Argo Group International Holdings, Ltd’s AGII Long-Term Issue Credit Rating (ICR) of “bbb” has recently been reiterated by A.M. Best. The credit rating agency has also retained the Financial Strength Rating of “A” (Excellent) and the Long-Term Issue Credit Ratings of “a” for Argo Re Ltd. and its subsidiaries.
At the same time, the rating agency has also retained the Long-Term Issue Credit Rating of “bbb” and the Long-Term IR of “bbb” on 6.5% $143.75 million senior unsecured notes, scheduled to mature by 2042. The outlook remains stable.
The rating affirmations of Argo Re came on the back of solid capitalization, sturdy operating performance and an effective enterprise risk program. The ratings also reflect Argo Re’s wide range of insurance and reinsurance programs, financial flexibility of its parent company, losses from Hurricanes Harvey and Irma remaining within the company’s risk tolerance level, plus the buyout of Maybrooke Holdings Limited, this February.
A.M. Best noted Argo Re’s noteworthy expertise in niche markets and solid underwriting results across varied lines of business to poise it well. The company boasts a solid business profile with huge global presence, complementing its U.S. presence in the excess and surplus lines sector and specialty admitted markets.
However, these positives are weighed down by potential earnings volatility in the group’s underwriting operations, heightened competitive as well as slow economic recovery worldwide.
A.M. Best stated that the ratings could be upgraded if the underwriting as well as the operating results of the company could be enhanced along with an increase in risk-adjusted capital.
Similarly, the ratings would be subject to downgrade, provided there is a decline in the company’s underwriting performance due to a material adverse loss reserve development or if the company has to incur huge losses in comparison to peers, possibly leading to a reduction in risk-adjusted capital.
Rating affirmations or upgrades have always played a significant role in retaining investors’ confidence as well as exhibiting a stock’s credit worthiness. Whereas, rating downgrades reflect companies’ deteriorating finances, thereby escalating the cost of further debt issuances. We believe that these ratings will not only help Argo Group retain investors’ faith but also enable it to write more business going forward.
Zacks Rank and Share Price Movement
Argo Group carries a Zacks Rank #3 (Hold). Shares of the company have underperformed the industry in a year’s time. While the stock has gained 6.4%, the industry has registered a 24.1% increase. Strategic acquisitions and solid underwriting results are expected to drive the stock higher in the future.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc AFH, Markel Corp. MKL and Mercury General Corp. MCY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive surprises in two of the last four quarters with an average beat of 57.94%
Markel markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises in two of the last four quarters with an average beat of 21.06%
Mercury General engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the last four quarters with the average beat being 1.06%.
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