Monday after the bell, insurance and reinsurance underwriters Argo Group International Holdings Ltd. (AGII), reported a swing to profit in the third quarter from a loss last year, on a 9.2% increase in revenues helped by higher premiums earned, as well as lower expenses in the period.
Pembroke, Bermuda- based Argo reported third-quarter net income of $27.6 million or $0.89 per share, compared to a loss of $8.8 million or $0.29 per share in the same quarter last year. Included in the results were favorable prior years' loss development of $9.5 million for the recently ended quarter and $10.6 million for the year-ago quarter, respectively.
Excluding the impact of a $0.7 million pre-tax gains associated with the company's investment portfolio and a pre-tax foreign currency exchange gains of $5.0 million, net operating income increased to $25.4 million or $0.82 per share, from $12.2 million or $0.40 per share last year.
On average, eight analysts polled by Thomson Reuters expected the company to earn $1.04 per share for the quarter. Analysts' estimates typically exclude special items.
The company also noted that net income and net operating income for the third quarter 2008 were impacted by a net charge after-tax of $3.8 million or $0.12 per share, related to its run-off unit that was subjected to binding arbitration.
Total revenue for the quarter increased to $383.8 million from $351.4 million reported for the same period of the prior year, ahead of consensus estimate of $371.95 million for the period.
Higher revenues were fueled by premiums earned, which increased to $347.2 million from $322.8 million in the year ago quarter, helped by a gain of $0.7 million from sale of investments and other than temporary charges which was a loss of $18.4 million last year. However, net investment income partially offset the increase in revenues, as it declined to $18.4 million from $38.8 million a year ago.
While earned premiums were higher from the company's Excess & Surplus Lines segment by $7 million at $138.4 million, International Specialty by $15.2 million at $95.6 million, Reinsurance segment by $0.5 million at $22.9 million, premiums from Commercial Specialty segment were lower at $90.4 million from $92.6 million last year.
Total expenses declined to $346.4 million from $357.8 million in the year-ago period, led by a $20.1 million decline in losses and loss adjustment expenses. The Group combined ratio for the third quarter shrunk favorably to 98.6%, from 106.2% for the same period in 2008.
For the nine months ended September 30, 2009, net income increased 49.7% to $76.5 million or $2.48 per share from $51.1 million or $1.66 per share last year. Net operating income increased to $100.3 million or $3.26 per share from $68.9 million or $2.24 per share.
Total revenue for the first nine months of 2009 was $1.16 billion, up from $908.7 million in the same nine-month period of 2008, led by the increase in earned premiums ro $1.06 billion from $803.4 million. The Group combined ratio was 96.9% compared with 101.1% for the same period in 2008.
AGII finished Monday's regular trading session up 42 cents or 1.24%, at $34.38 on the Nasdaq.
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