prior year was a particularly tough comparison since, like many in the industry, we benefited from a significant reduction in claims frequency at the beginning of the pandemic. If you look back to the second quarter of 2019, before the pandemic, our underlying loss ratio improved 370 basis points relative to that period, so I'm very pleased with the quarter's results and the overall progress. On the investment side, we reported very strong results with a significant contribution from our alternative investments. we ended the quarter with 13% in return for the positive year-over-year change in gross and net premiums. Those premiums were up approximately 14% in the second quarter after adjusting for businesses sold or placed into runoff over the last 12 months, including Ariel Lee. In the U.S., we continue to see solid rate increases in the mid-to-high single digits on average, This is a bit less than the increase that we experienced over the last couple quarters, but we feel very good about the rates we're getting in direction of our margins. Over the last three years, our cumulative rate change on renewals is about 25% in the U.S. In the U.S., gross premiums were up 7% in the quarter. There was a meaningful top-line impact from our decisions to reduce property exposure in a couple of our underperforming business units. On a year-to-date basis, these actions have been a headwind of more than $50 million to our top line. Performance across our remaining U.S. businesses was strong, and the six business units we highlighted at our investor update, ArgoPro, Casualty, Construction, Environmental, Inland Marine, and Surety, were up 25% collectively during the quarter. These businesses now represent almost two-thirds of our U.S. premium base and, most importantly, remain highly profitable with a combined ratio comfortably in the 80s with minimal catastrophe losses. In terms of submissions, we have continued to see positive trends in submission flow, particularly in our focus business units. Excluding businesses where we have been consciously reducing our exposure, submissions in the U.S. were up 8 percent. Over the past month, we have announced new leaders in three of our U.S. business units. ArgoPro, Construction, and Inland Marine. These individuals included internal promotions and an external hire. They all have strong underwriting backgrounds and have brought diverse perspectives and new energy to the business. We are confident they will be able to take advantage of our platform and market conditions to continue our growth and profit plans. Turning to international, gross premiums would have been up approximately 23% after adjusting for businesses we have exited over the last quarters, an increase from . Reported gross premiums were down about 5% in the second quarter due to the impact of businesses sold or placed into runoff over the last 12 months. Pricing continued to be strong in the quarter, with rate increases averaging just above 10% in international and remain broad-based. Over the past three years, The cumulative rate change for Syndicate 1200 has been 30% and approximately 90% for Bermuda Insurance. These businesses are well positioned to continue to generate attractive underlying margins. Very attractive market conditions across most of our platform and we're taking actions or de-emphasizing business where we're not getting returns we want. Across the group, we have achieved 30% compound renewal rate increases over the last three years. At the end of the day, and of greater significance, we continue to execute on limit reduction efforts to bring down gross and net lines. For example, in ArgoPro's commercial book, we have been able to reduce the average limit by more than 20% over the last 18 months. More than 90% of the portfolio now has limits of $5 million or less. In our excess casualty portfolio, we have continued to increase attachment points and reduce limits. During the first six months of 2021, average attachment points are up 10% while limits are down 10% in our U.S. excess casualty business. In the Bermuda excess casualty book, attachment points are up 15% and limits are down 8% during the first half of the year. Not only is this continued prudent risk management for our balance sheet, but limit reduction protects us from potential spikes in social inflation, and we expect it will help reduce volatility in our underwriting results going forward. The market has allowed us to take these actions while still growing our business, and we have capitalized on these opportunities. On the property side, we are also ahead of plan in terms of net exposure reduction. As we outlined at our investor update in March, we have been focused on bringing down our average annual loss, AAL, and probable maximum loss, PMLs. This work has been through a combination of lower gross exposure and some changes to our seeded reinsurance program. Back in March, we outlined a plan to reduce our AAL by 40% by the end of 2022. Through our gross property reductions and some additional reinsurance purchases, we have already completed this reduction as of July 1st. more than a year ahead of schedule. Since the beginning of the year, we have also reduced our peak 1 in 250 year PML to less than 4% of our common equity. This is ahead of the schedule we laid out a few months ago and gives us comfort as we head further into wind season, particularly in light of all the other natural catastrophes occurring and the inflation already associated with those events. In total, I'm very pleased with our results for the quarter and the progress we've been able to make on our strategic objectives. I will now turn the call over to Scott to discuss our results in more detail.