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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
ROBERT FARNAM, ANALYST, KEEFE, BRUYETTE & WOODS: It's my pleasure to introduce the next company, Argo Group International. We have got Jay Bullock, the Company's new CFO, relatively new CFO, and Mike Russell at the far end over here. He is in Investor Relations. Argo Group is rated [outperform]. We do like the story. It is very diversified. It has got a Bermuda platform, a US platform and a relatively new London platform. So a bunch of things to talk about.
JAY BULLOCK, CFO, ARGO GROUP INTERNATIONAL HOLDINGS, LTD.: Thanks a lot, Bob. So it still feels new to me. The last time I did one of these, I had been the CFO for about six weeks. Now I can say it is about 14 weeks. Pretty soon, it will be a year and I won't be able to use that excuse anymore, but I still feel every once in awhile, I can say, "I don't know" and I can get away with it, but not much longer.
There has been a lot of going on at Argo. And I think we have got a good story to tell on a platform that is now in a position to really take advantage of the market environment when and if it changes, but also weather the environment if it doesn't change.
Standard forward-looking statement.
Let me tell you a little bit about Argo and just to start out with and try to give you a sense as to who we are today. So we are an international specialty underwriter of property casualty insurance focused on niche markets, headquartered in Bermuda, operations in 50 states and worldwide, truly worldwide. I asked somebody last night just how many countries we are writing in. In [risks], in over 120 countries now. That is not where the insureds actually are, but (inaudible) you get a very broad spread of risk, so it truly is worldwide. Total capitalization of about $1.8 million and operations conducted through four business segments and I will go through each of those here in just a moment. Headquartered in Bermuda, as I have said. You see here that we have offices in London and across the United States.
And our strategy, very simply put, to deploy capital in international specialty markets for maximum return. Now it is important when I say international specialty market because we view the market that we are in as one market. That is specialty business that falls out of the standard lines market that may be underwritten in the US, it may be underwritten in Bermuda, it may be underwritten in Lloyds. A lot of it comes from the same distribution system, so it is important for us that we have the opportunity to underwrite that business regardless of the system that it is coming through.
We have a continuous focus on new business development and organic growth. We will talk a little bit more about that and we have grown strategically through acquisitions. Although that is not an object in and of itself for us to make acquisitions. They are all very strategically focused and I would suggest that what you will see going forward is much more bolt-on rather than transformation.
And finally, prudent management of balance sheet and the investment portfolio. That served us well in recent market times and we think that we will continue to see that. All of this should produce a return on capital for our shareholders. That is the focus, that is what we think about every day.
Now when the current management of Argo and that is Mark Watson and several of his (inaudible) took control of the Company -- this was in 2000 -- it was a very different business than it is today. It was a long tail, historic workers' comp writer, legacy issues to deal with, largely focused on the Western United States. And they started out with a series of -- (technical difficulty) --. Started out establishing some goals for what they wanted this company to be and goal number one was to make it a true specialty underwriter. You could say workers' comp is a specialization, but California comp really wasn't what we had in mind. And so goal number one was to expand that platform and build a US specialty lines carrier.
We did that with the acquisition of Colony ard Rockwood in 2000. I actually was the advisor on the other side of the table for that, so that is how I got to know Mark and the Company originally. And we have done it through small acquisitions and launching new businesses. So goal number one, establish a US platform. Status -- achieved.
As the market continued to develop and we realized that there was an advantage to being in Bermuda that much of the business that we wanted to underwrite could in fact be sourced out of London, two additional strategies. One, establish a Bermuda platform and two, establish a Lloyds platform. Achieved both of those in the acquisition or merger with PXRE and the acquisition of Heritage earlier this year.
And then, finally, there has been an overall strategic move to try to derisk the balance sheet of the legacy Argo as I had referenced at the beginning. That is a management of the runoff in any liabilities down over time, significantly reduce our non-earning assets. We have, in effect, put the balance sheet to much more effective use.
An example of how we actively manage our investment portfolio was our proactive response to our subprime exposure and then offloading PXRE's long-tail liability exposures that we picked up with the acquisition last year.
Finally, expand management ranks. I was hired as the CFO earlier this year. We hired Andrew Carrier as the President of Argo Re and we gained some very significant management talent with the Heritage transaction.
So the point that I want to make on this slide is here is a management team that has set out its strategy, very clearly defined, executed on that strategy and I think executed...
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