International headquarters

Insurer Argo Group explores “strategic alternatives”

Argo Group International Holdings Ltd., a specialty insurer with US headquarters in San Antonio, may be looking for a buyer or merger partner.

The Bermuda-based company announced that its board of directors has begun exploring a possible sale, merger or any other type of transaction.

“The board believes the time is right to explore a range of potential strategic alternatives to maximize shareholder value,” Argo Chairman Thomas Bradley said in a statement.

Argo’s announcement comes more than seven months after Capital Returns Management, a New York-based insurance industry investor, asked Argo to consider a sale or other alternatives.

“Exploring the sale of the entire company is the optimal and necessary next step to maximizing shareholder value,” Capital Returns Chairman Ron Bobman said in a September letter to Argo’s board. . “Previous attempts at piecemeal sales have either failed…or yielded no return to shareholders.”

Bobman believed Argo businesses could be sold for $80 a share. The stock closed at $43.71 on Monday. Its shares have risen about 12% since the company’s announcement on Thursday.

In March, Capital Returns named Bobman and another person to serve on Argo’s board. But the society has postponed its annual meeting until later this year.

“We can now add a sale and an annual meeting to the growing and long list of actions that the ARGO Board has taken too late or too little,” Bobman said in an emailed statement Monday. “The postponement of our annual meeting forces shareholders to continue to rely on an ineffective board of directors to make critical decisions about shareholder value, a responsibility they have so far failed us.”

Bradley played down Capital Returns openings in a memo to Argo employees in March.

“It has become increasingly common for investors to use the public forum to engage with management teams and boards,” Bradley said. “This news has no impact on our day-to-day operations.”

Bradley takes over from Argo CEO Kevin Rehnberg, who went on health leave in March.

This is the second proxy fight in Argo in the space of approximately three years.

In 2019, San Francisco investment adviser Voce Capital Management lambasted former Argo CEO Mark E. Watson III for what he called the insurer’s “spending culture” that cost money. to shareholders.

A torrent of events followed Voce’s criticisms. The Securities and Exchange Commission has issued a subpoena to Argo for documents related to its executive benefits and benefits disclosures. Watson then resigned.

In 2020, the SEC fined Argo $900,000 for failing to disclose approximately $5.3 million in benefits granted to Watson. The agency also fined Watson $450,000.

Argo is a mid-sized player in the niche area of ​​insuring complex or difficult to assess risks that other insurers will not address.

Since the management change, Argo has left various unprofitable businesses.

“Over the past year, Argo’s Board of Directors and management team have taken decisive steps to strengthen the business by pursuing profitable growth, reducing volatility and employing disciplined risk management. expenses,” Bradley said in the statement.

On Monday, Argo said it lost $3.6 million, or 11 cents per share, on $483.8 million in revenue in the first quarter ended March 31. That compares to net income of $27.2 million, or 78 cents per share, on $523.6 million in revenue. at the same time last year.

The company reduced its workforce in San Antonio from about 200 to 140 employees. As a result, he plans to move to a smaller office in July. It will occupy just over 25,000 square feet in the Soto building at 711 Broadway. It currently occupies 85,000 square feet at the IBC Center at 175 E. Houston St.

[email protected]

Rodney N.

The author Rodney N.