SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒	~~QUARTERLY REPORT PURSUANT TO SECTION~~
☒			Quarterly report pursuant to Section 13 ORor 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934

☐	~~TRANSITION REPORT PURSUANT TO SECTION~~
☐			Transition report pursuant to Section 13 ORor 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF~~of the Securities Exchange Act of 1934 for the transition period fromto

~~Bermuda~~

~~98-0214719~~

Bermuda

98-0214719

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

110 Pitts Bay Road
Pembroke HM08
Bermuda

P.O. Box HM 1282
Hamilton HM FX
Bermuda

Pembroke

HM08

Hamilton

HM FX

Bermuda

(Address of principal executive offices)

(Mailing address)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of ~~Security~~ Each Class	Trading Symbol(s)	Name of ~~Each Exchange~~each exchange on ~~Which Registered~~ which registered
Common Stock, par value of $1.00 per share	ARGO	~~NASDAQ Global Select Market~~ New York Stock Exchange
Guarantee of Argo Group ~~US,~~U.S., Inc. 6.500% Senior Notes due 2042	ARGD	~~NASDAQ~~New York Stock ~~Market LLC~~ Exchange
Depositary Shares, each representing a 1/1000th Interest in a share of Series A 7.00% Non-Cumulative Preference Shares, par value $1.00 per share	ARGOPrA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer☒

☒

Accelerated filer☐

☐

Non-accelerated filer

☐


Smaller reporting company☐			☐			Emerging growth company			☐

If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding (net of treasury shares) of each of the issuer’s classes of common shares as of November ~~02, 2017.~~

2, 2020.

~~Title~~	~~Outstanding~~
Title		Outstanding
Common Shares, par value $1.00 per share		~~29,680,863~~ 34,684,684

PART I. FINANCIAL INFORMATION

Item 1. ~~Condensed~~ Consolidated Financial Statements

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

(in millions, except number of shares and per share amounts)

September 30,

December 31,

2017

2016 *

(Unaudited)

Assets

Investments:

Fixed maturities available-for-sale, at fair value (cost: 2017 - $3,339.7; 2016 -
   $2,938.8)

$
3,378.4

$
2,932.4

Equity securities available-for-sale, at fair value (cost: 2017 - $347.6; 2016 - $335.2)

480.5

447.4

Other investments (cost: 2017 - $553.1; 2016 - $531.6)

562.6

539.0

Short-term investments, at fair value (cost: 2017 - $386.0; 2016 - $405.5)

386.0

405.5

Total investments

4,807.5

4,324.3

Cash

235.8

86.0

Accrued investment income

23.6

20.7

Premiums receivable

678.8

463.8

Reinsurance recoverables

2,101.9

1,385.6

Goodwill

152.2

152.2

Intangible assets, net of accumulated amortization

108.3

67.7

Deferred acquisition costs, net

168.8

139.1

Ceded unearned premiums

461.4

302.8

Other assets

319.7

262.8

Total assets

$
9,058.0

$
7,205.0

Liabilities and Shareholders' Equity

Reserves for losses and loss adjustment expenses

$
4,305.9

$
3,350.8

Unearned premiums

1,286.0

970.0

Accrued underwriting expenses

97.5

115.0

Ceded reinsurance payable, net

822.6

466.6

Funds held

45.0

77.1

Senior unsecured fixed rate notes

139.6

139.5

Other indebtedness

184.7

55.4

Junior subordinated debentures

256.5

172.7

Current income taxes payable, net

11.0

8.1

Deferred tax liabilities, net

41.5

24.1

Other liabilities

59.7

33.0

Total liabilities

7,250.0

5,412.3

Commitments and contingencies (Note 16)

Shareholders' equity:

Common shares - $1.00 par, 500,000,000 shares authorized; 40,300,433 and
   40,042,330 shares issued at September 30, 2017 and December 31, 2016,
   respectively

40.3

40.0

Additional paid-in capital

1,129.1

1,123.3

Treasury shares (10,640,789 and 10,028,755 shares at September 30, 2017
   and December 31, 2016, respectively)

(414.8
)

(378.2
)
Retained earnings

956.4

959.9

Accumulated other comprehensive income, net of taxes

97.0

47.7

Total shareholders' equity

1,808.0

1,792.7

Total liabilities and shareholders' equity

$
9,058.0

$
7,205.0

*	~~Derived from audited consolidated financial statements.~~


	September 30, 2020		December 31, 2019 *
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value (cost: 2020 - $3,847.0, 2019 - $3,605.0; allowance for expected credit losses: 2020 - $33.7)	$	3,914.4	$	3,633.5
Equity securities, at fair value (cost: 2020 - $160.6; 2019 - $122.8)	150.7		124.4
Other investments (cost: 2020 - $412.1; 2019 - $482.5)	412.2		496.5
Short-term investments, at fair value (cost: 2020 - $528.5; 2019 - $844.8)	528.7		845.0
Total investments	5,006.0		5,099.4
Cash	300.4		137.8
Accrued investment income	22.2		25.7
Premiums receivable	797.0		688.2
Reinsurance recoverables	3,046.5		3,104.6
Goodwill	156.5		161.4
Intangible assets, net of accumulated amortization	90.8		91.8
Current income taxes receivable, net	11.2		0
Deferred tax asset, net	17.0		6.1
Deferred acquisition costs, net	170.4		160.2
Ceded unearned premiums	660.9		545.0
Operating lease right-of-use assets	84.4		91.8
Other assets	358.5		387.1
Assets held for sale	12.5		15.4
Total assets	$	10,734.3	$	10,514.5
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	5,390.0	$	5,157.6
Unearned premiums	1,574.2		1,410.9
Accrued underwriting expenses and other liabilities	202.8		226.0
Ceded reinsurance payable, net	1,085.0		1,203.1
Funds held	62.6		50.6
Senior unsecured fixed rate notes	140.1		140.0
Other indebtedness	59.1		181.3
Junior subordinated debentures	257.7		257.4
Current income taxes payable, net	0		0.8

Operating lease liabilities	98.3		105.7
Total liabilities	8,869.8		8,733.4
Commitments and contingencies (Note 14)
Shareholders' equity:
Preferred shares and additional paid-in capital - $1.00 par, 30,000,000 shares authorized; 6,000 and 0 shares issued at September 30, 2020 and December 31, 2019, respectively; liquidation preference $25,000	144.0		0
Common shares - $1.00 par, 500,000,000 shares authorized; 45,985,685 and 45,698,470 shares issued at September 30, 2020 and December 31, 2019, respectively	46.0		45.7
Additional paid-in capital	1,378.5		1,376.6
Treasury shares (11,315,889 shares at September 30, 2020 and December 31, 2019, respectively)	(455.1)		(455.1)
Retained earnings	714.2		811.1
Accumulated other comprehensive income, net of taxes	36.9		2.8
Total shareholders' equity	1,864.5		1,781.1
Total liabilities and shareholders' equity	$	10,734.3	$	10,514.5

* Derived from audited consolidated financial statements.

See accompanying notes.

(in millions, except number of shares and per share amounts)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Premiums and other revenue:

Earned premiums

$
389.3

$
358.7

$
1,167.8

$
1,048.5

Net investment income

30.9

32.7

105.0

89.6

Fee and other income

13.0

7.6

20.4

20.2

Net realized investment and other gains

6.0

17.7

25.1

12.8

Total revenue

439.2

416.7

1,318.3

1,171.1

Expenses:

Losses and loss adjustment expenses

326.4

207.8

779.5

596.0

Underwriting, acquisition and insurance expenses

166.1

137.4

474.4

403.0

Interest expense

7.5

4.9

20.4

14.6

Fee and other expense

5.0

5.9

12.4

18.1

Foreign currency exchange losses (gains)

0.1

(1.5
)

4.0

4.5

Total expenses

505.1

354.5

1,290.7

1,036.2

(Loss) income before income taxes

(65.9
)

62.2

27.6

134.9

Income tax (benefit) provision

(4.6
)

7.0

6.2

21.1

Net (loss) income

$
(61.3
)

$
55.2

$
21.4

$
113.8

Net (loss) income per common share:

Basic

$
(2.04
)

$
1.84

$
0.71

$
3.76

Diluted

$
(2.04
)

$
1.80

$
0.69

$
3.68

Dividend declared per common share

$
0.27

$
0.22

$
0.81

$
0.64

Weighted average common shares:

Basic

29,978,485

30,018,637

30,075,424

30,227,725

Diluted

29,978,485

30,728,383

30,893,026

30,889,487

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Net realized investment and other gains before
   other-than-temporary impairment losses

$
6.2

$
20.1

$
26.8

$
21.8

Other-than-temporary impairment losses recognized in
   earnings:

Other-than-temporary impairment losses on fixed
   maturities

(0.1
)

(0.6
)

(0.1
)

(1.7
)
Other-than-temporary impairment losses on equity
   securities

(0.1
)

(1.8
)

(1.6
)

(7.3
)
Impairment losses recognized in earnings

(0.2
)

(2.4
)

(1.7
)

(9.0
)
Net realized investment and other gains

$
6.0

$
17.7

$
25.1

$
12.8


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Premiums and other revenue:
Earned premiums	$	445.5	$	451.5	$	1,313.9	$	1,303.7
Net investment income	42.0		40.2		79.0		116.9
Fee and other income	1.7		1.9		5.8		6.3
Net realized investment gains (losses):
Net realized investment (losses) gains	(5.7)		2.6		33.3		0.3
Change in fair value of equity securities	10.5		(8.8)		(12.0)		58.0
Credit losses on fixed maturity securities	(10.5)		0		(43.0)		0
Net realized investment (losses) gains	(5.7)		(6.2)		(21.7)		58.3
Total revenue	483.5		487.4		1,377.0		1,485.2
Expenses:
Losses and loss adjustment expenses	328.9		338.8		883.0		861.5
Underwriting, acquisition and insurance expenses	164.3		164.0		493.7		485.6
Other corporate expenses	0.4		3.7		6.2		11.7
Interest expense	6.8		7.5		21.3		25.3
Fee and other expense	0.9		1.2		3.1		3.8
Foreign currency exchange losses (gains)	11.6		(1.6)		15.0		(6.2)
Total expenses	512.9		513.6		1,422.3		1,381.7
(Loss) income before income taxes	(29.4)		(26.2)		(45.3)		103.5
Income tax provision (benefit)	0.2		(1.1)		9.5		8.6
Net (loss) income	$	(29.6)	$	(25.1)	$	(54.8)	$	94.9
Dividends on preferred shares	2.0		0		2.0		0
Net (loss) income attributable to common shareholders	$	(31.6)	$	(25.1)	$	(56.8)	$	94.9

Net (loss) income per common share:
Basic	$	(0.91)	$	(0.73)	$	(1.64)	$	2.78
Diluted	$	(0.91)	$	(0.73)	$	(1.64)	$	2.73
Dividend declared per common share	$	0.31	$	0.31	$	0.93	$	0.93
Weighted average common shares:
Basic	34,667,266		34,299,999		34,590,659		34,161,016
Diluted	34,667,266		34,299,999		34,590,659		34,769,622


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net realized investment gains (losses) before other-than-temporary impairment losses	$	(5.7)	$	(1.2)	$	(21.7)	$	70.1
Other-than-temporary impairment losses recognized in earnings:
Other-than-temporary impairment losses on fixed maturities	0		(5.0)		0		(11.8)

Impairment losses recognized in earnings	0		(5.0)		0		(11.8)
Net realized investment gains (losses)	$	(5.7)	$	(6.2)	$	(21.7)	$	58.3

See accompanying notes.

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Net (loss) income

$
(61.3
)

$
55.2

$
21.4

$
113.8

Other comprehensive income:
��

Foreign currency translation adjustments

0.4

(1.0
)

(0.2
)

2.8

Unrealized gains on securities:

Gains arising during the year

38.5

19.8

100.1

97.7

Reclassification adjustment for gains included in
   net income

(17.4
)

(17.0
)

(36.3
)

(25.1
)
Other comprehensive income before tax

21.5

1.8

63.6

75.4

Income tax provision related to other comprehensive
   income:

Unrealized gains on securities:

Gains arising during the year

10.1

7.6

26.0

27.5

Reclassification adjustment for gains included in
   net income

(5.5
)

(7.9
)

(11.7
)

(11.8
)
Income tax provision (benefit) related to other
   comprehensive income

4.6

(0.3
)

14.3

15.7

Other comprehensive income, net of tax

16.9

2.1

49.3

59.7

Comprehensive (loss) income

$
(44.4
)

$
57.3

$
70.7

$
173.5


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Net (loss) income	$	(29.6)	$	(25.1)	$	(54.8)	$	94.9
Other comprehensive income (loss):
Foreign currency translation adjustments	(4.7)		0		(12.3)		(0.1)
Unrealized gains (losses) on fixed maturity securities:
Gains (losses) arising during the year	38.2		(7.4)		68.3		91.3
Reclassification adjustment for losses (gains) included in net income	4.5		2.8		(15.4)		7.7
Other comprehensive income before tax	38.0		(4.6)		40.6		98.9
Income tax provision related to other comprehensive income:
Unrealized gains (losses) on fixed maturity securities:
Gains (losses) arising during the year	6.5		(0.7)		12.4		15.1
Reclassification adjustment for losses (gains) included in net income	0.5		0.3		(0.2)		1.0
Income tax provision related to other comprehensive income	7.0		(0.4)		12.2		16.1
Other comprehensive income (loss), net of tax	31.0		(4.2)		28.4		82.8
Comprehensive income (loss)	$	1.4	$	(29.3)	$	(26.4)	$	177.7

See accompanying notes.

(in millions, except number of shares and per share amounts)


	Preferred Shares and Additional Paid-in Capital		Common Shares		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Shareholders' Equity
Balance, June 30, 2019	$	—	$	45.6	$	1,369.7	$	(455.1)	$	959.9	$	8.9	$	1,929.0
Net income	—		—		—		—		(25.1)		—		(25.1)
Other comprehensive income - Change in fair value of fixed maturities, net of tax	—		—		—		—		—		(4.2)		(4.2)
Other comprehensive loss, net - Other	—		—		—		—		—		0		0
Activity under stock incentive plans	—		0		3.2		—		—		—		3.2
Retirement of common shares (tax payments on equity compensation)	—		0		(0.3)		—		—		—		(0.3)
Employee stock purchase plan	—		—		0.6		—		—		—		0.6
Cash dividend declared - common shares ($0.31/share)	—		—		—		—		(9.8)		—		(9.8)
Balance, September 30, 2019	$	—	$	45.6	$	1,373.2	$	(455.1)	$	925.0	$	4.7	$	1,893.4


Balance, June 30, 2020	$	0	$	46.0	$	1,376.5	$	(455.1)	$	756.7	$	5.9	$	1,730.0
Net loss	—		—		—		—		(29.6)		—		$	(29.6)
Preferred shares issued	144.0		—		—		—		—		—		$	144.0
Other comprehensive income - Change in fair value of fixed maturities, net of taxes	—		—		—		—		—		35.7		$	35.7
Other comprehensive loss, net - Other	—		—		—		—		—		(4.7)		$	(4.7)

Activity under stock incentive plans	—		0		1.5		—		—		—		$	1.5
Retirement of common shares (tax payments on equity compensation)	—		0		(0.1)		—		—		—		$	(0.1)
Employee stock purchase plan	—		—		0.6		—		—		—		$	0.6
Dividends on preferred shares	—		—		—		—		(2.0)		—		$	(2.0)
Cash dividend declared - common shares ($0.31/share)	—		—		—		—		(10.9)		—		$	(10.9)

Balance, September 30, 2020	$	144.0	$	46.0	$	1,378.5	$	(455.1)	$	714.2	$	36.9	$	1,864.5

See accompanying notes.

(in millions, except number of shares and per share amounts)


	Preferred Shares and Additional Paid-in Capital		Common Shares		Additional Paid-In Capital		Treasury Shares		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Shareholders' Equity
Balance, December 31, 2018	$	—	$	45.3	$	1,372.0	$	(455.1)	$	862.6	$	(78.1)	$	1,746.7
Net income	—		—		—		—		94.9		—		94.9
Other comprehensive income - Change in fair value of fixed maturities, net of tax	—		—		—		—		—		82.9		82.9
Other comprehensive loss, net - Other	—		—		—		—		—		(0.1)		(0.1)
Activity under stock incentive plans	—		0.4		10.6		—		—		—		11.0
Retirement of common shares (tax payments on equity compensation)	—		(0.1)		(11.1)		—		—		—		(11.2)
Employee stock purchase plan	—		—		1.7		—		—		—		1.7
Cash dividend declared - common shares ($0.93/share)	—		—		—		—		(32.5)		—		(32.5)
Balance, September 30, 2019	$	—	$	45.6	$	1,373.2	$	(455.1)	$	925.0	$	4.7	$	1,893.4


Balance, December 31, 2019	$	0	$	45.7	$	1,376.6	$	(455.1)	$	811.1	$	2.8	$	1,781.1
Net loss	—		—		—		—		(54.8)		—		(54.8)
Preferred shares issued	144.0		—		—		—		—		—		144.0
Other comprehensive income - Change in fair value of fixed maturities, net of taxes	—		—		—		—		—		40.7		40.7
Other comprehensive loss, net - Other	—		—		—		—		—		(12.3)		(12.3)

Activity under stock incentive plans	—		0.4		6.4		—		—		—		6.8
Retirement of common shares (tax payments on equity compensation)	—		(0.1)		(6.5)		—		—		—		(6.6)
Employee stock purchase plan	—		—		2.0		—		—		—		2.0
Dividends on preferred shares	—		—		—		—		(2.0)		—		(2.0)
Cash dividend declared - common shares ($0.93/share)	—		—		—		—		(32.2)		—		(32.2)
Cumulative effect of adoption of ASU 2016-13, net of taxes	—		—		—		—		(7.9)		5.7		(2.2)
Balance, September 30, 2020	$	144.0	$	46.0	$	1,378.5	$	(455.1)	$	714.2	$	36.9	$	1,864.5

See accompanying notes.

For the Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net income

$
21.4

$
113.8

Adjustments to reconcile net income to net cash provided by (used in)
operating activities:

Amortization and depreciation

24.4

27.4

Share-based payments expense

11.2

11.1

Deferred income tax (benefit) provision, net

(6.4
)

2.3

Net realized investment and other gains

(25.1
)

(12.8
)
Undistributed earnings from alternative investment portfolio

(38.6
)

(20.8
)
Loss on disposals of fixed assets, net

1.4

0.2

Change in:

Accrued investment income

(2.7
)

(0.3
)
Receivables

(690.9
)

(255.5
)
Deferred acquisition costs

(19.7
)

(14.9
)
Ceded unearned premiums

(65.8
)

(59.8
)
Reserves for losses and loss adjustment expenses

756.5

154.2

Unearned premiums

162.5

120.3

Ceded reinsurance payable and funds held

179.7

128.3

Income taxes

3.5

19.7

Accrued underwriting expenses

(42.5
)

(27.4
)
Other, net

(16.5
)

(35.0
)
Cash provided by operating activities

252.4

150.8

Cash flows from investing activities:

Sales of fixed maturity investments

1,069.7

761.8

Maturities and mandatory calls of fixed maturity investments

493.2

839.0

Sales of equity securities

140.0

155.3

Sales of other investments

68.3

92.1

Purchases of fixed maturity investments

(1,916.9
)

(1,650.7
)
Purchases of equity securities

(118.1
)

(114.7
)
Purchases of other investments

(25.2
)

(90.3
)
Change in foreign regulatory deposits and voluntary pools

(27.2
)

4.8

Change in short-term investments

291.4

(78.7
)
Settlements of foreign currency exchange forward contracts

—

(7.2
)
Acquisition of subsidiaries, net of cash acquired

(105.2
)

—

Purchases of fixed assets

(20.4
)

(26.7
)
Other, net

(15.6
)

31.9

Cash used in investing activities

(166.0
)

(83.4
)
Cash flows from financing activities:

Additional long-term borrowings

125.0

—

Activity under stock incentive plans

0.9

0.6

Repurchase of Company's common shares

(36.6
)

(45.3
)
Payment of cash dividends to common shareholders

(24.9
)

(19.8
)
Cash provided by (used in) financing activities

64.4

(64.5
)
Effect of exchange rate changes on cash

(1.0
)

(1.0
)
Change in cash

149.8

1.9

Cash, beginning of year

86.0

121.7

Cash, end of period

$
235.8

$
123.6


	For the Nine Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net (loss) income	$	(54.8)	$	94.9
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization and depreciation	24.7		20.4
Share-based payments expense	7.7		11.7
Deferred income tax benefit, net	(23.2)		(2.2)
Net realized investment losses (gains)	21.7		(58.3)
Undistributed earnings (loss) from alternative investment portfolio	1.6		(19.4)
Loss on disposals of long-lived assets, net	0.4		0

Change in:
Accrued investment income	3.5		(0.5)
Receivables	(65.1)		(282.6)
Deferred acquisition costs	(11.7)		7.5
Ceded unearned premiums	(120.5)		(147.1)
Reserves for losses and loss adjustment expenses	267.6		194.9
Unearned premiums	176.8		197.7
Ceded reinsurance payable and funds held	(102.2)		204.8
Income taxes	(12.8)		7.9
Accrued underwriting expenses and other liabilities	(7.4)		8.5
Other, net	(4.9)		(42.5)
Cash provided by operating activities	101.4		195.7
Cash flows from investing activities:
Sales of fixed maturity investments	977.5		1,046.3
Maturities and mandatory calls of fixed maturity investments	410.3		292.2
Sales of equity securities	18.2		66.3
Sales of other investments	95.5		67.7
Purchases of fixed maturity investments	(1,659.3)		(1,535.0)
Purchases of equity securities	(68.3)		(49.9)
Purchases of other investments	(24.5)		(54.6)
Change in foreign regulatory deposits and voluntary pools	(0.5)		2.3
Change in short-term investments	297.8		0
Settlements of foreign currency exchange forward contracts	9.1		(1.2)


Proceeds from sale of Trident assets	38.0		0
Purchases of fixed assets	(15.8)		(22.9)
Other, net	2.7		29.6
Cash provided by (used in) investing activities	80.7		(159.2)
Cash flows from financing activities:

Payment of long-term debt	(125.0)		(0.6)
Issuance of preferred shares, net of issuance costs	144.0		0
Activity under stock incentive plans	1.4		1.4

Payment of cash dividends to preferred shareholders	(2.0)		0
Payment of cash dividends to common shareholders	(32.2)		(32.5)
Cash used in financing activities	(13.8)		(31.7)
Effect of exchange rate changes on cash	(5.7)		1.1
Change in cash	162.6		5.9
Cash, beginning of year	137.8		139.2
Cash, end of period	$	300.4	$	145.1

See accompanying notes.

1.	~~Basis of Presentation~~

1. Basis of Presentation

The accompanying consolidated financial statements of Argo Group International Holdings, Ltd. (“Argo Group,” “we” or the “Company”) and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Argo Group is an underwriter of specialty insurance and reinsurance products in the property and casualty market.

The preparation of interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The major estimates reflected in our consolidated financial statements include, but are not limited to, reserves for losses and loss adjustment expenses; reinsurance recoverables, including the reinsurance recoverables allowance for ~~doubtful accounts;~~expected credit losses; estimates of written and earned premiums; reinsurance premium receivable; fair value of investments and assessment of potential ~~impairment;~~impairment, including the allowance for credit losses on fixed maturity securities; valuation of goodwill and intangibles and our deferred tax asset valuation allowance. Actual results could differ from those estimates. Certain financial information that normally is included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2019, filed with the Securities and Exchange Commission ("SEC") on February ~~24, 2017.~~

Effective February 6, 2017, we completed the acquisition of Maybrooke Holdings, S.A. (“Maybrooke”) and its direct subsidiaries, including Ariel Re. We have accounted for the acquisition in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations,” and the purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. See Note 3, “Acquisition of Maybrooke,” for additional discussion regarding the acquisition and the related financial disclosures. The Consolidated Financial Statements as of and for the three and nine months ended September 30, 2017 and the Notes to the Consolidated Financial Statements reflect the consolidated results of Argo Group and Maybrooke commencing on the date of acquisition.

28, 2020.

The interim financial information as of, and for the three and nine months ended, September 30, ~~2017~~2020 and ~~2016~~2019 is unaudited. However, in the opinion of management, the interim information includes all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results presented for the interim periods. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year. All significant intercompany amounts have been eliminated in consolidation.

Certain reclassifications have been made to financial information presented for prior years to conform to the current year’s presentation.

During the first ~~quarter~~nine months of ~~2017,~~both 2020 and 2019, we ~~evaluated~~incurred non-recurring costs associated with a number of activities that began with proxy solicitation efforts and ~~modified~~shareholder engagement. For the ~~presentation of our reportable segments to better reflect our new operating framework~~three and ~~management structure. Under this model, Argo Group’s chief operating decision maker – Mark E. Watson III, President~~nine months ended September 30, 2019, these costs were $3.7 million and ~~Chief Executive Officer – evaluates performance~~$11.7 million, respectively, and allocates resources based on the review of the U.S. Operations and the International Operations. The U.S. Operations includes the former Excess & Surplus and Commercial Specialty reportable segments. The International Operations includes the former Syndicate 1200, International Specialty reportable segments, and the recently acquired Ariel Re business. (See Note 3, “Acquisition of Maybrooke” for details regarding Ariel Re.) The business unit that produces the risk and not the location of the underlying exposure is the primary characteristic in distinguishing operating and reportable segments. For example, a U.S. property exposure underwritten through our Syndicate platform would bewere previously included in ~~International Operations. Consistent with prior periods,~~ the ~~Run-off Lines~~line item "Underwriting, Acquisition and ~~Corporate segments include all other activity~~Insurance Expenses" in the Consolidated Statements of ~~Argo Group and are included~~Income in our ~~consolidated financial results. Segment results~~Quarterly Report on Form 10-Q for the three and nine months ended September 30, ~~2016 have been reclassified to~~2019. To conform to the current ~~presentation.~~

2.	~~Recently Issued Accounting Pronouncements~~

~~In May 2017,~~year's presentation, these amounts have been reclassified out of "Underwriting, acquisition and insurance expenses" and into "Other corporate expenses" in the ~~Financial Accounting Standards Board~~Consolidated Statements of (Loss) Income herein. Please see Note 12, "Underwriting, Acquisition and Insurance Expenses & Other Corporate Expenses" for further discussion.

Sale of Trident Brand and Platform

On April 30, 2020, we sold our Trident Public Risk Solutions (“~~FASB”~~Trident”) ~~issued Accounting Standards Update~~brand and underwriting platform to Paragon Insurance Holdings, LLC (“~~ASU”~~Paragon”) ~~2017-09, “Compensation – Stock Compensation” (Topic 718): Scope~~and received $38 million in cash, with additional consideration in future periods depending on performance post-closing. We recognized a pre-tax gain of ~~Modification Accounting. ASU 2017-09 clarifies when changes~~$32.3 million related to the ~~terms or conditions~~sale, which is included in "Net realized investment gains (losses)" in our Consolidated Statements of ~~a share-based payment award must be accounted~~(Loss) Income for ~~as modifications. The guidance requires entities to apply~~ the ~~modification accounting guidance if the value, vesting conditions or classification~~nine months ended September 30, 2020. Trident was one of the ~~award changes. In addition~~business units within our U.S. Operations reporting segment.

Paragon will continue to ~~all~~write business on Argo paper through a managing general agency agreement, and we will retain Trident’s claims operations and provide claims services to Paragon for the ~~disclosures about modifications that are required today, the entities are required to affirmatively disclose when compensation expense has not changed. The ASU will be applied prospectively~~public entity business.

Acquisition of Ariel Indemnity Limited

Effective June 12, 2020, Argo Group and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including in any interim period for which financial statements have not been issued or made available for issuance. We are currently evaluating the impact that the adoptionour subsidiary Argo Re, Ltd. (“Argo Re”) acquired 100% of the ~~ASU will have on our financial results~~capital stock of Ariel Indemnity Limited (“AIL”) for consideration of $55.6 million. The acquisition of AIL was made pursuant to the former owners (the “Sellers”) of Maybrooke Holdings, S.A. (“Maybrooke”) exercising a put option within the Administrative Services Agreement (“ASA”) between the Company and ~~disclosures.~~

~~In January 2017,~~ the FASB issued ASU 2017-01, “Business Combinations” (Topic 805). ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.Sellers. The guidance specifies the minimum inputs and processes required to meet the definition of a business. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those periods, with early adoption permitted. We do not anticipate that this ASU will have a material impact on our financial results or disclosures.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” (Topic 350). ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill that is done in Step 2ASA was part of the ~~current goodwill impairment test to measure a goodwill impairment loss. Instead, entities will record an impairment loss based on~~stock purchase agreement between the ~~excess of a reporting unit’s carrying amount over its fair value. The guidance will be applied prospectively~~Company and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. We do not anticipate that this ASU will have a material impact on our financial results or disclosures.

~~In August 2016,~~ the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230). ASU 2016-15 will reduce diversity in practice on how eight specific cash receipts and payments are classified on the statement of cash flows. The ASU will be effective for fiscal years beginning after December 15, 2017, including interim periods within those years. This ASU will have an impact on how we present the distributions received from equity method investees in our statement of cash flows. We have elected to adopt the cumulative earnings approach to classify distributions received from equity method investees, which we will adopt retrospectively. We anticipate that this ASU will have no net effect on our consolidated statements of cash flows, but will likely have an immaterial impact on the classification of specific cash receipts and payments within the statement.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (Topic 326). ASU 2016-13 requires organizations to estimate credit losses on certain types of financial instruments, including receivables and available-for-sale debt securities, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The guidance requires a modified retrospective transition method and early adoption is permitted. We are currently evaluating the impact that the adoption of the ASU will have on our financial results and disclosures, but do not anticipate that any such potential impact would be material.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (Topic 718). ASU 2016-09 simplifies the accounting for share-based payment award transactions including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows, and accounting for forfeitures. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. We have adopted this ASU as of January 1, 2017, and for presentation purposes, the incremental tax windfall or shortfall associated with these events has been classified as a cash inflow from operating activity as compared with a financing activity, as previously required. The impact to our financial statements was not material. Additionally, we have selected to continue estimating forfeitures based on historical patterns and will true-up the expenses upon vesting.

In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). ASU 2016-02 requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Additionally, the ASU modifies current guidance for lessors' accounting. The ASU is effective for interim and annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. We do not anticipate that this ASU will have a material impact on our results of operations, but we anticipate an increase to the value of our assets and liabilities related to leases, with no material impact to equity.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (Subtopic 825-10). ASU 2016-01 will require equity investments that are not consolidated or accounted for under the equity method of accounting to be measured at fair value with changes in fair value recognized in net income. This ASU will also require us to assess the ability to realize our deferred tax assets related to an available-for-sale debt security in combination with our other deferred tax assets. The ASU will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. While we continue to evaluate the impact of this ASU, we anticipate the standard will increase the volatility of our consolidated statements of income, resulting from the remeasurement of our equity investments.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), which replaces most existing GAAP revenue recognition guidance and permits the use of either the retrospective or cumulative effect transition method. In August 2015, “Deferral of the Effective Date” (Topic 606), deferred the effective date of this guidance to interim and annual reporting periods beginning after December 15, 2017. Subsequently, in 2016, the FASB issued implementation guidance related to ASU 2014-09, including:

ASU 2016-08, “Principal versus Agent considerations (Reporting Revenue Gross versus Net)” (Topic 606), which is intended to provide further clarification on the application of the principal versus agent implementations;

~~ASU 2016-10, “Identifying Performance Obligations and Licensing” (Topic 606), which is intended to clarify the guidance for identifying promised goods or service in a contract with a customer;~~

~~ASU 2016-11, “Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting” (Topics 605 & 815);~~

ASU 2016-12, “Narrow-Scope Improvements and Practical Expedients” (Topic 606), provides additional guidance for quantitative and qualitative disclosures in certain cases, and makes 12 additional technical corrections and improvements to the new revenue standard.

~~While insurance contracts are excluded from this ASU, fee income~~Sellers related to our brokerage operations and management of the third-party capital for our underwriting Syndicate 1200 at Lloyd’s will be subject to this updated guidance. We continue to evaluate what impact this ASU will have on our financial results and disclosures and which adoption method to apply, but do not anticipate such impact being material based on the limited revenue streams subject to the ASU.

3.	~~Acquisition of Maybrooke~~

~~Effective~~ February 6, 2017 ~~we completed the~~ acquisition of Maybrooke, ~~whereby we acquired all~~the since-liquidated holding company of our Ariel Re platform. The $55.6 million sales price is equal to the 2019 year-end tangible net worth of the ~~issued~~AIL, less certain administrative costs. Upon acquiring AIL, we dissolved AIL and ~~outstanding capital stock~~merged it into Argo Re.

The net assets of ~~Maybrooke. The initial purchase price~~AIL are primarily comprised of ~~$235.3 million was paid in cash from funds on hand~~certain invested assets and available under our credit facility (see Note 7, “Other Indebtedness”). The initial purchase price was subject to post-closing adjustments based on a final calculation of the purchase price, which we delivered to the seller,receivables, as required, within 90 days of closing. As of the date of this filing, we are in discussions with the seller to finalize and agree upon certain changes included in the final purchase price calculation. We anticipate resolving this matter by the end of 2017 and do not expect any material adjustments to the purchase price disclosed below.

Through the acquisition of Maybrooke, we acquired Ariel Re, a global underwriter of specialty insurance and reinsurance business written primarily through its Lloyd’s Syndicate 1910. Ariel Re provides Argo Groupwell as run-off reserves associated with a ~~number of strategic advantages, including enhanced scale~~loss portfolio transfer agreement between AIL and the former Ariel Reinsurance Company, Ltd. ("ARL") legal entity. ARL was merged into Argo Re in ~~its London- and Bermuda-based platforms.~~

December 2017.

(in millions)

Assets:

Investments

$
340.7

Cash

130.1

Accrued investment income

0.2

Premiums receivable

157.6

Reinsurance recoverables

80.2

Current income taxes receivable

0.6

Deferred acquisition costs, net

9.8

Ceded unearned premiums

92.6

Other assets

24.9

Total assets

836.7

Liabilities:

Reserves for losses and loss adjustment expenses

197.0

Unearned premiums

152.5

Accrued underwriting expenses

28.8

Ceded reinsurance payable, net

144.2

Junior subordinated debentures

83.6

Deferred tax liabilities

9.0

Other liabilities

30.7

Total liabilities

645.8

Net assets acquired

190.9

Initial purchase price

235.3

Intangible assets

$
44.4

Risks and Uncertainties

Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the ~~valuation analysis~~economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The global COVID-19 pandemic has ~~not yet been completed. We anticipate recording both amortizable~~resulted in and ~~non-amortizable identifiable intangible assets~~is expected to continue to result in significant disruptions in economic activity and ~~goodwill upon~~financial markets. The cumulative effects of COVID-19 on the ~~completion of the valuation analyses, including intangible assets relating to the Lloyd’s Syndicate 1910 stamp capacity (non-amortizable), distribution networks (amortizable),~~Company, and the ~~Ariel Re tradename (amortizable). Goodwill is calculated as~~effect of any other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, reduce the ~~excess~~market value of invested assets held by the ~~purchase price over~~Company or negatively impact the fair value of ~~the net assets recognized, including identifiable intangible assets.~~

~~We recognized approximately $2.5 million of acquisition-related transaction costs in~~ our ~~Consolidated Statements of Income, all of which~~goodwill. Our liquidity and capital resources were ~~recorded~~not materially impacted by COVID-19 and related economic conditions during the first ~~quarter~~nine months of ~~2017. Of these amounts, $2.2 million were reported in “Underwriting, acquisition~~2020.

2. Recently Issued Accounting Pronouncements & Updates to Accounting Policies

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, “Measurement of Credit Losses on Financial Instruments” (Topic 326), commonly referred to as current expected credit losses or "CECL." ASU 2016-13 requires organizations to estimate credit losses on certain types of financial instruments, including receivables and ~~insurance expenses”~~available-for-sale debt securities, by introducing an approach based on expected losses. The expected loss approach will require entities to incorporate considerations of historical information, current information and ~~$0.3 million in “Interest expense” related~~reasonable and supportable forecasts. The updated guidance also amends the previous other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the ~~borrowings under our credit facility to help fund~~difference between a security’s amortized cost basis and its fair value. In addition, the ~~acquisition. No additional transaction costs were incurred during the three months ended September 30, 2017.~~

~~Maybrooke’s Contribution to Argo Group’s Revenue and (Loss) Income~~

~~The following selected financial information summarizes the results~~length of ~~Maybrooke from the date of acquisition that have been included in our Consolidated Statement of (Loss) Income:~~

(in millions)

For the Three
Months Ended
September 30, 2017

For the Nine
Months Ended
September 30, 2017

Revenues

$
27.5

$
93.7

Net loss

$
(26.7
)

$
(13.7
)

~~Unaudited Pro forma Results of Operations~~

~~The following unaudited pro forma financial information~~time a security has been ~~provided~~in an unrealized loss position will no longer impact the determination of whether a credit loss exists. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within the year of adoption. The guidance requires a modified retrospective transition method.

We adopted the updated guidance effective January 1, 2020 using the modified retrospective approach, which resulted in a $7.9 million net of tax reduction to ~~present~~retained earnings. Partially offsetting this reduction of retained earnings was a ~~summary~~$5.7 million net of tax increase in other comprehensive income representing the reclassification of unrealized investment losses to credit losses under this accounting update. The cumulative effect adjustment decreased shareholders’ equity $2.2 million. Please see Note 3, “Investments” and Note 4, “Allowance for Credit Losses” for further discussion of the ~~combined results~~impact of ~~Argo Group’s operations with Maybrooke’s as if the acquisition had occurred~~ASU 2016-13 on ~~January 1, 2016. The unaudited pro forma~~our financial ~~information is for informational purposes only~~position and is not necessarily indicative of what the results would have been had the acquisition been completed at the date indicated above, as it may not include all necessary adjustments. Future changes to Maybrooke’s business, such as, but not limited to, the impact from underwriting decisions, changes in risk selection, or retention rates, could result in a material favorable or unfavorable impact on Argo Group’s future results of operations at and ~~financial position. The unaudited pro forma results~~ for the three and nine months ended September 30, ~~2017 include favorable development from prior accident years~~2020.

Updates to ~~one specific claim in January 2017. In addition,~~Accounting Policies

The following accounting policies have been updated to reflect the ~~$2.5 million~~adoption of ~~nonrecurring transaction costs directly attributable~~ASU 2016-13, as described above.

Investment Impairments of Available-for-Sale Fixed Maturities

We regularly review our investments to identify and evaluate those that may have credit impairments. For fixed maturity securities, the evaluation for credit losses is generally based on the present value of expected cash flows of the security as compared to the ~~acquisition~~amortized book value, the financial condition, near-term and long-term prospects for ~~nine months ended September 30, 2017, as disclosed above, have also been removed~~the issuer, including industry conditions, implications of rating agency actions, the likelihood of principal and interest recoverability and whether it is more likely than not we will be required to sell the investment prior to the anticipated recovery in value.

Effective January 1, 2020 with the adoption of ASU 2016-13 Financial Instruments-Credit Losses, we recognize credit losses on fixed maturities through an allowance account. For fixed maturities that we do not intend to sell or for which it is more likely than not we will not be required to sell prior to the anticipated recovery in value, we separate the credit component of the impairment from the ~~unaudited pro forma results~~component related to all other market factors and report the credit loss component to net realized investment gains (losses) in the ~~table below.~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions, except per share data)

2017

2016

2017

2016

Pro forma revenues

$
439.2

$
466.0

$
1,332.4

$
1,340.5

Pro forma net (loss) income

(63.4
)

56.2

29.8

132.9

Pro forma net (loss) income per share - basic

(2.11
)

1.87

0.99

4.40

Pro forma net (loss) income per share - diluted

(2.11
)

1.83

0.96

4.30

4.	~~Investments~~

~~Composition~~Consolidated Statement of ~~Invested Assets~~

Income. The ~~amortized~~impairment related to all other market factors is reported as a separate component of shareholder’s equity in other comprehensive income (loss). The credit loss allowance account is adjusted for any additional credit losses or subsequent recoveries and the cost ~~gross unrealized~~basis of the fixed maturity security is not adjusted.

For fixed maturity securities that we intend to sell or for which it is more likely than not that we will be required to sell before an anticipated recovery in value, the full amount of the impairment is recognized in net realized investment gains ~~gross unrealized~~(losses) in the Consolidated Statement of Income and the cost basis of the fixed maturity security is adjusted to reflect the recognized realized loss. The new cost basis is not adjusted for any recoveries in fair value.

We report accrued investment income separately from fixed maturity securities and have elected to not measure an allowance for credit losses for accrued investment income. The write-off of investment income accrued for fixed maturities that have defaulted on interest payments is recognized as a loss in net realized investment gains (losses), in the period of the default, in the Consolidated Statement of Income.

Reinsurance Recoverables

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated claim liability. We report our reinsurance recoverables net of an allowance for estimated uncollectible reinsurance. The allowance is based upon our ongoing review of amounts outstanding, length of collection periods, changes in reinsurer credit standing, disputes, applicable coverage defenses and ~~fair value~~other relevant factors. We use the rating-based method to estimate the uncollectible reinsurance reserves due to credit losses. Under this method, reinsurance credit risk is estimated by considering the reinsurers probability of ~~investments were~~default. Reinsurance recoverables are forecasted out of the assumed billing periods and a liquidation factor is applied based on the rating of the reinsurer and adjusted as ~~follows:~~

September 30, 2017

(in millions)

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Fixed maturities

U.S. Governments

$
342.7

$
0.5

$
3.2

$
340.0

Foreign Governments

231.9

7.9

3.5

236.3

Obligations of states and political subdivisions

324.1

11.9

0.8

335.2

Corporate bonds

1,612.7

29.0

9.9

1,631.8

Commercial mortgage-backed securities

147.4

0.4

1.1

146.7

Residential mortgage-backed securities

271.7

3.4

1.6

273.5

Asset-backed securities

156.4

0.7

0.6

156.5

Collateralized loan obligations

252.8

6.6

1.0

258.4

Total fixed maturities

3,339.7

60.4

21.7

3,378.4

Equity securities

347.6

138.2

5.3

480.5

Other investments

553.1

9.5

—

562.6

Short-term investments

386.0

—

—

386.0

Total investments

$
4,626.4

$
208.1

$
27.0

$
4,807.5

needed based on our historical experience with the reinsurers. Additionally, reinsurance receivable balances are evaluated to identify any dispute risk and when required, an additional reserve is recorded. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of underwriting expense. We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies.

Premiums and Unearned Premium Reserves

December 31, 2016

(in millions)

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value

Fixed maturities

U.S. Governments

$
275.1

$
0.6

$
4.5

$
271.2

Foreign Governments

244.2

1.1

8.0

237.3

Obligations of states and political subdivisions

375.7

8.9

1.8

382.8

Corporate bonds

1,316.9

23.3

19.5

1,320.7

Commercial mortgage-backed securities

154.9

0.4

1.6

153.7

Residential mortgage-backed securities

174.8

3.7

1.7

176.8

Asset-backed securities

127.6

0.1

2.1

125.6

Collateralized loan obligations

269.6

3.8

9.1

264.3

Total fixed maturities

2,938.8

41.9

48.3

2,932.4

Equity securities

335.2

117.9

5.7

447.4

Other investments

531.6

7.5

0.1

539.0

Short-term investments

405.5

—

—

405.5

Total investments

$
4,211.1

$
167.3

$
54.1

$
4,324.3

Premiums are recognized as revenues pro rata over the policy period. Unearned premium reserves represent the unexpired portion of policy premiums. Accrued retrospective premiums are included in premium balances receivable. Premiums receivable balances are reported net of an allowance for expected losses, both dispute and credit related. The allowance is based upon our ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by our ability to cancel the policy if the policyholder does not pay the premium.

3. Investments

Included in “Total investments” in our Consolidated Balance Sheets at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 is ~~$154.8~~$150.2 million and ~~$131.9~~$158.6 million, respectively, of assets managed on behalf of the trade capital providers, who are third-party participants that provide underwriting capital to the operations of ~~Syndicate 1200.~~

Syndicates 1200 and 1910.

Table of Contents

Fixed Maturities

The amortized cost, gross unrealized gains, gross unrealized losses, allowance for credit losses, and fair value of fixed maturity investments were as follows:


September 30, 2020
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses(1)		Fair Value
Fixed maturities
U.S. Governments	$	374.9	$	17.6	$	0	$	0	$	392.5
Foreign Governments	274.5		5.9		2.2		0.2		278.0
Obligations of states and political subdivisions	162.6		7.4		0.3		0.2		169.5
Corporate bonds	1,842.6		62.7		25.7		32.2		1,847.4
Commercial mortgage-backed securities	321.7		14.5		0.4		0		335.8
Residential mortgage-backed securities	454.8		19.4		0.8		0		473.4
Asset-backed securities	141.7		3.2		0.5		1.1		143.3
Collateralized loan obligations	274.2		3.3		3.0		0		274.5
Total fixed maturities	$	3,847.0	$	134.0	$	32.9	$	33.7	$	3,914.4

(1) Effective January 1, 2020 we adopted ASU 2016-13 and as a result any credit impairment losses on our available-for-sale fixed maturities are recorded as an allowance, subject to reversal. Prior periods have not been restated to conform with the current year presentation. See Note 1.


December 31, 2019
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Fixed maturities
U.S. Governments	$	353.5	$	2.3	$	1.2	$	354.6
Foreign Governments	244.8		4.6		0.7		248.7
Obligations of states and political subdivisions	145.8		6.9		0.1		152.6
Corporate bonds	1,777.4		37.7		34.7		1,780.4
Commercial mortgage-backed securities	213.5		4.6		1.1		217.0
Residential mortgage-backed securities	479.1		10.4		0.6		488.9
Asset-backed securities	164.2		1.5		0.2		165.5
Collateralized loan obligations	226.7		0.5		1.4		225.8
Total fixed maturities	$	3,605.0	$	68.5	$	40.0	$	3,633.5

Contractual Maturity

The amortized cost and fair values of fixed maturity investments as of September 30, ~~2017,~~2020, by contractual maturity, were as follows:


(in millions)	Amortized Cost		Fair Value		(in millions)	Amortized Cost		Fair Value
Due in one year or less		231.9		230.3	Due in one year or less	$	303.4	$	305.4
Due after one year through five years		1,515.6		1,533.6	Due after one year through five years	1,682.0		1,691.7
Due after five years through ten years		594.1		604.6	Due after five years through ten years	603.4		622.9
Thereafter		169.8		174.8	Thereafter	65.8		67.4
Structured securities		828.3		835.1	Structured securities	1,192.4		1,227.0
Total	$	3,339.7	$	3,378.4	Total	$	3,847.0	$	3,914.4

The expected maturities may differ from the contractual maturities because debtors may have the right to call or prepay obligations.

Other ~~Invested Assets~~

Investments

Details regarding the carrying value and unfunded investment commitments of ~~the~~ other ~~invested assets portfolio~~investments as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 were as follows:

September 30, 2017

September 30, 2020						September 30, 2020
(in millions)	Carrying Value			Unfunded Commitments		(in millions)	Carrying Value		Unfunded Commitments
Investment Type						Investment Type
Hedge funds	$	180.1		$	—	Hedge funds	$	105.7	$	0
Private equity		167.7			117.9	Private equity	204.7		86.5
Long only funds		215.7			—
Other investments		(0.9	)		—
Total other invested assets	$	562.6		$	117.9
Overseas deposits						Overseas deposits	97.2		0
Other						Other	4.6		0
Total other investments						Total other investments	$	412.2	$	86.5

December 31, 2016

(in millions)

Carrying
Value

Unfunded
Commitments

Investment Type

Hedge funds

$
180.9

$
—

Private equity

179.0

93.4

Long only funds

170.7

—

Other investments

8.4

—

Total other invested assets

$
539.0

$
93.4


December 31, 2019
(in millions)	Carrying Value		Unfunded Commitments
Investment Type
Hedge funds	$	109.5	$	0
Private equity	268.1		110.0
Overseas deposits	114.6		0
Other	4.3		0
Total other investments	$	496.5	$	110.0

The following describes each investment type:

•Hedge funds:Hedge funds include funds that primarily buy and sell stocks, including short sales, multi-strategy credit, relative value credit and distressed credit.

•Private equity:Private equity includes buyout funds, real asset/infrastructure funds, credit special situations funds, mezzanine lending funds and direct investments and strategic non-controlling minority investments in private companies that are principally accounted for using the equity method of accounting.

~~Long only funds:~~ ~~Our long only funds include a fund that primarily owns international stocks and funds that primarily own investment-grade corporate and~~•Overseas deposits: Overseas deposits are principally invested in short-term sovereign fixed income ~~securities.~~

and investment grade corporate securities and international stocks.

•Other:Other ~~investments:~~ ~~Other investments include~~includes participation in investment pools, foreign exchange currency forward contracts to manage our foreign currency exposure and a portfolio of foreign exchange currency forward contracts that are actively traded by an external currency manager for a total return strategy.

pools.

Unrealized Losses ~~and Other-Than-Temporary Impairments~~

An aging of unrealized losses on our investments in fixed maturities ~~equity securities, other investments and short-term investments~~ is presented below:

September 30, 2017

Less Than One Year

One Year or Greater

Total

(in millions)

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fixed maturities

U.S. Governments

$
279.2

$
2.7

$
17.6

$
0.5

$
296.8

$
3.2

Foreign Governments

194.8

3.4

6.2

0.1

201.0

3.5

Obligations of states and political subdivisions

25.7

0.3

15.0

0.5

40.7

0.8

Corporate bonds

426.9

8.2

72.5

1.7

499.4

9.9

Commercial mortgage-backed securities

73.6

0.4

26.8

0.7

100.4

1.1

Residential mortgage-backed securities

137.9

1.3

17.9

0.3

155.8

1.6

Asset-backed securities

69.4

0.3

9.3

0.3

78.7

0.6

Collateralized loan obligations ⁽²⁾

61.0

1.0

2.3

—

63.3

1.0

Total fixed maturities

1,268.5

17.6

167.6

4.1

1,436.1

21.7

Equity securities

55.2

5.3

—

—

55.2

5.3

Other investments⁽¹⁾

0.3

—

—

—

0.3

—

Short-term investments⁽¹⁾

46.4

—

—

—

46.4

—

Total

$
1,370.4

$
22.9

$
167.6

$
4.1

$
1,538.0

$
27.0

December 31, 2016

Less Than One Year

One Year or Greater

Total

(in millions)

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fixed maturities

U.S. Governments

$
183.4

$
4.5

$
—

$
—

$
183.4

$
4.5

Foreign Governments

201.2

8.0

—

—

201.2

8.0

Obligations of states and political subdivisions

72.6

1.7

1.8

0.1

74.4

1.8

Corporate bonds

490.5

17.7

50.6

1.8

541.1

19.5

Commercial mortgage-backed securities

70.6

1.5

7.1

0.1

77.7

1.6

Residential mortgage-backed securities ⁽²⁾

87.5

1.7

4.4

—

91.9

1.7

Asset-backed securities

69.7

1.4

8.2

0.7

77.9

2.1

Collateralized loan obligations

122.5

8.6

16.9

0.5

139.4

9.1

Total fixed maturities

1,298.0

45.1

89.0

3.2

1,387.0

48.3

Equity securities

62.1

5.7

—

—

62.1

5.7

Other investments

0.3

0.1

—

—

0.3

0.1

Short-term investments ⁽¹⁾

4.8

—

—

—

4.8

—

Total

$
1,365.2

$
50.9

$
89.0

$
3.2

$
1,454.2

$
54.1

⁽¹⁾	~~Unrealized losses less than one year are less than $0.1 million.~~


September 30, 2020	Less Than One Year				One Year or Greater				Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities
U.S. Governments (1)	$	14.9	$	0	$	0	$	0	$	14.9	$	0
Foreign Governments	140.2		2.0		0.3		0.2		140.5		2.2
Obligations of states and political subdivisions	9.6		0.3		0		0		9.6		0.3
Corporate bonds	394.4		14.9		23.1		10.8		417.5		25.7
Commercial mortgage-backed securities	32.0		0.4		0		0		32.0		0.4
Residential mortgage-backed securities	40.3		0.6		3.9		0.2		44.2		0.8
Asset-backed securities	11.4		0.5		0		0		11.4		0.5
Collateralized loan obligations	139.2		2.3		44.0		0.7		183.2		3.0
Total fixed maturities	$	782.0	$	21.0	$	71.3	$	11.9	$	853.3	$	32.9

⁽²⁾	~~Unrealized losses one year or greater are less than $0.1 million.~~

(1) Unrealized losses are less than $0.1 million.

Table of Contents


December 31, 2019	Less Than One Year				One Year or Greater				Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities
U.S. Governments	$	114.6	$	1.1	$	17.0	$	0.1	$	131.6	$	1.2
Foreign Governments (1)	117.6		0.7		5.1		0		122.7		0.7
Obligations of states and political subdivisions (1)	0.7		0		2.1		0.1		2.8		0.1
Corporate bonds	249.4		18.9		63.6		15.8		313.0		34.7
Commercial mortgage-backed securities (1)	74.8		1.1		4.9		0		79.7		1.1
Residential mortgage-backed securities	66.9		0.3		25.2		0.3		92.1		0.6
Asset-backed securities	22.5		0.1		18.9		0.1		41.4		0.2
Collateralized loan obligations	54.7		0.8		116.7		0.6		171.4		1.4
Total fixed maturities	$	701.2	$	23.0	$	253.5	$	17.0	$	954.7	$	40.0

(1) Unrealized losses are less than $0.1 million.

We ~~regularly evaluate our investments for other-than-temporary impairment. For~~hold a total of 5,011 fixed maturity securities, of which 1,411 were in an unrealized loss position for less than one year and 174 were in an unrealized loss position for a period one year or greater as of September 30, 2020.

We adopted ASU 2016-13 “Measurement of Credit Losses on Financial Instruments” effective January 1, 2020.

For fixed maturities for which a decline in the fair value between the amortized cost is due to credit-related factors, an allowance is established for the difference between the estimated recoverable value and amortized cost with a corresponding charge to realized investment losses in the Statement of Income (Loss). The allowance is limited to the difference between amortized cost and fair value. The estimated recoverable value is the present value of cash flows expected to be collected, as determined by management. The difference between fair value and amortized cost that is not associated with credit-related factors is recognized in the Statement of Comprehensive Income (Loss). Accrued interest is excluded from the measurement of the allowance for credit losses.

When determining if a credit loss has been incurred, we may consider the historical performance of the security, available market information and security specific considerations such as the priority payment of the security. In addition, inputs used in our analysis include, but are not limited to, credit ratings and downgrades, delinquency rates, missed scheduled interest or principal payments, purchase yields, underlying asset performance, collateral types, modeled default rates, modeled severity rates, call/prepayment rates, expected cash flows, industry concentrations, and potential or filed bankruptcies or restructurings.

We evaluate for credit losses each period. If we determine that all or a portion of a fixed maturity is uncollectible, the uncollectible amortized cost is written off with a corresponding reduction to the allowance for credit losses. If we collect cash flows that were previously written off, the recovery is recognized in realized investment gains. We also consider whether we intend to sell an available-for-sale security or if it is more likely than not that we will be required to sell the security before recovery of its amortized cost. In these instances, a decline in fair value is recognized in net realized gains (losses) in the Statement of Income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

Prior to the adoption of ASU 2016-13, the evaluation for a credit loss iswas generally based on the present value of expected cash flows of the security as compared to the amortized ~~book value.~~cost. For structured securities, frequency and severity of loss inputs ~~are~~were used in projecting future cash flows of the securities. Loss frequency iswas measured ason the credit default rate, which ~~includes~~included factors such ~~factors~~ as loan-to-value ratios and credit scores of borrowers. ~~For equity securities and other investments,~~If a determination was made that the ~~length~~unrealized loss was other-than-temporary, a realized loss was recognized in the realized investment losses in the Statement of ~~time~~Income (Loss) and the ~~amount~~amortized cost basis of ~~decline~~the security was reduced to reflect the loss.

Table of Contents

The following table presents a roll-forward of the changes in ~~fair value are the principal factors in determining other-than-temporary impairment. We also recognize other-than-temporary~~allowance for credit losses on available-for-sale fixed ~~maturity securities that we intend to sell.~~

~~We hold a total~~maturities by industry category:


	Foreign Governments		Obligations of states and political subdivisions		Corporate bonds		Asset backed securities		Total
Beginning balance, January 1, 2020	$	0	$	0	$	0	$	0	$	0
Additions-initial adoption of accounting standard	0		0		6.8		0.1		6.9
Securities for which allowance was not previously recorded	0.3		0.3		14.4		0		15.0
Securities sold during the period	(0.2)		0		(15.5)		0		(15.7)
Additional net increases (decreases) in existing allowance	0.1		(0.1)		26.5		1.0		27.5
Ending balance, September 30, 2020	$	0.2	$	0.2	$	32.2	$	1.1	$	33.7

Total credit impairment losses included in net realized investment gains (losses) in the Consolidated Statement of ~~8,410 securities, of which 1,949 were in an unrealized loss position~~Income was $10.5 million and $43.0 million for ~~less than one year~~the three and ~~182 were in an unrealized loss position for a period one year or greater as of~~nine months ended September 30, ~~2017. Unrealized~~2020, respectively. Total other-than-temporary impairment losses ~~greater than twelve~~included in net realized investments gains (losses) was $5.0 million and $11.8 million for the three and nine months on fixed maturities were the result of a number of factors, including increased credit spreads, foreign currency fluctuations and higher market yields relative to the date the securities were purchased, and for structured securities, by the performance of the underlying collateral, as well. In considering whether an investment is other-than-temporarily impaired or not, we also considered that we do not intend to sell the investments and it is unlikely that we will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. In situations where we did not recognize other-than-temporary losses on investments in our equity portfolio, we have evaluated the near-term prospects of the investment in relation to the severity and duration of the impairment and based on that evaluation, have the ability and intent to hold these investments until a recovery of the cost basis. We do not consider these investments to be other-than-temporarily impaired atended September 30, ~~2017.~~

~~We recognized other-than-temporary losses on our fixed maturities and equity portfolio as follows:~~

2019, respectively.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Other-than-temporary impairment:

Corporate bonds

$
(0.1
)

$
(0.6
)

$
(0.1
)

$
(1.7
)
Equity securities

(0.1
)

(1.8
)

(1.6
)

(7.3
)
Other-than-temporary impairment losses

$
(0.2
)

$
(2.4
)

$
(1.7
)

$
(9.0
)

~~Realized~~Investment Gains and Losses

The following table presents our gross realized investment ~~and other~~ gains (losses):

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Realized gains

Fixed maturities

$
6.3

$
5.4

$
18.9

$
16.4

Equity securities

9.4

20.8

37.1

45.4

Other investments

7.0

4.2

17.8

31.2

Short-term investments

0.2

—

0.7

0.4

Other assets

—

1.2

—

1.2

Gross realized investment and other gains

22.9

31.6

74.5

94.6

Realized losses

Fixed maturities

(4.8
)

(6.1
)

(16.0
)

(21.0
)
Equity securities

(1.4
)

(1.9
)

(3.9
)

(9.0
)
Other investments

(10.5
)

(3.5
)

(27.7
)

(42.7
)
Short-term investments

—

—

(0.1
)

(0.1
)
Other-than-temporary impairment losses on
   fixed maturities

(0.1
)

(0.6
)

(0.1
)

(1.7
)
Other-than-temporary impairment losses on
   equity securities

(0.1
)

(1.8
)

(1.6
)

(7.3
)
Gross realized investment and other losses

(16.9
)

(13.9
)

(49.4
)

(81.8
)
Net realized investment and other gains (losses)
   before income taxes

6.0

17.7

25.1

12.8

Income tax expense

(2.2
)

(6.5
)

(7.9
)

(7.7
)
Net realized investment and other gains (losses),
   net of income taxes

$
3.8

$
11.2

$
17.2

$
5.1


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Realized gains on fixed maturities and other
Fixed maturities	$	7.2	$	3.7	$	30.5	$	13.0
Other investments	10.8		7.5		70.7		21.9
Other assets	0		0		32.3		0
	18.0		11.2		133.5		34.9
Realized losses on fixed maturities and other
Fixed maturities	(7.5)		(1.6)		(25.7)		(8.7)
Other investments	(12.6)		(8.4)		(58.4)		(21.8)
Other assets	(0.4)		0		(0.3)		0
Credit losses on fixed maturities	(10.5)		(5.0)		(43.0)		(11.8)

	(31.0)		(15.0)		(127.4)		(42.3)
Equity securities
Net realized (losses) gains on equity securities	(3.2)		6.4		(15.8)		7.7
Change in unrealized gains (losses) on equity securities held at the end of the period	10.5		(8.8)		(12.0)		58.0
Net realized gains (losses) on equity securities	7.3		(2.4)		(27.8)		65.7
Net realized investment and other (losses) gains before income taxes	(5.7)		(6.2)		(21.7)		58.3
Income tax (benefit) provision	(0.5)		(0.3)		(1.7)		11.9
Net realized investment (losses) gains, net of income taxes	$	(5.2)	$	(5.9)	$	(20.0)	$	46.4

The cost of securities sold is based on the specific identification method.

Table of Contents

Changes in unrealized ~~appreciation (depreciation)~~gains related to investments are summarized as follows:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Change in unrealized gains (losses)

Fixed maturities

$
9.5

$
13.7

$
41.6

$
78.5

Equity securities

11.7

(10.8
)

20.2

(6.8
)
Other investments

(0.1
)

—

2.0

0.6

Short-term investments

—

(0.1
)

—

0.3

Net unrealized investment and other gains before
income taxes

21.1

2.8

63.8

72.6

Income tax provision

(4.6
)

0.3

(14.3
)

(15.7
)
Net unrealized investment and other gains, net of
income taxes

$
16.5

$
3.1

$
49.5

$
56.9


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Change in unrealized gains
Fixed maturities	$	42.5	$	(3.8)	$	66.9	$	95.3

Other investments	0.2		0		(14.0)		4.4
Other and short-term investments	0		(0.8)		0		(0.7)
Net unrealized investment gains (losses) before income taxes	42.7		(4.6)		52.9		99.0
Income tax provision (benefit)	7.0		(0.4)		12.2		16.1
Net unrealized investment gains (losses), net of income taxes	$	35.7	$	(4.2)	$	40.7	$	82.9

Foreign Currency Exchange Forward Contracts

We entered into foreign currency exchange forward contracts to manage operational currency exposure on our Canadian dollar ~~(“CAD”)~~ investment portfolio and certain catastrophic events, minimize negative impacts to ~~our~~ investment portfolio returns ~~manage currency exposure on certain Euro (“EUR”) denominated investments~~ and gain exposure to a total return strategy which invests in multiple currencies. ~~These~~The currency forward contracts are carried at fair value in our Consolidated Balance Sheets in “Other ~~investments”.~~liabilities" and "Other assets” at September 30, 2020 and December 31, 2019, respectively. The net realized ~~and unrealized~~ gains and ~~losses~~(losses) are included in “Net realized investment ~~and other~~ (losses) gains” in our Consolidated Statements of (Loss) Income.

The fair value of our foreign currency exchange forward contracts as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 was as follows:

(in millions)

September 30, 2017

December 31, 2016

Operational currency exposure

$
(1.6
)

$
—

Asset manager investment exposure

(3.0
)

0.7

Total return strategy

(0.8
)

3.3

$
(5.4
)

$
4.0


(in millions)	September 30, 2020		December 31, 2019
Operational currency exposure	$	(0.7)	$	(0.8)
Asset manager investment exposure	(1.1)		(0.3)
Total return strategy	(0.7)		2.2
Total	$	(2.5)	$	1.1

The following table represents our gross investment realized gains and losses on our foreign currency exchange forward contracts:

Regulatory Deposits, Pledged Securities and Letters of Credit

(in millions)

September 30, 2017

December 31, 2016

Securities on deposit for regulatory and other purposes

$
177.8

$
168.7

Securities pledged as collateral for letters of credit

42.6

35.9

Securities and cash on deposit supporting Lloyd’s business

405.6

161.8

Total restricted investments

$
626.0

$
366.4

We are required to maintain assets on deposit with various regulatory authorities to support our insurance and reinsurance operations. We maintain assets pledged as collateral in support of irrevocable letters of credit issued under the terms of certain reinsurance agreements for reported loss and loss expense reserves. The following table presents our components of restricted assets:


(in millions)	September 30, 2020		December 31, 2019
Securities on deposit for regulatory and other purposes	$	232.0	$	192.5
Securities pledged as collateral for letters of credit and other	141.9		169.9
Securities and cash on deposit supporting Lloyd’s business	353.3		412.8
Total restricted investments	$	727.2	$	775.2

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market. Market participants are buyers and sellers in the principal (or most advantageous) market that are independent, knowledgeable, able to transact for the asset or liability and willing to transfer the asset or liability.

Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. The inputs of these valuation techniques are categorized into three levels.

•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the reporting date. We define actively traded as a security that has traded in the past seven days. We receive one quote per instrument for Level 1 inputs.

•Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. We receive one quote per instrument for Level 2 inputs.

•Level 3 inputs are unobservable inputs. Unobservable inputs reflect our own judgments about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

Fixed Maturities (Available-for-Sale) Levels 1 and 2:

•United States Treasury securities are typically valued using Level 1 inputs. For these securities, we obtain fair value measurements from third-party pricing services using quoted prices (unadjusted) in active markets at the reporting date.

•United States Government agencies, non-U.S. Government securities, obligations of states and political subdivisions, credit securities and foreign denominated government and credit securities are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, yield curves, live trading levels, trade execution data, credit information and the security’s terms and conditions, among other things.

•Asset and mortgage-backed securities and collateralized loan obligations are reported at fair value using Level 2 inputs. For these securities, we obtain fair value measurements from third-party pricing services. Observable data may include dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

Fixed Maturities (Available-for-Sale) Levels 3:

We own a term ~~loan~~loans that isare valued using unobservable inputs.

Table of Contents

Equity Securities Level 1:Equity securities are principally reported at fair value using Level 1 inputs. For these securities, we obtain fair value measurements from a third-party pricing service using quoted prices (unadjusted) in active markets at the reporting date.

~~Equity Securities Level 2:~~ We own interests in a mutual fund that is reported at fair value using Level 2 inputs. The valuation is based on the fund’s net asset value per share, at the end of each month. The underlying assets in the fund are valued primarily on the basis of closing market quotations or official closing prices on each valuation day.

Equity Securities Level 3: We own certain equity securities that are reported at fair value using Level 3 inputs. The valuation techniques for these securities include the following:

~~Fair value measurements are obtained from the National Association of Insurance Commissioners’ Security Valuation Office at the reporting date.~~

•Fair value measurements for an investment in an equity fund obtained by applying final prices provided by the administrator of the fund, which is based upon certain estimates and assumptions.

•Fair value measurements from brokers and independent valuation services, both based upon estimates, assumptions and other unobservable inputs.

Other Investments Level 2: Foreign regulatory deposits are assets held in trust in jurisdictions where there is a legal and regulatory requirement to maintain funds locally in order to protect policyholders. Lloyd’s is the appointed investment manager for the funds. These assets are invested in short-term government securities, agency securities and corporate bonds and are valued using Level 2 inputs based upon values obtained from Lloyd’s. ~~Foreign currency future contracts are valued by our counterparty using market driven foreign currency exchange rates and are considered Level 2 investments.~~

Short-term Investments: Short-term investments are principally reported at fair value using Level 1 inputs, with the exception of short-term corporate and governmental bonds reported at fair value using Level 2 inputs as described in the fixed maturities section above. Values for the investments categorized as Level 1 are obtained from various financial institutions as of the reporting date.

~~Transfers Between Level 1 and Level 2 Securities:~~ ~~There were no transfers between Level 1 and Level 2 securities during the three and nine months ended September 30, 2017.~~

Based on an analysis of the inputs, our financial assets measured at fair value on a recurring basis have been categorized as follows:

Fair Value Measurements at Reporting Date Using

(in millions)

September 30, 2017

Level 1 ^(a)

Level 2 ^(b)

Level 3 ^(c)

Fixed maturities

U.S. Governments

$
340.0

$
335.3

$
4.7

$
—

Foreign Governments

236.3

—

236.3

—

Obligations of states and political subdivisions

335.2

—

335.2

—

Corporate bonds

1,631.8

—

1,629.9

1.9

Commercial mortgage-backed securities

146.7

—

146.7

—

Residential mortgage-backed securities

273.5

—

273.5

—

Asset-backed securities

156.5

—

156.5

—

Collateralized loan obligations

258.4

—

258.4

—

Total fixed maturities

3,378.4

335.3

3,041.2

1.9

Equity securities

480.5

476.6

3.5

0.4

Other investments

124.1

—

124.1

—

Short-term investments

386.0

347.6

38.4

—

$
4,369.0

$
1,159.5

$
3,207.2

$
2.3

^(a)	~~Quoted prices in active markets for identical assets~~

^(b)	~~Significant other observable inputs~~


			Fair Value Measurements at Reporting Date Using
(in millions)	September 30, 2020		Level 1 (a)		Level 2 (b)		Level 3 (c)
Fixed maturities
U.S. Governments	$	392.5	$	376.5	$	16.0	$	0
Foreign Governments	278.0		0		278.0		0
Obligations of states and political subdivisions	169.5		0		169.5		0
Corporate bonds	1,847.4		0		1,840.4		7.0
Commercial mortgage-backed securities	335.8		0		335.8		0
Residential mortgage-backed securities	473.4		0		473.4		0
Asset-backed securities	143.3		0		143.3		0
Collateralized loan obligations	274.5		0		274.5		0
Total fixed maturities	3,914.4		376.5		3,530.9		7.0
Equity securities	150.7		132.9		0		17.8
Other investments	97.5		0.3		97.2		0
Short-term investments	528.7		512.3		16.4		0
	$	4,691.3	$	1,022.0	$	3,644.5	$	24.8

^(c)	~~Significant unobservable inputs~~

Fair Value Measurements at Reporting Date Using

(in millions)

December 31, 2016

Level 1 ^(a)

Level 2 ^(b)

Level 3 ^(c)

Fixed maturities

U.S. Governments

$
271.2

$
228.0

$
43.2

$
—

Foreign Governments

237.3

—

237.3

—

Obligations of states and political subdivisions

382.8

—

382.8

—

Corporate bonds

1,320.7

—

1,318.7

2.0

Commercial mortgage-backed securities

153.7

—

153.7

—

Residential mortgage-backed securities

176.8

—

176.8

—

Asset-backed securities

125.6

—

125.6

—

Collateralized loan obligations

264.3

—

264.3

—

Total fixed maturities

2,932.4

228.0

2,702.4

2.0

Equity securities

447.4

444.9

2.1

0.4

Other investments

95.5

—

95.5

—

Short-term investments

405.5

375.1

30.4

—

$
3,880.8

$
1,048.0

$
2,830.4

$
2.4

^(a)	~~Quoted prices in active markets for identical assets~~

(a)Quoted prices in active markets for identical assets

^(b)	~~Significant other observable inputs~~

(b)Significant other observable inputs

^(c)	~~Significant unobservable inputs~~

(c)Significant unobservable inputs

Table of Contents


			Fair Value Measurements at Reporting Date Using
(in millions)	December 31, 2019		Level 1 (a)		Level 2 (b)		Level 3 (c)
Fixed maturities
U.S. Governments	$	354.6	$	349.1	$	5.5	$	0
Foreign Governments	248.7		0		248.7		0
Obligations of states and political subdivisions	152.6		0		152.6		0
Corporate bonds	1,780.4		0		1,773.0		7.4
Commercial mortgage-backed securities	217.0		0		217.0		0
Residential mortgage-backed securities	488.9		0		488.9		0
Asset-backed securities	165.5		0		165.5		0
Collateralized loan obligations	225.8		0		225.8		0
Total fixed maturities	3,633.5		349.1		3,277.0		7.4
Equity securities	124.4		117.8		0		6.6
Other investments	96.3		0		96.3		0
Short-term investments	845.0		823.5		21.5		0
	$	4,699.2	$	1,290.4	$	3,394.8	$	14.0

(a)Quoted prices in active markets for identical assets

(b)Significant other observable inputs

(c)Significant unobservable inputs

The fair value measurements in the tables above do not equal “Total investments” on our Consolidated Balance Sheets as they exclude certain other investments that are accounted for under the equity-method of accounting.

A reconciliation of the beginning and ending balances for the investments categorized as Level 3 are as follows:

Fair Value Measurements Using Observable Inputs (Level 3)


(in millions)	Corporate Bonds			Equity Securities		Total			(in millions)	Corporate Bonds		Equity Securities		Total
Beginning balance, January 1, 2017	$	2.0		$	0.4	$	2.4
Beginning balance, January 1, 2020									Beginning balance, January 1, 2020	$	7.4	$	6.6	$	14.0
Transfers into Level 3		—			—		—		Transfers into Level 3	0		0		0
Transfers out of Level 3		—			—		—		Transfers out of Level 3	0		0		0
Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in net income (loss)		—			—		—
Included in other comprehensive income (loss)		(0.1	)		—		(0.1	)
Included in net income									Included in net income	0		(1.6)		(1.6)
Included in other comprehensive income									Included in other comprehensive income	(0.5)		0		(0.5)
Purchases, issuances, sales, and settlements:									Purchases, issuances, sales, and settlements:
Purchases		—			—		—		Purchases	0.1		12.8		12.9
Issuances		—			—		—		Issuances	0		0		0
Sales		—			—		—		Sales	0		0		0
Settlements		—			—		—		Settlements	0		0		0
Ending balance, September 30, 2017	$	1.9		$	0.4	$	2.3
Amount of total gains or losses for the year included in net income (loss) attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2017	$	—		$	—	$	—
Ending balance, September 30, 2020									Ending balance, September 30, 2020	$	7.0	$	17.8	$	24.8
Amount of total gains or losses for the year included in net income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020									Amount of total gains or losses for the year included in net income attributable to the change in unrealized gains or losses relating to assets still held at September 30, 2020	$	0	$	0	$	0

(in millions)

Corporate Bonds

Equity
Securities

Total

Beginning balance, January 1, 2016

$
—

$
0.7

$
0.7

Transfers into Level 3

—

—

—

Transfers out of Level 3

—

—

—

Total gains or losses (realized/unrealized):

Included in net income (loss)

—

—

—

Included in other comprehensive income (loss)

—

—

—

Purchases, issuances, sales, and settlements:

Purchases

2.0

—

2.0

Issuances

—

—

—

Sales

—

(0.3
)

(0.3
)
Settlements

—

—

—

Ending balance, December 31, 2016

$
2.0

$
0.4

$
2.4

Amount of total gains or losses for the year included in net income (loss)
attributable to the change in unrealized gains or losses relating to assets
still held at December 31, 2016

$
—

$
—

$
—

Table of Contents


(in millions)	Credit Financial		Equity Securities		Total
Beginning balance, January 1, 2019	$	2.2	$	8.2	$	10.4
Transfers into Level 3	3.5		0		3.5
Transfers out of Level 3	0		0		0
Total gains or losses (realized/unrealized):
Included in net income	(0.4)		(1.6)		(2.0)
Included in other comprehensive loss	0.6		0		0.6
Purchases, issuances, sales, and settlements:
Purchases	1.9		0		1.9
Issuances	0		0		0
Sales	(0.4)		0		(0.4)
Settlements	0		0		0
Ending balance, December 31, 2019	$	7.4	$	6.6	$	14.0
Amount of total gains or losses for the year included in net income attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2019	$	0	$	0	$	0

At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, we did not have any financial assets or financial liabilities measured at fair value on a nonrecurring basis or any financial liabilities on a recurring basis.

5.	~~Reserves for Losses and Loss Adjustment Expenses~~

4. Allowance for Credit Losses

Premiums receivable

The following table represents the balances of premiums receivable, net of allowance for expected credit losses, at September 30, 2020 and January 1, 2020, and the changes in the allowance for expected credit losses for the nine months ended September 30, 2020.


(in millions)	Premiums Receivable, Net of Allowance for Estimated Uncollectible Premiums		Allowance for Estimated Uncollectible Premiums
Balance, January 1, 2020	$	688.2	$	7.9
Cumulative effect of adoption of ASU 2016-13 at January 1, 2020			0
Current period change for estimated uncollectible premiums			1.0
Write-offs of uncollectible premiums receivable			0
Foreign exchange adjustments			0.2
Balance, September 30, 2020	$	797.0	$	9.1

Reinsurance Recoverables

The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at September 30, 2020 and January 1, 2020, and changes in the allowance for estimated uncollectible reinsurance for the nine months ended September 30, 2020.


(in millions)	Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance
Balance, January 1, 2020	$	3,104.6	$	1.1
Cumulative effect of adoption of ASU 2016-13 at January 1, 2020			2.5
Current period change for estimated uncollectible reinsurance			0.1
Write-offs of uncollectible reinsurance recoverables			0
Balance, September 30, 2020	$	3,046.5	$	3.7

Table of Contents

Of the total reinsurance recoverable balance outstanding at September 30, 2020, reinsurers representing 89.7% were rated A- or better. We primarily utilize A.M. Best credit ratings when determining the allowance, adjusted as needed based on our historical experience with the reinsurers. Certain of our reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

5. Reserves for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of reserves for losses and loss adjustment expenses (“LAE”):


	For the Nine Months Ended September 30,							For the Nine Months Ended September 30,
(in millions)	2017			2016			(in millions)	2020		2019
Net reserves beginning of the year	$	2,180.2		$	2,133.3		Net reserves beginning of the year	$	2,722.7	$	2,562.9
Net Maybrooke reserves acquired		131.8			—
Net AIL reserves acquired							Net AIL reserves acquired	27.9		0

Add:							Add:
Losses and LAE incurred during current calendar year, net of reinsurance:							Losses and LAE incurred during current calendar year, net of reinsurance:
Current accident year		775.1			614.8		Current accident year	876.9		799.9
Prior accident years		4.4			(18.8	)	Prior accident years	6.1		61.6
Losses and LAE incurred during calendar year, net of reinsurance		779.5			596.0		Losses and LAE incurred during calendar year, net of reinsurance	883.0		861.5
Deduct:							Deduct:
Losses and LAE payments made during current calendar year, net of reinsurance:							Losses and LAE payments made during current calendar year, net of reinsurance:
Current accident year		165.6			115.3		Current accident year	188.2		163.6
Prior accident years		413.7			403.9		Prior accident years	632.7		615.8
Losses and LAE payments made during current calendar year, net of reinsurance:		579.3			519.2		Losses and LAE payments made during current calendar year, net of reinsurance:	820.9		779.4
Change in participation interest ⁽¹⁾		(23.2	)		(36.3	)	Change in participation interest (1)	33.0		(14.4)
Foreign exchange adjustments		18.9			1.0		Foreign exchange adjustments	23.0		(26.3)
Net reserves - end of period		2,507.9			2,174.8		Net reserves - end of period	2,868.7		2,604.3
Add:							Add:
Reinsurance recoverables on unpaid losses and LAE, end of year		1,798.0			1,110.0
Reinsurance recoverables on unpaid losses and LAE, end of period							Reinsurance recoverables on unpaid losses and LAE, end of period	2,521.3		2,238.2
Gross reserves - end of period	$	4,305.9		$	3,284.8		Gross reserves - end of period	$	5,390.0	$	4,842.5

⁽¹⁾	~~Amount represents decreases in reserves due to change in syndicate participation~~

(1)Amount represents the change in reserves due to changing our participation in Syndicates 1200 and 1910.

Reserves for losses and LAE represent the estimated indemnity cost and related adjustment expenses necessary to investigate and settle claims. Such estimates are based upon individual case estimates for reported claims, estimates from ceding companies for reinsurance assumed and actuarial estimates for losses that have been incurred but not yet reported to the insurer. Any change in probable ultimate liabilities is reflected in current operating results.

Underwriting results for the three and nine months ended September 30, 2020 included net losses and loss adjustment expenses attributed to the COVID-19 pandemic of $16.9 million and $60.5 million, respectively, primarily resulting from contingency and property exposures in the Company’s International Operations and property exposures in its U.S. Operations. Property losses relate to sub-limited affirmative business interruption coverage, primarily in certain International markets, as well as expected costs associated with claims handling.

The impact from the unfavorable ~~(favorable)~~ development of prior accident years’ loss and LAE reserves on each reporting segment is presented below:


	For the Nine Months Ended September 30,							For the Nine Months Ended September 30,
(in millions)	2017			2016			(in millions)	2020		2019
U.S. Operations	$	(28.7	)	$	(25.6	)	U.S. Operations	$	(0.5)	$	(9.8)
International Operations		17.0			(10.8	)	International Operations	(4.5)		69.5
Run-off Lines		16.1			17.6		Run-off Lines	11.1		1.9
Total unfavorable (favorable) prior-year development	$	4.4		$	(18.8	)
Total unfavorable prior-year development							Total unfavorable prior-year development	$	6.1	$	61.6

Table of Contents

The following describes the primary factors behind each segment’s prior accident year reserve development for the nine months ended September 30, ~~2017,~~2020 and ~~2016:~~

2019:

Nine months ended September 30, ~~2017:~~

2020:

•U.S. Operations: Favorable development ~~for the workers compensation,~~in surety and commercial ~~automobile lines.~~

~~International Operations:~~ ~~Unfavorable~~multi-peril, partially offset by unfavorable development in ~~the~~general liability, special property and commercial auto liability.

•International Operations: Favorable development in property, specialty and reinsurance, partially offset by unfavorable development in general liability ~~lines, primarily due to the first quarter 2017 Ogden rate change~~ and ~~claims from Hurricane Matthew.~~

surety lines.

•Run-off Lines:Unfavorable loss reserve development on prior accident years in asbestos and environmental driven by asbestos claims remaining open longer than expected, higher defense costs and movement on individual environmental claims as well as unfavorable development in other run-off ~~segments~~lines, partially offset by favorable development in risk management ~~liability.~~

workers compensation.

Nine months ended September 30, ~~2016:~~

2019:

•U.S. Operations:Favorable development ~~within the commercial automobile, surety, workers compensation~~in general liability and specialty lines, partially offset by unfavorable development in professional and property lines.

•International Operations: ~~Favorable~~ Unfavorable development was primarily concentrated in liability and professional lines. The charges impacted our Bermuda casualty and professional divisions, and to a lesser extent our European and Syndicate 1200 operations. The charges stemmed from public utility business in our Bermuda casualty division, which we previously exited, as well as updated estimates on a number of other claims based on new information received in the second and third quarters of 2019. As it relates to Europe, the adverse development primarily related to certain cover-holders whose contracts were previously terminated or where aggressive remedial underwriting actions have been taken. As it relates to Syndicate 1200, the adverse development largely related to businesses that we have previously exited or where aggressive remedial underwriting actions have been taken.

The International Operations unfavorable development includes $68.7 million recognized during the second and third quarters of 2019. This unfavorable development was primarily due to obtaining additional information on several individual claims, including investigations regarding causes of the incidents leading to the losses, reports provided by outside counsel, audits of the underlying losses and recent court decisions, settlements and jury awards. The result was an increase in the number of claims with the potential for underlying losses to reach our attachment point, particularly within our Bermuda Operations. The unfavorable development in the ~~property lines~~second and ~~our Brazil unit.~~

third quarters of 2019 was also attributable to the results of ongoing audits, underwriting reviews, and updated data from third-party cover-holders, which included the identification of differences from original expectations with regard to the classes written, the distribution of writings by geography, and the rates charged by the cover-holders. Adverse development in Syndicate 1200 related to large claims involving the marine and energy and liability divisions. Losses on small and medium enterprise package business were also higher than expected.

•Run-off Lines:Unfavorable development in ~~asbestos and~~other run-off lines, partially offset by favorable development in risk management ~~liability.~~

workers compensation.

In the opinion of management, our reserves represent the best estimate of our ultimate liabilities, based on currently known facts, current law, current technology and reasonable assumptions ~~considered reasonable~~ where facts are not known. Due to the significant uncertainties and related management judgments, there can be no assurance that future favorable or unfavorable loss development, which may be material, will not occur.

6.	~~Junior Subordinated Debentures~~

~~Trust Preferred Debentures~~

~~Through a series~~The spread of ~~trusts,~~COVID-19 and related economic shutdown has increased the uncertainty that are wholly-owned subsidiaries (non-consolidated), we issued debt. The debentures are variable with the rate being reset quarterly and subject to certain interest rate ceilings. Interest payments are payable quarterly. The debentures are all unsecured and are subordinated to other indebtedness. At September 30, 2017 and December 31, 2016, all debentures were eligible for redemption subject to certain terms and conditions at a price equal to 100% of the principal plus accrued and unpaid interest.

~~A summary of~~is always present in our ~~outstanding junior subordinated debentures is presented below:~~

(in millions)

Issue Date

Trust Preferred Pools

Maturity

Rate Structure

Interest Rate at September 30, 2017

Amount

Argo Group

05/15/2003

PXRE Capital Statutory Trust II

05/15/2033

3M LIBOR + 4.10%

5.42%

$
18.1

11/06/2003

PXRE Capital Trust VI

09/30/2033

3M LIBOR + 3.90%

5.24%

10.3

Argo Group US

05/15/2003

Argonaut Group Statutory Trust I

05/15/2033

3M LIBOR + 4.10%

5.42%

15.5

12/16/2003

Argonaut Group Statutory Trust III

01/08/2034

3M LIBOR + 4.10%

5.40%

12.3

04/29/2004

Argonaut Group Statutory Trust IV

04/29/2034

3M LIBOR + 3.85%

5.17%

13.4

05/26/2004

Argonaut Group Statutory Trust V

05/24/2034

3M LIBOR + 3.85%

5.17%

12.3

05/12/2004

Argonaut Group Statutory Trust VI

05/12/2034

3M LIBOR + 3.80%

5.12%

13.4

09/17/2004

Argonaut Group Statutory Trust VII

12/15/2034

3M LIBOR + 3.60%

4.92%

15.5

09/22/2004

Argonaut Group Statutory Trust VIII

09/22/2034

3M LIBOR + 3.55%

4.87%

15.5

10/22/2004

Argonaut Group Statutory Trust IX

12/15/2034

3M LIBOR + 3.60%

4.92%

15.5

09/15/2005

Argonaut Group Statutory Trust X

09/15/2035

3M LIBOR + 3.40%

4.72%

30.9

Total Outstanding

$
172.7

(in millions)

Issue Date

Trust Preferred Pools

Maturity

Rate Structure

Interest Rate at December 31, 2016

Amount

Argo Group

05/15/2003

PXRE Capital Statutory Trust II

05/15/2033

3M LIBOR + 4.10%

5.00%

$
18.1

11/06/2003

PXRE Capital Trust VI

09/30/2033

3M LIBOR + 3.90%

4.90%

10.3

Argo Group US

05/15/2003

Argonaut Group Statutory Trust I

05/15/2033

3M LIBOR + 4.10%

5.00%

15.5

12/16/2003

Argonaut Group Statutory Trust III

01/08/2034

3M LIBOR + 4.10%

4.98%

12.3

04/29/2004

Argonaut Group Statutory Trust IV

04/29/2034

3M LIBOR + 3.85%

4.76%

13.4

05/26/2004

Argonaut Group Statutory Trust V

05/24/2034

3M LIBOR + 3.85%

4.77%

12.3

05/12/2004

Argonaut Group Statutory Trust VI

05/12/2034

3M LIBOR + 3.80%

4.79%

13.4

09/17/2004

Argonaut Group Statutory Trust VII

12/15/2034

3M LIBOR + 3.60%

4.56%

15.5

09/22/2004

Argonaut Group Statutory Trust VIII

09/22/2034

3M LIBOR + 3.55%

4.55%

15.5

10/22/2004

Argonaut Group Statutory Trust IX

12/15/2034

3M LIBOR + 3.60%

4.56%

15.5

09/15/2005

Argonaut Group Statutory Trust X

09/15/2035

3M LIBOR + 3.40%

4.36%

30.9

Total Outstanding

$
172.7

~~Maybrooke Junior Subordinated Debentures~~

Unsecured junior subordinated debentures with a principal balance of $91.8 million were assumed through the acquisition of Maybrooke (“the Maybrooke debt”). The Maybrooke debt is carried on our consolidated balance sheet at $83.8 million, which represents our initial estimate of the ~~debt’s fair value at~~ultimate cost of loss and settlement expense. Actuarial models base future emergence on historic experience, with adjustments for current trends, and the date of acquisition plus accumulated accretion of discount to par value, as required by accounting for business combinations under ASC 805 (see Note 3, “Acquisition of Maybrooke”). This fair value is subject to change based on finalizing the valuation of Maybrooke’s opening balance sheet by the end of 2017. At September 30, 2017, the Maybrooke debt was eligible for redemption at par. Interest accrues on the Maybrooke debt based on a variable rate, which is reset quarterly. Interest payments are payable quarterly. A summary of the terms of the Maybrooke debt outstanding at September 30, 2017 is presented below:

(in millions)

Issue Date

Maturity

Rate Structure

Interest Rate at September 30, 2017

Principal at September 30, 2017

Carrying Value at September 30, 2017

9/15/2007

9/15/2037

3 month LIBOR + 3.15%

4.47%

$
91.8

$
83.8

7.	~~Other Indebtedness~~

Our Consolidated Balance Sheets includes various long-term debt instruments under the caption “Other indebtedness,” as detailed in the table below. Information regarding the terms and principal amounts of eachappropriateness of these ~~debt instruments is also provided.~~

(in millions)

Debt Type

September 30, 2017

December 31, 2016

Floating rate loan stock

$
59.1

$
54.8

Term loan

125.0

—

Other debt

0.6

0.6

Total other indebtedness

$
184.7

$
55.4

~~Floating Rate Loan Stock~~

This debt was assumed through the acquisition of Lloyd’s Syndicate 1200. These notes are unsecured. At September 30, 2017 and December 31, 2016, all notes were eligible for redemption subject to certain terms and conditions at a price equal to 100% of the principal plus accrued and unpaid interest. Interest on the U.S. Dollar and Euro notes is due semiannually and quarterly, respectively. A summary of the notes outstanding at September 30, 2017 and December 31, 2016 is presented below:

(in millions)

Issue Date

Currency

Maturity

Rate Structure

Interest Rate at September 30, 2017

Amount

12/08/2004

U.S. Dollar

11/15/2034

6 month LIBOR + 4.2%

5.66%

$
6.5

09/06/2005

Euro

08/22/2035

3 month LIBOR + 4.0%

3.67%

14.2

10/31/2006

U.S. Dollar

01/15/2036

6 month LIBOR + 4.0%

5.46%

10.0

10/31/2006

Euro

11/22/2036

3 month LIBOR + 4.0%

3.67%

12.4

06/08/2007

Euro

09/15/2037

3 month LIBOR + 3.9%

3.57%

16.0

$
59.1

(in millions)

Issue Date

Currency

Maturity

Rate Structure

Interest Rate at December 31, 2016

Amount

12/08/2004

U.S. Dollar

11/15/2034

6 month LIBOR + 4.2%

5.18%

$
6.5

09/06/2005

Euro

08/22/2035

3 month LIBOR + 4.0%

3.70%

12.8

10/31/2006

U.S. Dollar

01/15/2036

6 month LIBOR + 4.0%

4.98%

10.0

10/31/2006

Euro

11/22/2036

3 month LIBOR + 4.0%

3.70%

11.2

06/08/2007

Euro

09/15/2037

3 month LIBOR + 3.9%

3.58%

14.3

$
54.8

No principal payments have been made since the acquisition of Lloyd’s Syndicate 1200. The floating rate loan stock denominated in Euros fluctuates due to foreign currency translation. The outstanding balance on these ~~loans was $42.6~~ ~~million and~~ ~~$38.3 million~~assumptions involved more uncertainty as of September 30, ~~2017 and December 31, 2016, respectively. The foreign currency translation adjustment is recorded in our Consolidated Statements of (Loss) Income.~~

~~Borrowing Under Credit Facility~~

On March 3, 2017, each of Argo Group, Argo Group US, Inc., Argo International Holdings Limited and Argo Underwriting Agency Limited (the “Borrowers”) entered into a $325.0 million Credit Agreement (“New Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. The New Credit Agreement replaced and terminated the previous $175.0 million Credit Agreement (“Prior Agreement”).

The New Credit Agreement provides for a $200.0 million revolving credit facility with a maturity date of March 3, 2022 unless extended in accordance with the terms of the New Credit Agreement. In addition, the New Credit Agreement includes a $125.0 million term loan borrowing, which Argo Group used to pay off in its entirety the $125.0 million borrowing drawn on January 31, 2017 under the Prior Agreement to help fund the acquisition of Maybrooke. Interest accrues based on a variable rate, which resets and is payable based on reset options selected by Argo Group pursuant2020. We expect there will be impacts to the ~~terms~~timing of loss emergence and ultimate loss ratios for certain coverages we underwrite. The industry is experiencing new issues, including the ~~New Credit Agreement. A summary~~temporary suspension of civil court cases in most states, the ~~terms~~extension of certain statutes of limitations and the ~~outstanding balance at September 30, 2017 is presented below:~~

(in millions)

Issue Date

Maturity

Rate Structure

Interest Rate at September 30, 2017

Amount

3/3/2017

3/3/2019

2 month LIBOR + 1.5%

2.80%

$
125.0

~~Borrowings under the New Credit Agreement may be used for general corporate purposes, including working capital, permitted acquisitions~~impact on our insureds from a significant reduction in economic activity. Our booked reserves include consideration of these factors, but legislative, regulatory or judicial actions could result in loss reserve deficiencies and ~~letters~~reduce earnings in future periods.

6. Disclosures about Fair Value of ~~the Borrowers has agreed to be jointly and severally liable for the obligations of the other Borrowers under the New Credit Agreement.~~

The New Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers could be required immediately to repay all amounts outstanding under the New Credit Agreement. Lenders holding at least a majority of the loans and commitments under the New Credit Agreement could elect to accelerate the maturity of the loans and/or terminate the commitments under the New Credit Agreement upon the occurrence and during the continuation of an event of default.

Financial Instruments

8.	~~Disclosures about Fair Value of Financial Instruments~~

Investment securities and short-term ~~investments~~.investments. See Note 4,3, “Investments,” for additional information.

Premiums receivable and reinsurance recoverables on paid losses. The carrying value of current receivables ~~approximates fair value. At September 30, 2017~~ and December 31, 2016, the carrying values of premiums receivable over 90 days were $20.5 million and $14.3 million, respectively. Included in “Reinsurance recoverables” in our Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, are amounts that are due from trade capital providers associated with the operations of Syndicate 1200. Upon settlement, the receivable is offset against the liability which is included in “Ceded reinsurance payable, net” in our accompanying Consolidated Balance Sheets. At September 30, 2017 and December 31, 2016, the payable was in excess of the receivable. Of our reinsurance recoverables on paid losses ~~excluding amounts attributable to Syndicate 1200’s trade capital providers, at~~approximates fair value.

Debt. At September 30, ~~2017~~2020 and December 31, 2016, the carrying values over 90 days were $13.2 million and $11.2 million, respectively. Our methodology for establishing our allowances for doubtful accounts includes specifically identifying all potential uncollectible balances regardless of aging. At September 30, 2017 and December 31, 2016, the allowance for doubtful accounts for premiums receivable was $3.0 million and $2.7 million, respectively, and the allowance for doubtful accounts for reinsurance recoverables on paid losses was $2.1 million. At September 30, 2017, the amount of premiums receivable over 90 days secured by collateral was negligible. At December 31, 2016, premiums receivable over 90 days were secured by collateral in the amount of $0.1 million. Reinsurance recoverables on paid losses over 90 days were secured by collateral in the amount of $0.6 million at September 30, 2017 and December 31, 2016.

~~Debt. At September 30, 2017 and December 31, 2016,~~2019, the fair value of our ~~junior subordinated debentures,~~debt instruments is determined using both Level 1 and Level 2 inputs, as previously defined in Note 3, "Investments".

We receive fair value prices from third-party pricing services for our financial instruments as well as for similar financial instruments. These prices are determined using observable market information such as publicly traded quoted prices, and trading prices for similar financial instruments actively being traded in the current market. We have reviewed the processes used by the third-party providers for pricing the securities and have determined that these processes result in fair values consistent with GAAP requirements. In addition, we review these prices for reasonableness, and have not adjusted any prices received from the third-party providers as of September 30, 2020 and December 31, 2019. A description of the valuation techniques we use to measure these liabilities at fair value is as follows:

Senior Unsecured Fixed Rate Notes Level 1:

•Our senior unsecured fixed rate notes ~~and other indebtedness was estimated~~are valued using ~~appropriate market indices or~~Level 1 inputs. For these securities, we obtain fair value measurements from a third-party pricing service using quoted prices (unadjusted) in active markets at the reporting date.

Junior Subordinated Debentures and Floating Rate Loan Stock Level 2:

•Our trust preferred debentures, subordinated debentures and floating rate loan stock are typically valued using Level 2 inputs. For these securities, we obtain fair value measurements from ~~external sources based on current market conditions.~~

a third-party pricing service using quoted prices for similar securities being traded in active markets at the reporting date, as our specific debt instruments are more infrequently traded.

A summary of our financial instruments whose carrying value did not equal fair value is shown below:

9.	~~Shareholders’ Equity~~

Based on an analysis of the inputs, our financial instruments measured at fair value on a recurring basis have been categorized as follows:


			Fair Value Measurements at Reporting Date Using
(in millions)	September 30, 2020		Level 1 (a)		Level 2 (b)		Level 3 (c)
Junior subordinated debentures:
Trust preferred debentures	$	173.6	$	0	$	173.6	$	0
Subordinated debentures	92.3		0		92.3		0
Total junior subordinated debentures	265.9		0		265.9		0
Senior unsecured fixed rate notes	147.3		147.3		0		0
Floating rate loan stock	59.5		0		59.5		0
	472.7		147.3		325.4		0

(a)Quoted prices in active markets for identical assets

(b)Significant other observable inputs

(c)Significant unobservable inputs


			Fair Value Measurements at Reporting Date Using
(in millions)	December 31, 2019		Level 1 (a)		Level 2 (b)		Level 3 (c)
Junior subordinated debentures:
Trust preferred debentures	$	174.0	$	0	$	174.0	$	0
Subordinated debentures	92.5		0		92.5		0
Total junior subordinated debentures	266.5		0		266.5		0
Senior unsecured fixed rate notes	144.2		144.2		0		0
Floating rate loan stock	56.8		0		56.8		0
	467.5		144.2		323.3		0

(a)Quoted prices in active markets for identical assets

(b)Significant other observable inputs

(c)Significant unobservable inputs

7. Shareholders’ Equity

On August ~~8, 2017~~7, 2020, our Board of Directors declared a quarterly cash dividend in the amount of ~~$0.27~~$0.31 on each share of common stock outstanding. On September ~~15, 2017,~~11, 2020, we paid ~~$8.3~~$10.9 million to our shareholders of record on ~~September 1, 2017.~~

August 28, 2020.

On August ~~2, 2016~~7, 2020, our Board of Directors declared a quarterly cash dividend in the amount of ~~$0.22~~$330.556 per share on our 7.00% Resettable Fixed Rate Preference Shares, Series A, par value of $1.00 per share, with a liquidation preference of $25,000 per share (the “Series A Preference Shares”). Holders of depositary shares each representing a 1/1,000th interest in a Series A Preference Share (the “Depositary Shares”) received $0.330556 per Depositary Share. On September 15, 2020, we paid $2.0 million to our shareholders of record on September 1, 2020.

On August 6, 2019, our Board of Directors declared a quarterly cash dividend in the amount of $0.31 on each share of common stock outstanding. On ~~August 29, 2016,~~September 13, 2019, we paid ~~$6.7~~$10.9 million to our shareholders of record on August ~~15, 2016.~~

30, 2019.

We did 0t repurchase any common shares ~~for $36.6 million. A summary of activity from January 1, 2017 through September 30, 2017 follows.~~

~~A summary of common shares repurchased~~ for the nine months ended September 30, ~~2017 is shown below:~~

2020.

Repurchase Type

Date
Trading Plan
Initiated

2017
Purchase
Period

Number of
Shares
Repurchased

Average Price
of Shares
Repurchased

Total Cost
(in millions)

Repurchase
Authorization
Year
10b5-1 Trading Plan

6/14/2017

06/20/2017-08/10/2017

156,570

$
59.53

$
9.4

2016
10b5-1 Trading Plan

9/15/2017

09/18/2017-09/28/2017

33,488

$
60.85

$
2.0

2016
Open Market

N/A

08/11/2017-09/15/2017

421,976

$
59.75

25.2

2016
Total

612,034

$
59.75

$
36.6

~~10.~~

~~Accumulated Other Comprehensive (Loss) Income~~

Table of Contents

Preferred Stock Offering

On July 9, 2020, the Company issued 6,000 shares of its Series A Preference Shares (equivalent to 6,000,000 Depositary Shares, each representing a 1/1,000th interest in a Series A Preference Share) with a $25,000 liquidation preference per share (equivalent to $25 per Depositary Share).

Net proceeds from the sale of the Depositary Shares were approximately $144 million after deducting underwriting discounts and estimated offering expenses payable by the Company. On September 17, 2020, the Company used most of the net proceeds to repay its $125 million principal outstanding on its term loan, previously reported in the line item “Other indebtedness” on our Consolidated Balance Sheets, and intends to use the remainder of the proceeds for working capital to support continued growth in insurance operations.

Dividends to the holders of the Series A Preference Shares will be payable on a non-cumulative basis only when, as and if declared by our Board of Directors or a duly authorized committee thereof, quarterly in arrears on the 15th of March, June, September, and December of each year, commencing on September 15, 2020, at a rate equal to 7.00% of the liquidation preference per annum (equivalent to $1,750 per Series A Preference Share and $1.75 per Depositary Share per annum) up to but excluding September 15, 2025. Beginning on September 15, 2025, any such dividends will be payable on a non-cumulative basis, only when, as and if declared by our Board of Directors or a duly authorized committee thereof, during each reset period, at a rate per annum equal to the Five-Year U.S. Treasury Rate as of the most recent reset dividend determination date (as described in the Company’s prospectus supplement dated July 7, 2020) plus 6.712% of the liquidation preference per annum.

8. Accumulated Other Comprehensive (Loss) Income

A summary of changes in accumulated other comprehensive (loss) income, net of taxes (where applicable) by component for the nine months ended September 30, ~~2017,~~2020, and ~~2016~~2019 is presented below:

(in millions)

Foreign
Currency
Translation
Adjustments

Unrealized
Holding Gains
on Securities

Defined
Benefit
Pension
Plans

Total

Balance at January 1, 2017

$
(17.6
)

$
72.4

$
(7.1
)

$
47.7

Other comprehensive (loss) income before
   reclassifications

(0.2
)

74.1

—

73.9

Amounts reclassified from accumulated other
   comprehensive (loss) income

—

(24.6
)

—

(24.6
)
Net current-period other comprehensive (loss)
   income

(0.2
)

49.5

—

49.3

Balance at September 30, 2017

$
(17.8
)

$
121.9

$
(7.1
)

$
97.0


(in millions)	Foreign Currency Translation Adjustments		Unrealized Holding Gains on Securities		Defined Benefit Pension Plans		Total
Balance, January 1, 2020	$	(22.6)	$	33.5	$	(8.1)	$	2.8
Other comprehensive loss before reclassifications	(12.3)		55.9		0		43.6
Amounts reclassified from accumulated other comprehensive loss	0		(15.2)		0		(15.2)
Net current-period other comprehensive loss	(12.3)		40.7		0		28.4
Cumulative effect of adoption of ASU 2016-13	0		5.7		0		5.7
Balance, September 30, 2020	$	(34.9)	$	79.9	$	(8.1)	$	36.9

(in millions)

Foreign
Currency
Translation
Adjustments

Unrealized
Holding Gains
on Securities

Defined
Benefit
Pension
Plans

Total

Balance at January 1, 2016

$
(21.6
)

$
40.0

$
(6.9
)

$
11.5

Other comprehensive (loss) income before
   reclassifications

2.8

70.2

—

73.0

Amounts reclassified from accumulated other
   comprehensive (loss) income

—

(13.3
)

—

(13.3
)
Net current-period other comprehensive (loss)
   income

2.8

56.9

—

59.7

Balance at September 30, 2016

$
(18.8
)

$
96.9

$
(6.9
)

$
71.2


(in millions)	Foreign Currency Translation Adjustments		Unrealized Holding Gains on Securities		Defined Benefit Pension Plans		Total
Balance, January 1, 2019	$	(22.4)	$	(49.0)	$	(6.7)	$	(78.1)
Other comprehensive income before reclassifications	(0.1)		76.2		0		76.1
Amounts reclassified from accumulated other comprehensive income	0		6.7		0		6.7
Net current-period other comprehensive income	(0.1)		82.9		0		82.8
Balance, September 30, 2019	$	(22.5)	$	33.9	$	(6.7)	$	4.7

The ~~following table illustrates the~~ amounts reclassified from accumulated other comprehensive (loss) income shown in the above ~~tables that~~table have been included in the following captions in our Consolidated Statements of (Loss) Income:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Unrealized gains on securities:

Net realized investment gains

$
(17.4
)

$
(17.0
)

$
(36.3
)

$
(25.1
)
Provision for income taxes (benefit)

5.5

7.9

11.7

11.8

Net of taxes

$
(11.9
)

$
(9.1
)

$
(24.6
)

$
(13.3
)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Unrealized gains and losses on securities:
Net realized investment (gains) loss	$	4.5	$	2.8	$	(15.4)	$	7.7
Provision (benefit) for income taxes	(0.5)		(0.3)		0.2		(1.0)
Net of taxes	$	4.0	$	2.5	$	(15.2)	$	6.7

~~11.~~

~~Net (Loss) Income Per Common Share~~

9. Net (Loss) Income Per Common Share

The following table presents the calculation of net (loss) income per common share on a basic and diluted basis:

Excluded from the weighted average common shares outstanding calculation at September 30, ~~2017~~2020 and ~~2016~~2019 are ~~10,640,789~~11,315,889 shares, ~~and 9,996,840 shares, respectively,~~ which are held as treasury shares. The shares are excluded as of their repurchase date. ~~For~~Due to the net loss incurred for the three and nine months ended September 30, 2020, all of the potentially dilutive securities were anti-dilutive, and therefore, omitted from the calculation. Due to the net loss incurred for the three months ended September 30, ~~2017, 711,854 shares~~2019, all of the potentially dilutive securities were ~~not included in~~anti-dilutive, and therefore, omitted from the ~~calculation of diluted net loss per common share as their effect would have been anti-dilutive.~~

~~12.~~

~~Supplemental Cash Flow Information~~

~~Income taxes paid.~~ ~~We paid income taxes of $10.1 million and $1.5 million during~~calculation. For the nine months ended September 30, ~~2017,~~2019, there were 2,331 weighted average shares excluded from the computation of diluted net income per common share because they were anti-dilutive.

10. Supplemental Cash Flow Information

Interest paid and ~~2016, respectively.~~

~~Income taxes recovered. We recovered~~ income taxes ~~of $2.4 million and $0.5 million during the nine months ended September 30, 2017, and 2016, respectively.~~

~~Interest~~ paid ~~was~~(recovered) were as follows:

~~13.~~

~~Share-based Compensation~~

~~The fair value method~~Table of accounting is used for share-based compensation plans. Under the fair value method, compensation cost is measured based on the fair value of the award at the measurement date and recognized over the requisite service period. We use the Black-Scholes model to estimate the fair values on the measurement date for share options and share appreciation rights (“SARs”). The Black-Scholes model uses several assumptions to value a share award. The risk-free rate of return assumption is based on the

Contents

11. Share-based Compensation

For the Nine Months Ended September 30,

2017

2016

Risk-free rate of return

1.85
%

1.12
%
Expected dividend yields

1.71
%

1.65
%
Expected award life (years)

4.48

4.50

Expected volatility

18.13
%

18.73
%

In ~~November 2007,~~May 2019, our shareholders approved the ~~2007 Long-Term~~2019 Omnibus Incentive Plan (the ~~“2007~~“2019 Plan”), which provides ~~for an aggregate of 4.5 million shares of our common stock that may be issued~~equity-based and cash-based performance-related incentives to ~~executives,~~key employees, non-employee directors and other ~~key employees. As~~service providers. The intent of ~~May 2014, 1.46 million~~the 2019 Plan is to encourage and provide for the acquisition of an ownership interest in Argo Group, enabling us to attract and retain qualified and competent persons to serve as members of our management team and the Board of Directors. The 2019 Plan authorizes 1,885,000 common shares ~~remained available for grant~~to be granted as equity-based awards. No further grants will be made under any prior plan; however, any awards under a prior plan that are outstanding as of the effective date shall remain subject to the terms and conditions of, and be governed by, such prior plan.

Awards granted under the ~~2007 Plan. In May 2014, our shareholders approved the 2014 Long-Term Incentive~~2019 Plan (the “2014 Plan”), which provides for an additional 2.8 million shares of our common stock to be available for issuance to executives, non-employee directors and other key employees. The share awards may be in the form of ~~share~~stock options, ~~SARs,~~stock appreciation rights, restricted ~~shares, restricted share~~stock awards, restricted ~~share~~stock unit awards, performance awards, other ~~share-based~~stock-based awards ~~and~~or other cash-based awards. Awards may be granted either alone or in addition to or in tandem with other awards authorized under the 2019 Plan. Awards that are settled in stock will count as one share for the purposes of reducing the share reserve under the 2019 Plan. Shares issued under this plan may be shares that are authorized and unissued or shares that we reacquired, including shares purchased on the open market. ~~Share~~

Stock options and SARs will count as one share for the purposes of the limits under the incentive plans; restricted shares, restricted share units, performance units, performance shares or other share-based incentive awards which settle in common shares will count as 2.75 shares for purpose of the limits under the 2014 Plan.

~~Share options may be in the form of incentive share options, non-qualified share options and restorative options. Share options~~stock appreciation rights are required to have an exercise price that is not less than the fair market value on the date of grant. ~~We are prohibited from repricing the options.~~ The term of ~~the share options cannot~~these awards is not to exceed ~~seven years from the grant date.~~

ten years.

A summary of restricted share activity as of September 30, ~~2017~~2020 and changes during the nine months then ended is as follows:

The restricted shares vest over one to ~~eight~~four years.Expense recognized under this plan for the restricted shares was ~~$2.5~~$1.7 million and ~~$7.5~~$6.9 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, as compared to ~~$1.7~~$3.2 million and ~~$5.2~~$10.5 million for the three and nine months ended September 30, ~~2016,~~2019, respectively. Compensation expense for all share-based compensation awards is included in “Underwriting, acquisition and insurance expenses” in the accompanying Consolidated Statements of (Loss) Income. As of September 30, ~~2017,~~2020, there was ~~$27.4~~$18.4 million of total unrecognized compensation cost related to restricted share compensation arrangements granted by Argo Group.

Stock-Settled SARs

In January 2016, we modified certain unvested cash-settled SARs, converting the awards into stock-settled SARs. We evaluated this modification under the terms of ASU 718 “Share Based Payments,” and determined that no additional expense resulted from the conversion. The expense for the stock-settled SARs will be amortized over the remaining vesting period.

As of September 30, 2020, all stock-settled SARs ~~vest over a one to four-year period.~~are fully vested. Upon exercise of the stock-settled SARs, the employee is entitled to receive ~~shares of our~~ common ~~stock~~shares equal to the appreciation of the stock as compared to the exercise price. ~~Expense~~There was 0 expense recognized ~~for the stock-settled SARs was $0.7 million and $3.5 million~~ for the three and nine months ended September 30, ~~2017, respectively,~~2020 for stock-settled SARs. There was 0 expense recognized for the three months ended September 30, 2019. For the nine months ended September 30, 2019, expense recognized for the stock-settled SARs was $0.4 million. As of September 30, 2020, there was 0 unrecognized compensation cost related to stock-settled SARs outstanding.

12. Underwriting, Acquisition and Insurance Expenses & Other Corporate Expenses

Underwriting, Acquisition and Insurance Expenses

Underwriting, acquisition and insurance expenses were as ~~compared to $1.0 million and $3.6 million for~~follows:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Commissions	$	79.4	$	58.0	$	201.9	$	178.0
General expenses	92.1		89.2		284.3		269.3
Premium taxes, boards and bureaus	9.4		10.8		23.9		27.0
	180.9		158.0		510.1		474.3
Net deferral of policy acquisition costs	(16.6)		6.0		(16.4)		11.3
Total underwriting, acquisition and insurance expenses	$	164.3	$	164.0	$	493.7	$	485.6

Other Corporate Expenses

During the three and nine months ended September 30, ~~2016, respectively. As~~2020 and 2019, we incurred costs of ~~September 30, 2017, there was $4.3~~$0.4 million ~~of total unrecognized~~and $6.2 million, and $3.7 million and $11.7 million, respectively, in connection with the previously disclosed corporate governance and compensation ~~cost~~matters, including responding to the 2019 subpoena from the SEC related to ~~stock-settled SARs outstanding.~~

~~Cash-Settled SARs~~

~~A summary~~the Company's disclosure of ~~cash-settled SARs activity as~~certain compensation-related perquisites received by the Company's former chief executive officer. During the second quarter of ~~September 30, 2017 and changes during~~2020, the ~~nine months then ended~~Company reached a settlement with the SEC related to its investigation, which required that the Company pay a civil penalty of approximately $900,000, which is ~~as follows:~~

Shares

Weighted-Average
Exercise Price

Outstanding at January 1, 2017

500,486

$
32.08

Exercised

(235,663
)

$
32.37

Expired or forfeited

(14,628
)

$
23.74

Outstanding at September 30, 2017

250,195

$
32.30

~~As of September 30, 2017, all the cash-settled SARs are fully vested. Upon exercise of the cash-settled SARs, the employee is entitled to receive cash payment~~included in other corporate expenses for the appreciation in the value of our common stock over the exercise price. We account for the cash-settled SARs as liability awards, which require the awards to be revalued at each reporting period. Expense recognized for the cash-settle SARs was $0.3 million for the three months ended September 30, 2017. Due to a decrease in the fair market value of our stock, we recouped $0.6 million of expense for nine months ended September 30, ~~2017. Expense recognized for~~2020.

These non-recurring costs are included in the ~~cash-settle SARs was $2.6 million~~line item “Other corporate expenses” in the Company’s Consolidated Statements of (Loss) Income, and ~~$2.1 million for~~have been excluded from the ~~three and nine months ended September 30, 2016, respectively. As~~calculation of ~~September 30, 2017, there was no unrecognized compensation cost related to cash-settled SARs outstanding.~~

our expense ratio.

~~14.~~

~~Underwriting, Acquisition and Insurance Expenses~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Commissions

$
70.8

$
59.3

$
201.2

$
178.5

General expenses

89.7

75.6

266.4

217.3

Premium taxes, boards and bureaus

11.8

6.1

25.9

19.0

172.3

141.0

493.5

414.8

Net deferral of policy acquisition costs

(6.2
)

(3.6
)

(19.1
)

(11.8
)
Total underwriting, acquisition and insurance expenses

$
166.1

$
137.4

$
474.4

$
403.0

13. Income Taxes

~~15.~~

~~Income Taxes~~

We have subsidiaries based in the United Kingdom that are subject to the tax laws of that country. Under current law, these subsidiaries are taxed at the applicable corporate tax rates. ~~Eight~~Certain of the United Kingdom subsidiaries are deemed to be engaged in business in the United States, and therefore, are subject to United States corporate tax in respect of a proportion of their United States underwriting business only. Relief is available against the United Kingdom tax liabilities in respect of overseas taxes paid that arise from the underwriting business. Our United Kingdom subsidiaries file separate United Kingdom income tax returns.

We have subsidiaries based in the United States that are subject to United States tax laws. Under current law, these subsidiaries are taxed at the applicable corporate tax rates. Our United States subsidiaries generally file a consolidated United States federal income tax return.

We also have operations in Belgium, Brazil, France, Ireland, ~~Luxembourg,~~Italy, Malta, Spain, and Switzerland, which also are subject to income taxes imposed by the jurisdiction in which they operate. We have operations in Barbados and the United Arab Emirates, which are not subject to income tax under the laws of ~~that country.~~

~~Our income tax provision includes the following components:~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Current tax provision (benefit)

$
(2.9
)

$
10.8

$
12.6

$
18.8

Deferred tax provision (benefit) related to:

Future tax deductions

(2.5
)

(3.0
)

(6.1
)

1.9

Valuation allowance change

0.8

(0.8
)

(0.3
)

0.4

Income tax provision (benefit)

$
(4.6
)

$
7.0

$
6.2

$
21.1

~~For the three and nine months ended September 30, 2017 and 2016, pre-tax income (loss) attributable to our operations and the operations’ effective tax rates were as follows:~~

For the Three Months Ended September 30,

(in millions)

2017

2016

Pre-Tax
Income (Loss)

Effective
Tax
Rate

Pre-Tax
Income (Loss)

Effective
Tax
Rate

Bermuda

$
(43.0
)

0.0
%

$
35.6

0.0
%
United States

(1.3
)

52.9
%

28.2

24.2
%
United Kingdom

(24.6
)

16.4
%

(2.8
)

-3.0
%
Barbados

—

⁽¹⁾

0.0
%

—

⁽¹⁾

0.0
%
Belgium

0.1

36.1
%

—

⁽¹⁾

-160.0
%
Brazil

—

⁽¹⁾

0.0
%

0.4

0.0
%
Ireland ⁽²⁾

(0.1
)

0.0
%

(0.1
)

0.0
%
Luxembourg

(1.3
)

0.0
%

—

⁽¹⁾

0.0
%
Malta

0.6

0.0
%

0.9

0.0
%
Switzerland

0.2

18.1
%

—

⁽¹⁾

21.2
%
United Arab Emirates

3.5

0.0
%

—

⁽¹⁾

0.0
%
Total

$
(65.9
)

7.0
%

$
62.2

11.3
%
those countries.

For the Nine Months Ended September 30,

(in millions)

2017

2016

Pre-Tax
Income (Loss)

Effective
Tax
Rate

Pre-Tax
Income (Loss)

Effective
Tax
Rate

Bermuda

$
8.7

0.0
%

$
79.7

0.0
%
United States

57.4

24.1
%

78.0

26.3
%
United Kingdom

(36.6
)

21.6
%

(24.9
)

-1.9
%
Barbados

—

⁽¹⁾

0.0
%

—

0.0
%
Belgium

0.2

36.2
%

—

⁽¹⁾

0.0
%
Brazil

(0.2
)

0.0
%

1.1

0.0
%
Ireland ⁽²⁾

(0.1
)

0.0
%

(0.2
)

0.0
%
Luxembourg

(3.7
)

0.0
%

—

⁽¹⁾

0.0
%
Malta

1.7

0.0
%

1.2

0.0
%
Switzerland

0.2

21.1
%

—

⁽¹⁾

21.1
%
United Arab Emirates

—

⁽¹⁾

0.0
%

—

⁽¹⁾

0.0
%
Total

$
27.6

22.3
%

$
134.9

15.7
%

Table of Contents

⁽¹⁾	~~Pre-tax income for the respective year was less than $0.1 million.~~

Our expected income tax provision computed on pre-tax income (loss) at the weighted average tax rate has been calculated as the sum of the pre-tax income (loss) in each jurisdiction multiplied by that jurisdiction’s applicable statutory tax rate. For the three and nine months ended September 30, 2020 and 2019, pre-tax income (loss) attributable to our operations and the corresponding operations’ effective tax rates were as follows:


	For the Three Months Ended September 30,
	2020					2019
(in millions)	Pre-Tax Income (Loss)			Effective Tax Rate		Pre-Tax Income (Loss)			Effective Tax Rate
Bermuda	$	2.4		0	%	$	(7.8)		0	%
United States	7.4			81.6	%	7.7			16.4	%
United Kingdom	(38.1)			15.4	%	(17.9)			13.1	%
Belgium	0.2			22.8	%	(0.1)			28.6	%
Brazil	0.3			0	%	1.2			0	%
United Arab Emirates	0.4			0	%	0		(1)	0	%
Ireland	0		(1)	0	%	0		(1)	0	%
Italy	(0.9)			0	%	(3.6)			0	%
Malta	(1.1)			0	%	(5.6)			0	%
Switzerland	0		(1)	0	%	(0.1)			1.0	%
Pre-tax loss	$	(29.4)		(0.7)	%	$	(26.2)		4.1	%

(1) Pre-tax income (loss) for the respective year was less than $0.1 million.


	For the Nine Months Ended September 30,
	2020					2019
	Pre-Tax Income (Loss)			Effective Tax Rate		Pre-Tax Income (Loss)		Effective Tax Rate
Bermuda	$	(50.3)		0	%	$	39.1	0	%
United States	64.6			24.7	%	99.5		14.6	%
United Kingdom	(65.6)			9.9	%	(30.3)		19.2	%
Belgium	0.2			25.3	%	(0.4)		29.4	%
Brazil	3.2			0	%	5.0		0	%
United Arab Emirates	1.8			0	%	0.3		0	%
Ireland	(0.1)			0	%	(0.1)		0	%
Italy	0.7			0	%	(4.1)		0	%
Malta	0.2			0	%	(5.4)		0	%
Switzerland	0		(1)	0	%	(0.1)		0.9	%
Pre-tax (loss) income	$	(45.3)		(21.0)	%	$	103.5	8.4	%

(1) Pre-tax income (loss) for the respective year was less than $0.1 million.

Our effective tax rate may vary significantly from period to period depending on the jurisdiction generating the pre-tax income (loss) and its corresponding statutory tax rate. The geographic distribution of pre-tax income (loss) can fluctuate significantly between periods given the inherit nature of our business. A reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average tax rate is as follows:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Income tax provision at expected rate

$
(5.5
)

$
9.8

$
12.9

$
23.2

Tax effect of:

Tax-exempt interest

(0.6
)

(0.7
)

(2.1
)

(2.5
)
Dividends received deduction

(0.5
)

(0.4
)

(1.4
)

(1.7
)
Valuation allowance change

0.8

(0.8
)

(0.3
)

0.4

Other permanent adjustments, net

—

0.1

(1.1
)

0.3

Adjustment for prior period

(1.2
)

(0.8
)

(1.9
)

(0.8
)
Adjustment for annualized rate

0.8

(0.9
)

(1.5
)

(1.5
)
Other foreign adjustments

0.2

(0.1
)

0.1

(0.7
)
State income taxes, net of Federal benefit

—

—

0.1

(0.3
)
Foreign exchange adjustments

1.4

0.8

1.1

4.4

Foreign withholding taxes

—

—

0.3

0.3

Income tax provision (benefit)

$
(4.6
)

$
7.0

$
6.2

$
21.1

Income tax (benefit) provision - Foreign

$
(3.9
)

$
0.2

$
(7.7
)

$
0.6

Income tax provision (benefit) - United States, Federal

(0.8
)

6.8

$
13.4

20.2

Income tax provision - United States, State

0.1

—

0.2

—

Foreign withholding taxes

—

—

0.3

0.3

Income tax provision (benefit)

$
(4.6
)

$
7.0

$
6.2

$
21.1


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2020			2019			2020		2019
Income tax provision (benefit) at expected rate	$	(6.5)		$	(4.1)		$	2.8	$	14.4
Tax effect of:
Nontaxable investment income	(0.2)			(0.4)			(0.5)		(1.1)
Foreign exchange adjustments	0.7			0.7			0.1		1.3
Goodwill	0		(1)	0			1.0		0
Withholding taxes	0		(1)	0		(1)	0.1		0.2
Prior period adjustments	0.9			0		(1)	0.9		(1.8)
Change in uncertain tax position liability	2.7			0			2.7		0
Change in valuation allowance	1.2			2.2			1.2		1.6
Other	1.4			0.5			1.2		(6.0)
Income tax provision (benefit)	$	0.2		$	(1.1)		$	9.5	$	8.6

(1) Tax effect of the adjustment for the respective year was less than $0.1 million.

Our ~~net~~gross deferred tax assets ~~(liabilities)~~ are supported by taxes paid in previous periods, reversal of taxable temporary differences and recognition of future taxable income. Management regularly evaluates the recoverability of the deferred tax assets and makes any necessary adjustments to them based upon any changes in management’s expectations of future taxable income. Realization of deferred tax assets is dependent upon our generation of ~~sufficient~~future taxable income ~~in the future~~sufficient to recover tax benefits that cannot be recovered from taxes paid in the carryback period, generally for our U.S. property and casualty insurers two years for net operating losses and for all our U.S. subsidiaries three years for capital ~~losses for our United States operations.~~

~~Management has determined~~losses. If a company determines that any of its deferred tax assets will not result in future tax benefits, a valuation allowance ~~is required~~must be established for athe portion of these assets that are not expected to be realized. The net change in valuation allowance for deferred tax assets was an increase of $1.2 million in 2020, relating to the tax-effected net operating loss carryforward included as part of the United States consolidated group of $15.1 million generated from PXRE Corporation and for the tax-effected net operating loss carryforward of $1.0 million from ARIS. The valuation allowances have been established asfollowing: Internal Revenue Code Section 382 limits the application of net operating loss and net capital loss carryforwards following an ownership change. The loss carryforwards available per year are $2.8 million as required by Internal Revenue Code Section 382.

Furthermore, due to cumulative losses since inception, management has concluded that a valuation allowance is required for the full amount of the tax-effected net operating losses generated by our Brazil and Malta entities.

Accordingly, a valuation allowance of $25.9 million is required as of September 30, 2017 of which $13.2 million relates to the PXRE Corporation and ARIS loss carryforwards, $8.1 million relates to Brazil operations, $3.8 million relates to Maybrooke, and $0.8 million relates to Malta operations. For the nine months ended September 30, 2017, the valuation allowance was reduced by $0.7 million pertaining to the PXRE Corporation and ARIS loss carryforwards, $0.3 million pertaining to our Brazil operations, and $0.4 million pertaining to our Malta operations. Additionally, the valuation allowance increased $3.8 million pertaining to Maybrooke of which $2.7 million valuation allowance was acquired with Maybrooke.

~~Of the PXRE Corporation~~limited net operating loss carryforwards ~~$13.6 million~~within the United States, cumulative losses incurred since inception, and valuation allowances acquired through or related to acquisitions. Based upon a review of our available evidence, both positive and negative discussed above, our management concluded that it is more-likely-than-not that the other deferred tax assets will expire if not used by December 31, 2025 and $1.5 million will expire if not used by December 31, 2027. Of the ARIS loss carryforward, $0.2 million will expire if not used by December 31, 2027, $0.4 million will expire if not used by December 31, 2028 and $0.4 million will expire if not used by December 31, 2029.

be realized.

For any uncertain tax positions not meeting the “more-likely-than-not” recognition threshold, accounting standards require recognition, measurement and disclosure in a company’s financial statements. ~~We had no material unrecognized tax benefits as of~~For the three and nine months ended September 30, ~~2017~~2020, the Company recorded uncertain tax positions in the amount of $2.7 million. Related interest in the amount of $0.5 million has been recorded in the line item “Interest expense” in our Consolidated Statements of (Loss) Income for the three and ~~2016.~~nine months ended September 30, 2020. Our United States subsidiaries are no longer subject to U.S. federal and state income tax examinations by tax authorities for years before ~~2013.~~2015. Our United Kingdom subsidiaries are no longer subject to United Kingdom income tax examinations by Her Majesty’s Revenue and Customs for years before ~~2014.~~

2016.

~~16.~~

~~Commitments and Contingencies~~

Numerous foreign jurisdictions in which we operate have provided or proposed income-tax relief in response to the COVID-19 pandemic. Within the U.S., the Coronavirus Aid, Relief, and Economic Securities Act (the “CARES Act”) was enacted on March 27, 2020. The Company does not anticipate the CARES Act to have a material impact on its financial statements and will continue to analyze it and other income-tax relief measures in response to the COVID-19 pandemic.

14. Commitments and Contingencies

Argo Group’s subsidiaries are parties to legal actions incidental to their business. Based on the opinion of legal counsel, management believes that the resolution of these matters will not materially affect our financial condition or results of operations.

We have contractual commitments to invest up to ~~$117.9~~$86.5 million related to our limited partnership investments at September 30, ~~2017.~~2020. These commitments will be funded as required by the partnership agreements which can be called to be fulfilled at any time, not to exceed thirteen years.

~~17.~~

15. Segment Information

We are primarily engaged in underwriting property and casualty insurance and reinsurance. We have ~~two~~2 ongoing reporting segments: U.S. Operations and International Operations. Additionally, we have a Run-off Lines segment for certain products that we no longer underwrite. ~~See Note 1, “Basis of Presentation,” for information on the changes to our reporting segments that were effective beginning in the first quarter of 2017.~~

We consider many factors, including the nature of each segment’s insurance and reinsurance products, production sources, distribution strategies and the regulatory environment, in determining how to aggregate reporting segments.

Transactions between segments are reported in the segment that initiated the transaction.

In evaluating the operating performance of our segments, we focus on core underwriting and investing results before the consideration of realized gains or losses from ~~the sales of~~ investments. Realized investment gains are reported as a component of the Corporate and Other segment, as decisions regarding the acquisition and disposal of securities reside with the corporate investment function and are not under the control of the individual business segments. Identifiable assets by segment are those assets used in the operation of each segment.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Income (loss) before income taxes

U.S. Operations

$
28.7

$
45.9

$
118.9

$
126.2

International Operations

(77.5
)

20.1

(60.1
)

53.1

Run-off Lines

(12.7
)

(10.0
)

(16.4
)

(14.6
)
Total segment (loss) income before taxes

(61.5
)

56.0

42.4

164.7

Corporate and Other

(10.4
)

(11.5
)

(39.9
)

(42.6
)
Net realized investment and other gains

6.0

17.7

25.1

12.8

Total (loss) income before income taxes

$
(65.9
)

$
62.2

$
27.6

$
134.9


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2020		2019		2020		2019
Income (loss) before income taxes
U.S. Operations	$	20.1	$	42.2	$	88.2	$	138.3
International Operations	(14.7)		(52.9)		(54.5)		(57.7)
Run-off Lines	(10.2)		0.7		(11.0)		0.2
Total segment (loss) income before taxes	(4.8)		(10.0)		22.7		80.8
Corporate and Other	(6.9)		(7.9)		(25.1)		(30.1)
Net realized investment and other (losses) gains	(5.7)		(6.2)		(21.7)		58.3
Foreign currency exchange (losses) gains	(11.6)		1.6		(15.0)		6.2
Other corporate expenses	(0.4)		(3.7)		(6.2)		(11.7)
Total (loss) income before income taxes	$	(29.4)	$	(26.2)	$	(45.3)	$	103.5

The table below presents earned premiums by geographic location for the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~2019. For this disclosure, we determine geographic location by the country of domicile of our subsidiaries that underwrite the business and not by the location of insureds or reinsureds from whom the business was generated.

The following table represents identifiable assets:

Included in total assets at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 are ~~$815.7~~$800.6 million and ~~$630.4~~$916.3 million, respectively, in assets associated with trade capital providers.

~~18.~~

~~Senior Unsecured Fixed Rate Notes~~

16. Senior Unsecured Fixed Rate Notes

In September 2012, Argo Group (the “Parent Guarantor”), through its subsidiary Argo Group US (the “Subsidiary Issuer”), issued $143,750,000 aggregate principal amount of the Subsidiary Issuer’s 6.5% Senior Notes due September 15, 2042 (the “Notes”). The Notes are unsecured and unsubordinated obligations of the Subsidiary Issuer and rank equally in right of payment with all of the Subsidiary Issuer’s other unsecured and unsubordinated debt. The Notes are guaranteed on a full and unconditional senior unsecured basis by the Parent Guarantor. The Notes may be redeemed, for cash, in whole or in part, on or after September 15, 2017, at the Subsidiary Issuer’s option, at any time and from time to time, prior to maturity at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date.

In accordance with ASU ~~2015-03,~~2015-3, “Simplifying the Presentation of Debt Issuance Costs” (Topic 835), we present the unamortized debt issuance costs in the balance sheet as a direct deduction from the carrying value of the debt liability. At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Notes consisted of the following:


(in millions)	September 30, 2017			December 31, 2016			(in millions)	September 30, 2020		December 31, 2019
Senior unsecured fixed rate notes							Senior unsecured fixed rate notes
Principal	$	143.8		$	143.8		Principal	$	143.8	$	143.8
Less: unamortized debt issuance costs		(4.2	)		(4.3	)	Less: unamortized debt issuance costs	(3.7)		(3.8)
Senior unsecured fixed rate notes, less unamortized debt issuance costs	$	139.6		$	139.5		Senior unsecured fixed rate notes, less unamortized debt issuance costs	$	140.1	$	140.0

In accordance with Article 10 of SEC Regulation S-X, we have elected to present condensed consolidating financial information in lieu of separate financial statements for the Subsidiary Issuer. The following tables present condensed consolidating financial information at September 30, ~~2017~~2020 and December 31, ~~2016~~2019 and for the three and nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, of the Parent Guarantor and the Subsidiary Issuer. The Subsidiary Issuer is an indirect wholly-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor’s investment accounts and earnings.

The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. Condensed consolidating financial information of the Subsidiary Issuer is presented on a consolidated basis and consists principally of the net assets, results of operations and cash flows of operating insurance company subsidiaries.

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Assets

Investments

$
(1.6
)

$
3,039.1

$
1,770.0

$
—

$
4,807.5

Cash

—

73.5

162.3

—

235.8

Accrued investment income

—

16.8

6.8

—

23.6

Premiums receivable

—

227.3

451.5

—

678.8

Reinsurance recoverables

—

1,450.3

651.6

—

2,101.9

Goodwill and other intangible assets, net

44.4

125.2

90.9

—

260.5

Deferred acquisition costs, net

—

82.3

86.5

—

168.8

Ceded unearned premiums

—

194.9

266.5

—

461.4

Other assets

8.3

173.7

137.7

—

319.7

Intercompany note receivable

—

50.2

69.8

(120.0
)

—

Investments in subsidiaries

2,086.7

—

—

(2,086.7
)

—

Total assets

$
2,137.8

$
5,433.3

$
3,693.6

$
(2,206.7
)

$
9,058.0

Liabilities and Shareholders' Equity

Reserves for losses and loss adjustment expenses

$
—

$
2,452.6

$
1,853.3

$
—

$
4,305.9

Unearned premiums

—

694.5

591.5

—

1,286.0

Funds held and ceded reinsurance payable, net

—

790.1

77.5

—

867.6

Long-term debt

153.4

284.6

142.8

—

580.8

Current income taxes payable, net

—

7.9

3.1

—

11.0

Deferred tax liabilities, net

—

37.3

4.2

—

41.5

Accrued underwriting expenses and other liabilities

12.1

103.2

41.9

—

157.2

Due to affiliates

44.3

6.9

(6.9
)

(44.3
)

—

Intercompany note payable

120.0

40.1

(40.1
)

(120.0
)

—

Total liabilities

329.8

4,417.2

2,667.3

(164.3
)

7,250.0

Total shareholders' equity

1,808.0

1,016.1

1,026.3

(2,042.4
)

1,808.0

Total liabilities and shareholders' equity

$
2,137.8

$
5,433.3

$
3,693.6

$
(2,206.7
)

$
9,058.0

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Assets
Investments	$	1.2	$	3,379.4	$	1,625.4	$	0	$	5,006.0
Cash	2.9		133.6		163.9		0		300.4
Accrued investment income	0		17.0		5.2		0		22.2
Premiums receivable	0		305.1		491.9		0		797.0
Reinsurance recoverables	0		1,817.3		1,229.2		0		3,046.5
Goodwill and other intangible assets, net	39.6		118.5		89.2		0		247.3
Current income taxes receivable, net	0		2.7		8.5		0		11.2
Deferred tax assets, net	0		4.1		12.9		0		17.0
Deferred acquisition costs, net	0		98.2		72.2		0		170.4
Ceded unearned premiums	0		342.0		318.9		0		660.9
Operating lease right-of-use assets	6.5		53.3		24.6		0		84.4
Other assets	8.8		157.9		191.8		0		358.5
Assets held for sale	0		12.2		0.3		0		12.5
Intercompany note receivable	0		58.4		(58.4)		0		0
Investments in subsidiaries	1,932.2		0		0		(1,932.2)		0
Total assets	$	1,991.2	$	6,499.7	$	4,175.6	$	(1,932.2)	$	10,734.3
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	0	$	3,285.5	$	2,104.5	$	0	$	5,390.0
Unearned premiums	0		956.0		618.2		0		1,574.2
Funds held and ceded reinsurance payable, net	0		576.2		571.4		0		1,147.6
Debt	28.4		284.4		144.1		0		456.9


Accrued underwriting expenses and other liabilities	4.0		84.1		114.7		0		202.8
Operating lease liabilities	6.6		61.9		29.8		0		98.3
Due to (from) affiliates	87.7		(14.2)		14.2		(87.7)		0

Total liabilities	126.7		5,233.9		3,596.9		(87.7)		8,869.8
Total shareholders' equity	1,864.5		1,265.8		578.7		(1,844.5)		1,864.5
Total liabilities and shareholders' equity	$	1,991.2	$	6,499.7	$	4,175.6	$	(1,932.2)	$	10,734.3

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, ~~2016~~

2019

(in millions)

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Assets

Investments

$
2.2

$
2,834.2

$
1,487.9

$
—

$
4,324.3

Cash

—

53.7

32.3

—

86.0

Accrued investment income

—

16.0

4.7

—

20.7

Premiums receivable

—

204.9

258.9

—

463.8

Reinsurance recoverables

—

1,348.4

37.2

—

1,385.6

Goodwill and other intangible assets, net

—

127.1

92.8

—

219.9

Deferred acquisition costs, net

—

63.5

75.6

—

139.1

Ceded unearned premiums

—

168.9

133.9

—

302.8

Other assets

8.7

168.0

86.1

—

262.8

Intercompany note receivable

—

50.2

(50.2
)

—

—

Investments in subsidiaries

1,834.4

—

—

(1,834.4
)

—

Total assets

$
1,845.3

$
5,034.9

$
2,159.2

$
(1,834.4
)

$
7,205.0

Liabilities and Shareholders' Equity

Reserves for losses and loss adjustment expenses

$
—

$
2,322.4

$
1,028.4

$
—

$
3,350.8

Unearned premiums

—

580.0

390.0

—

970.0

Funds held and ceded reinsurance payable, net

—

750.2

(206.5
)

—

543.7

Long-term debt

28.4

284.4

54.8

—

367.6

Current income taxes payable, net

—

8.5

(0.4
)

—

8.1

Deferred tax liabilities, net

—

17.6

6.5

—

24.1

Accrued underwriting expenses and other liabilities

13.7

92.0

42.3

—

148.0

Due to affiliates

10.5

1.8

(1.8
)

(10.5
)

—

Total liabilities

52.6

4,056.9

1,313.3

(10.5
)

5,412.3

Total shareholders' equity

1,792.7

978.0

845.9

(1,823.9
)

1,792.7

Total liabilities and shareholders' equity

$
1,845.3

$
5,034.9

$
2,159.2

$
(1,834.4
)

$
7,205.0

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Assets
Investments	$	0.6	$	3,405.6	$	1,693.2	$	0	$	5,099.4
Cash	1.9		31.6		104.3		0		137.8
Accrued investment income	0		18.2		7.5		0		25.7
Premiums receivable	0		231.3		456.9		0		688.2
Reinsurance recoverables	0		1,689.4		1,415.2		0		3,104.6
Goodwill and other intangible assets, net	40.6		123.4		89.2		0		253.2
Deferred tax assets, net	0		0.4		5.7		0		6.1
Deferred acquisition costs, net	0		88.4		71.8		0		160.2
Ceded unearned premiums	0		306.4		238.6		0		545.0
Operating lease right-of-use assets	7.1		59.6		25.1		0		91.8
Other assets	7.8		165.8		213.5		0		387.1
Assets held for sale	0		15.4		0		0		15.4
Intercompany note receivable	0		56.7		(56.7)		0		0
Investments in subsidiaries	1,916.7		0		0		(1,916.7)		0
Total assets	$	1,974.7	$	6,192.2	$	4,264.3	$	(1,916.7)	$	10,514.5
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	0	$	3,037.5	$	2,120.1	$	0	$	5,157.6
Unearned premiums	0		899.8		511.1		0		1,410.9
Funds held and ceded reinsurance payable, net	0		645.9		607.8		0		1,253.7
Debt	153.4		284.3		141.0		0		578.7
Current income taxes payable, net	0		8.2		(7.4)		0		0.8

Accrued underwriting expenses and other liabilities	13.6		87.6		124.8		0		226.0
Operating lease liabilities	7.3		68.9		29.5		0		105.7
Due to (from) affiliates	19.3		(13.4)		13.4		(19.3)		0

Total liabilities	193.6		5,018.8		3,540.3		(19.3)		8,733.4
Total shareholders' equity	1,781.1		1,173.4		724.0		(1,897.4)		1,781.1
Total liabilities and shareholders' equity	$	1,974.7	$	6,192.2	$	4,264.3	$	(1,916.7)	$	10,514.5

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF ~~LOSS~~

(LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2017~~

2020

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Premiums and other revenue:

Earned premiums

$
—

$
145.3

$
244.0

$
—

$
389.3

Net investment (expense) income

(1.1
)

16.5

15.5

—

30.9

Fee and other income

—

12.3

0.7

—

13.0

Net realized investment and other gains (losses)

—

6.6

(0.6
)

—

6.0

Total revenue

(1.1
)

180.7

259.6

—

439.2

Expenses:

Losses and loss adjustment expenses

—

99.1

227.3

—

326.4

Underwriting, acquisition and insurance
   expenses

5.6

74.0

86.5

—

166.1

Interest expense

1.6

4.2

1.7

—

7.5

Fee and other expense

—

4.1

0.9

—

5.0

Foreign currency exchange (gains) loss

—

(0.1
)

0.2

—

0.1

Total expenses

7.2

181.3

316.6

—

505.1

(Loss) Income before income taxes

(8.3
)

(0.6
)

(57.0
)

—

(65.9
)
Provision for income taxes

—

(0.6
)

(4.0
)

—

(4.6
)
Net (loss) income before equity in earnings of
   subsidiaries

(8.3
)

0.0

(53.0
)

—

(61.3
)
Equity in undistributed earnings of
   subsidiaries

(53.0
)

—

—

53.0

—

Net loss

$
(61.3
)

$
0.0

$
(53.0
)

$
53.0

$
(61.3
)

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Premiums and other revenue:
Earned premiums	$	0	$	298.2	$	147.3	$	0	$	445.5
Net investment income	0		32.8		9.2		0		42.0
Fee and other income	0		0.6		1.1		0		1.7
Net realized investment losses	0		(4.5)		(1.2)		0		(5.7)
Total revenue	0		327.1		156.4		0		483.5
Expenses:
Losses and loss adjustment expenses	0		211.5		117.4		0		328.9
Underwriting, acquisition and insurance expenses	4.5		102.7		57.1		0		164.3
Other corporate expenses	0.2		0.2		0		0		0.4
Interest expense	0.8		4.3		1.7		0		6.8
Fee and other expense	0		0.5		0.4		0		0.9
Foreign currency exchange losses	0		0.6		11.0		0		11.6
Total expenses	5.5		319.8		187.6		0		512.9
(Loss) income before income taxes	(5.5)		7.3		(31.2)		0		(29.4)
Provision (benefit) for income taxes	0		6.0		(5.8)		0		0.2
Net (loss) income before equity in earnings of subsidiaries	(5.5)		1.3		(25.4)		0		(29.6)
Equity in undistributed earnings of subsidiaries	(24.1)		0		0		24.1		0
Net (loss) income	$	(29.6)	$	1.3	$	(25.4)	$	24.1	$	(29.6)
Dividends on preferred shares	2.0		0		0		0		2.0
Net (loss) income attributable to common shareholders	$	(31.6)	$	1.3	$	(25.4)	$	24.1	$	(31.6)

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF (LOSS) INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, ~~2016~~

2019

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Premiums and other revenue:

Earned premiums

$
—

$
128.0

$
230.7

$
—

$
358.7

Net investment (expense) income

(0.9
)

22.5

11.1

—

32.7

Fee and other income

—

5.5

2.1

—

7.6

Net realized investment and other gains (losses)

—

19.4

(1.7
)

—

17.7

Total revenue

(0.9
)

175.4

242.2

—

416.7

Expenses:

Losses and loss adjustment expenses

—

83.5

124.3

—

207.8

Underwriting, acquisition and insurance
   expenses

3.7

54.0

79.7

—

137.4

Interest expense

0.3

4.0

0.6

—

4.9

Fee and other expense

—

5.5

0.4

—

5.9

Foreign currency exchange (gains) loss

—

0.2

(1.7
)

—

(1.5
)
Total expenses

4.0

147.2

203.3

—

354.5

(Loss) Income before income taxes

(4.9
)

28.2

38.9

—

62.2

Provision for income taxes

—

6.8

0.2

—

7.0

Net (loss) income before equity in earnings of
   subsidiaries

(4.9
)

21.4

38.7

—

55.2

Equity in undistributed earnings of
   subsidiaries

60.1

—

—

(60.1
)

—

Net income

$
55.2

$
21.4

$
38.7

$
(60.1
)

$
55.2

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Premiums and other revenue:
Earned premiums	$	0	$	265.5	$	186.0	$	0	$	451.5
Net investment (expense) income	(0.9)		27.7		13.4		0		40.2
Fee and other income	0		0.7		1.2		0		1.9
Net realized investment (losses) gains	(0.3)		(0.3)		(5.6)		0		(6.2)
Total revenue	(1.2)		293.6		195.0		0		487.4
Expenses:
Losses and loss adjustment expenses	0		177.7		161.1		0		338.8
Underwriting, acquisition and insurance expenses	(1.7)		103.5		62.2		0		164.0
Other corporate expenses	3.7		0		0		0		3.7
Interest expense	1.7		4.0		1.8		0		7.5
Fee and other expense	0		0.7		0.5		0		1.2
Foreign currency exchange gains	0		0.1		(1.7)		0		(1.6)
Total expenses	3.7		286.0		223.9		0		513.6
(Loss) income before income taxes	(4.9)		7.6		(28.9)		0		(26.2)
Provision (benefit) for income taxes	0		1.2		(2.3)		0		(1.1)
Net (loss) income before equity in earnings of subsidiaries	(4.9)		6.4		(26.6)		0		(25.1)
Equity in undistributed earnings of subsidiaries	(20.2)		0		0		20.2		0
Net (loss) income attributable to common shareholders	$	(25.1)	$	6.4	$	(26.6)	$	20.2	$	(25.1)

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF (LOSS) INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~

2020

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Premiums and other revenue:

Earned premiums

$
—

$
411.7

$
756.1

$
—

$
1,167.8

Net investment (expense) income

(3.2
)

64.7

43.5

—

105.0

Fee and other income

—

18.0

2.4

—

20.4

Net realized investment and other gains (losses)

0.5

25.6

(1.0
)

—

25.1

Total revenue

(2.7
)

520.0

801.0

—

1,318.3

Expenses:

Losses and loss adjustment expenses

—

247.7

531.8

—

779.5

Underwriting, acquisition and insurance
expenses

17.8

190.7

265.9

—

474.4

Interest expense

3.0

12.7

4.7

—

20.4

Fee and other expense

—

10.7

1.7

—

12.4

Foreign currency exchange loss

—

(0.1
)

4.1

—

4.0

Total expenses

20.8

461.7

808.2

—

1,290.7

(Loss) Income before income taxes

(23.5
)

58.3

(7.2
)

—

27.6

Provision for income taxes

—

13.9

(7.7
)

—

6.2

Net (loss) income before equity in earnings of
subsidiaries

(23.5
)

44.4

0.5

—

21.4

Equity in undistributed earnings of subsidiaries

44.9

—

—

(44.9
)

—

Net income

$
21.4

$
44.4

$
0.5

$
(44.9
)

$
21.4

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Premiums and other revenue:
Earned premiums	$	0	$	900.4	$	413.5	$	0	$	1,313.9
Net investment income	0		63.2		15.8		0		79.0
Fee and other income	0		2.0		3.8		0		5.8
Net realized investment gains (losses)	1.3		(12.0)		(11.0)		0		(21.7)
Total revenue	1.3		953.6		422.1		0		1,377.0
Expenses:
Losses and loss adjustment expenses	0		569.7		313.3		0		883.0
Underwriting, acquisition and insurance expenses	13.5		306.2		174.0		0		493.7
Other corporate expenses	5.4		0.8		0		0		6.2
Interest expense	3.3		12.6		5.4		0		21.3
Fee and other expense	0		1.8		1.3		0		3.1
Foreign currency exchange (gains) losses	0		(0.4)		15.4		0		15.0
Total expenses	22.2		890.7		509.4		0		1,422.3
(Loss) income before income taxes	(20.9)		62.9		(87.3)		0		(45.3)
Provision (benefit) for income taxes	0		15.9		(6.4)		0		9.5
Net (loss) income before equity in earnings of subsidiaries	(20.9)		47.0		(80.9)		0		(54.8)
Equity in undistributed earnings of subsidiaries	(33.9)		0		0		33.9		0
Net (loss) income	$	(54.8)	$	47.0	$	(80.9)	$	33.9	$	(54.8)
Dividends on preferred shares	$	2.0	$	0	$	0	$	0	$	2.0
Net (loss) income attributable to common shareholders	$	(56.8)	$	47.0	$	(80.9)	$	33.9	$	(56.8)

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2016~~

2019

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Premiums and other revenue:

Earned premiums

$
—

$
368.1

$
680.4

$
—

$
1,048.5

Net investment (expense) income

(2.0
)

62.6

29.0

—

89.6

Fee and other income

—

14.9

5.3

—

20.2

Net realized investment and other gains (losses)

0.2

32.5

(19.9
)

—

12.8

Total revenue

(1.8
)

478.1

694.8

—

1,171.1

Expenses:

Losses and loss adjustment expenses

—

220.9

375.1

—

596.0

Underwriting, acquisition and insurance
   expenses

10.0

150.6

242.4

—

403.0

Interest expense

1.0

11.8

1.8

—

14.6

Fee and other expense

—

16.7

1.4

—

18.1

Foreign currency exchange (gains) loss

—

0.1

4.4

—

4.5

Total expenses

11.0

400.1

625.1

—

1,036.2

(Loss) Income before income taxes

(12.8
)

78.0

69.7

—

134.9

Provision for income taxes

—

20.5

0.6

—

21.1

Net (loss) income before equity in earnings of
   subsidiaries

(12.8
)

57.5

69.1

—

113.8

Equity in undistributed earnings of
   subsidiaries

126.6

—

—

(126.6
)

—

Net income

$
113.8

$
57.5

$
69.1

$
(126.6
)

$
113.8

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Premiums and other revenue:
Earned premiums	$	0	$	792.1	$	511.6	$	0	$	1,303.7
Net investment (expenses) income	(2.2)		79.6		39.5		0		116.9
Fee and other income	0		2.5		3.8		0		6.3
Net realized investment (losses) gains	(0.5)		60.6		(1.8)		0		58.3
Total revenue	(2.7)		934.8		553.1		0		1,485.2
Expenses:
Losses and loss adjustment expenses	0		507.0		354.5		0		861.5
Underwriting, acquisition and insurance expenses	(0.7)		311.7		174.6		0		485.6
Other corporate expenses	11.6		0.1		0		0		11.7
Interest expense	5.1		13.9		6.3		0		25.3
Fee and other expense	0		2.4		1.4		0		3.8
Foreign currency exchange losses (gains)	0		0.3		(6.5)		0		(6.2)
Total expenses	16.0		835.4		530.3		0		1,381.7
(Loss) income before income taxes	(18.7)		99.4		22.8		0		103.5
Provision (benefit) for income taxes	0		14.5		(5.9)		0		8.6
Net (loss) income before equity in earnings of subsidiaries	(18.7)		84.9		28.7		0		94.9
Equity in undistributed earnings of subsidiaries	113.6		0		0		(113.6)		0
Net income	$	94.9	$	84.9	$	28.7	$	(113.6)	$	94.9

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~

2020

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Net cash flows from  operating activities

$
11.8

$
175.3

$
65.3

$
—

$
252.4

Cash flows from investing activities:

Proceeds from sales of investments

—

652.5

625.5

—

1,278.0

Maturities and mandatory calls of fixed
   maturity investments

—

350.6

142.6

—

493.2

Purchases of investments

—

(1,140.8
)

(919.4
)

—

(2,060.2
)
Change in short-term investments and
   foreign regulatory deposits

1.8

29.6

232.8

—

264.2

Settlements of foreign currency exchange
   forward contracts

0.8

(5.5
)

4.7

—

—

Acquisition of subsidiaries, net of cash

(235.3
)

—

130.1

—

(105.2
)
Issuance of intercompany note, net

—

—

(120.0
)

120.0

—

Purchases of fixed assets and other, net

(0.1
)

(5.3
)

(30.6
)

—

(36.0
)
Cash (used in) provided by investing activities

(232.8
)

(118.9
)

65.7

120.0

(166.0
)
Cash flows from financing activities:

Additional long-term borrowings

125.0

—

—

—

125.0

Borrowing under intercompany note, net

120.0

—

—

(120.0
)

—

Activity under stock incentive plans

0.9

—

—

—

0.9

Repurchase of Company's common shares

—

(36.6
)

—

—

(36.6
)
Payment of cash dividend to common
   shareholders

(24.9
)

—

—

—

(24.9
)
Cash provided by (used in) financing activities

221.0

(36.6
)

—

(120.0
)

64.4

Effect of exchange rate changes on cash

—

—

(1.0
)

—

(1.0
)
Change in cash

—

19.8

130.0

—

149.8

Cash, beginning of year

—

53.7

32.3

—

86.0

Cash, end of period

$
—

$
73.5

$
162.3

$
—

$
235.8

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Net cash flows from operating activities	$	35.6	$	23.5	$	42.3	$	0	$	101.4
Cash flows from investing activities:
Proceeds from sales of investments	0		581.6		509.6		0		1,091.2
Maturities and mandatory calls of fixed maturity investments	0		296.3		114.0		0		410.3
Purchases of investments	0		(1,294.2)		(457.9)		0		(1,752.1)
Change in short-term investments and foreign regulatory deposits	(0.6)		449.9		(152.0)		0		297.3
Settlements of foreign currency exchange forward contracts	0.1		(0.1)		9.1		0		9.1

Capital contribution to subsidiaries	(145.3)		0		0		145.3		0
Sale of Trident's assets	0		38.0		0		0		38.0

Purchases of fixed assets and other, net	0		7.0		(20.1)		0		(13.1)
Cash (used in) provided by investing activities	(145.8)		78.5		2.7		145.3		80.7
Cash flows from financing activities:


Payment on long-term debt	0		0		(125.0)		0		(125.0)
Issuance of preferred shares, net of issuance costs	144.0		0		0		0		144.0
Capital contribution from parent	0		0		145.3		(145.3)		0
Activity under stock incentive plans	1.4		0		0		0		1.4

Payment of cash dividends to preferred shareholders	(2.0)		0		0		0		(2.0)
Payment of cash dividend to common shareholders	(32.2)		0		0		0		(32.2)
Cash provided by (used in) financing activities	111.2		0		20.3		(145.3)		(13.8)
Effect of exchange rate changes on cash	0		0		(5.7)		0		(5.7)
Change in cash	1.0		102.0		59.6		0		162.6
Cash, beginning of year	1.9		31.6		104.3		0		137.8
Cash, end of period	$	2.9	$	133.6	$	163.9	$	0	$	300.4

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, ~~2016~~

2019

(in millions)

~~(Unaudited)~~

Argo Group
International
Holdings, Ltd
(Parent Guarantor)

Argo Group US, Inc.
and Subsidiaries
(Subsidiary Issuer)

Other Subsidiaries
and Eliminations ⁽¹⁾

Consolidating
Adjustments ⁽²⁾

Total

Net cash flows from (used in) operating activities

$
19.6

$
60.7

$
70.5

$
—

$
150.8

Cash flows from investing activities:

Proceeds from sales of investments

—

762.4

246.8

—

1,009.2

Maturities and mandatory calls of fixed
   maturity investments

—

419.7

419.3

—

839.0

Purchases of investments

—

(1,134.6
)

(721.1
)

—

(1,855.7
)
Change in short-term investments and
   foreign regulatory deposits

(0.4
)

(70.5
)

(3.0
)

—

(73.9
)
Settlements of foreign currency exchange
   forward contracts

—

—

(7.2
)

—

(7.2
)
Purchases of fixed assets and other, net

—

8.1

(2.9
)

—

5.2

Cash (used in) provided by investing activities

(0.4
)

(14.9
)

(68.1
)

—

(83.4
)
Cash flows from financing activities:

Activity under stock incentive plans

0.6

—

—

—

0.6

Repurchase of Company's common shares

—

(45.3
)

—

—

(45.3
)
Payment of cash dividend to common
   shareholders

(19.8
)

—

—

—

(19.8
)
Cash used in financing activities

(19.2
)

(45.3
)

—

—

(64.5
)
Effect of exchange rate changes on cash

—

—

(1.0
)

—

(1.0
)
Change in cash

—

0.5

1.4

—

1.9

Cash, beginning of year

—

88.8

32.9

—

121.7

Cash, end of period

$
—

$
89.3

$
34.3

$
—

$
123.6

⁽¹⁾	~~Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.~~

⁽²⁾	~~Includes all Argo Group parent company eliminations.~~

(Unaudited)


	Argo Group International Holdings, Ltd. (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations (1)		Consolidating Adjustments (2)		Total
Net cash flows from operating activities	$	29.2	$	124.6	$	41.9	$	0	$	195.7
Cash flows from investing activities:
Proceeds from sales of investments	0		744.2		436.1		0		1,180.3
Maturities and mandatory calls of fixed maturity investments	0		219.2		73.0		0		292.2
Purchases of investments	0		(1,091.2)		(548.3)		0		(1,639.5)
Change in short-term investments and foreign regulatory deposits	3.5		34.7		(35.9)		0		2.3
Settlements of foreign currency exchange forward contracts	(0.1)		1.4		(2.5)		0		(1.2)


Purchases of fixed assets and other, net	0		(1.8)		8.5		0		6.7
Cash provided by investing activities	3.4		(93.5)		(69.1)		0		(159.2)
Cash flows from financing activities:

Payment on the intercompany note	0		(19.1)		19.1		0		0
Payment on note payable	0		(0.6)		0		0		(0.6)
Activity under stock incentive plans	1.4		0		0		0		1.4

Payment of cash dividend to common shareholders	(32.5)		0		0		0		(32.5)
Cash (used in) provided by financing activities	(31.1)		(19.7)		19.1		0		(31.7)
Effect of exchange rate changes on cash	0		0		1.1		0		1.1
Change in cash	1.5		11.4		(7.0)		0		5.9
Cash, beginning of year	1.7		31.7		105.8		0		139.2
Cash, end of period	$	3.2	$	43.1	$	98.8	$	0	$	145.1

(1)Includes all other subsidiaries of Argo Group International Holdings, Ltd. and all intercompany eliminations.

(2)Includes all Argo Group parent company eliminations.

17. Subsequent Event

On November 2, 2020, we announced that we had reached an agreement to sell our reinsurance business, Ariel Re, to Pelican Ventures and J.C. Flowers & Co. Ariel Re is one of the units within our International Operations reporting segment. The transaction is subject to regulatory approval and is expected to close in the fourth quarter of 2020.

Under the terms of the agreement, the buying group’s corporate member will provide Ariel Re’s capital for the 2021 Lloyd’s year of account, and Argo Group has agreed to retain historical reserves and the remaining exposure for the 2020 Lloyd’s year of account.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, ~~2017~~2020 compared with the three and nine months ended September 30, ~~2016,~~2019, and ~~also~~ a discussion of our financial condition as of September 30, ~~2017.~~2020. This discussion and analysis should be read in conjunction with the attached unaudited interim Condensed Consolidated Financial Statements and notes thereto and Argo Group’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the Securities and Exchange Commission (“SEC”) on February ~~24, 2017,~~28, 2020, including the audited Consolidated Financial Statements and notes thereto.

Forward Looking Statements

~~Management’s Discussion~~

This report includes forward-looking statements that reflect our current views with respect to future events and ~~Analysis~~financial performance. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of ~~Financial Condition~~words such as "expect," "intend," "plan," "believe," “do not believe,” “aim,” "project," "anticipate," “seek,” "will," “likely,” “assume,” “estimate,” "may," “continue,” “guidance,” “objective,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” “on track” and ~~Results~~similar expressions of Operations, Quantitative and Qualitative Disclosures about Market Risk and the accompanying Consolidated Financial Statements (including the notes thereto) may contain “forward looking statements,” which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward lookinga future or forward-looking nature.

Such statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that actual developments will be those anticipated by us. Actual results may differ materially as a result of significantsubject to certain risks and uncertainties including non-receipt of expected payments, capital markets and their effect on investment income and fair value of the investment portfolio, development of claims and the effect on loss reserves, accuracy in estimating loss reserves, changes in the demand for our products, effect of general economic conditions, adverse government legislation and regulations, government investigations into industry practices, developments relatingthat could cause actual events or results to ~~existing agreements, heightened competition, changes in pricing environments and changes in asset valuations.~~differ materially. For a more detailed discussion of such risks and uncertainties, see ~~our public~~Item 1A, “Risk Factors” in Argo Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as supplemented in Part II, Item 1A, “Risk Factors” of this report, and in other filings ~~made~~ with the SEC. ~~We undertake~~The inclusion of a forward-looking statement herein should not be regarded as a representation by Argo Group that Argo Group's objectives will be achieved. Argo Group undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any ~~forward looking~~such statements.

Generally, it is our policy to communicate events that may have a material adverse impact on our operations or financial position, including property and casualty catastrophe events and material losses in the investment portfolio, in a timely manner through a public announcement. It is also our policy not to make public announcements regarding events that are believed to have no material adverse impact on our results of operations or financial position based on management’s current estimates and available information, other than through regularly scheduled calls, press releases or filings.

Table of Contents

Consolidated Results of Operations

For the three and nine months ended September 30, ~~2017,~~2020, we reported a net loss attributable to common shareholders of ~~$61.3~~$31.6 million ($~~2.04~~0.91 per diluted common share) and ~~net income of $21.4~~$56.8 million ($~~0.69~~1.64 per diluted common share), respectively. Effective February 6, 2017, we completed the acquisition of Maybrooke Holdings, S.A., and its subsidiaries, including Ariel Reinsurance, Ltd. (collectively “Ariel Re”). Included in our consolidated results of operations for the three and nine months ended September 30, 2017 is activity specifically attributable to Ariel Re from the date of acquisition. For the three and nine months ended September 30, ~~2016,~~2019, we reported a net loss of $25.1 million ($0.73 per diluted common share) and net income of ~~$55.2~~$94.9 million ($~~1.80~~2.73 per diluted ~~share) and $113.8 million ($3.68 per diluted~~common share), respectively.

The following is a comparison of selected data from our ~~operations:~~

operations, as well as book value per common share, for the relevant comparative periods:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2017			2016			2017			2016			(in millions)	2020			2019			2020			2019
Gross written premiums	$	805.1		$	585.4		$	2,090.9		$	1,665.8		Gross written premiums	$	890.2		$	882.7		$	2,515.7		$	2,416.4
Earned premiums	$	389.3		$	358.7		$	1,167.8		$	1,048.5		Earned premiums	$	445.5		$	451.5		$	1,313.9		$	1,303.7
Net investment income		30.9			32.7			105.0			89.6		Net investment income	42.0			40.2			79.0			116.9
Fee and other income		13.0			7.6			20.4			20.2		Fee and other income	1.7			1.9			5.8			6.3
Net realized investment and other gains		6.0			17.7			25.1			12.8
Net realized investment gains (losses):													Net realized investment gains (losses):
Net realized investment (losses) gains													Net realized investment (losses) gains	(5.7)			2.6			33.3			0.3
Change in fair value of equity securities													Change in fair value of equity securities	10.5			(8.8)			(12.0)			58.0
Credit losses on fixed maturity securities													Credit losses on fixed maturity securities	(10.5)			—			(43.0)			—
Net realized investment (losses) gains													Net realized investment (losses) gains	(5.7)			(6.2)			(21.7)			58.3
Total revenue	$	439.2		$	416.7		$	1,318.3		$	1,171.1		Total revenue	$	483.5		$	487.4		$	1,377.0		$	1,485.2
(Loss) income before income taxes	$	(65.9	)	$	62.2		$	27.6		$	134.9		(Loss) income before income taxes	$	(29.4)		$	(26.2)		$	(45.3)		$	103.5
Income tax (benefit) provision		(4.6	)		7.0			6.2			21.1
Income tax provision (benefit)													Income tax provision (benefit)	0.2			(1.1)			9.5			8.6
Net (loss) income	$	(61.3	)	$	55.2		$	21.4		$	113.8		Net (loss) income	$	(29.6)		$	(25.1)		$	(54.8)		$	94.9
Less: Dividends on preferred shares													Less: Dividends on preferred shares	2.0			—			2.0			—
Net (loss) income attributable to common shareholders													Net (loss) income attributable to common shareholders	$	(31.6)		$	(25.1)		$	(56.8)		$	94.9
Loss ratio		83.8	%		57.9	%		66.7	%		56.8	%	Loss ratio	73.8		%	75.1		%	67.2		%	66.1		%
Expense ratio		42.7	%		38.3	%		40.6	%		38.4	%	Expense ratio	36.9		%	36.3		%	37.6		%	37.2		%
Combined ratio		126.5	%		96.2	%		107.3	%		95.2	%	Combined ratio	110.7		%	111.4		%	104.8		%	103.3		%


	September 30, 2020		December 31, 2019		September 30, 2019
Book value per common share	$	49.63	$	51.80	$	55.18

Impact of COVID-19

The global COVID-19 pandemic has resulted in and is expected to continue to result in significant disruptions in economic activity and financial markets. COVID-19 has directly and indirectly adversely affected the Company and may continue to do so for an uncertain period of time. Beginning in March 2020, the pandemic and related economic conditions began to impact our results of operations. For the three and nine months ended September 30, 2020, our underwriting results included net pre-tax catastrophe losses of $16.9 million and $60.5 million, respectively, associated with COVID-19 and related economic conditions, primarily resulting from contingency and property exposures in the Company’s International Operations and property exposures in its U.S. Operations. Property losses relate to sub-limited affirmative business interruption coverage, primarily in certain International markets, as well as expected costs associated with claims handling. Premium growth in certain lines in both our U.S. and International Operations reporting segments has been negatively impacted by the challenges of the economic slowdown. Conversely, our current accident year non-catastrophe loss results have seen reduced claim activity during the first three quarter of 2020 due, in part, to the impact of the COVID-19 pandemic. Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first nine months of 2020. The extent to which COVID-19 will continue to impact our business will depend on future developments that cannot be predicted, and while we have recorded our best estimates of this impact as of and for the three and nine months ended September 30, 2020, actual results in future periods could materially differ from those disclosed herein.

Table of Contents

In March 2020, we transitioned predominantly all of our employees to a remote working environment, leveraging our investments over the last several years in business contingency planning and digital solutions. This has allowed Argo Group and its business functions to operate successfully from the onset of the COVID-19 pandemic through the date of this filing. We are committed to serving the needs of our employees, customers, business partners and shareholders and have developed a COVID-19 response team to monitor our efforts around safeguarding our people, supporting our front office and business operations, understanding and managing our loss exposures and other risks associated with COVID-19. We also consistently seek to keep our employees, customers, business partners and shareholders informed.

Non-GAAP Measures

In presenting our results in the following discussion and analysis of our results of operations, we have included certain non-generally accepted accounting principles ("non-GAAP") financial measures within the meaning of Regulation G as promulgated by the SEC. We believe that these non-GAAP measures, specifically the current accident year non-catastrophe loss, expense and combined ratios, which may be defined differently by other companies, better explain our results of operations in a manner that allows for a more complete understanding of the underlying trends in our business. However, these measures should not be viewed as a substitute for those determined in accordance with United States generally accepted accounting principles ("GAAP"). Reconciliations of these financial measures to their most directly comparable GAAP measures are included in the tables below.


	For the Three Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	445.5			$	451.5
Less:
Catastrophe-related premium adjustments - (outward) inward	(3.9)				0.1
Earned premiums, net of catastrophe-related adjustments	$	449.4			$	451.4

Losses and loss adjustment expenses, as reported	$	328.9	73.8	%	$	338.8	75.1	%
Less:
Unfavorable prior accident year loss development	(1.6)		(0.4)	%	(41.8)		(9.3)	%
Catastrophe losses, including COVID-19 (2)	(71.2)		(16.5)	%	(19.3)		(4.3)	%
Current accident year non-catastrophe losses (non-GAAP)	$	256.1	56.9	%	$	277.7	61.5	%
Non-catastrophe expense ratio (non-GAAP)			36.6	%			36.3	%
Current accident year non-catastrophe combined ratio (non-GAAP)			93.5	%			97.8	%

(1) For purposes of calculating the percentage points impact on the loss, expense and combined ratios, earned premiums were adjusted to exclude outward reinstatement premium adjustments of $3.9 million for the three months ended September 30, 2020, and inward reinstatement premium adjustments of $0.1 million for the three months ended September 30, 2019.

(2) Catastrophe losses’ percentage point impact are calculated as the difference between the reported combined ratio and the combined ratio excluding incurred catastrophe losses and catastrophe-related premium adjustments.

Table of Contents


	For the Nine Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	1,313.9			$	1,303.7
Less:
Catastrophe-related premium adjustments - (outward) inward	(6.0)				0.1
Earned premiums, net of catastrophe-related adjustments	$	1,319.9			$	1,303.6

Losses and loss adjustment expenses, as reported	$	883.0	67.2	%	$	861.5	66.1	%
Less:
Unfavorable prior accident year loss development	(6.1)		(0.5)	%	(61.6)		(4.7)	%
Catastrophe losses, including COVID-19 (2)	(128.2)		(10.0)	%	(31.3)		(2.4)	%
Current accident year non-catastrophe losses (non-GAAP)	$	748.7	56.7	%	$	768.6	59.0	%
Non-catastrophe expense ratio (non-GAAP)			37.4	%			37.2	%
Current accident year non-catastrophe combined ratio (non-GAAP)			94.1	%			96.2	%

(1) For purposes of calculating the percentage points impact on the loss, expense and combined ratios, earned premiums were adjusted to exclude outward reinstatement premium adjustments of $6.0 million for the nine months ended September 30, 2020, and inward reinstatement premium adjustments of $0.1 million for the nine months ended September 30, 2019.

Gross Written and Earned Premiums

Consolidated gross written and earned premiums by our four primary insurance lines were as follows:


	For the Three Months Ended September 30,									For the Three Months Ended September 30,
	2017				2016					2020				2019
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned		(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	245.1	$	75.5	$	145.8	$	81.8	Property	$	251.8	$	80.9	$	236.3	$	77.8
Liability		333.5		182.8		267.3		170.7	Liability	365.1		192.0		371.1		208.0
Professional		89.0		53.5		75.0		43.6	Professional	161.4		93.2		136.6		73.1
Specialty		137.5		77.5		97.3		62.6	Specialty	111.9		79.4		138.7		92.6
Total	$	805.1	$	389.3	$	585.4	$	358.7	Total	$	890.2	$	445.5	$	882.7	$	451.5

For the Nine Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
583.7

$
254.7

$
461.7

$
247.5

Liability

842.0

514.9

723.4

495.2

Professional

240.3

155.9

210.1

128.6

Specialty

424.9

242.3

270.6

177.2

Total
$
2,090.9

$
1,167.8

$
1,665.8

$
1,048.5

~~The increase in~~


	For the Nine Months Ended September 30,
	2020				2019
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	654.0	$	232.9	$	672.5	$	219.2
Liability	990.6		580.7		963.6		617.8
Professional	469.4		265.4		371.3		202.3
Specialty	401.7		234.9		409.0		264.4
Total	$	2,515.7	$	1,313.9	$	2,416.4	$	1,303.7

Table of Contents

Consolidated gross written premiums increased $7.5 million, or 0.8%, for the three months ended September 30, 2020, as compared to the same period ended 2019, while net earned premiums decreased $6.0 million, or 1.3%, for the comparative periods. For the nine months ended September 30, 2020, consolidated gross written premiums increased $99.3 million, or 4.1%, as compared to the same period ended 2019, while net earned premiums increased $10.2 million, or 0.8%, for the comparative periods. Both U.S. Operations and International Operations saw overall rate increases for the three and nine months ended September 30, 2017 as compared to the same periods ended 2016 was attributable to growth across all product lines as we continue to focus on introducing new products and increasing renewal retention. Additionally, Ariel Re contributed gross written premiums of $136.0 million and $255.5 million for the three and nine months ended September 30, 2017, respectively. During 2017, all product lines have experienced increased competition and pressure on rates due to market conditions. Consolidated earned premiums increased for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 due to increased gross written premiums in the fourth quarter of 2016 and into the first nine months of 2017. The increase in consolidated2020. Net earned premiums for the three and nine months ended September 30, ~~2017 includes Ariel Re~~2020 included outward catastrophe-related reinsurance reinstatement premiums of $3.9 million and $6.0 million, respectively. We recorded $0.1 million of inward catastrophe-related reinsurance reinstatement premiums for the both three and nine months ended September 30, 2019.

Our gross written and earned premiums are further discussed by reporting segment and major lines of ~~$26.0~~business below under the heading "Segment Results."

Net Investment Income

Consolidated net investment income was $42.0 million and ~~$90.9~~$79.0 million ~~respectively. Partially offsetting these increases was the reduction in our participation percentage~~ for the ~~Syndicate 1200 operations, from 53.5%~~three and nine months ended September 30, 2020, respectively, compared to $40.2 million and $116.9 million for ~~2016 to 46.0% for 2017. Additionally, during~~the same periods ended 2019. The increase in net investment income in the third quarter of 2017, we recorded catastrophe-related reinsurance premium adjustments which reduced net earned premiums by $14.5 million and, in connection with risk management activities related to the acquisition of Ariel Re, purchased additional reinsurance contracts which reduced net earned premiums by $8.1 million, all within our property lines.

~~The decrease in consolidated net investment income for the three months ended September 30, 2017 as~~2020 compared to the same period ~~ended 2016~~in 2019 was ~~primarily attributable to decreased investment income~~driven by a significant increase coming from our alternative investment portfolio. Our alternative investment portfolio, ~~and increased investment related expenses, partially offset by increased investment income~~which is reported on ~~fixed maturities. For the three months ended September 30, 2017,~~a one to three-month lag, produced net investment income ~~from our alternative~~of $19.3 million and net investment ~~portfolio decreased $4.0 million, from $9.8~~losses of $1.6 million for the ~~same period ended 2016,~~three and investment related expenses increased $1.0 million. Partially offsetting these decreases in net investment income was $2.5 million of increased investment income on our fixed maturities portfolio, primarily related to the investment of Ariel Re cash. The increase in consolidated net investment income for the nine months ended September 30, ~~2017 as~~2020, respectively, compared to ~~the same period ended 2016 was primarily attributable to a $14.0 million increase in the~~ net investment income of ~~our~~$8.0 million and $19.4 million for the same periods ended 2019. The improvement concentrated in the third quarter of 2020 reflected the strengthening in global financial markets during the second quarter of 2020 following the March 2020 downturn related to COVID-19. Additionally, the third quarter of 2020 alternative ~~investment~~ portfolio ~~and~~performance included $6.2 million from a ~~$7.0 million increase in income from our fixed maturities portfolio, partially offset by increased investment~~performance-based contingent payment related ~~expenses. Included in net investment income was $11.6 million of net investment gains relating~~ to net asset sales initiated by an equity investee ~~during~~in the second quarter of 2017, as previously reported.

Our core investment portfolio produced net investment income of $22.7 million and $80.6 million for the three and nine months ended September 30, ~~2017.~~

2020, respectively, compared to net investment income of $32.2 million and $97.5 million for the same periods ended 2019. The decline in the comparative periods was primarily due to a combination of our decision to hold highly liquid investments at the end of the first quarter of 2020 due to concerns around potential business impacts from COVID-19, as well as the drop in treasury rates and LIBOR during the second and third quarters of 2020, which impacted our reinvestment rate.

Net Realized Investment Gains/Losses

Consolidated net realized investment ~~and other gains~~losses of ~~$6.0~~$5.7 million for the three months ended September 30, ~~2017 consisted of $9.7~~2020 included a $10.5 million ~~in realized gains from the sale of equity and~~charge for expected credit losses on fixed maturity securities recognized under Accounting Standards Update ("ASU") 2016-13, "Measurement of Credit Losses on Financial Instruments," which was effective January 1, 2020. We recognized a $10.5 million increase in the fair value of equity securities during the third quarter of 2020 and ~~$1.3~~$1.7 million ~~in realized gains from other invested assets, primarily options. Partially offsetting these realized gains was $4.8 million of realized loss on our~~related to net foreign currency ~~forward contracts. For the three months ended September 30, 2017, we recognized $0.2~~exchange gains. The remaining $7.4 million ~~in other-than-temporary impairment losses within our equity and~~net realized investment loss primarily related to sales of fixed maturity ~~portfolios.~~ and equity securities.

Consolidated net realized investment ~~and other gains~~losses of ~~$17.7~~$6.2 million for the three months ended September 30, ~~2016 consisted~~2019 included an $8.8 million decrease in the fair value of ~~$24.9~~equity securities. The remaining $2.6 million net realized investment gain included recognizing gains of $8.8 million from the sale of fixed maturity and equity securities. Partially offsetting these gains were $5.0 million in other-than-temporary impairment losses, primarily on fixed maturity securities, and $1.2 million of foreign currency exchange losses.

Consolidated net realized investment losses of $21.7 million for the nine months ended September 30, 2020 included a $43.0 million charge for expected credit losses on fixed maturity securities recognized under ASU 2016-13, a $12.0 million decrease in the fair value of equity securities, as well as $3.8 million related to net foreign currency exchange losses. Partially offsetting these losses was the $32.3 million gain recognized on the sale of our Trident Public Risk Solutions ("Trident") brand and underwriting platform in the second quarter of 2020. The remaining $4.8 million net realized investment gain primarily related to sales of fixed maturity and equity securities.

Consolidated net realized investment gains of $58.3 million for the nine months ended September 30, 2019 included a $58.0 million increase in the fair value of equity securities. The remaining $0.3 million net realized investment gain included realized gains of $14.2 million from the sale of fixed maturity and equity securities, partially offset by $11.8 million in other-than-temporary impairment losses, primarily on fixed maturity securities, and ~~$0.4 million from other invested assets. Partially offsetting these realized gains was $5.2~~$2.1 million of net foreign currency ~~losses, primarily from the sale~~exchange losses.

Table of ~~fixed maturities. Additionally,~~Contents

Loss and Loss Adjustment Expenses

The consolidated loss ratio for the three months ended September 30, ~~2016, we recognized $2.4~~2020 was 73.8%, compared to 75.1% for the same period in 2019. The lower loss ratio in the third quarter of 2020 is driven by an 8.9 percentage point year-over-year improvement in the net unfavorable prior-year reserve development, an improvement of 4.6 percentage points in the current accident year non-catastrophe loss ratio, largely due to rate improvements achieved over the last several quarters, as well as a reduction in claim activity, offset by a 12.2 percentage point increase in catastrophe losses, which included COVID 19-related losses. Catastrophe losses in the third quarter of 2020 included $16.9 million ~~in other-than-temporary impairment losses within our fixed maturity~~for COVID-19-related claims, with the remaining $54.3 million being primarily attributable to Hurricanes Laura and ~~equity portfolios. Consolidated net realized investment~~Sally, the California wildfires, and ~~other gains of $25.1 million~~various smaller events including the August Midwest derecho.

The consolidated loss ratio for the nine months ended September 30, ~~2017 consisted~~2020 was 67.2%, compared to 66.1% for the same period in 2019, driven by an increase in catastrophe losses (7.6 percentage points), which included COVID 19-related losses, partially offset by a decrease in net unfavorable prior-year reserve development during the first nine months of ~~$44.6~~2020 (4.2 percentage points), and a decrease in the current accident year non-catastrophe loss ratio (2.3 percentage points). Catastrophe losses during the first nine months of 2020 included $60.5 million ~~in realized gains~~for COVID-19-related claims, with the remaining $67.7 million being mainly attributable to the events from the ~~sale~~third quarter of ~~fixed maturity~~2020, as well as losses associated with civil unrest and ~~equity securities and $0.5 million from other invested assets, primarily options. Partially offsetting these realized gains was $18.3 million of realized foreign currency exchange losses,~~social demonstrations, including ~~$10.4 million on our foreign currency forward~~

riots in some locations, across the U.S.

~~contracts and $7.9 million on our fixed maturity and equity securities portfolios. Additionally,~~The following table summarizes the above referenced prior-year loss reserve development for the nine months ended September 30, 2017, we recognized $1.7 million in other-than-temporary impairment losses primarily within our equity portfolio. Consolidated net realized investment and other gains of $12.8 million for the nine months ended September 30, 2016 consisted of $48.3 million in realized gains from the sale of fixed maturity and equity securities and $0.2 million from other invested assets. Partially offsetting these realized gains was $26.7 million in realized foreign currency exchange losses, including $11.7 million in foreign currency forward contracts and $15.0 million in our fixed maturity portfolio. Additionally, for the nine months ended September 30, 2016 we recognized other-than-temporary impairment losses on our equity securities and fixed maturity portfolios of $7.3 million and $1.7 million, respectively.

The increase in the loss ratios for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 was primarily attributable to the significant catastrophe losses that occurred in the third quarter of 2017, as well as increased non-catastrophe losses within the current accident year recorded in our Lloyd’s Syndicate 1200.

Consolidated losses and loss adjustment expenses were $326.4 million and $207.8 million for the three months ended September 30, 2017 and 2016, respectively. Losses and loss adjustment expenses include $49.1 million for Ariel Re for the three months ended September 30, 2017. Catastrophe losses, net of reinsurance, for the third quarter of 2017 totaled $90.0 million, primarily attributable to Hurricanes Harvey, Irma and Maria and the Mexican earthquakes, as compared to $13.0 million for the third quarter of 2016, primarily due to the Louisiana floods and other U.S. storm activity. The third quarter of 2017 also included $15.0 million of non-catastrophe losses in the current accident year, driven primarily by higher than anticipated attritional losses on property business underwritten by our Lloyd’s Syndicate 1200. Included in losses and loss adjustment expenses for the three months ended September 30, 2017 was $1.3 million of net favorable loss reserve development on prior accident years compared to $2.9 million of net favorable loss reserve development on prior accident years for the same period ended 2016.

Consolidated losses and loss adjustment expenses were $779.5 million and $596.0 million for the nine months ended September 30, 2017 and 2016, respectively. Losses and loss adjustment expenses include $81.6 million for Ariel Re from the date of acquisition through September 30, 2017. Included in losses and loss adjustment expenses for the nine months ended September 30, 2017 and 2016 was $96.4 million and $40.5 million, respectively, in catastrophe losses, net of reinsurance. Included in losses and loss adjustment expenses for the nine months ended September 30, 2017 was $4.4 million of net unfavorable loss reserve development on prior accident years compared to $18.8 million of net favorable loss reserve development on prior accident years for the same period ended 2016.

~~The following table summarizes the above referenced loss reserve development~~2020 with respect to ~~prior year~~net loss reserves by line of business ~~for~~as of December 31, 2019. Our loss and loss adjustment expenses, including the ~~nine months ended September 30, 2017.~~

prior-year loss reserve development shown in the following table, are further discussed by reporting segment below under the heading "Segment Results."


(in millions)	2016 Net Reserves		Net Reserve Development (Favorable)/ Unfavorable			Percent of 2016 Net Reserves			(in millions)	Net Reserves 2019		Net Reserve Development (Favorable)/ Unfavorable		Percent of 2019 Net Reserves
General and professional liability	$	1,028.9	$	10.0			1.0	%
General liability									General liability	$	1,533.3	$	43.3	2.8	%
Workers compensation		312.9		(7.6	)		-2.4	%	Workers compensation	309.2		(10.1)		(3.3)	%
Lloyd's liability		198.1		11.4			5.8	%
Syndicate liability									Syndicate liability	197.8		5.7		2.9	%
Commercial multi-peril		156.6		(2.6	)		-1.7	%	Commercial multi-peril	163.9		(3.2)		(2.0)	%
Commercial auto liability		113.6		(6.5	)		-5.7	%	Commercial auto liability	109.7		7.7		7.0	%
Property		83.6		11.0			13.2	%
Fidelity/Surety									Fidelity/Surety	50.5		(29.9)		(59.2)	%
Reinsurance - nonproportional assumed property		65.6		(4.1	)		-6.3	%	Reinsurance - nonproportional assumed property	38.6		(2.5)		(6.5)	%
Fidelity/Surety		38.4		(6.7	)		-17.4	%
Syndicate and U.S. special property									Syndicate and U.S. special property	23.7		(1.1)		(4.6)	%
Syndicate Specialty									Syndicate Specialty	17.9		(2.7)		(15.1)	%
All other lines		182.5		(0.5	)		-0.3	%	All other lines	278.1		(1.1)		(0.4)	%

Total	$	2,180.2	$	4.4			0.2	%	Total	$	2,722.7	$	6.1	0.2	%

Consolidated gross reserves for losses and loss adjustment expenses were ~~$4,305.9~~$5,390.0 million (including ~~$273.3~~$239.3 million of reserves attributable to our ~~Lloyd’s~~ Syndicate ~~1200’s~~1200 and 1910 trade capital providers) and ~~$3,284.8~~$4,842.5 million (including ~~$142.7~~$217.6 million of reserves attributable to our ~~Lloyd’s~~ Syndicate ~~1200’s~~1200 and 1910 trade capital providers) as of September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Management has recorded its best estimate of loss reserves at each date based on current known facts and circumstances. Due to the significant uncertainties inherent in the estimation of loss reserves, there can be no assurance that future loss development, favorable or unfavorable, ~~loss development, which may be material,~~ will not occur.

Underwriting, Acquisition and Insurance Expenses

Consolidated underwriting, ~~insurance~~acquisition and ~~acquisition~~insurance expenses were ~~$166.1~~$164.3 million for the three months ended September 30, 2020 compared to $164.0 million for the same period ending 2019, and $493.7 million and ~~$474.4~~$485.6 million for nine months ended September 30, 2020 and 2019, respectively. The slight increase in expenses for both comparative periods was primarily due to an increase in non-acquisition expenses in our Lloyd's syndicates due to decreasing our use of third-party capital at Lloyd's and, as such, retaining certain costs in the first nine months of 2020 that were previously allocated to trade capital providers, severance costs in International Operations, as well as the continued investment in strategic growth areas of our business.

Table of Contents

The expense ratios for the comparative three and nine month periods ended September 30, 2020 and 2019 were relatively flat, at 36.9% and 36.3% for the three months ended September 30, 2020 and 2019, respectively, and 37.6% and 37.2% for the nine months ended September 30, 2020 and 2019, respectively. The expense ratio for our U.S. Operations was slightly higher in the third quarter of 2020 compared to the same period in 2019, while improving for the nine months ended September 30, 2020 as compared to the same period in 2019. The expense ratio for our International Operations experienced deterioration for the three and nine months ended September 30, 2020 compared to the same periods in 2019.

Our underwriting, acquisition and insurance expenses are further discussed by reporting segment below under the heading "Segment Results."

Interest Expense

Consolidated interest expense was $6.8 million and $21.3 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared to ~~$137.4~~$7.5 million and ~~$403.0~~$25.3 million for the same periods ~~ended 2016. Ariel Re contributed $8.3 million and $24.5 million~~ in ~~underwriting expenses for~~2019. The decreases were due to significant reductions in short-term LIBOR rates during the ~~three and~~first nine months ~~ended September 30, 2017, respectively. The expense ratio for the three and nine months ended September 30, 2017~~of 2020 as compared to the same periods ended 2016 was negatively impacted by the aforementioned third quarter 2017 reductions to earned premiums for catastrophe-related reinsurance premium adjustments and additional reinsurance contracts purchasedperiod in connection with risk management activities related to the acquisition of Ariel Re. During the three months ended September 30, 2017, we also recorded a one-time acquisition expense of $3.5 million relating to the final resolution of a premium tax dispute in our U.S. Operations. The remaining increase in the expense ratio for the three and nine months ended September 30, 2017 as compared to the same periods ended 2016 included higher acquisition costs driven by declines in ceding commissions and fronting fees earned, and writing more binder business, which has higher acquisition rates, in our International Operations. Non-acquisition expenses2019.

Foreign Currency Exchange Gains/Losses

Consolidated foreign currency exchange losses were negatively impacted by increased information technology and marketing costs, as well as increased personnel expenses in our strategic growth units. Additionally, included in non-acquisition expense for the nine months ended September 30, 2017 was $2.5 million in transaction costs related to the Ariel Re acquisition.

~~Consolidated interest expense was $7.5~~$11.6 million and ~~$20.4~~$15.0 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, as compared to ~~$4.9~~foreign currency exchange gains of $1.6 million and ~~$14.6~~$6.2 million ~~for the same periods ended 2016. Included in consolidated interest expense was $1.2 million and $3.0 million from the operations of Ariel Re~~ for the three and nine months ended September 30, 2017, respectively. The remaining increase was primarily attributable to interest expense on a $125.0 million term loan entered into to fund a portion of the acquisition price of Ariel Re and to a lesser extent, an increase in short-term LIBOR rates.

Consolidated foreign currency exchange loss was $0.1 million for the three months ended September 30, 2017, as compared to a $1.5 million foreign currency exchange gain for the three months ended September 30, 2016. Consolidated foreign currency exchange loss was $4.0 million and $4.5 million for the nine months ended September 30, 2017 and 2016,2019, respectively. The changes in the foreign currency exchange gains/losses were due to fluctuations of the U.S. Dollar, on a weighted average basis, against the currencies in which we transact our business. For the three months ended September 30, ~~2017,~~2020, the foreign currency exchange losses were primarily driven by the U.S. Dollar ~~weakened~~weakening against the Euro, British Pound, Canadian Dollar and Australian Dollar, as there was increased volatility in currency markets. For the nine months ended September 30, 2020, the foreign currency exchange losses were primarily driven by the U.S. Dollar weakening against Euro. For the three months ended September 30, 2019, the foreign currency exchange gains were primarily driven by the U.S. Dollar strengthening against the British Pound ~~the Euro, the Canadian Dollar~~ and the Australian Dollar. For the nine months ended September 30, ~~2017,~~2019, the foreign currency exchange gains were primarily driven by the U.S. Dollar ~~weakened~~strengthening against ~~all major currencies. For~~the Euro and the Australian Dollar, partially offset by the U.S. Dollar weakening against the Canadian Dollar.

Other Corporate Expenses

During the three and nine months ended September 30, ~~2016, the U.S. Dollar weakened against all major currencies, except~~2020, we incurred other corporate expenses of $0.4 million and $6.2 million, respectively, compared to $3.7 million and $11.7 million for the ~~British Pound.~~

three and nine months ended September 30, 2019. During the second quarter of 2020, the Company reached a settlement with the SEC related to its investigation, which required that the Company pay an approximately $900,000 civil penalty, and is included in the other corporate expenses for the nine months ended September 30, 2020. The other corporate expenses were incurred in connection with the previously disclosed corporate governance and compensation matters, including responding to the 2019 subpoena from the SEC related to the Company’s disclosure of certain compensation-related perquisites received by the Company’s former chief executive officer.

These non-recurring costs are included in the line item “Other corporate expenses” in the Company’s Consolidated Statements of (Loss) Income, and have been excluded from the calculation of our expense ratio.

Income Tax Provision

The consolidated income tax provision represents the income tax expense or benefit associated with our operations based on the tax laws of the jurisdictions in which we operate. Therefore, the consolidated provision for income taxes represents taxes on ~~the~~ net income ~~or loss~~ for our Belgium, Brazil, Ireland, ~~Luxembourg,~~Italy, Malta, Switzerland, United Kingdom, and ~~United States~~U.S. operations. The consolidated income tax benefit was $4.6 million for the three months ended September 30, 2017 compared to income tax expense of $7.0 million for the same period ended 2016. The effective tax rate declined to 7.0% for the three months ended September 30, 2017 from 11.3% for the same period ended 2016. The decline in the effective tax rate was due to approximately 37.4% of our consolidated loss before income taxes for the third quarter of 2017 being attributable to the United States and United Kingdom operations, our primary taxing jurisdictions, as compared to 40.8% of our consolidated income before income taxes being from the same jurisdictions in the third quarter of 2016. The majority of the remaining earnings for the comparative periods were attributable to our Bermuda operations, a zero-taxation jurisdiction. The consolidated provision for income taxes was ~~$6.2~~$0.2 million and ~~$21.1~~$9.5 million for the nine months ended September 30, 2017 and 2016, respectively. The effective tax rate was 22.3% and 15.7% for the nine months ended September 30, 2017 and 2016, respectively. The increase in the effective tax rate was primarily attributable to the change in the income tax provision for our United Kingdom operations, coupled with the impact of the weakening U.S. Dollar against the British Pound. Included in the provision for income taxes for the three and nine months ended September 30, ~~2017 was $2.6~~2020, respectively, compared to the consolidated income tax benefit of $1.1 million and ~~$0.4~~income tax provision of $8.6 million offor the same periods ended 2019. The consolidated effective tax ~~benefit for Ariel Re~~rates were (0.7)% and (21.0)% for the three and nine months ended September 30, ~~2017, respectively.~~

2020, respectively, compared to consolidated effective tax rates of 4.1% and 8.4% for the same periods ended 2019. The decrease in the effective tax rates for the three and nine months ended September 30, 2020 was due to the jurisdictional mix of taxable income compared to the respective periods in 2019.

Table of Contents

Segment Results

~~As discussed~~

We are primarily engaged in ~~Note 1 “Basis of Presentation”~~writing property and ~~Note 17 “Segment Information,” during the first quarter of 2017, we evaluated~~casualty insurance and ~~modified the presentation of our reportable segments to reflect our new operating framework and management structure. As a result, we~~reinsurance. We have ~~organized our business into~~ two ongoing reporting segments: U.S. Operations and ~~the~~ International Operations. The U.S. Operations includes the former Excess & Surplus and Commercial Specialty reportable segments. The International Operations includes the former Syndicate 1200 and International Specialty reportable segments, and the recently acquired Ariel Re business. Consistent with prior periods, theAdditionally, we have a Run-off Lines segment for products that we no longer underwrite.

We consider many factors, including the nature of each segment’s insurance and ~~Corporate segments include all other activity of Argo Group~~reinsurance products, production sources, distribution strategies and ~~are included~~regulatory environment, in our consolidated financial results. It is the business unit that produces the risk and not the location of the underlying exposure that is the primary characteristic in distinguishing U.S Operations from International Operations. For example, a U.S. property exposure underwritten through our Syndicate platform would be included in our International Operations.

determining how to aggregate reporting segments.

Our reportable segments include four primary insurance and reinsurance services and offerings as follows:

•Property includes both property insurance and reinsurance products. Insurance products cover commercial properties primarily in North America with some ~~residential and~~ international ~~covers.~~covers, including business interruption coverage. Reinsurance covers underlying exposures ~~that are~~ located throughout the world, including the United States. These offerings include coverages for man-made and natural disasters.

•Liability includes a broad range of primary and excess casualty products for risks on both an admitted and non-admitted basis in the United States. Internationally, Argo Group underwrites worldwide casualty risks primarily exposed in the United Kingdom, Canada, and Australia.

•Professional includes various professional lines products including ~~Errors~~errors & omissions, management liability (including directors and ~~Omissions, Management Liability (including Directors~~officers) and ~~Officers) and Cyber~~cyber liability coverages.

•Specialtyincludes niche insurance coverages including ~~Marine~~marine & ~~Energy, Accident~~energy, accident & ~~Health~~health and ~~Surety~~surety product offerings.

~~The results of operations for prior periods have been reclassified to conform to the current presentation.~~

In evaluating the operating performance of our segments, we focus on core underwriting and investing results before consideration of realized gains or losses from the sales of investments. Intersegment transactions are allocated to the segment that initiated the transaction. Realized investment gains and losses are reported as a component of the Corporate and Other segment, as decisions regarding the acquisition and disposal of securities reside with the corporate investment function and are not under the control of the individual business segments.

Although this measure of profit (loss) does not replace net income (loss) computed in accordance with GAAP as a measure of profitability, management uses this measure of profit (loss) to focus our reporting segments on generating operating income.

Since we generally manage and monitor the investment portfolio on an aggregate basis, the overall performance of the investment portfolio, and related net investment income, is discussed above on a ~~consolidated~~combined basis under consolidated net investment income rather than within or by segment.

U.S. Operations

The following table summarizes the results of operations for the U.S. Operations segment:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,							For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2017			2016			2017			2016			(in millions)	2020			2019			2020			2019
Gross written premiums	$	428.9		$	360.8		$	1,128.9		$	970.2		Gross written premiums	$	542.4		$	529.9		$	1,499.1		$	1,394.2
Earned premiums	$	242.6		$	216.3		$	692.9		$	629.7		Earned premiums	$	298.7		$	290.8		$	902.8		$	848.6
Losses and loss adjustment expenses		148.4			117.5			394.2			348.1		Losses and loss adjustment expenses	205.5			178.6			566.3			496.3
Underwriting, acquisition and insurance expenses		88.6			71.3			243.0			202.7		Underwriting, acquisition and insurance expenses	99.1			92.8			290.8			278.7
Underwriting income		5.6			27.5			55.7			78.9
Underwriting (loss) income													Underwriting (loss) income	(5.9)			19.4			45.7			73.6
Net investment income		18.8			20.3			66.0			55.8		Net investment income	30.1			27.4			56.1			80.1
Interest expense		(3.8	)		(2.2	)		(10.3	)		(6.8	)	Interest expense	(4.0)			(4.6)			(13.1)			(15.5)
Fee and other income		11.6			5.1			16.0			13.1		Fee and other income	—			—			—			0.3
Fee and other expense		(3.5	)		(4.8	)		(8.5	)		(14.8	)	Fee and other expense	(0.1)			—			(0.5)			(0.2)
Income before income taxes	$	28.7		$	45.9		$	118.9		$	126.2		Income before income taxes	$	20.1		$	42.2		$	88.2		$	138.3
Loss ratio		61.2	%		54.3	%		56.8	%		55.3	%	Loss ratio	68.8		%	61.4		%	62.7		%	58.5		%
Expense ratio		36.5	%		33.0	%		35.1	%		32.2	%	Expense ratio	33.2		%	31.9		%	32.2		%	32.8		%
Combined ratio		97.7	%		87.3	%		91.9	%		87.5	%	Combined ratio	102.0		%	93.3		%	94.9		%	91.3		%

Table of Contents

The following table contains reconciliations of certain non-GAAP financial measures, specifically the current accident year non-catastrophe loss, expense and combined ratios, to their most directly comparable GAAP measures for our U.S. Operations.


	For the Three Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	298.7			$	290.8
Less:
Catastrophe-related premium adjustments - outward	(3.2)				—
Earned premiums, net of catastrophe-related adjustments	$	301.9			$	290.8

Losses and loss adjustment expenses, as reported	$	205.5	68.8	%	$	178.6	61.4	%
Less:
Favorable prior accident year loss development	3.2		1.1	%	0.7		0.2	%
Catastrophe losses, including COVID-19 (2)	(26.3)		(9.4)	%	(6.1)		(2.1)	%
Current accident year non-catastrophe losses (non-GAAP)	$	182.4	60.5	%	$	173.2	59.5	%
Non-catastrophe expense ratio (non-GAAP)			32.8	%			31.9	%
Current accident year non-catastrophe combined ratio (non-GAAP)			93.3	%			91.4	%


	For the Nine Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	902.8			$	848.6
Less:
Catastrophe-related premium adjustments - outward	(3.2)				—
Earned premiums, net of catastrophe-related adjustments	$	906.0			$	848.6

Losses and loss adjustment expenses, as reported	$	566.3	62.7	%	$	496.3	58.5	%
Less:
Favorable prior accident year loss development	0.5		0.1	%	9.8		1.2	%
Catastrophe losses, including COVID-19 (2)	(42.3)		(4.9)	%	(14.3)		(1.7)	%
Current accident year non-catastrophe losses (non-GAAP)	$	524.5	57.9	%	$	491.8	58.0	%
Non-catastrophe expense ratio (non-GAAP)			32.1	%			32.8	%
Current accident year non-catastrophe combined ratio (non-GAAP)			90.0	%			90.8	%

Table of Contents

Gross Written and Earned Premiums

Gross written and earned premiums by our four primary insurance lines were as follows:


	For the Three Months Ended September 30,									For the Three Months Ended September 30,
	2017				2016					2020				2019
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned		(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	68.1	$	26.8	$	69.2	$	28.6	Property	$	90.8	$	36.6	$	85.1	$	35.3
Liability		277.2		160.2		226.7		146.3	Liability	291.6		165.2		313.9		179.9
Professional		46.2		30.8		35.3		21.3	Professional	111.7		63.3		83.4		44.2
Specialty		37.4		24.8		29.6		20.1	Specialty	48.3		33.6		47.5		31.4
Total	$	428.9	$	242.6	$	360.8	$	216.3	Total	$	542.4	$	298.7	$	529.9	$	290.8

For the Nine Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
193.4

$
85.8

$
188.6

$
93.7

Liability

715.4

454.8

613.2

429.1

Professional

119.9

85.5

98.9

56.8

Specialty

100.2

66.8

69.5

50.1

Total
$
1,128.9

$
692.9

$
970.2

$
629.7


	For the Nine Months Ended September 30,
	2020				2019
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	237.5	$	117.3	$	227.3	$	100.1
Liability	804.4		507.4		812.9		533.8
Professional	312.7		177.4		220.1		119.6
Specialty	144.5		100.7		133.9		95.1
Total	$	1,499.1	$	902.8	$	1,394.2	$	848.6

Property

~~The decline in gross~~

Gross written ~~and earned~~ premiums ~~for property~~ for the three months ~~ended~~ending September 30, ~~2017 as~~2020 increased compared to the same period ~~ended 2016 was~~in 2019 primarily ~~attributable to planned reductions due to increased competition~~driven by growth in inland marine and ~~the pressure on rates. Additionally, the third quarter 2017 catastrophe-related reinsurance premium adjustments~~fronted property, partially offset by a decrease in excess and additional reinsurance contracts purchased in connection with risk management activities related to the acquisition of Ariel Re reduced net earned premiums in U.S. Operations by $5.2 million. The increase in grosssurplus (“E&S”) property. Gross written premiums ~~for property~~ for the nine months ~~ended~~ending September 30, ~~2017 as~~2020 increased compared the same period in 2019 due to new business growth in inland marine and strong rate execution for the contract binding business unit. Net earned premium for the three and nine months ending September 30, 2020 increased compared to the same periods in 2019 driven by the premium growth achieved in inland marine, programs, and contract binding business units in recent quarters, partially offset by $3.2 million of outward catastrophe-related reinsurance reinstatement premiums incurred in September 2020.

Liability

Gross written premiums for the three and nine months ending September 30, 2020 decreased compared to the same periods in 2019 due to the challenges of the current economic environment and pandemic-related economic slowdowns, which generally resulted in a lower exposure base and fewer new business opportunities. Most business units had decreased production through the first nine months of 2020, with the exception of general liability lines, environmental products and delegated authority programs, which continued to see new business submissions. Net earned premium for the three and nine months ending September 30, 2020 decreased compared to the same period ~~ended 2016 was primarily attributable~~in 2019 largely due to planned increases to ceded premium.

Professional

The growth in ~~our fronting programs, which do not impact earned premiums, but result in a ceding commissions received. The decline in~~gross written and net earned premiums for ~~property~~the three and nine months ending September 30, 2020 compared to the prior year was driven by the favorable rate environment and increased new business for management liability and errors and omissions products.

Specialty

Gross written premiums for the ~~nine~~three months ~~ended~~ending September 30, ~~2017 as~~2020 were relatively flat compared to the same period ended 2016 was primarily attributable the previously mentioned third quarter 2017 catastrophe-related reinsurance premium adjustments and catastrophe and risk management reinsurance contracts, as well as reduced grossin 2019. Gross written premiums for the ~~non-fronting~~nine months ending September 30, 2020 increased compared to the same period in 2019 primarily due to growth in the surety, fronted business, and inland marine, partially offset by reduced animal mortality programs ~~which were primarily driven by increased competition and pressure on rates.~~

~~Liability~~

~~The increase in gross written and~~business due to weaker livestock prices. Net earned premiums ~~for liability~~ for the three and nine months ended September 30, ~~2017 as~~2020 increased compared to the same periods ~~ended 2016~~in 2019 driven by growth in surety, partially offset by decreased net earned premiums for animal mortality programs.

Table of Contents

Loss and Loss Adjustment Expenses

The loss ratio for the third quarter of 2020 was ~~primarily attributable~~68.8% compared to ~~capitalizing on targeted growth initiatives~~61.4% for the third quarter of 2019. The increased loss ratio was driven by a 7.3 percentage point increase in catastrophe losses, which includes COVID-19-related claims, as well as a 1.0 percentage point increase in the ~~specialty~~current accident year non-catastrophe loss ratio, partially offset by an improvement of 0.9 percentage points related to an increase in net favorable prior-year reserve development.

The loss ratios for the nine months ended September 30, 2020 and ~~general casualty lines, growth~~2019 were 62.7% and 58.5%, respectively. The higher loss ratio in ~~writings due~~the first nine months of 2020 was driven by a 3.2 percentage point impact from an increase in catastrophe losses, which includes COVID-19-related claims, as well as deterioration of 1.1 percentage points related to lower net favorable prior-year reserve development in the first nine months of 2020 compared to the ~~upturn~~same period in 2019, partially offset by a 0.1 percentage point improvement in the ~~coal market and the introduction of new products in our programs division.~~

~~Professional~~

current accident year non-catastrophe loss ratio.

The ~~increase in gross written and earned premiums within professional~~current accident year non-catastrophe loss ratios for the three and nine months ended September 30, ~~2017 as~~2020 were 60.5% and 57.9%, respectively, compared to ~~the same periods ended 2016 was primarily attributable to new business within our management liability~~59.5% and ~~errors and omissions lines.~~

~~Specialty~~

~~The increase in gross written and earned premiums for specialty~~58.0% for the three and nine months ended September 30, ~~2017 as compared to the same periods ended 2016 was driven by growth from new business in our surety lines and new products within our programs division.~~

2019, respectively. The increase in the ratio for the comparative quarterly periods primarily related to a large property loss and a large liability loss that added 1.7 points to the loss ratio for the ~~three months ended September 30, 2017 as compared to the same period in 2016 was driven by~~ third quarter of ~~2017 catastrophe losses,~~2020. Additionally, an increase in the estimated loss ratio for professional liability business was offset by a reduction in the loss ratio due to the slowdown in claims activity during the quarter while most businesses were in a nationwide shutdown. The slight decrease in the ratio for the comparative nine month periods primarily related to rate improvement achieved over the past several quarters, as well as ~~lower net~~reduced claim activity during the first three quarters of 2020, partially offset by the aforementioned increase during the third quarter of 2020.

Net favorable ~~loss~~prior-year reserve development onfor the third quarter of 2020 was $3.2 million and primarily related to favorable development in specialty lines, partially offset by unfavorable development in professional, liability and property lines. Net favorable prior ~~accident years.~~year development for the first nine months of 2020 was $0.5 million, driven predominantly by favorable development in specialty lines, largely offset by unfavorable development in professional, liability and property lines. Net favorable prior-year reserve development for the third quarter of 2019 was $0.7 million and related primarily to specialty and liability lines, partially offset by unfavorable development in professional lines. Net favorable prior-year reserve development for the first nine months of 2019 was $9.8 million and related primarily to liability and specialty lines, partially offset by unfavorable development in our professional and property lines.

Catastrophe losses for the third quarter and first nine months of 2020 were $26.3 million and $42.3 million, respectively, which included reserves associated with COVID-19, primarily related to expected costs associated with potential litigation related to property exposures. The COVID-19 net incurred losses decreased by $2.0 million during the third quarter of 2020 and increased by $6.5 million for the first nine months of 2020. The remaining catastrophe losses of $28.3 million for the third quarter of 2020 were mainly attributable to the California wildfires, Hurricanes Laura and Sally, and various smaller U.S. storms. The remaining catastrophe losses of $35.8 million for the first nine months of 2020 were mainly attributable to the events from the third quarter of 2020, as well as losses associated with civil unrest and social demonstrations, including riots in some locations, across the U.S. Catastrophe losses for the third quarter of ~~2017 totaled $17.2~~2019 were $6.1 million ~~primarily from Hurricanes Harvey~~ and ~~Irma, as compared~~related to ~~$4.5 million for the third quarter of 2016, mainly attributable to the Louisiana floods. Included in losses~~Hurricane Dorian and loss adjustment expenses for the three months ended September 30, 2017 was $10.7 million of net favorable loss reserve development on prior accident years primarily attributable to net favorable development for the general and products liability, surety and commercial automobile lines. Net favorable loss reserve development on prior accident years for the three months ended September 30, 2016 was $13.7 million concentrated in the surety, commercial automobile, commercial multiple peril and workers compensation lines.

The increase in the loss ratio for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily attributable to the previously mentioned third quarter of 2017 catastrophe losses, partially offset by increased net favorable loss reserve development on prior accident years.U.S. storms. Catastrophe losses ~~during~~for the first nine months of ~~2017 totaled $22.1~~2019 were $14.3 million ~~primarily from Hurricanes Harvey~~ and ~~Irma, as compared~~related to ~~$11.5 million for the same period ended 2016, which were mainly attributable to the Louisiana floods~~Hurricane Dorian and ~~other~~ U.S. ~~storms. Included in losses~~storms, including Midwest floods.

Underwriting, Acquisition and loss adjustment expenses for the nine months ended September 30, 2017 was $28.7 million of net favorable loss reserve development on prior accident years primarily attributable to net favorable development for the workers compensation, surety and commercial automobile lines. Net favorable loss reserve development on prior accident years for the nine months ended September 30, 2016 was $25.6 million concentrated in the commercial automobile, surety, workers compensation and property lines.

Insurance Expenses

The ~~increase in the~~ expense ratio for the three months ended September 30, 2017 as compared to the same period in 2016 was primarily driven by changes in certain reinsurance agreements and programs that resulted in declines in ceding commissions and fronting fees earned, a one-time expense of $3.5 million relating to the final resolution of a premium tax dispute, as well as increased non-acquisition costs. The increase in non-acquisition expense was primarily driven by increased personnel expenses in our strategic growth units and increased information technology costs.

The increase in the expense ratio for the nine months ended September 30, 2017 as compared to the same period ended 2016 was primarily attributable to increased non-acquisition costs. The increase in non-acquisition expenses was primarily attributable to increased personnel expenses, information technology costs, outside services and occupancy costs. The acquisition expense ratio was slightly higher for the nine months ended September 30, 2017 as compared to the same period ended 2016, due to declines in fronting fees and ceding commissions earned and the previously mentioned premium tax charge incurred in the third quarter of 2017.

~~Fee and other income, and the associated fee and other expense, increased~~ratios for the three and nine months ended September 30, ~~2017~~2020 were 33.2% and 32.2%, respectively, compared to 31.9% and 32.8% for the same periods in 2019. The increase in the expense ratio in the third quarter of 2020 as compared to the same ~~periods~~period in ~~2016~~2019 was partly impacted by the aforementioned reduction to earned premiums from the catastrophe-related reinstatement premium adjustments, as well as higher gross commission expense related to the annual July renewal of public entity business. The improvement in the expense ratio for the nine months ending September 30, 2020 was primarily due to ~~closing a transaction~~the impact of earning higher ceding commissions on certain reinsurance contracts during the first nine months of 2020 compared to the same period in ~~the third quarter~~2019.

Table of ~~2017 related to transferring to a third party the distribution rights and operations of certain business managed on behalf of unaffiliated insurance companies.~~

Contents

International Operations

The following table summarizes the results of operations for the International Operations segment:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Gross written premiums

$
376.3

$
224.5

$
962.0

$
695.3

Earned premiums

$
146.8

$
142.3

$
474.9

$
418.5

Losses and loss adjustment expenses

166.0

78.9

369.2

230.3

Underwriting, acquisition and insurance
expenses

63.5

50.9

183.8

157.6

Underwriting (loss) income

(82.7
)

12.5

(78.1
)

30.6

Net investment income

7.7

7.5

24.4

22.7

Interest expense

(2.8
)

(1.4
)

(7.1
)

(4.0
)
Fee and other income

0.8

2.0

2.3

5.3

Fee and other expense

(0.5
)

(0.5
)

(1.6
)

(1.5
)
(Loss) income before income taxes

$
(77.5
)

$
20.1

$
(60.1
)

$
53.1

Loss ratio

113.0
%

55.4
%

77.7
%

55.0
%
Expense ratio

43.3
%

35.8
%

38.7
%

37.7
%
Combined ratio

156.3
%

91.2
%

116.4
%

92.7
%


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2020			2019			2020			2019
Gross written premiums	$	347.7		$	352.8		$	1,016.2		$	1,022.1
Earned premiums	$	146.7		$	160.7		$	410.8		$	455.0
Losses and loss adjustment expenses	113.0			160.0			305.6			363.3
Underwriting, acquisition and insurance expenses	57.1			62.5			175.0			174.7
Underwriting loss	(23.4)			(61.8)			(69.8)			(83.0)
Net investment income	9.9			10.7			19.0			31.3
Interest expense	(1.9)			(2.5)			(6.2)			(8.4)
Fee and other income	1.1			1.2			3.8			3.8
Fee and other expense	(0.4)			(0.5)			(1.3)			(1.4)
Loss before income taxes	$	(14.7)		$	(52.9)		$	(54.5)		$	(57.7)
Loss ratio	77.1		%	99.6		%	74.4		%	79.8		%
Expense ratio	38.9		%	38.9		%	42.6		%	38.4		%
Combined ratio	116.0		%	138.5		%	117.0		%	118.2		%


	For the Three Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	146.7			$	160.7
Less:
Catastrophe-related premium adjustments - (outward) inward	(0.7)				0.1
Earned premiums, net of catastrophe-related adjustments	$	147.4			$	160.6

Losses and loss adjustment expenses, as reported	$	113.0	77.1	%	$	160.0	99.6	%
Less:
Favorable (unfavorable) prior accident year loss development	5.6		3.8	%	(42.3)		(26.3)	%
Catastrophe losses, including COVID-19 (2)	(44.9)		(30.9)	%	(13.2)		(8.3)	%
Current accident year non-catastrophe losses (non-GAAP)	$	73.7	50.0	%	$	104.5	65.0	%
Non-catastrophe expense ratio (non-GAAP)			38.7	%			38.9	%
Current accident year non-catastrophe combined ratio (non-GAAP)			88.7	%			103.9	%

(1) For purposes of calculating the percentage points impact on the loss, expense and combined ratios, earned premiums were adjusted to exclude outward reinstatement premium adjustments of $0.7 million for the three months ended September 30, 2020, and inward reinstatement premium adjustments of $0.1 million for the three months ended September 30, 2019.

Table of Contents


	For the Nine Months Ended September 30,
	2020				2019
(in millions)	Amount		Ratio (1)		Amount		Ratio (1)
Earned premiums	$	410.8			$	455.0
Less:
Catastrophe-related premium adjustments - (outward) inward	(2.8)				0.1
Earned premiums, net of catastrophe-related adjustments	$	413.6			$	454.9

Losses and loss adjustment expenses, as reported	$	305.6	74.4	%	$	363.3	79.8	%
Less:
Favorable (unfavorable) prior accident year loss development	4.5		1.1	%	(69.5)		(15.3)	%
Catastrophe losses, including COVID-19 (2)	(85.9)		(21.3)	%	(17.0)		(3.7)	%
Current accident year non-catastrophe losses (non-GAAP)	$	224.2	54.2	%	$	276.8	60.8	%
Non-catastrophe expense ratio (non-GAAP)			42.3	%			38.4	%
Current accident year non-catastrophe combined ratio (non-GAAP)			96.5	%			99.2	%

(1) For purposes of calculating the percentage points impact on the loss, expense and combined ratios, earned premiums were adjusted to exclude outward reinstatement premium adjustments of $2.8 million for the nine months ended September 30, 2020, and inward reinstatement premium adjustments of $0.1 million for the nine months ended September 30, 2019.

Gross Written and Earned Premiums

Gross written and earned premiums by our four primary insurance and reinsurance lines were as follows:


	For the Three Months Ended September 30,									For the Three Months Ended September 30,
	2017				2016					2020				2019
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned		(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	177.1	$	48.8	$	76.6	$	53.2	Property	$	161.0	$	44.3	$	151.2	$	42.5
Liability		56.3		22.6		40.5		24.3	Liability	73.4		26.7		57.2		28.1
Professional		42.8		22.7		39.7		22.3	Professional	49.7		29.9		53.2		28.9
Specialty		100.1		52.7		67.7		42.5	Specialty	63.6		45.8		91.2		61.2
Total	$	376.3	$	146.8	$	224.5	$	142.3	Total	$	347.7	$	146.7	$	352.8	$	160.7

The increase in gross written ~~premiums~~ and ~~$26.0 million of~~net earned premiums for the three months ended September 30, ~~2017,~~2020 as compared to the same period in 2019 was due to favorable rate changes and ~~$255.5 million of~~new business in our Bermuda Insurance and Reinsurance operations. The decreases in gross written ~~premiums~~ and ~~$90.9 million of~~net earned premiums for the nine months ended September 30, ~~2017.~~

~~Property~~

The previously mentioned third quarter 2017 catastrophe-related reinsurance premium adjustments and additional reinsurance contracts purchased in connection with risk management activities related to the acquisition of Ariel Re reduced net earned premiums in International Operations by $17.4 million. Excluding the impact of these transactions, gross written and earned premiums for property increased for the three months ended September 30, 2017 due to premiums written by Ariel Re and Argo Re, partially offset by reduced premiums for Syndicate 1200. For the three months ended September 30, 2017 Ariel Re contributed property lines gross written premiums of $103.3 million and $11.1 million earned premiums, respectively. Partially offsetting these increases were reduced gross written and earned premiums for Syndicate 1200 due to continued competition, rate reductions and a reduction in our ownership percentage for Syndicate 1200, from 53.5% for 2016 to 46.0% for 2017.

~~Excluding the impact of the aforementioned transactions in the third quarter of 2017, gross written and earned premiums also increased for the nine months ended September 30, 2017~~2020 as compared to the same period in ~~2016~~2019 was due to ~~premiums written by Ariel Re,~~targeted reductions in our U.S. Property Reinsurance book and continued optimization work in Syndicate 1200 and Europe, partially offset by ~~reduced premiums~~an improved rate environment and increased new business accounts in our Lloyd’s Syndicate 1200 and, to a lesser extent, Argo Re. For the nine months ended September 30, 2017 Ariel Re contributed gross written premiums of $147.5 million and $43.5 million in earned premiums, respectively.

Bermuda Insurance operation.

The increase in gross written premiums ~~for liability~~ for the three and nine months ended September 30, ~~2017~~2020 as compared to the same periods in ~~2016~~2019 was ~~primarily attributable~~due to new U.S. Casualty Treaty business and growth in our International Casualty Treaty business in our Reinsurance operation, as well as favorable rate changes in our Bermuda ~~casualty business due to the introduction of new products and a rate increase on a large policy that renewed during the third quarter of 2017. The decline in~~Insurance operation. Net earned premiums ~~for liability~~ for the three and nine months ended September 30, ~~2017~~2020 decreased as ~~compared to~~ the ~~same periods in 2016 was primarily attributable to a combination of changes to the reinsurance structure in 2017 and slightly lower premiums written in prior quarters.~~

~~Professional~~

~~The increase~~growth in gross written premiums ~~for professional lines~~was offset by additional outwards reinsurance, as well as the cancellation of several coverholders in Europe.

The increases in gross written and net earned premiums for the three and nine months ended September 30, ~~2017~~2020 as compared to the same periods in ~~2016 was primarily attributable~~2019 were due to growth in ~~our~~Europe and Bermuda ~~Brazil~~Insurance primarily as a result of favorable rate changes and ~~European professional lines, directors~~new and ~~officers and cyber lines, partially offset~~expanded business, as well as growth in Syndicate 1200 driven by ~~a decline~~prior year premium growth in professional ~~indemnity. Earned premiums for~~and healthcare indemnity, as well as increased professional ~~lines for the third quarter~~indemnity business written out of 2017 were relatively flat compared to the same period in 2016, while earned premiums were slightly lower for nine months ended September 30, 2017 as compared to the same period in 2016 primarily due to changes in our reinsurance programs.

Dubai.

Specialty

~~The increase in~~ gross written and net earned premiums ~~for specialty lines~~decreased for the three and nine months ended September 30, ~~2017~~2020 as compared to the same periods ~~ended 2016~~in 2019. This decrease was ~~primarily attributable to premiums written~~driven by ~~Ariel Re. For the three months ended September 30, 2017 Ariel Re contributed specialty lines gross~~lower written premiums in Syndicate 1200, mainly due to re-underwriting efforts in accident and health and the impact of ~~$32.6 million~~COVID-19 to the political risks, and contingency events markets, as well as lower written and earned premiums in Reinsurance resulting from no longer underwriting a large fronting arrangement.

Loss and Loss Adjustment Expenses

The loss ratio for the third quarter of ~~$15.1 million, respectively. For~~2020 was 77.1% compared to 99.6% for the third quarter of 2019. The reduced loss ratio was driven by a year-over-year improvement of 30.1 percentage points from net favorable prior-year reserve development in the third quarter of 2020 (3.8 percentage points) compared to net unfavorable prior-year reserve development in the third quarter of 2019 (26.3 percentage points), and an improvement of 15.0 percentage points in the current accident year non-catastrophe loss ratio, partially offset by a 22.6 percentage point increase in catastrophe losses, which includes COVID-19 related claims.

The loss ratios for the nine months ended September 30, ~~2017 Ariel Re contributed specialty lines gross written premiums~~2020 and 2019 were 74.4% and 79.8%, respectively. The reduced loss ratio was driven by a year-over-year improvement of $106.1 million and earned premiums of $47.1 million, respectively. Additionally, gross written and earned premiums were favorably impacted by increases within the surety and marine liability lines. Partially offsetting these increases were reductions16.4 percentage points from net favorable prior-year reserve development in the ~~aerospace division due~~first nine months of 2020 (1.1 percentage point) compared to ~~planned reductions to these exposures,~~net unfavorable prior-year reserve development in the first nine months of 2019 (15.3 percentage points), as well as ~~offshore energy due to continuing soft market conditions.~~

~~The~~a 6.6 percentage point improvement in the current accident year non-catastrophe loss ratio, partially offset by a 17.6 percentage point increase in ~~the~~catastrophe losses, which includes COVID-19 related claims.

The current accident year non-catastrophe loss ratios for the three and nine months ended September 30, ~~2017 as~~2020 were 50.0% and 54.2%, respectively, compared to the same periods in 2016 was primarily attributable to the significant catastrophe losses that occurred in the third quarter of 2017, as well as increased non-catastrophe losses within the current accident year.

~~Included in losses~~65.0% and loss adjustment expenses for the three months ended September 30, 2017 was $49.1 million for Ariel Re. Net catastrophe losses for the third quarter of 2017 totaled $72.8 million, attributable to Hurricanes Harvey, Irma and Maria and the Mexican earthquakes, as compared to $8.5 million for the third quarter of 2016, primarily due to the Louisiana floods and other U.S. storm activity. The third quarter of 2017 also included $15.0 million of non-catastrophe losses in the current accident year, driven primarily by higher than anticipated attritional losses on property business underwritten by our Lloyd’s Syndicate 1200. Included in losses and loss adjustment expenses for the three months ended September 30, 2017 was $2.6 million of net favorable loss reserve development on prior accident years primarily attributable to net favorable development for specialty lines, partially offset by net unfavorable development within the liability and property lines. Net favorable loss reserve development on prior accident years for the three months ended September 30, 2016 was $0.6 million.

Included in losses and loss adjustment expenses for the nine months ended September 30, 2017 was $81.6 million for Ariel Re. The increase in the loss ratio for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily attributable to the previously mentioned third quarter 2017 net catastrophe losses, higher than anticipated non-catastrophe current accident year property claims of $26.5 million, as well as net unfavorable loss reserve development on prior accident years of $17.0 million. Catastrophe losses during the first nine months of 2017 totaled $74.3 million, primarily from Hurricanes Harvey, Irma, and Maria and the Mexican earthquakes, as compared to $29.0 million for the same period ended 2016, which were mainly attributable to the Alberta wildfire, Louisiana floods and other U.S. storms. The $17.0 million of net unfavorable loss reserve development on prior accident years for the nine months ended September 30, 2017 was concentrated in the property and liability lines, primarily due to the first quarter 2017 Ogden rate change and claims from Hurricane Matthew. Net favorable loss reserve development on prior accident years for the nine months ended September 30, 2016 was $10.8 million concentrated in property lines and our Brazil unit.

~~The expense ratio~~60.8% for the three and nine months ended September 30, ~~2017 as~~2019, respectively. The decrease in the ratio for the third quarter and first nine months of 2020 compared to the same periods ended 2016 was negatively impacted by the aforementioned third quarter 2017 reductions to net earned premiums for catastrophe-related reinsurance premium adjustments and additional reinsurance contracts purchased in ~~connection with risk management activities~~2019 primarily related to the ~~acquisition~~results of ~~Ariel Re. These adjustments increased~~re-underwriting actions across multiple divisions in Syndicate 1200, as well as improvements in our Reinsurance operations. The current accident year non-catastrophe loss ratio also benefited from rate increases earning through earned premiums.

Net favorable prior-year reserve development for the third quarter of 2020 was $5.6 million and primarily related to favorable development in Reinsurance and Syndicate 1200, with smaller movements in other businesses. The Reinsurance movement was due to favorable experience on events from older accident years. The Syndicate 1200 movement was due to favorable experience on property lines in recent accident years. Net favorable prior-year reserve development for the first nine months of 2020 was $4.5 million and primarily related to the favorable development in the third quarter of 2020 in Syndicate 1200 and Reinsurance, partially offset by unfavorable development in Bermuda Insurance. Net unfavorable prior-year reserve development for the third quarter and first nine months of 2019 was $42.3 million and $69.5 million, respectively, which was primarily related to certain liability, professional, specialty and property lines, and was the result of new information received in the second and third quarters of 2019 related to the resolution or notification of several large losses, as well as a continued review of International business in run-off. The liability and professional charges impacted our Bermuda division and, to a lesser extent, our European and Syndicate 1200 operations. The adverse development in our Bermuda division was due to information from investigations regarding the causes of the incidents leading to the losses, reports provided by counsel, audits of underlying losses, and recent court decisions and settlements. Related to Europe, the adverse development primarily related to certain cover-holders whose contracts were previously terminated. The Syndicate 1200 adverse development related to movements on large claims involving marine and energy and liability divisions. Attritional losses on small and medium enterprise package business were also higher than expected.

Catastrophe losses for the third quarter and first nine months of 2020 were $44.9 million and $85.9 million, respectively, which included $18.9 million and $54.0 million, respectively, associated with COVID-19, primarily resulting from contingency exposures. The property losses relate to sub-limited affirmative business interruption coverage in certain International markets, as well as expected costs associated with potential litigation. The remaining catastrophe losses of $26.0 million for the third quarter of 2020 were mainly attributable to Hurricanes Laura and Sally, the California wildfires, and various smaller events including the Midwest derecho. The remaining catastrophe losses of $31.9 million for the first nine months of 2020 were mainly attributable to the events from the third quarter of 2020, as well as losses associated with civil unrest and social demonstrations, including riots in some locations, across the U.S. Catastrophe losses for the third quarter of 2019 were $13.2 million and related to Hurricane Dorian, Typhoon Faxai and U.S. storms, and included losses from flooding. Catastrophe losses for the first nine months of 2019 were $17.0 million and related to the aforementioned events from the third quarter as well as U.S. storms and floods in Australia that occurred during the first nine months

Underwriting, Acquisition and Insurance Expenses

	~~Page~~
		Page
PART I. Financial Information		3
Item 1.		Condensed Consolidated Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019	3
		Condensed Consolidated Statements of (Loss) Income for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	4
		Condensed Consolidated Statements of Comprehensive (Loss) ~~Comprehensive~~ Income for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	5
	Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	6 8
		Notes to Condensed Consolidated Financial Statements	7 9
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	42 41
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	53 60
Item 4.		Controls and Procedures	54 61
PART II. Other Information		54		61
Item 1.		Legal Proceedings	54 61
Item 1A.		Risk Factors	54 61
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	54 62
Item 3.		Defaults Upon Senior Securities	55 63
Item 4.		Mine Safety Disclosures	55 63
Item 5.		Other Information	55 63
Item 6.		Exhibits	55 64
		Signatures	57 65

	September 30,			December 31,
	2017			2016 *
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value (cost: 2017 - $3,339.7; 2016 - $2,938.8)	$	3,378.4		$	2,932.4
Equity securities available-for-sale, at fair value (cost: 2017 - $347.6; 2016 - $335.2)		480.5			447.4
Other investments (cost: 2017 - $553.1; 2016 - $531.6)		562.6			539.0
Short-term investments, at fair value (cost: 2017 - $386.0; 2016 - $405.5)		386.0			405.5
Total investments		4,807.5			4,324.3
Cash		235.8			86.0
Accrued investment income		23.6			20.7
Premiums receivable		678.8			463.8
Reinsurance recoverables		2,101.9			1,385.6
Goodwill		152.2			152.2
Intangible assets, net of accumulated amortization		108.3			67.7
Deferred acquisition costs, net		168.8			139.1
Ceded unearned premiums		461.4			302.8
Other assets		319.7			262.8
Total assets	$	9,058.0		$	7,205.0
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	4,305.9		$	3,350.8
Unearned premiums		1,286.0			970.0
Accrued underwriting expenses		97.5			115.0
Ceded reinsurance payable, net		822.6			466.6
Funds held		45.0			77.1
Senior unsecured fixed rate notes		139.6			139.5
Other indebtedness		184.7			55.4
Junior subordinated debentures		256.5			172.7
Current income taxes payable, net		11.0			8.1
Deferred tax liabilities, net		41.5			24.1
Other liabilities		59.7			33.0
Total liabilities		7,250.0			5,412.3
Commitments and contingencies (Note 16)
Shareholders' equity:
Common shares - $1.00 par, 500,000,000 shares authorized; 40,300,433 and 40,042,330 shares issued at September 30, 2017 and December 31, 2016, respectively		40.3			40.0
Additional paid-in capital		1,129.1			1,123.3
Treasury shares (10,640,789 and 10,028,755 shares at September 30, 2017 and December 31, 2016, respectively)		(414.8	)		(378.2	)
Retained earnings		956.4			959.9
Accumulated other comprehensive income, net of taxes		97.0			47.7
Total shareholders' equity		1,808.0			1,792.7
Total liabilities and shareholders' equity	$	9,058.0		$	7,205.0

(in millions)
Assets:
Investments	$	340.7
Cash		130.1
Accrued investment income		0.2
Premiums receivable		157.6
Reinsurance recoverables		80.2
Current income taxes receivable		0.6
Deferred acquisition costs, net		9.8
Ceded unearned premiums		92.6
Other assets		24.9
Total assets		836.7
Liabilities:
Reserves for losses and loss adjustment expenses		197.0
Unearned premiums		152.5
Accrued underwriting expenses		28.8
Ceded reinsurance payable, net		144.2
Junior subordinated debentures		83.6
Deferred tax liabilities		9.0
Other liabilities		30.7
Total liabilities		645.8

Net assets acquired		190.9
Initial purchase price		235.3
Intangible assets	$	44.4

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(in millions, except per share data)	2017			2016		2017		2016
Pro forma revenues	$	439.2		$	466.0	$	1,332.4	$	1,340.5
Pro forma net (loss) income		(63.4	)		56.2		29.8		132.9
Pro forma net (loss) income per share - basic		(2.11	)		1.87		0.99		4.40
Pro forma net (loss) income per share - diluted		(2.11	)		1.83		0.96		4.30

(in millions)
Debt Type	September 30, 2017		December 31, 2016
Floating rate loan stock	$	59.1	$	54.8
Term loan		125.0		—
Other debt		0.6		0.6
Total other indebtedness	$	184.7	$	55.4

Repurchase Type	Date Trading Plan Initiated	2017 Purchase Period	Number of Shares Repurchased		Average Price of Shares Repurchased		Total Cost (in millions)		Repurchase Authorization Year
10b5-1 Trading Plan	6/14/2017	06/20/2017-08/10/2017		156,570	$	59.53	$	9.4	2016
10b5-1 Trading Plan	9/15/2017	09/18/2017-09/28/2017		33,488	$	60.85	$	2.0	2016
Open Market	N/A	08/11/2017-09/15/2017		421,976	$	59.75		25.2	2016
Total				612,034	$	59.75	$	36.6

(in millions)	Foreign Currency Translation Adjustments			Unrealized Holding Gains on Securities			Defined Benefit Pension Plans			Total
Balance at January 1, 2017	$	(17.6	)	$	72.4		$	(7.1	)	$	47.7
Other comprehensive (loss) income before reclassifications		(0.2	)		74.1			—			73.9
Amounts reclassified from accumulated other comprehensive (loss) income		—			(24.6	)		—			(24.6	)
Net current-period other comprehensive (loss) income		(0.2	)		49.5			—			49.3
Balance at September 30, 2017	$	(17.8	)	$	121.9		$	(7.1	)	$	97.0

	Shares			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2017		702,030		$	42.69
							Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2020						Outstanding at January 1, 2020	471,271	$	60.09
Granted		239,997		$	62.91	Granted	399,578	$	32.53
Vested and issued		(154,706	)	$	41.65	Vested and issued	(175,321)	$	51.22
Expired or forfeited		(34,970	)	$	48.80	Expired or forfeited	(134,676)	$	52.00
Outstanding at September 30, 2017		752,351		$	49.07
Outstanding at September 30, 2020						Outstanding at September 30, 2020	560,852	$	43.61

	Shares			Weighted-Average Exercise Price
Outstanding at January 1, 2017		1,982,695		$	34.80
							Shares	Weighted-Average Exercise Price
Outstanding at January 1, 2020						Outstanding at January 1, 2020	625,368	$	33.60
Exercised		(396,355	)	$	31.52	Exercised	(418,702)	$	32.25
Expired or forfeited		(105,024	)	$	40.62	Expired or forfeited	(15,031)	$	0
Outstanding at September 30, 2017		1,481,316		$	35.26
Outstanding at September 30, 2020						Outstanding at September 30, 2020	191,635	$	36.21

	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Assets
Investments	$	(1.6	)	$	3,039.1	$	1,770.0		$	—		$	4,807.5
Cash		—			73.5		162.3			—			235.8
Accrued investment income		—			16.8		6.8			—			23.6
Premiums receivable		—			227.3		451.5			—			678.8
Reinsurance recoverables		—			1,450.3		651.6			—			2,101.9
Goodwill and other intangible assets, net		44.4			125.2		90.9			—			260.5
Deferred acquisition costs, net		—			82.3		86.5			—			168.8
Ceded unearned premiums		—			194.9		266.5			—			461.4
Other assets		8.3			173.7		137.7			—			319.7
Intercompany note receivable		—			50.2		69.8			(120.0	)		—
Investments in subsidiaries		2,086.7			—		—			(2,086.7	)		—
Total assets	$	2,137.8		$	5,433.3	$	3,693.6		$	(2,206.7	)	$	9,058.0
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	—		$	2,452.6	$	1,853.3		$	—		$	4,305.9
Unearned premiums		—			694.5		591.5			—			1,286.0
Funds held and ceded reinsurance payable, net		—			790.1		77.5			—			867.6
Long-term debt		153.4			284.6		142.8			—			580.8
Current income taxes payable, net		—			7.9		3.1			—			11.0
Deferred tax liabilities, net		—			37.3		4.2			—			41.5
Accrued underwriting expenses and other liabilities		12.1			103.2		41.9			—			157.2
Due to affiliates		44.3			6.9		(6.9	)		(44.3	)		—
Intercompany note payable		120.0			40.1		(40.1	)		(120.0	)		—
Total liabilities		329.8			4,417.2		2,667.3			(164.3	)		7,250.0
Total shareholders' equity		1,808.0			1,016.1		1,026.3			(2,042.4	)		1,808.0
Total liabilities and shareholders' equity	$	2,137.8		$	5,433.3	$	3,693.6		$	(2,206.7	)	$	9,058.0


	Nine Months Ended September 30,													For the Nine Months Ended September 30,
	2017						2016							2020				2019
(in millions)	Gross			Net			Gross			Net			(in millions)	Gross		Net		Gross		Net
Asbestos and environmental:													Asbestos and environmental:
Loss reserves, beginning of the year	$	48.4		$	40.6		$	46.4		$	43.5		Loss reserves, beginning of the year	$	52.6	$	43.8	$	54.7	$	46.2
Incurred losses		12.5			15.2			15.6			10.5		Incurred losses	20.0		17.1		0.7		0.7
Losses paid		(1.6	)		(5.2	)		(10.0	)		(10.0	)	Losses paid	(8.7)		(6.9)		(8.4)		(7.0)
Loss reserves - asbestos and environmental, end of year		59.3			50.6			52.0			44.0
Risk management reserves		222.1			138.6			241.4			151.4
Loss reserves - asbestos and environmental, end of period													Loss reserves - asbestos and environmental, end of period	63.9		54.0		47.0		39.9
Risk-management reserves													Risk-management reserves	164.4		102.2		189.5		117.8
Run-off reinsurance reserves		1.8			1.8			2.2			2.2		Run-off reinsurance reserves	0.5		0.5		0.6		0.6
Other run-off lines		4.9			4.9			4.2			4.2		Other run-off lines	15.7		10.1		11.5		6.4
Total loss reserves - Run-off Lines	$	288.1		$	195.9		$	299.8		$	201.8		Total loss reserves - Run-off Lines	$	244.5	$	166.8	$	248.6	$	164.7

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publically Announced Plan or Program (c)		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan or Program (d)
July 1 through July 31, 2017		26,604	$	59.73		25,732	$	125,928,881
August 1 through August 31, 2017		352,307	$	60.06		332,820	$	110,967,483
September 1 through September 30, 2017		208,456	$	59.37		206,982	$	93,662,284
Total		587,367				565,534


Period	Total Number of Shares Surrendered (a)	Average Price Paid per Share (b)		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (c)	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plan or Program (d)
July 1 through July 31, 2020	2,739	$	33.77	—	$	53,281,805
August 1 through August 31, 2020	1,901	$	33.51	—	$	53,281,805
September 1 through September 30, 2020	21	$	38.99	—	$	53,281,805
Total	4,661			—

Exhibit Number	~~Description~~
Exhibit Number		Description
~~12.1~~ 31.1		~~Statements of Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Share Dividends~~
~~31.1~~	Rule 13a – 14(a)/15d – 14(a) Certification of the Chief Executive Officer
31.2		Rule 13a – 14(a)/15d – 14(a) Certification of the Chief Financial Officer
32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).


	ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

November ~~7, 2017~~ 4, 2020	By	/s/ ~~Mark E. Watson III~~ Kevin J. Rehnberg
		~~Mark E. Watson III~~ Kevin J. Rehnberg
		President and Chief Executive Officer

November ~~7, 2017~~ 4, 2020	By	/s/ Jay S. Bullock
		Jay S. Bullock
		Executive Vice President and Chief Financial Officer