Specialty insurer Argo Group International Holdings has agreed to sell the rights to renew its US specialty property business to Westfield Insurance of Ohio.
This transaction includes Argo’s joint and multi-layered real estate business, which ensures disaster-focused excess and excess property is covered through wholesale brokers. Argo Small and Medium Enterprises (SME) ownership policies are not included in this transaction. Argo said it will continue to respect and serve all policies currently in place.
Terms of the deal were not disclosed.
The deal reflects Argo’s ongoing streamlining strategy while strengthening the new niche business that Westfield launched several months ago.
“This transaction supports the company’s ongoing strategy to reduce volatility within the business,” said Marsh Duncan, Argo Group President, President, Surplus and Surplus.
As part of the deal, several members of Argo’s US-based specialist real estate team will have the option to join Westfield.
“Expanding our real estate track record allows us to accelerate our launch of E&S properties, ensuring our continued success,” said Jack Kohn, President of Westfield Specialty.
Westfield, a regional property/accident insurer with a history of 173 years, announced this summer that it was diversifying into the niche insurance business with the launch of Westfield Specialty and the appointment of Kuhn as head of the new venture.
“The strength of our company’s financial position combined with our ability to move quickly and invest in this opportunity makes us a stronger player in the P&C market,” Westfield CEO Ed Largent said in announcing the expansion. “We expect to systematically enter into areas of business where we can attract the best talent and grow profitably.”
Westfield offers personal insurance in 10 states, commercial insurance in 21 states and warranty products in 50 states through independent agencies.
Westfield is seeing a significant decline in the E&S market at a time that appears to be rebounding from 2020, when it achieved an aggregate aggregate rate of 107. AM Best has upgraded its E&S market outlook from negative to stable. Fitch said it expects strong rate hikes to support the recovery of E&S earnings in 2021.
Argo is reassessing its business since 2019 in the face of allegations that its board of directors overspent on executive compensation and after suffering a $114 million underwriting loss in the fourth quarter of 2019. The combined international ratio was 149.1 compared to 104.5 the year before. The company’s US operations recorded a combined ratio of 104.8 in the fourth quarter versus 92 in the fourth quarter of 2018.
Kevin Renberg, who became CEO in November 2019, pledged that Argo will continue its overall path with a focus on improving its operations.
“We are a professional insurer and reinsurer that is very focused on the US, based on 80 percent of our written premiums for risks that are in the US, so that won’t change,” Renberg said at the time. “What we are looking to change is that the returns are sufficient because they are not at the moment.
The Argo Group agreed during the past year to sell its Brazilian and Italian businesses and the reinsurance franchise Ariel Re. It has also agreed to sell the rights to renew its accident-related property/business binding contract to E&S, a subsidiary of Selective Insurance Group.
Results have improved. Argo reported a net profit of $19.8 million for the third quarter of 2021 compared to a net loss of $25.1 million for the third quarter of 2020. The company’s consolidated loss ratio improved by 10 points.
“Argo continues to strive for profitable growth, improve underwriting margins, reduce volatility, and maintain disciplined expense management,” Argo’s CEO said on third-quarter results. He cited in particular Argo’s reduced exposure to property disaster “on the back of the catastrophic high losses that the insurance industry suffered this quarter.”
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