Argo Group International Holdings Ltd.

The negative outlook reflects Argo's underperformance, mainly in its international operations, its high expense load, and its ability to successfully execute on its strategic initiatives to address the shortcomings. Furthermore, changes to the governance framework, processes, and internal controls are recent and it will take time to assess their effectiveness. We could lower the ratings during the next 12-18 months if Argo's operating results are weaker than our expectations, or are worse than similarly rated peers', or if the company's capitalization declines materially because of underwriting or investment losses. S&P Global Ratings could revise the outlook to stable and affirm its ratings during the next 12-18 months if: Argo is able to successfully execute on its strategy, leading to stabilization

... modest net adverse reserve development drag 2020 earnings. Uncertainty from the COVID-19 pandemic persists and additional losses are anticipated, which may spill into 2021. In addition, lower interest rates, higher credit stress, and market volatility will depress investment income. At the same time, the pricing environment is favorable across most lines, which along with underwriting initiatives, should help improve the accident year combined ratio. The strategic review undertaken by the new CEO, Kevin Rehnberg, should help the company sharpen its focus on key businesses. Kevin is a seasoned executive who successfully led the U.S. business as its President prior to his current appointment. Argo has a strong competitive position in the U.S. commercial and specialty lines market, although its international business is undergoing remediation efforts and the group is hampered by a high expense base. Argo Group International Holdings Ltd. has...

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