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

(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

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

~~None~~

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			☐

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

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.~~

4, 2021.

~~Title~~	~~Outstanding~~
Title		Outstanding
Common Shares, par value $1.00 per share		~~29,680,863~~ 34,872,707

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

INDEX

	~~Page~~
		Page
PART I. Financial Information		3
Item 1.		Condensed Consolidated Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020	3
		Condensed Consolidated Statements of Income (Loss) ~~Income~~ for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020	4
		Condensed Consolidated Statements of ~~(Loss)~~ Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020	5
	Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2021 and ~~2016~~2020	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 30
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	53 51
Item 4.		Controls and Procedures	54 53
PART II. Other Information		54		53
Item 1.		Legal Proceedings	54 53
Item 1A.		Risk Factors	54 53
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.		Defaults Upon Senior Securities	55 54
Item 4.		Mine Safety Disclosures	55 54
Item 5.		Other Information	55 54
Item 6.		Exhibits	55
		Signatures	57 56

Table of Contents P~~ART~~

PART I. FINANCIAL INFORMATION

Item 1. ~~Condensed~~ Consolidated Financial Statements

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(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


	September 30, 2021		December 31, 2020
	(Unaudited)
Assets
Investments:
Fixed maturities available-for-sale, at fair value (cost: 2021 - $4,145.2, 2020 - $3,981.1; allowance for expected credit losses: 2021 - $7.0, 2020 - $6.6)	$	4,197.3	$	4,107.1
Equity securities, at fair value (cost: 2021 - $131.1; 2020 - $162.5)	181.8		176.7
Other investments (cost: 2021 - $425.8; 2020 - $429.4)	425.8		429.4
Short-term investments, at fair value (cost: 2021 - $507.8; 2020 - $541.4)	508.6		542.6
Total investments	5,313.5		5,255.8
Cash	202.0		148.8
Accrued investment income	20.9		21.8
Premiums receivable	701.9		679.8
Reinsurance recoverables	2,954.0		3,009.0
Goodwill	147.3		147.3
Intangible assets, net of accumulated amortization	60.5		60.5
Current income taxes receivable, net	3.8		3.0
Deferred tax asset, net	42.8		16.7
Deferred acquisition costs, net	175.7		163.6
Ceded unearned premiums	572.1		575.1
Operating lease right-of-use assets	87.7		82.0
Other assets	231.4		294.7
Assets held for sale	4.5		7.7
Total assets	$	10,518.1	$	10,465.8
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	5,439.5	$	5,406.0
Unearned premiums	1,540.2		1,464.8
Accrued underwriting expenses and other liabilities	255.2		167.6
Ceded reinsurance payable, net	763.8		950.4
Funds held	74.2		64.7
Senior unsecured fixed rate notes	140.3		140.2
Other indebtedness	58.7		60.7
Junior subordinated debentures	258.1		257.8


Operating lease liabilities	100.5		95.8
Total liabilities	8,630.5		8,608.0
Commitments and contingencies (Note 14)	0		0
Shareholders' equity:
Preferred shares and additional paid-in capital - $1.00 par, 30,000,000 shares authorized; 6,000 shares issued at September 30, 2021 and December 31, 2020, respectively; liquidation preference $25,000	144.0		144.0
Common shares - $1.00 par, 500,000,000 shares authorized; 46,178,719 and 46,009,966 shares issued at September 30, 2021 and December 31, 2020, respectively	46.2		46.0
Additional paid-in capital	1,385.0		1,380.2
Treasury shares (11,315,889 shares at September 30, 2021 and December 31, 2020, respectively)	(455.1)		(455.1)
Retained earnings	765.5		684.1
Accumulated other comprehensive income, net of taxes	2.0		58.6
Total shareholders' equity	1,887.6		1,857.8
Total liabilities and shareholders' equity	$	10,518.1	$	10,465.8

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

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) ~~INCOME~~

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

(Unaudited)

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,
	2021		2020		2021		2020
Premiums and other revenue:
Earned premiums	$	487.5	$	445.5	$	1,423.9	$	1,313.9
Net investment income	46.1		42.0		143.2		79.0

Net realized investment gains (losses):
Net realized investment gains (losses)	0.6		(5.7)		3.3		32.7
Change in fair value of equity securities	(5.1)		10.5		30.7		(13.7)
Credit losses on fixed maturity securities	(0.8)		(10.5)		(1.5)		(43.0)
Net realized investment (losses) gains	(5.3)		(5.7)		32.5		(24.0)
Total revenue	528.3		481.8		1,599.6		1,368.9
Expenses:
Losses and loss adjustment expenses	311.7		328.9		890.9		883.0
Underwriting, acquisition and insurance expenses	177.1		161.9		530.8		489.8
Non-operating expenses	8.2		3.0		20.9		9.8
Interest expense	5.5		6.9		16.3		21.7
Fee and other (income) expense, net	(1.1)		(0.8)		(1.8)		(2.7)
Foreign currency exchange (gains) losses	(1.3)		8.4		4.4		13.6
Total expenses	500.1		508.3		1,461.5		1,415.2
Income (loss) before income taxes	28.2		(26.5)		138.1		(46.3)
Income tax provision (benefit)	5.8		(3.4)		16.1		6.9
Net income (loss)	$	22.4	$	(23.1)	$	122.0	$	(53.2)
Dividends on preferred shares	2.6		2.0		7.9		2.0
Net income (loss) attributable to common shareholders	$	19.8	$	(25.1)	$	114.1	$	(55.2)

Net income (loss) attributable to common shareholders per common share:
Basic	$	0.57	$	(0.72)	$	3.28	$	(1.60)
Diluted	$	0.56	$	(0.72)	$	3.26	$	(1.60)
Dividend declared per common share	$	0.31	$	0.31	$	0.93	$	0.93
Weighted average common shares:
Basic	34,854,724		34,667,266		34,796,528		34,590,659
Diluted	35,036,700		34,667,266		35,062,416		34,590,659

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

(in millions)

(Unaudited)

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,
	2021		2020		2021		2020
Net income (loss)	$	22.4	$	(23.1)	$	122.0	$	(53.2)
Other comprehensive income (loss):
Foreign currency translation adjustments	(2.3)		(4.7)		0.2		(12.3)
Defined benefit pension plans:
Net gain arising during the year	—		—		1.9		—
Unrealized gains (losses) on fixed maturity securities:
(Losses) gains arising during the year	(31.5)		38.2		(60.3)		68.3
Reclassification adjustment for losses (gains) included in net income	8.2		4.5		(11.0)		(15.4)
Other comprehensive income (loss) before tax	(25.6)		38.0		(69.2)		40.6
Income tax provision related to other comprehensive income (loss):
Defined benefit pension plans:
Net gain arising during the year	—		—		0.4		—
Unrealized gains (losses) on fixed maturity securities:
(Losses) gains arising during the year	(4.8)		6.5		(11.1)		12.4
Reclassification adjustment for losses (gains) included in net income	0.4		0.5		(1.9)		(0.2)
Income tax (benefit) provision related to other comprehensive income (loss)	(4.4)		7.0		(12.6)		12.2
Other comprehensive income (loss), net of tax	(21.2)		31.0		(56.6)		28.4
Comprehensive income (loss)	$	1.2	$	7.9	$	65.4	$	(24.8)

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

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

(Unaudited)


	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, 2020	$	—	$	46.0	$	1,376.5	$	(455.1)	$	734.4	$	5.9	$	1,707.7
Net loss	—		—		—		—		(23.1)		—		(23.1)
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	—		—		1.5		—		—		—		1.5
Retirement of common shares (tax payments on equity compensation)	—		—		(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)	$	698.4	$	36.9	$	1,848.7

Balance, June 30, 2021	$	144.0	$	46.2	$	1,383.1	$	(455.1)	$	756.5	$	23.2	$	1,897.9
Net income	—		—		—		—		22.4		—		22.4
Other comprehensive income - Change in fair value of fixed maturities, net of taxes	—		—		—		—		—		(18.9)		(18.9)
Other comprehensive income, net - Other	—		—		—		—		—		(2.3)		(2.3)

Activity under stock incentive plans	—		—		1.5		—		—		—		1.5
Retirement of common shares (tax payments on equity compensation)	—		—		(0.1)		—		—		—		(0.1)
Employee stock purchase plan	—		—		0.5		—		—		—		0.5
Dividends on preferred shares	—		—		—		—		(2.6)		—		(2.6)
Cash dividend declared - common shares ($0.31/share)	—		—		—		—		(10.8)		—		(10.8)
Balance, September 30, 2021	$	144.0	$	46.2	$	1,385.0	$	(455.1)	$	765.5	$	2.0	$	1,887.6

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)

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

(Unaudited)


	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, 2019	$	—	$	45.7	$	1,376.6	$	(455.1)	$	793.7	$	2.8	$	1,763.7
Net loss	—		—		—		—		(53.2)		—		(53.2)
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)	$	698.4	$	36.9	$	1,848.7


Balance, December 31, 2020	$	144.0	$	46.0	$	1,380.2	$	(455.1)	$	684.1	$	58.6	$	1,857.8
Net income	—		—		—		—		122.0		—		122.0

Other comprehensive loss - change in fair value of fixed maturities, net of taxes	—		—		—		—		—		(58.3)		(58.3)
Other comprehensive income, net - other	—		—		—		—		—		1.7		1.7

Activity under stock incentive plans	—		0.2		5.8		—		—		—		6.0
Retirement of common shares (tax payments on equity compensation)	—		—		(2.5)		—		—		—		(2.5)
Employee stock purchase plan	—		—		1.5		—		—		—		1.5
Dividends on preferred shares	—		—		—		—		(7.9)		—		(7.9)
Cash dividend declared - common shares ($0.93/share)	—		—		—		—		(32.7)		—		(32.7)

Balance, September 30, 2021	$	144.0	$	46.2	$	1,385.0	$	(455.1)	$	765.5	$	2.0	$	1,887.6

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

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,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	122.0	$	(53.2)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation	28.5		24.7
Share-based payments expense	6.4		7.7
Deferred income tax benefit, net	(14.4)		(16.5)
Net realized investment (gains) losses	(32.5)		24.0
Undistributed earnings from alternative investment portfolio	(74.8)		1.6
Loss on disposals of long-lived assets, net	1.7		0.4

Change in:
Accrued investment income	0.9		3.5
Receivables	30.2		(67.4)
Deferred acquisition costs	(12.0)		(11.7)
Ceded unearned premiums	2.3		(120.5)
Reserves for losses and loss adjustment expenses	36.5		267.6
Unearned premiums	77.3		176.8
Ceded reinsurance payable and funds held	(176.3)		(104.2)
Income taxes	(1.0)		(22.2)
Accrued underwriting expenses and other liabilities	42.5		(0.8)
Other, net	3.5		(8.4)
Cash provided by (used in) operating activities	40.8		101.4
Cash flows from investing activities:
Sales of fixed maturity investments	786.4		977.5
Maturities and mandatory calls of fixed maturity investments	591.1		410.3
Sales of equity securities	36.9		18.2
Sales of other investments	81.1		95.5
Purchases of fixed maturity investments	(1,511.9)		(1,659.3)
Purchases of equity securities	(5.3)		(68.3)
Purchases of other investments	(40.1)		(24.5)
Change in foreign regulatory deposits and voluntary pools	36.2		(0.5)
Change in short-term investments	32.3		297.8
Settlements of foreign currency exchange forward contracts	(9.7)		9.1


Proceeds from sale of Trident assets	—		38.0
Sale (Purchases) of fixed assets, net	16.0		(15.8)
Other, net	37.6		2.7
Cash (used in) provided by investing activities	50.6		80.7
Cash flows from financing activities:

Payment of long-term debt	—		(125.0)
Issuance of preferred shares, net of issuance costs	—		144.0
Activity under stock incentive plans	1.2		1.4

Payment of cash dividends to preferred shareholders	(7.9)		(2.0)
Payment of cash dividends to common shareholders	(32.7)		(32.2)
Cash used in financing activities	(39.4)		(13.8)
Effect of exchange rate changes on cash	1.2		(5.7)
Change in cash	53.2		162.6
Cash, beginning of year	148.8		137.8
Cash, end of period	$	202.0	$	300.4

See accompanying notes.

Table of Contents

ARGO GROUP INTERNATIONAL HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	~~Basis of Presentation~~

1. Basis of Presentation

The accompanying consolidated financial statements of Argo Group International Holdings, Ltd. and its subsidiaries (“Argo Group,” ~~“we”~~“Argo,” “we,” “us,” “our” 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 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 materially differ from those estimates. Certain financial information that is 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,~~2020, 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.

March 15, 2021.

The interim financial information as of, and for, the three and nine months ended, September 30, ~~2017~~2021 and ~~2016~~2020 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.

During the first quarter of 2017, we evaluated and modified the presentation of our reportable segments to better reflect our new operating framework and management structure. Under this model, Argo Group’s chief operating decision maker – Mark E. Watson III, President and Chief Executive Officer – evaluates performance 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 be included in International Operations. Consistent with prior periods, the Run-off Lines and Corporate segments include all other activity of Argo Group and are included in our consolidated financial results. Segment results for the three and nine months ended September 30, 2016 Certain reclassifications have been ~~reclassified~~made to financial information presented for prior years to conform to the current year’s presentation.

2.	~~Recently Issued Accounting Pronouncements~~

Update on Trident Transaction

~~In May 2017, the Financial Accounting Standards Board~~

On April 30, 2020, we sold our Trident Public Risk Solutions (“~~FASB”~~Trident”) issued Accounting Standards Update (“ASU”) 2017-09, “Compensation – Stock Compensation” (Topic 718): Scope of Modification Accounting. ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The guidance requires entities to apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. In addition to all 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 prospectivelybrand 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 adoption of the ASU will have on our financial results 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. 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 2 of the current goodwill impairment test to measure a goodwill impairment loss. Instead, entities will record an impairment loss based on the excess of a reporting unit’s carrying amount over its fair value. The guidance will be applied prospectively 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 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 of the issued and outstanding capital stock of Maybrooke. The initial purchase price of $235.3 million was paid in cash from funds on hand 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, 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 Group with a number of strategic advantages, including enhanced scale in its London- and Bermuda-based platforms.

The acquisition is being accounted for in accordance with ASC 805, “Business Combinations.” Purchase accounting, as defined by ASC 805, requires that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. We are in the process of finalizing our determination of fair values, including an independent appraisal of certain assets and liabilities, including intangible assets. Therefore, a preliminary allocation of the purchase price to the acquired assets, liabilities, and intangible assets is presented in the table below:

(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

platform. During the second quarter of ~~2017,~~2021, the parties to the transaction agreed to amend the transaction and other related agreements associated with the sale of Trident to eliminate certain lines of business from the transaction. As a result, we ~~engaged an independent valuation firm and anticipate completing our valuation analysis and closing~~recognized a $16.5 million reduction in the ~~fair value measurement period by~~original gain on sale during the ~~end~~second quarter of ~~2017. The excess~~2021. Additionally, we recognized a $5.0 million gain during the second quarter of the purchase price over the fair value of the net assets acquired has been preliminarily allocated to intangible assets, which will be specifically identified and quantified by the end of 2017. We did not record amortization expense2021 related to ~~the $44.4 million intangible assets during~~meeting certain post-closing performance conditions. This transaction is included in "Net realized investment gains (losses)" in our Consolidated Statements of Income (Loss) for the nine months ended September 30, ~~2017, as the valuation analysis~~2021.

2. Recently Issued Accounting Pronouncements

The Company has ~~not yet been completed. We anticipate recording both amortizable~~evaluated recently issued accounting pronouncements and ~~non-amortizable identifiable intangible assets and goodwill upon the completion of the valuation analyses, including intangible assets relating~~determined none are material to the Lloyd’s Syndicate 1910 stamp capacity (non-amortizable), distribution networks (amortizable), and the Ariel Re tradename (amortizable). Goodwill is calculated as the excess of the purchase price over 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 were recorded during the first quarter of 2017. Of these amounts, $2.2 million were reported in “Underwriting, acquisition and insurance expenses” and $0.3 million in “Interest expense” related to the borrowings under our credit facility to help fund 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 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 has been provided to present a summary of the combined results of Argo Group’s operations with Maybrooke’s as if the acquisition had occurred on January 1, 2016. The unaudited pro forma financial information is for informational purposes only 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 ~~and~~or financial position. The unaudited pro forma results for nine months ended September 30, 2017 include favorable development from prior accident years of $10.5 million, including $6.2 million relating to one specific claim in January 2017. In addition, the $2.5 million of nonrecurring transaction costs directly attributable to the acquisition for nine months ended September 30, 2017, as disclosed above, have also been removed from the unaudited pro forma results 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 of Invested Assets~~

~~The amortized cost, gross unrealized gains, gross unrealized losses and fair value of investments were 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

position reported herein.

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

3. Investments

Included in “Total investments” in our Consolidated Balance Sheets at September 30, ~~2017~~2021 and December 31, ~~2016~~2020 is ~~$154.8~~$97.1 million and ~~$131.9~~$140.3 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, 2021
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturities
U.S. Governments	$	404.8	$	7.5	$	2.1	$	—	$	410.2
Foreign Governments	229.3		2.7		2.7		0.2		229.1
Obligations of states and political subdivisions	169.9		6.7		0.9		—		175.7
Corporate bonds	1,996.2		47.8		14.4		6.6		2,023.0
Commercial mortgage-backed securities	403.1		9.1		3.0		—		409.2
Residential mortgage-backed securities	488.1		10.6		4.8		—		493.9
Asset-backed securities	110.9		2.2		0.1		0.2		112.8
Collateralized loan obligations	342.9		1.8		1.3		—		343.4
Total fixed maturities	$	4,145.2	$	88.4	$	29.3	$	7.0	$	4,197.3


December 31, 2020
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturities
U.S. Governments	$	385.4	$	14.7	$	0.3	$	—	$	399.8
Foreign Governments	284.1		11.6		0.7		0.2		294.8
Obligations of states and political subdivisions	163.1		7.7		0.3		0.1		170.4
Corporate bonds	1,925.9		75.3		13.3		6.1		1,981.8
Commercial mortgage-backed securities	324.8		15.2		0.3		—		339.7
Residential mortgage-backed securities	491.4		17.4		0.6		—		508.2
Asset-backed securities	120.5		2.9		0.4		0.2		122.8
Collateralized loan obligations	285.9		4.9		1.2		—		289.6
Total fixed maturities	$	3,981.1	$	149.7	$	17.1	$	6.6	$	4,107.1

Contractual Maturity

The amortized cost and fair values of fixed maturity investments as of September 30, ~~2017,~~2021, by contractual maturity, were as follows:


(in millions)	Amortized Cost		Fair Value
Due in one year or less	$	288.7	$	292.9
Due after one year through five years	1,670.6		1,695.1
Due after five years through ten years	719.6		728.6
Due after ten years	121.3		121.4
Structured securities	1,345.0		1,359.3
Total	$	4,145.2	$	4,197.3

(in millions)

Amortized
Cost

Fair
Value

Due in one year or less

231.9

230.3

Due after one year through five years

1,515.6

1,533.6

Due after five years through ten years

594.1

604.6

Thereafter

169.8

174.8

Structured securities

828.3

835.1

Total

$
3,339.7

$
3,378.4

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

Table of Contents

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~~2021 and December 31, ~~2016~~2020 were as follows:

September 30, 2017

(in millions)

Carrying
Value

Unfunded
Commitments

Investment Type

Hedge funds

$
180.1

$
—

Private equity

167.7

117.9

Long only funds

215.7

—

Other investments

(0.9
)

—

Total other invested assets

$
562.6

$
117.9


September 30, 2021
(in millions)	Carrying Value		Unfunded Commitments
Investment Type
Hedge funds	$	102.1	$	—
Private equity	254.3		63.0
Overseas deposits	64.6		—
Other	4.8		—
Total other investments	$	425.8	$	63.0


December 31, 2020
(in millions)	Carrying Value		Unfunded Commitments
Investment Type
Hedge funds	$	111.2	$	—
Private equity	211.4		80.0
Overseas deposits	102.1		—
Other	4.7		—
Total other investments	$	429.4	$	80.0

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

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


September 30, 2021	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	$	161.1	$	1.7	$	5.6	$	0.4	$	166.7	$	2.1
Foreign Governments	117.7		2.4		1.3		0.3		119.0		2.7
Obligations of states and political subdivisions	28.3		0.5		0.4		0.4		28.7		0.9
Corporate bonds	626.4		10.8		40.7		3.6		667.1		14.4
Commercial mortgage-backed securities	136.9		2.6		8.9		0.4		145.8		3.0
Residential mortgage-backed securities	207.4		4.6		4.8		0.2		212.2		4.8
Asset-backed securities	21.3		0.1		—		—		21.3		0.1
Collateralized loan obligations	126.8		1.3		2.4		—		129.2		1.3
Total fixed maturities	$	1,425.9	$	24.0	$	64.1	$	5.3	$	1,490.0	$	29.3

Table of Contents

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.~~

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


December 31, 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	$	40.6	$	0.3	$	—	$	—	$	40.6	$	0.3
Foreign Governments	18.0		0.5		0.1		0.2		18.1		0.7
Obligations of states and political subdivisions	5.2		0.3		—		—		5.2		0.3
Corporate bonds	202.5		6.7		17.5		6.6		220.0		13.3
Commercial mortgage-backed securities	21.8		0.3		—		—		21.8		0.3
Residential mortgage-backed securities	74.4		0.4		3.0		0.2		77.4		0.6
Asset-backed securities	4.6		0.4		—		—		4.6		0.4
Collateralized loan obligations	121.1		0.9		49.1		0.3		170.2		1.2
Total fixed maturities	$	488.2	$	9.8	$	69.7	$	7.3	$	557.9	$	17.1

We regularly evaluate our investments for other-than-temporary impairment. For fixed maturity securities, the evaluation for a credit loss is generally based on the present value of expected cash flows of the security as compared to the amortized book value. For structured securities, frequency and severity of loss inputs are used in projecting future cash flows of the securities. Loss frequency is measured as the credit default rate, which includes such factors as loan-to-value ratios and credit scores of borrowers. For equity securities and other investments, the length of time and the amount of decline in fair value are the principal factors in determining other-than-temporary impairment. We also recognize other-than-temporary losses on fixed maturity securities that we intend to sell.

We hold a total of ~~8,410~~5,377 fixed maturity securities, of which ~~1,949~~577 were in an unrealized loss position for less than one year and ~~182~~85 were in an unrealized loss position for a period one year or greater as of September 30, ~~2017. Unrealized losses greater than twelve months on~~2021.

Allowance for Credit Losses

For fixed maturities ~~were~~with a decline in the ~~result~~fair value between the amortized cost 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 ~~a number of factors, including increased credit spreads, foreign currency fluctuations and higher market yields relative~~Income (Loss). The allowance is limited to the ~~date~~difference between amortized cost and fair value. The estimated recoverable value is the ~~securities were purchased,~~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 ~~structured securities, by~~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 ~~as well. In considering~~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 quarter. 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 ~~an investment is other-than-temporarily impaired or not,~~ we ~~also considered that we do not~~ intend to sell ~~the investments and~~an available-for-sale security or if it is ~~unlikely~~more likely than not that we will be required to sell the ~~investments~~security before recovery of ~~their~~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 ~~bases, which may be maturity. In situations where we did not recognize other-than-temporary~~basis for the security.

Table of Contents

The following table presents a roll-forward of the changes in allowance for credit losses on ~~investments in our equity portfolio, we have evaluated~~available-for-sale fixed maturities by industry category for the ~~near-term prospects of the investment in relation to the severity~~three 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 atnine months ending September 30, ~~2017.~~

~~We recognized other-than-temporary~~2021 and 2020, respectively:


(in millions)	Foreign Governments		Obligations of states and political subdivisions		Corporate bonds		Asset backed securities		Total
Beginning balance, June 30, 2021	$	0.2	$	—	$	6.2	$	—	$	6.4

Securities for which allowance was not previously recorded	—		—		0.7		0.2		0.9
Securities sold during the period	—		—		(0.2)		—		(0.2)
Additional net increases (decreases) in existing allowance	—		—		(0.1)		—		(0.1)
Ending balance, September 30, 2021	$	0.2	$	—	$	6.6	$	0.2	$	7.0


(in millions)	Foreign Governments		Obligations of states and political subdivisions		Corporate bonds		Asset backed securities		Total
Beginning balance, June 30, 2020	$	0.3	$	0.1	$	39.7	$	0.1	$	40.2

Securities for which allowance was not previously recorded	0.1		—		13.6		—		13.7
Securities sold during the period	(0.2)		—		(14.7)		—		(14.9)
Additional net increases (decreases) in existing allowance	—		0.1		(6.4)		1.0		(5.3)
Ending balance, September 30, 2020	$	0.2	$	0.2	$	32.2	$	1.1	$	33.7


(in millions)	Foreign Governments		Obligations of states and political subdivisions		Corporate bonds		Asset backed securities		Total
Beginning balance, January 1, 2021	$	0.2	$	0.1	$	6.1	$	0.2	$	6.6

Securities for which allowance was not previously recorded	—		—		2.7		0.2		2.9
Securities sold during the period	—		—		(1.1)		—		(1.1)
Additional net increases (decreases) in existing allowance	—		(0.1)		(1.1)		(0.2)		(1.4)
Ending balance, September 30, 2021	$	0.2	$	—	$	6.6	$	0.2	$	7.0


(in millions)	Foreign Governments		Obligations of states and political subdivisions		Corporate bonds		Asset backed securities		Total
Beginning balance, January 1, 2020	$	—	$	—	$	—	$	—	$	—
Additions-initial adoption of accounting standard	—		—		6.8		0.1		6.9
Securities for which allowance was not previously recorded	0.3		0.3		14.4		—		15.0
Securities sold during the period	(0.2)		—		(15.5)		—		(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 (gains) losses ~~on our fixed maturities~~included in net realized investment gains (losses) in the Consolidated Statement of Income was $0.8 million and ~~equity portfolio as follows:~~

$1.5 million for the three and nine months ended September 30, 2021, respectively. Total credit impairment losses included in net realized investment gains (losses) in the Consolidated Statement of Income was $10.5 million and $43.0 million for the three and nine months ended September 30, 2020, 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
)

Table of Contents

~~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)	2021		2020		2021		2020
Realized gains on fixed maturities and other
Fixed maturities	$	3.3	$	7.2	$	26.3	$	30.5
Other investments, including short-terms	0.9		10.8		8.9		70.7
Other assets	—		—		3.4		32.3
	4.2		18.0		38.6		133.5
Realized losses on fixed maturities and other
Fixed maturities	(0.4)		(7.5)		(5.0)		(25.7)
Other investments, including short-terms	(3.3)		(12.6)		(16.6)		(58.4)
Other assets	(1.4)		(0.4)		(14.0)		(0.9)
Credit losses on fixed maturities	(0.7)		(10.5)		(1.5)		(43.0)

	(5.8)		(31.0)		(37.1)		(128.0)
Equity securities
Net realized gains (losses) on equity securities	1.4		(3.2)		0.3		(15.8)
Change in unrealized gains (losses) on equity securities held at the end of the period	(5.1)		10.5		30.7		(13.7)
Net realized gains (losses) on equity securities	(3.7)		7.3		31.0		(29.5)
Net realized investment and other gains (losses) before income taxes	(5.3)		(5.7)		32.5		(24.0)
Income tax (benefit) provision	—		(0.5)		—		(1.7)
Net realized investment gains (losses), net of income taxes	$	(5.3)	$	(5.2)	$	32.5	$	(22.3)

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

Changes in unrealized ~~appreciation (depreciation)~~gains (losses) 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)	2021		2020		2021		2020
Change in unrealized gains (losses)
Fixed maturities	$	(23.0)	$	42.5	$	(70.7)	$	66.9

Other investments	—		0.2		—		(14.0)
Other and short-term investments	(0.3)		—		(0.6)		—
Net unrealized investment gains (losses) before income taxes	(23.3)		42.7		(71.3)		52.9
Income tax provision (benefit)	(4.4)		7.0		(13.0)		12.2
Net unrealized investment gains (losses), net of income taxes	$	(18.9)	$	35.7	$	(58.3)	$	40.7

Foreign Currency Exchange Forward Contracts

We ~~entered~~enter 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, 2021 and December 31, 2020, respectively. The net realized ~~and unrealized~~ gains and ~~losses~~(losses) are included in “Net realized investment ~~and other~~gains (losses) ~~gains”~~” in our Consolidated Statements of Income (Loss) ~~Income.~~

Table of Contents

The fair value of our foreign currency exchange forward contracts as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020 was as follows:


(in millions)	September 30, 2017			December 31, 2016		(in millions)	September 30, 2021		December 31, 2020
Operational currency exposure	$	(1.6	)	$	—	Operational currency exposure	$	(0.3)	$	0.4
Asset manager investment exposure		(3.0	)		0.7	Asset manager investment exposure	2.0		(0.2)
Total return strategy		(0.8	)		3.3	Total return strategy	(3.4)		0.7
	$	(5.4	)	$	4.0
Total						Total	$	(1.7)	$	0.9

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Realized gains
Operational currency exposure	$	—	$	4.2	$	7.1	$	10.1
Asset manager investment exposure	1.0		—		2.8		1.0
Total return strategy	6.9		10.3		13.0		43.5
Gross realized investment gains	7.9		14.5		22.9		54.6
Realized losses
Operational currency exposure	(5.2)		(1.8)		(17.8)		(6.5)
Asset manager investment exposure	—		(0.9)		(0.8)		(1.9)
Total return strategy	(6.9)		(10.4)		(12.0)		(47.0)
Gross realized investment losses	(12.1)		(13.1)		(30.6)		(55.4)
Net realized investment (losses) gains on foreign currency exchange forward contracts	$	(4.2)	$	1.4	$	(7.7)	$	(0.8)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Realized gains

Operational currency exposure

$
1.8

$
1.3

$
7.5

$
8.7

Asset manager investment exposure

0.6

—

1.1

2.3

Total return strategy

4.1

2.2

7.7

18.4

Gross realized investment gains

6.5

3.5

16.3

29.4

Realized losses

Operational currency exposure

(4.2
)

(0.8
)

(10.1
)

(16.3
)
Asset manager investment exposure

(3.6
)

(0.8
)

(10.4
)

(4.5
)
Total return strategy

(3.5
)

(1.6
)

(6.2
)

(20.1
)
Gross realized investment losses

(11.3
)

(3.2
)

(26.7
)

(40.9
)
Net realized investment (losses) gains on foreign
currency exchange forward contracts

$
(4.8
)

$
0.3

$
(10.4
)

$
(11.5
)

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, 2021		December 31, 2020
Securities on deposit for regulatory and other purposes	$	205.3	$	227.5
Securities pledged as collateral for letters of credit and other	191.0		189.4
Securities and cash on deposit supporting Lloyd’s business (1)	331.2		409.2
Total restricted investments	$	727.5	$	826.1

(1) As the corporate member for our Lloyd’s syndicates, Argo’s share of Argo (No. 604) Limited’s required Funds to maintain at Lloyd’s was $397.9 million at September 30, 2021, of which $179.0 million was provided by Argo Re, Ltd. (“Argo Re.”)

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.

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•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.

We receive fair value prices from third-party pricing services and our outside investment managers. These prices are determined using observable market information such as 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. 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, ~~2017.~~2021 and December 31, 2020. A description of the valuation techniques we use to measure assets at fair value is as follows:

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.

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.~~

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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, 2021		Level 1 (a)		Level 2 (b)		Level 3 (c)
Fixed maturities
U.S. Governments	$	410.2	$	398.3	$	11.9	$	—
Foreign Governments	229.1		—		229.1		—
Obligations of states and political subdivisions	175.7		—		175.7		—
Corporate bonds	2,023.0		—		2,019.2		3.8
Commercial mortgage-backed securities	409.2		—		409.2		—
Residential mortgage-backed securities	493.9		—		493.9		—
Asset-backed securities	112.8		—		112.8		—
Collateralized loan obligations	343.4		—		343.4		—
Total fixed maturities	4,197.3		398.3		3,795.2		3.8
Equity securities	181.8		156.3		—		25.5
Other investments	65.1		—		65.1		—
Short-term investments	508.6		497.4		11.2		—
	$	4,952.8	$	1,052.0	$	3,871.5	$	29.3

^(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


			Fair Value Measurements at Reporting Date Using
(in millions)	December 31, 2020		Level 1 (a)		Level 2 (b)		Level 3 (c)
Fixed maturities
U.S. Governments	$	399.8	$	383.5	$	16.3	$	—
Foreign Governments	294.8		—		294.8		—
Obligations of states and political subdivisions	170.4		—		170.4		—
Corporate bonds	1,981.8		—		1,974.8		7.0
Commercial mortgage-backed securities	339.7		—		339.7		—
Residential mortgage-backed securities	508.2		—		508.2		—
Asset-backed securities	122.8		—		122.8		—
Collateralized loan obligations	289.6		—		289.6		—
Total fixed maturities	4,107.1		383.5		3,716.6		7.0
Equity securities	176.7		159.2		—		17.5
Other investments	102.5		0.4		102.1		—
Short-term investments	542.6		526.5		16.1		—
	$	4,928.9	$	1,069.6	$	3,834.8	$	24.5

(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.

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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		Short Term Investments		Total
Beginning balance, January 1, 2017	$	2.0		$	0.4	$	2.4
Beginning balance, January 1, 2021									Beginning balance, January 1, 2021	$	7.0	$	17.5	$	—	$	24.5
Transfers into Level 3		—			—		—		Transfers into Level 3	—		1.5		—		1.5
Transfers out of Level 3		—			—		—		Transfers out of Level 3	—		—		—		—
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		6.5		—		6.6
Included in other comprehensive income									Included in other comprehensive income	0.1		—		—		0.1
Purchases, issuances, sales, and settlements:									Purchases, issuances, sales, and settlements:
Purchases		—			—		—		Purchases	0.1		—		—		0.1
Issuances		—			—		—		Issuances	—		—		—		—
Sales		—			—		—		Sales	(3.5)		—		—		(3.5)
Settlements		—			—		—		Settlements	—		—		—		—
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, 2021									Ending balance, September 30, 2021	$	3.8	$	25.5	$	—	$	29.3
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, 2021									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, 2021	$	—	$	—	$	—	$	—


(in millions)	Corporate Bonds		Equity Securities			Total			(in millions)	Credit Financial		Equity Securities		Total
Beginning balance, January 1, 2016	$	—	$	0.7		$	0.7
Beginning balance, January 1, 2020									Beginning balance, January 1, 2020	$	7.4	$	18.2	$	25.6
Transfers into Level 3		—		—			—		Transfers into Level 3	—		—		—
Transfers out of Level 3		—		—			—		Transfers out of Level 3	—		—		—
Total gains or losses (realized/unrealized):									Total gains or losses (realized/unrealized):
Included in net income (loss)		—		—			—
Included in other comprehensive income (loss)		—		—			—
Included in net income									Included in net income	—		(5.9)		(5.9)
Included in other comprehensive loss									Included in other comprehensive loss	(0.5)		—		(0.5)
Purchases, issuances, sales, and settlements:									Purchases, issuances, sales, and settlements:
Purchases		2.0		—			2.0		Purchases	0.1		5.2		5.3
Issuances		—		—			—		Issuances	—		—		—
Sales		—		(0.3	)		(0.3	)	Sales	—		—		—
Settlements		—		—			—		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	$	—	$	—		$	—
Ending balance, December 31, 2020									Ending balance, December 31, 2020	$	7.0	$	17.5	$	24.5
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, 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 December 31, 2020	$	—	$	—	$	—

At September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, 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~~

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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, 2021 and January 1, 2021, and the changes in the allowance for expected credit losses for the nine months ended September 30, 2021.


(in millions)	Premiums Receivable, Net of Allowance for Estimated Uncollectible Premiums		Allowance for Estimated Uncollectible Premiums
Balance, January 1, 2021	$	679.8	$	9.4

Current period change for estimated uncollectible premiums			—
Write-offs of uncollectible premiums receivable			(0.6)
Foreign exchange adjustments			—
Balance, September 30, 2021	$	701.9	$	8.8

Reinsurance Recoverables

The following table presents the balances of reinsurance recoverables, net of the allowance for estimated uncollectible reinsurance, at September 30, 2021 and January 1, 2021, and changes in the allowance for estimated uncollectible reinsurance for the nine months ended September 30, 2021.


(in millions)	Reinsurance Recoverables, Net of Allowance for Estimated Uncollectible Reinsurance		Allowance for Estimated Uncollectible Reinsurance
Balance, January 1, 2021	$	3,009.0	$	4.1

Current period change for estimated uncollectible reinsurance			(0.3)
Write-offs of uncollectible reinsurance recoverables			—
Balance, September 30, 2021	$	2,954.0	$	3.8

We primarily utilize A.M. Best credit ratings when determining the allowance, adjusted as needed based on our historical experience with the reinsurers. A portion of our reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements.

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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,
(in millions)	2021		2020
Net reserves beginning of the year	$	2,906.1	$	2,722.7
Net AIL reserves acquired	—		27.9

Add:
Losses and LAE incurred during current calendar year, net of reinsurance:
Current accident year	884.9		876.9
Prior accident years	6.0		6.1
Losses and LAE incurred during calendar year, net of reinsurance	890.9		883.0
Deduct:
Net reserve ceded - reinsurance to close transaction for years of account 2017 and prior (1)	219.7		—
Losses and LAE payments made during current calendar year, net of reinsurance:
Current accident year	100.5		188.2
Prior accident years	552.8		632.7
Losses and LAE payments made during current calendar year, net of reinsurance:	653.3		820.9
Change in participation interest (2)	12.5		33.0
Foreign exchange adjustments	(7.3)		23.0
Net reserves - end of period	2,929.2		2,868.7
Add:
Reinsurance recoverables on unpaid losses and LAE, end of period	2,510.3		2,521.3
Gross reserves - end of period	$	5,439.5	$	5,390.0

For the Nine Months Ended September 30,

(in millions)
2017

2016

Net reserves beginning of the year
$
2,180.2

$
2,133.3

Net Maybrooke reserves acquired

131.8

—

Add:

Losses and LAE incurred during current calendar
   year, net of reinsurance:

Current accident year

775.1

614.8

Prior accident years

4.4

(18.8
)
Losses and LAE incurred during calendar year,
   net of reinsurance

779.5

596.0

Deduct:

Losses and LAE payments made during current
   calendar year, net of reinsurance:

Current accident year

165.6

115.3

Prior accident years

413.7

403.9

Losses and LAE payments made during current
   calendar year, net of reinsurance:

579.3

519.2

Change in participation interest ⁽¹⁾

(23.2
)

(36.3
)
Foreign exchange adjustments

18.9

1.0

Net reserves - end of period

2,507.9

2,174.8

Add:

Reinsurance recoverables on unpaid losses and
   LAE, end of year

1,798.0

1,110.0

Gross reserves - end of period
$
4,305.9

$
3,284.8

(1)Amount represents reserves ceded under the reinsurance to close transaction with RiverStone for Lloyd’s years of account 2017 and prior, effective January 1, 2020.

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

(2)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.

The impact from the (favorable) 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)	2021		2020
U.S. Operations	$	(28.7	)	$	(25.6	)	U.S. Operations	$	(0.7)	$	(0.5)
International Operations		17.0			(10.8	)	International Operations	0.1		(4.5)
Run-off Lines		16.1			17.6		Run-off Lines	6.6		11.1
Total unfavorable (favorable) prior-year development	$	4.4		$	(18.8	)
Total (favorable) unfavorable prior-year development							Total (favorable) unfavorable prior-year development	$	6.0	$	6.1

The following describes the primary factors behind each segment’s prior accident year reserve development for the nine months ended September 30, ~~2017,~~2021 and ~~2016:~~

2020:

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

2021:

•U.S. ~~Operations:~~Operations: Favorable development ~~for the~~primarily in specialty lines, partially offset by unfavorable development in liability and professional lines.

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•International Operations: Unfavorable development primarily related to a one-time accounting adjustment and large claim movements in Argo Insurance Bermuda, partially offset by favorable development in property lines, including losses associated with prior year catastrophe losses.

•Run-off Lines: Unfavorable loss reserve development on prior accident years in risk management workers compensation, other run-off lines and an individual environmental loss.

Nine months ended September 30, 2020:

•U.S. Operations: Favorable development 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.~~

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

~~U.S. Operations:~~ ~~Favorable development within the commercial automobile, surety,~~ workers ~~compensation and property lines.~~

compensation.

~~International Operations:~~ ~~Favorable development within the property lines and our Brazil unit.~~

~~Run-off Lines:~~ ~~Unfavorable development in asbestos and risk management liability.~~

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~~

6. Disclosures about Fair Value of trusts, 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 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

Financial Instruments

(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 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 each 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 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 pursuant to the terms of the New Credit Agreement. A summary of the terms of 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 and letters of credit, and each 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.

Included in the New Credit Agreement is a provision that allows up to $200.0 million of the revolving credit facility to be used for LOCs, subject to availability. On March 3, 2017, the $0.2 million LOC outstanding under the Prior Credit Agreement was transferred to the New Credit Agreement. At September 30, 2017 and December 31, 2016, there were no borrowings outstanding under the revolving portions of the credit facilities. At September 30, 2017 and December 31, 2016, there were $0.5 million and $0.2 million, respectively in LOCs against the New and Prior Credit Agreement, respectively.

~~Other Debt~~

~~As part of the ARIS Title Insurance Corporation (“ARIS”) acquisition,~~ ~~at September 30, 2017 and December 31, 2016, we had a note payable for $0.6 million.~~ The note had a variable interest rate of 2.00% above 30-day LIBOR, with the variable interest rate being reset quarterly and subject to certain interest rate ceilings. Interest payments are payable quarterly. The note payable matures on April 1, 2019.

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

Cash. The carrying amount approximates fair value.

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~~2021 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,~~2020, 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, 2021 and December 31, 2020. 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.

Table of Contents

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


	September 30, 2017				December 31, 2016					September 30, 2021				December 31, 2020
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Junior subordinated debentures
Junior subordinated debentures:									Junior subordinated debentures:
Trust preferred debentures	$	172.7	$	168.6	$	172.7	$	162.4	Trust preferred debentures	$	172.7	$	173.1	$	172.7	$	173.6
Maybrooke subordinated debenture		83.8		86.3		—		—
Subordinated debentures									Subordinated debentures	85.4		92.0		85.1		92.3
Total junior subordinated debentures									Total junior subordinated debentures	258.1		265.1		257.8		265.9
Senior unsecured fixed rate notes		139.6		139.4		139.5		139.3	Senior unsecured fixed rate notes	140.3		150.1		140.2		146.7
Floating rate loan stock		59.1		57.7		54.8		51.5	Floating rate loan stock	58.7		58.9		60.7		61.0
										457.1		474.1		458.7		473.6

9.	~~Shareholders’ Equity~~

Based on an analysis of the inputs, our financial instruments measured at fair value for disclosure purposes have been categorized as follows:


	Fair Value Measurements at Reporting Date Using
(in millions)	September 30, 2021		Level 1 (a)		Level 2 (b)		Level 3 (c)
Junior subordinated debentures:
Trust preferred debentures	$	173.1	$	—	$	173.1	$	—
Subordinated debentures	92.0		—		92.0		—
Total junior subordinated debentures	265.1		—		265.1		—
Senior unsecured fixed rate notes	150.1		150.1		—		—
Floating rate loan stock	58.9		—		58.9		—
	474.1		150.1		324.0		—

(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, 2020		Level 1 (a)		Level 2 (b)		Level 3 (c)
Junior subordinated debentures:
Trust preferred debentures	$	173.6	$	—	$	173.6	$	—
Subordinated debentures	92.3		—		92.3		—
Total junior subordinated debentures	265.9		—		265.9		—
Senior unsecured fixed rate notes	146.7		146.7		—		—
Floating rate loan stock	61.0		—		61.0		—
	473.6		146.7		326.9		—

(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~~6, 2021, our Board of Directors declared a quarterly cash dividend in the amount of ~~$0.27~~$0.31 on each ~~share of~~ common ~~stock~~share outstanding. On September 15, ~~2017,~~2021, we paid ~~$8.3~~$10.8 million to our shareholders of record on ~~September 1, 2017.~~

August 31, 2021.

On August ~~2, 2016~~6, 2021, our Board of Directors declared a quarterly cash dividend in the amount of ~~$0.22~~$437.500 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 $0.437500 per Depositary Share. On September 15, 2021, we paid $2.6 million to our shareholders of record of Series A Preference Shares on August 31, 2021.

Table of Contents

On August 7, 2020, our Board of Directors declared a quarterly cash dividend in the amount of $0.31 on each ~~share of~~ common ~~stock~~share outstanding. On ~~August 29, 2016,~~September 11, 2020, we paid ~~$6.7~~$10.9 million to our shareholders of record on August ~~15, 2016.~~

28, 2020.

On ~~May 3, 2016,~~August 7, 2020, our Board of Directors declared a ~~10% stock~~quarterly cash dividend ~~payable~~in the amount of $330.556 per share on ~~June~~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, ~~2016,~~2020, we paid $2.0 million to our shareholders of record ~~at the close~~ of ~~business~~Series A Preference Shares on ~~June~~September 1, 2016. As a result of the stock dividend, 2,735,542 additional shares were issued. Cash was paid in lieu of fractional shares of our common shares. All references to share and per share amounts in this document and related disclosures have been adjusted to reflect the stock dividend for all periods presented.

2020.

On May 3, 2016, our Board of Directors authorized the repurchase of up to $150.0 million of our common shares (“2016 Repurchase Authorization”). The 2016 Repurchase Authorization supersedes all ~~the~~ previous ~~Repurchase Authorizations.~~repurchase authorizations. As of September 30, ~~2017,~~2021, availability under the 2016 Repurchase Authorization for future repurchases of our common shares was ~~$93.7~~$53.3 million.

~~For the nine months ended September 30, 2017, we repurchased a total of 612,034~~

We did not 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:~~

2021.

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.~~

8. Accumulated Other Comprehensive Income (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,~~2021 and ~~2016~~2020 is presented below:


(in millions)	Foreign Currency Translation Adjustments		Unrealized Holding Gains on Securities		Defined Benefit Pension Plans		Total
Balance, January 1, 2021	$	(37.9)	$	105.1	$	(8.6)	$	58.6
Other comprehensive income (loss) before reclassifications	0.2		(49.2)		1.5		(47.5)
Amounts reclassified from accumulated other comprehensive loss	—		(9.1)		—		(9.1)
Net current-period other comprehensive income (loss)	0.2		(58.3)		1.5		(56.6)
Balance, September 30, 2021	$	(37.7)	$	46.8	$	(7.1)	$	2.0

(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 income (loss) before reclassifications	(12.3)		55.9		—		43.6
Amounts reclassified from accumulated other comprehensive loss	—		(15.2)		—		(15.2)
Net current-period other comprehensive income (loss)	(12.3)		40.7		—		28.4
Cumulative effect of adoption of ASU 2016-13	—		5.7		—		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

Income tax effects are released from accumulated other comprehensive income (loss) for unrealized gains or losses when the gains or losses are realized, and are taxed at the statutory rate based on jurisdiction of the underlying transaction.

9. Net Income (Loss) ~~Income:~~

Per Common Share

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
)

~~11.~~

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

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

2017

2016

2017

2016

Net (loss) income

$
(61.3
)

$
55.2

$
21.4

$
113.8

Weighted average common shares
outstanding - basic

29,978,485

30,018,637

30,075,424

30,227,725

Effect of dilutive securities:

Equity compensation awards

—

709,746

817,602

661,762

Weighted average common shares
outstanding - diluted

29,978,485

30,728,383

30,893,026

30,889,487

Net (loss) income per common share:

Basic

$
(2.04
)

$
1.84

$
0.71

$
3.76

Diluted

$
(2.04
)

$
1.80

$
0.69

$
3.68

~~12.~~

~~Supplemental Cash Flow Information~~

10. Supplemental Cash Flow Information

Interest paid ~~was~~and income taxes paid (recovered) were as follows:


	For the Nine Months Ended September 30,
(in millions)	2021		2020
Senior unsecured fixed rate notes	$	7.0	$	7.0
Junior subordinated debentures	7.5		9.4
Other indebtedness	1.5		4.6
Total interest paid	$	16.0	$	21.0

Income taxes paid	30.7		46.0
Income taxes recovered	(1.2)		(1.6)
Income taxes paid, net	$	29.5	$	44.4

For the Nine Months Ended September 30,

(in millions)

2017

2016

Senior unsecured fixed rate notes

$
7.0

$
7.0

Junior subordinated debentures

9.4

5.7

Other indebtedness

3.0

2.0

Revolving credit facility

0.3

—

Total interest paid

$
19.7

$
14.7

~~13.~~

~~Share-based Compensation~~

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 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, 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 have 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 non-vested restricted share activity as of September 30, ~~2017~~2021 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~~$1.4 million and ~~$7.5~~$4.3 million for the three and nine months ended September 30, ~~2017,~~2021, respectively, as compared to ~~$1.7~~$1.4 million and ~~$5.2~~$5.9 million for the three and nine months ended September 30, ~~2016,~~2020, respectively. Compensation expense for all share-based compensation awards is included in “Underwriting, acquisition and insurance expenses” in the accompanying Consolidated Statements of Income (Loss) ~~Income.~~. As of September 30, ~~2017,~~2021, there was ~~$27.4~~$11.4 million of total unrecognized compensation cost related to restricted share compensation arrangements granted by Argo Group.

~~Stock-Settled SARs~~

~~In January 2016, we modified~~

We have issued to certain ~~unvested cash-settled SARs, converting~~key employees non-vested restricted stock awards whose vesting is subject to the achievement of certain performance measures. The non-vested performance share awards vest over three to four years. Market-based performance awards are valued using the Monte Carlo simulation. All other non-vested performance share awards are valued based on the fair market value as of the grant date. Vesting of the awards ~~into stock-settled SARs.~~is subject to the achievement of defined performance measures and the number of shares vested may be adjusted based on the achievement of certain targets. We ~~evaluated~~evaluate the likelihood of the employee achieving the performance condition and include this ~~modification under~~estimate in the ~~terms~~determination of ~~ASU 718 “Share Based Payments,” and determined that no additional expense resulted from~~ the ~~conversion. The expense~~forfeiture factor for ~~the stock-settled SARs will be amortized over the remaining vesting period.~~

these grants.

Shares

Weighted-Average
Exercise Price

Outstanding at January 1, 2017

1,982,695

$
34.80

Exercised

(396,355
)

$
31.52

Expired or forfeited

(105,024
)

$
40.62

Outstanding at September 30, 2017

1,481,316

$
35.26


	Shares	Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2021	157,847	$	43.10
Granted	100,291	$	54.79
Vested and issued	(8,987)	$	44.49
Expired or forfeited	(45,768)	$	48.36
Outstanding at June 30, 2021	203,383	$	47.62

Expense recognized under this plan for the ~~stock-settled SARs~~performance shares was ~~$0.7~~$0.2 million and ~~$3.5~~$1.8 million for the three and nine months ended September 30, ~~2017,~~2021, respectively, as compared to ~~$1.0~~$0.2 million and ~~$3.6~~$0.9 million for the three and nine months ended September 30, ~~2016,~~2020, respectively. As of September 30, ~~2017,~~2021, there was ~~$4.3~~$5.6 million of total unrecognized compensation cost related to ~~stock-settled SARs outstanding.~~

~~Cash-Settled SARs~~

~~A summary~~performance share compensation arrangements granted by Argo Group.

12. Underwriting, Acquisition and ~~changes during the nine months then ended is as follows:~~

Insurance Expenses

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

~~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

~~15.~~

~~Income Taxes~~

We are incorporated under the laws of Bermuda and, under current Bermuda law, are not obligated to pay any taxes in Bermuda based upon income or capital gains. We have received an undertaking from the Supervisor of Insurance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax Protection Act, 2011, which exempts us from any Bermuda taxes computed on profits, income or any capital asset, gain or appreciation or any tax in the nature of estate, duty or inheritance tax, at least until the year 2035.

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~~those countries.

On June 10, 2021, U.K. tax ~~provision~~legislation referred to as Finance Act 2021 received Royal Assent and was enacted. The effects of changes in tax laws and tax rates are recognized in the period of enactment. Accordingly, we recorded the impacts of Finance Act 2021 in our June 30, 2021 consolidated financial statements which primarily 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~~remeasurement of our deferred tax assets and liabilities for the ~~three and nine months ended September 30, 2017 and 2016, pre-tax income (loss) attributable~~increased U.K. federal tax rate from 19% to ~~our operations and the operations’ effective~~25% beginning on April 1, 2023. The remeasurement resulted in an increase of net deferred 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
%
assets of $7.4 million.

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, 2021 and 2020, 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,
	2021					2020
(in millions)	Pre-Tax Income (Loss)			Effective Tax Rate		Pre-Tax Income (Loss)			Effective Tax Rate
Bermuda	$	7.2		—	%	$	5.5		0.1	%
United States	21.4			26.8	%	7.2			3.1	%
United Kingdom	(6.1)			(1.0)	%	(38.1)			9.7	%
Barbados	—			—	%	—			—	%
Belgium	—			—	%	0.2			22.8	%
Brazil	5.9			—	%	0.3			—	%
United Arab Emirates	0.9			—	%	0.4			—	%
Ireland	—		(1)	—	%	—		(1)	—	%
Italy	0.2			—	%	(0.9)			—	%
Malta	(1.3)			—	%	(1.1)			—	%
Switzerland	—		(1)	—	%	—		(1)	1.0	%
Pre-tax income (loss)	$	28.2		20.6	%	$	(26.5)		12.9	%

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


	For the Nine Months Ended September 30,
	2021					2020
(in millions)	Pre-Tax Income (Loss)			Effective Tax Rate		Pre-Tax Income (Loss)			Effective Tax Rate
Bermuda	$	14.5		—	%	$	(49.1)		—	%
United States	126.7			20.7	%	62.5			21.3	%
United Kingdom	(14.9)			68.4	%	(65.7)			9.9	%
Barbados	—		(1)	—	%	—			—	%
Belgium	—			—	%	0.2			25.3	%
Brazil	9.8			—	%	3.2			—	%
United Arab Emirates	1.2			—	%	1.8			—	%
Ireland	(0.1)			—	%	(0.1)			—	%
Italy	1.4			—	%	0.7			—	%
Malta	(0.4)			—	%	0.2			—	%
Switzerland	(0.1)			—	%	—		(1)	—	%
Pre-tax income (loss)	$	138.1		11.7	%	$	(46.3)		(14.8)	%

(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)	2021		2020			2021		2020
Income tax provision at expected rate	$	5.6	$	(6.5)		28.4		2.8
Tax effect of:
Nontaxable investment income	(0.1)		(0.2)			(0.4)		(0.5)
Foreign exchange adjustments	0.2		0.7			(0.3)		0.1
Goodwill	—		—		(1)	—		1.0
Withholding taxes	—		—		(1)	0.1		0.1
Prior period adjustments	—		0.9			—		0.9
Change in uncertain tax position liability	(0.4)		—			(2.3)		—
Change in valuation allowance	0.8		1.2			(1.1)		1.2
Impact of change in tax rate related to Finance Act 2021	—		—			(7.4)		—
Other	(0.3)		0.5			(0.9)		1.3
Income tax provision (benefit)	$	5.8	$	(3.4)		$	16.1	$	6.9

(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. For the ~~tax-effected~~three and nine months ended September 30, 2021, the net ~~operating loss carryforward included as part~~change in valuation allowance for deferred tax assets was an increase (decrease) of $0.8 million and $(1.1) million, respectively, relating to 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~~2021, the Company had a net decrease of uncertain tax positions in the amount of $(0.4) million and ~~2016.~~ $(2.3) million, respectively. A net increase (decrease) of interest in the amount of $0.1 million and $(0.3) million has been recorded in the line item “Interest expense” in our Consolidated Statements of (Loss) Income for the three and nine months ended September 30, 2021, respectively. A net increase (decrease) of penalty in the amount of $0.0 million and $(0.4) million has been recorded in the line “Underwriting, acquisition and insurance expenses” in our Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2021, respectively.

Our United States subsidiaries are no longer subject to U.S. federal and state income tax examinations by tax authorities for years before ~~2013.~~2017. 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.~~

2019.

~~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. The Company does not anticipate any of the recent legislative initiatives to have a material impact on its financial statements and will continue to analyze these initiatives 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~~$63.0 million related to our limited partnership investments at September 30, ~~2017.~~2021, as further disclosed in Note 3, “Investments.” 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~~twelve years.

~~17.~~

15. Segment Information

We are primarily engaged in underwriting property and casualty ~~insurance and reinsurance.~~insurance. 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

Revenue:

Earned premiums

U.S. Operations

$
242.6

$
216.3

$
692.9

$
629.7

International Operations

146.8

142.3

474.9

418.5

Run-off Lines

(0.1
)

0.1

—

0.3

Total earned premiums

389.3

358.7

1,167.8

1,048.5

Net investment income

U.S. Operations

18.8

20.3

66.0

55.8

International Operations

7.7

7.5

24.4

22.7

Run-off Lines

2.0

3.2

7.0

8.8

Corporate and Other

2.4

1.7

7.6

2.3

Total 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

The table below presents earned premiums by geographic location for the three and nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020. 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.


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
United States	$	322.7	$	299.1	$	949.7	$	900.2
United Kingdom	129.1		90.6		344.9		252.8
Bermuda	10.3		27.3		46.1		73.8
Malta	7.7		13.0		32.7		43.3
All other jurisdictions	17.7		15.5		50.5		43.8
Total earned premiums	$	487.5	$	445.5	$	1,423.9	$	1,313.9

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Bermuda

$
23.3

$
29.0

$
72.0

$
86.1

Brazil

11.7

10.4

36.8

29.6

Malta

2.7

0.6

5.0

1.6

United Kingdom

109.1

102.4

361.2

301.1

United States

242.5

216.3

692.8

630.1

Total earned premiums

$
389.3

$
358.7

$
1,167.8

$
1,048.5

(in millions)

September 30, 2017

December 31, 2016

U.S. Operations

$
4,335.1

$
3,961.2

International Operations

3,814.2

2,356.9

Run-off Lines

458.9

537.0

Corporate and Other

449.8

349.9

Total

$
9,058.0

$
7,205.0

~~18.~~

~~Senior Unsecured Fixed Rate Notes~~

16. Subsequent Event

On October 4, 2021, we reached an agreement to sell our Brazilian operations, Argo Seguros Brasil S.A. (“Argo Brazil”), to Spice Private Equity Ltd., an investment company focused on global private equity investments, for a purchase price of 160 million Brazilian Reais (approximately $29.8 million), subject to the terms and conditions set forth in the purchase agreement. Argo Brazil is one of the units within our International Operations reporting segment. The transaction is subject to regulatory and anti-trust approval and is expected to close in the fourth quarter of 2021. As of the date of the financial statements included in this Quarterly Report on Form 10-Q we are unable to reasonably estimate the gain/loss that will result from this transaction.

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, 2021 compared with the three and nine months ended September 30, 2020, and a discussion of our financial condition as of September 30, 2021. 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, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 15, 2021, including the audited Consolidated Financial Statements and notes thereto.

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

Forward Looking Statements

This report includes forward-looking statements that reflect our current views with respect to future events and 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 words such as "expect," "intend," "plan," "believe," “do not believe,” “aim,” "project," "anticipate," “seek,” "will," “likely,” “assume,” “estimate,” "may," “continue,” “guidance,” “objective,” “remain optimistic,” “improve,” “progress,” “path toward,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” “on track” and similar expressions of a future or forward-looking nature.

Such statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially. For a more detailed discussion of such risks and uncertainties, see Item 1A, “Risk Factors” in Argo Group’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in our other filings with the SEC. 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 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.

Consolidated Results of Operations

For the three and nine months ended September 30, 2021, we reported net income attributable to common shareholders of $19.8 million ($0.56 per diluted common share) and $114.1 million ($3.26 per diluted common share), respectively. For the three and nine months ended September 30, 2020, we reported a net loss attributable to common shareholders of $25.1 million ($0.72 per diluted common share) and $55.2 million ($1.60 per diluted common share), respectively.

The following is a comparison of selected data from our 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,
(in millions)	2021			2020			2021			2020
Gross written premiums	$	875.6		$	890.2		$	2,447.4		$	2,515.7
Earned premiums	$	487.5		$	445.5		$	1,423.9		$	1,313.9
Net investment income	46.1			42.0			143.2			79.0

Net realized investment gains (losses):
Net realized investment gains (losses)	0.6			(5.7)			3.3			32.7
Change in fair value of equity securities	(5.1)			10.5			30.7			(13.7)
Credit losses on fixed maturity securities	(0.8)			(10.5)			(1.5)			(43.0)
Net realized investment (losses) gains	(5.3)			(5.7)			32.5			(24.0)
Total revenue	$	528.3		$	481.8		$	1,599.6		$	1,368.9
Income (loss) before income taxes	$	28.2		$	(26.5)		$	138.1		$	(46.3)
Income tax provision (benefit)	5.8			(3.4)			16.1			6.9
Net income (loss)	$	22.4		$	(23.1)		$	122.0		$	(53.2)
Less: Dividends on preferred shares	2.6			2.0			7.9			2.0
Net income (loss) attributable to common shareholders	$	19.8		$	(25.1)		$	114.1		$	(55.2)
Loss ratio	64.0		%	73.8		%	62.5		%	67.2		%
Expense ratio	36.3		%	36.3		%	37.3		%	37.2		%
Combined ratio	100.3		%	110.1		%	99.8		%	104.4		%

Beginning in March 2020 and continuing into 2021, the global COVID-19 pandemic, including the arrival of new strains of the virus, has resulted in significant disruptions in economic activity and financial markets. While the Company’s consolidated net investment income benefited from the gradual improvement of economic conditions as the impact of the pandemic lessened during the first nine months of 2021, COVID-19 has directly and indirectly adversely affected the Company and may continue to do so for an uncertain period of time. For the three and nine months ended September 30, 2021, our underwriting results included net pre-tax catastrophe losses of $3.0 million and $12.0 million, respectively, associated with COVID-19 and related economic conditions, as compared to $16.9 million and $60.5 million, respectively, for the three and nine months ended September 30, 2020. Premium levels in certain lines in both our U.S. and International Operations have been negatively impacted by the challenges of the economic slowdown. Conversely, our current accident year non-catastrophe loss results saw reduced claim activity during the nine months ended September 30, 2021 due, in part, to the impact of the COVID-19 pandemic. While this reduction in claim activity during 2021 was not as significant as that experienced for the same period in 2020, the 2021 current accident year non-catastrophe claim frequency is still below our historical averages. Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the nine months ended September 30, 2021 or 2020. Although vaccines are now available and are in the process of being widely distributed, the extent to which COVID-19 (including emerging new strains of the COVID-19 virus) 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, 2021, actual results in future periods could materially differ from those disclosed herein.

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 U.S. 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,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	487.5			$	445.5




Losses and loss adjustment expenses, as reported	311.7		64.0	%	328.9		73.8	%
Less:
Favorable (unfavorable) prior accident year loss development	(6.2)		(1.3)	%	(1.6)		(0.4)	%
Catastrophe losses, including COVID-19	(27.3)		(5.6)	%	(71.2)		(16.0)	%
Current accident year non-catastrophe losses (non-GAAP)	$	278.2	57.1	%	$	256.1	57.4	%
Expense ratio			36.3	%			36.3	%
Current accident year non-catastrophe combined ratio (non-GAAP)			93.4	%			93.7	%


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	1,423.9			$	1,313.9




Losses and loss adjustment expenses, as reported	$	890.9	62.5	%	$	883.0	67.2	%
Less:
Favorable (unfavorable) prior accident year loss development	(6.0)		(0.4)	%	(6.1)		(0.5)	%
Catastrophe losses, including COVID-19	(85.9)		(6.0)	%	(128.2)		(9.8)	%
Current accident year non-catastrophe losses (non-GAAP)	$	799.0	56.1	%	$	748.7	56.9	%
Expense ratio			37.3	%			37.2	%
Current accident year non-catastrophe combined ratio (non-GAAP)			93.4	%			94.1	%

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


	For the Three Months Ended September 30,
	2021				2020
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	160.8	$	64.0	$	251.8	$	80.9
Liability	375.7		203.7		365.1		192.0
Professional	192.3		125.1		161.4		93.2
Specialty	146.8		94.7		111.9		79.4
Total	$	875.6	$	487.5	$	890.2	$	445.5


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	451.0	$	220.7	$	654.0	$	232.9
Liability	1,030.4		600.8		990.6		580.7
Professional	530.7		341.0		469.4		265.4
Specialty	435.3		261.4		401.7		234.9
Total	$	2,447.4	$	1,423.9	$	2,515.7	$	1,313.9

Consolidated gross written premiums decreased $14.6 million, or (1.6)%, for the three months ended September 30, 2021, as compared to the same period ended 2020, and $68.3 million, or 2.7%, for the nine months ended September 30, 2021, as compared to the same period ended 2020. The decrease in gross written premiums for the three months ended September 30, 2021 is attributable to businesses we are exiting, plan to exit or have sold, including sales of Ariel Re in November 2020, our businesses in Italy and Malta, and our U.S. grocery business, and re-underwriting actions across our catastrophe exposed lines of business. Partially offsetting the decrease was our U.S. Operations which increased 3.7% as compared to the same period in 2020, concentrated in Liability and Professional Lines. The decrease in gross written premiums for the nine months ended September 30, 2021 was primarily due to a 13.2% year-over-year decrease in International Operations, driven by the sale of Ariel Re, partially offset by 4.4% growth in gross written premiums in U.S. Operations for the comparative periods. Both U.S. Operations and International Operations continued to see overall rate increases (mid single to low double digits) during the three and nine months ended September 30, 2021.

Consolidated net earned premiums for the three and nine months ended September 30, 2021 increased $42.0 million, or 9.4%, and $110.0 million, or 8.4%, respectively, as compared to the same periods ended 2020. Net earned premiums increased in both U.S. Operations and International Operations for the three and nine months ended September 30, 2021. The increase in U.S. Operations was due to premium growth and change in business mix, while International Operations was driven by growth in Syndicate 1200 primarily due to significantly decreasing our use of third-party capital at Lloyd’s for the 2021 year of account, partially offset by the sale of Ariel Re. We anticipate the negative impact to net earned premiums from the sale of Ariel Re to be greater in future quarters, as we have no new business, but continue to earn premium from the 2020 and prior Lloyd’s years of account where we still participate on Syndicate 1910.

Our gross written and earned premiums are further discussed by reporting segment and major lines of business below under the heading “Segment Results.”

Consolidated net investment income for the three and nine months ended September 30, 2021 was $46.1 million and $143.2 million, respectively, compared to $42.0 million and $79.0 million for the same periods ended 2020. The increase in net investment income for the three and nine months ended September 30, 2021 compared to the same periods in 2020 was driven by increases from our alternative investment portfolio and included gains from both private equity and hedge fund investments. The increase was partially offset by a decline in net investment income from our fixed maturities portfolio. Our alternative investment portfolio, which is reported on a one to three-month lag, produced net investment income for the three and nine months ended September 30, 2021 of $24.2 million and $74.8 million, respectively, compared to net investment income of $19.3 million and net investment loss of $1.6 million for the same periods ended 2020, primarily from higher returns on hedge funds and private equity investments as valuations benefited from the improving circumstances surrounding COVID-19 throughout 2021.

Net investment income from fixed maturity assets held directly and dividends from equity securities was $21.9 million and $68.4 million for the three and nine months ended September 30, 2021, respectively, compared to $22.7 million and $80.6 million for the same periods ended 2020. The decline in the comparative periods was due to the 2020 liquidation of a high yield portfolio in connection with a “de-risking” in our investment strategy, lower reinvestment rates and security disposals in the second quarter of 2021 in the Syndicate 1200 portfolios related to the RiverStone reinsurance-to-close (“RITC”) transaction.

Consolidated net realized investment losses of $5.3 million for the three months ended September 30, 2021 included a $5.1 million decrease in the fair value of equity securities, $1.7 million net foreign currency exchange losses, $0.8 million in credit losses on fixed maturities and $1.4 million loss on other transactions. Partially offsetting these losses was a $3.7 million net realized investment gain primarily related to the sales of fixed maturity and equity securities.

Consolidated net realized investment gains of $32.5 million for the nine months ended September 30, 2021 included a $30.7 million increase in the fair value of equity securities, $10.0 million related to the sales of fixed maturity securities and $3.8 million foreign currency exchange gain and a $5.0 million gain related to meeting certain post-closing performance conditions on the previously disclosed sale of our former Trident Public Risk Solutions (“Trident”) brand and underwriting platform during the second quarter of 2020. Partially offsetting these gains was a $16.5 million reduction in the original gain on Trident due to renegotiating the transaction agreements with the buyer to exclude certain lines of business and a $1.5 million charge for expected credit losses on fixed maturity securities.

Loss and loss adjustment expenses was $311.7 million for the three months ended September 30, 2021 compared to $328.9 million for the same period ended 2020. The consolidated loss ratio for the three months ended September 30, 2021 was 64.0%, compared to 73.8% for the same period in 2020, driven by lower catastrophe losses in the third quarter of 2021 (5.6 loss ratio points) compared to the third quarter of 2020 (16.0 loss ratio points). Catastrophe losses in the third quarter of 2021 included losses related to COVID-19 claims of $3.0 million, with the remaining $24.3 million being attributable to $18.3 million from Hurricane Ida, $4.2 million in losses from various small U.S. storms and $1.8 million from an increase in the estimated loss from Winter Storm Uri that occurred in February 2021. The loss ratio was also unfavorably impacted by a 0.9 loss ratio point increase in net prior-year reserve development, as we experienced net unfavorable prior-year reserve development (1.3 loss ratio point) for the three months ended September 30, 2021 as compared to net unfavorable prior-year reserve development (0.4 loss ratio point) for the three months ended September 30, 2020. Included in the net unfavorable prior-year reserve development for the three months ended September 30, 2021 was $7.2 million in unfavorable development due to a one-time accounting adjustment. Additionally, there was a 0.3 loss ratio percentage point improvement in the current accident year non-catastrophe loss ratio for the comparative periods.

Loss and loss adjustment expenses was $890.9 million for the nine months ended September 30, 2021 compared to $883.0 million for the same period ended 2020. The consolidated loss ratio for the nine months ended September 30, 2021 was 62.5%, compared to 67.2% for the same period in 2020, driven by a 0.8 loss ratio point improvement in the current accident year non-catastrophe loss ratio, largely due to Syndicate 1200 driven by rate improvements achieved over the last several quarters. The loss ratio was also favorably impacted by a 0.1 loss ratio point improvement in net prior-year reserve development, as we experienced net unfavorable prior-year reserve development of $6.0 million for the nine months ended September 30, 2021, primarily attributable to the one time accounting adjustment. Net unfavorable prior-year reserve development was $6.1 million for the nine months ended September 30, 2020. The period-over-period impact from catastrophe losses declined for the first nine months of 2021 compared to the same period in 2020 (3.8 loss ratio point favorable impact). Catastrophe losses in the first nine months of 2021 included losses related to COVID-19 claims of $12.0 million, with the remaining $73.9 million being attributable to $47.4 million in losses resulting from Winter Storm Uri, $18.3 from Hurricane Ida and $8.2 million from various small U.S. storms.

The following table summarizes the above referenced prior-year loss reserve development for the nine months ended September 30, 2021 with respect to net loss reserves by line of business as of December 31, 2020. Our loss and loss adjustment expenses, including the prior-year loss reserve development shown in the following table, are further discussed by reporting segment below under the heading “Segment Results.”


(in millions)	Net Reserves 2020		Net Reserve Development (Favorable)/ Unfavorable		Percent of 2020 Net Reserves
General liability	$	1,587.4	$	29.3	1.8	%
Workers compensation	284.9		3.8		1.3	%
Syndicate Liability	239.1		1.5		0.6	%
Commercial multi-peril	233.4		(18.4)		(7.9)	%
Syndicate and US special property	108.0		13.3		12.3	%
Commercial auto liability	86.9		3.5		4.0	%
Syndicate specialty	76.0		(17.2)		(22.6)	%
Fidelity/Surety	38.4		(10.7)		(27.9)	%
All other lines	252.0		0.9		0.4
Total	$	2,906.1	$	6.0	0.2	%

Consolidated gross reserves for losses and loss adjustment expenses were $5,439.5 million (including $140.7 million of reserves attributable to our Syndicate 1200 and 1910 trade capital providers) and $5,390.0 million (including $230.6 million of reserves attributable to our Syndicate 1200 and 1910 trade capital providers) as of September 30, 2021 and 2020, respectively. Our 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, it is possible that future loss development, favorable or unfavorable, may occur.

Consolidated underwriting, acquisition and insurance expenses for the three and nine months ended September 30, 2021 were $177.1 million and $530.8 million, respectively, compared to $161.9 million and $489.8 million for the same periods ending 2020. The expense ratio of 36.3% in the third quarter of 2021 was flat compared to the prior year third quarter as improvement in U.S. Operations was offset by a higher expense ratio in International Operations. The acquisition expense ratio of 17.1% and general and administrative expense ratio of 19.2% were both flat compared to the prior year third quarter. The expense ratios for the comparative nine month periods ended September 30, 2021 and 2020 were 37.3% and 37.2%, respectively.

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

Consolidated interest expense for the three and nine months ended September 30, 2021 was $5.5 million and $16.3 million, respectively, compared to $6.9 million and $21.7 million for the same periods in 2020. The decreases were due to a lower debt balance due to paying off our $125 million term loan in September 2020, as well as significant reductions in short-term LIBOR rates during the first three and nine months of 2021 as compared to the same periods in 2020.

Non-operating expenses represent costs not associated with our ongoing insurance or other operations, including severance expenses, certain legal costs, merger and acquisition and other transaction-related expenses, and certain non-recurring expenses. Non-operating expenses for the three and nine months ended September 30, 2021 of $8.2 million and $20.9 million, respectively, primarily related to non-recurring costs associated with closing certain U.S. offices, severance expenses and retention bonuses, as compared to $3.0 million and $9.8 million for the same periods in 2020. Certain prior year’s balances have been reclassified between underwriting, acquisition and insurance expenses and non-operating expenses to conform to current year’s presentation.

We are primarily engaged in writing property and casualty insurance. We have two ongoing reporting segments: U.S. Operations and International Operations. Additionally, 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 products, production sources, distribution strategies and regulatory environment, in determining how to aggregate reporting segments.

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

•Property includes both property insurance and reinsurance products. Insurance products cover commercial properties primarily in North America with some international covers. Reinsurance covers underlying exposures located throughout the world, including the United States. These offerings include coverages for man-made and natural disasters. With the sale of our reinsurance business in the fourth quarter of 2020, we do not anticipate writing significant new reinsurance business going forward.

•Liability includes a broad range of primary and excess casualty products primarily underwritten as insurance and, to a lesser extent reinsurance, for risks on both an admitted and non-admitted basis in the United States. Internationally, Argo Group underwrites non-U.S. casualty risks primarily exposed in the United Kingdom, Canada and Australia.

•Professional includes various professional lines products including errors and omissions and management liability coverages (including directors and officers).

•Specialty includes niche insurance coverages including marine and energy, accident and health and surety product offerings.

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 combined basis under consolidated net investment income rather than within or by segment.

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


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2021			2020			2021			2020
Gross written premiums	$	562.5		$	542.4		$	1,564.9		$	1,499.1
Earned premiums	$	323.5		$	298.7		$	952.4		$	902.8
Losses and loss adjustment expenses	203.9			205.5			583.1			566.3
Underwriting, acquisition and insurance expenses	104.7			98.2			318.2			289.6
Underwriting income	14.9			(5.0)			51.1			46.9
Net investment income	29.2			30.1			91.7			56.1
Interest expense	(3.5)			(4.0)			(10.6)			(13.1)
Fee and other income (expense), net	(0.1)			(0.1)			(0.6)			(0.5)
Non-operating expenses	(0.6)			(0.9)			(1.5)			(1.2)
Income before income taxes	$	39.9		$	20.1		$	130.1		$	88.2
Loss ratio	63.0		%	68.8		%	61.2		%	62.7		%
Expense ratio	32.4		%	32.9		%	33.4		%	32.1		%
Combined ratio	95.4		%	101.7		%	94.6		%	94.8		%

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,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	323.5			$	298.7




Losses and loss adjustment expenses, as reported	$	203.9	63.0	%	$	205.5	68.8	%
Less:
Favorable (unfavorable) prior accident year loss development	(0.2)		(0.1)	%	3.2		1.1	%
Catastrophe losses, including COVID-19	(10.0)		(3.1)	%	(26.3)		(8.8)	%
Current accident year non-catastrophe losses (non-GAAP)	$	193.7	59.8	%	$	182.4	61.1	%
Expense ratio			32.4	%			32.9	%
Current accident year non-catastrophe combined ratio (non-GAAP)			92.2	%			94.0	%


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	952.4			$	902.8




Losses and loss adjustment expenses, as reported	583.1		61.2	%	566.3		62.7	%
Less:
Favorable prior accident year loss development	0.7		0.1	%	0.5		0.1	%
Catastrophe losses, including COVID-19	(32.9)		(3.5)	%	(42.3)		(4.7)	%
Current accident year non-catastrophe losses (non-GAAP)	$	550.9	57.8	%	$	524.5	58.1	%
Expense ratio			33.4	%			32.1	%
Current accident year non-catastrophe combined ratio (non-GAAP)			91.2	%			90.2	%

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


	For the Three Months Ended September 30,
	2021				2020
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	73.5	$	35.7	$	90.8	$	36.6
Liability	306.3		170.1		291.6		165.2
Professional	129.8		81.3		111.7		63.3
Specialty	52.9		36.4		48.3		33.6
Total	$	562.5	$	323.5	$	542.4	$	298.7


	For the Nine Months Ended September 30,
	2021				2020
	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	203.2	$	116.5	$	237.5	$	117.3
Liability	837.8		501.2		804.4		507.4
Professional	362.0		227.7		312.7		177.4
Specialty	161.9		107.0		144.5		100.7
Total	$	1,564.9	$	952.4	$	1,499.1	$	902.8

The growth in gross written and net earned premiums for the three and nine months ending September 30, 2021 compared to the same periods in 2020 was driven by the favorable rate environment for the directors and officers products, new business growth from the errors and omissions products and the delegated authority programs.

Gross written and net earned premiums for the three and nine months ended September 30, 2021 increased compared to the same periods in 2020 due to growth achieved primarily in surety.

Loss and Loss Adjustment Expenses

Loss and loss adjustment expenses were $203.9 million and $205.5 million for the three months ended September 30, 2021 and 2020, respectively. The loss ratio for the third quarter of 2021 was 63.0% compared to 68.8% for the third quarter of 2020. The decreased loss ratio was driven by a 5.7 loss ratio point decline in catastrophe losses, which includes COVID-19 claims and a 1.3 loss ratio point decline in the current accident year non-catastrophe loss ratio. The impact from net unfavorable prior-year reserve development was 0.1 loss ratio points for the third quarter of 2021 compared to 1.1 loss ratio points of favorable reserve development for the third quarter of 2020.

Loss and loss adjustment expenses were $583.1 million and $566.3 million for the nine months ended September 30, 2021 and 2020, respectively. The loss ratios for the nine months ended September 30, 2021 and 2020 were 61.2% and 62.7%, respectively. The reduced loss ratio in the first nine months of 2021 was driven by a 1.2 loss ratio point impact from a decrease in catastrophe losses, which includes COVID-19-related claims in 2020, as well as an improvement of 0.3 loss ratio point in the current accident year non-catastrophe loss ratio. The impact from net favorable prior-year reserve development was 0.1 loss ratio points for each of the comparative periods.

The current accident year non-catastrophe loss ratios for the three and nine months ended September 30, 2021 were 59.8% and 57.8%, respectively, compared to 61.1% and 58.1% for the three and nine months ended September 30, 2020, respectively. The current accident year non-catastrophe loss ratio for the three months ended September 30, 2020 was impacted by an increase to the professional loss ratio and a large property loss.

Net unfavorable prior-year reserve development for the third quarter of 2021 was $0.2 million. Net favorable prior year development for the first nine months of 2021 was $0.7 million. The net favorable prior year reserve development for the first nine months of 2021 primarily related to our surety business unit partially offset by unfavorable movements in liability and professional lines. Net favorable prior-year reserve development for 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 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.

Underwriting, acquisition and insurance expense were $104.7 million and $318.2 million for the three and nine months ended September 30, 2021, respectively, compared to $98.2 million and $289.6 million for the same periods in 2020. The expense ratios for the three and nine months ended September 30, 2021 were 32.4% and 33.4%, respectively, compared to 32.9% and 32.1% for the three and nine months ended September 30, 2020. The improvement in the expense ratio for the third quarter was primarily due to higher ceding commissions and growth in net earned premiums outpacing growth in the non-acquisition expenses. The decline in the expense ratio for the nine months ended September 30, 2021 was due to higher acquisition expenses as a result of business mix, higher gross commissions and lower ceding commissions.

International Operations

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


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(in millions)	2021			2020			2021			2020
Gross written premiums	$	312.9		$	347.7		$	881.9		$	1,016.2
Earned premiums	$	163.9		$	146.7		$	471.1		$	410.8
Losses and loss adjustment expenses	103.8			113.0			301.2			305.6
Underwriting, acquisition and insurance expenses	64.7			56.9			188.8			174.8
Underwriting loss	(4.6)			(23.2)			(18.9)			(69.6)
Net investment income	12.3			9.9			38.2			19.0
Interest expense	(1.3)			(1.9)			(4.2)			(6.2)
Fee and other (expense) income, net	1.0			0.7			1.5			2.5
Non-operating expenses	(0.5)			(0.2)			(2.0)			(0.2)
Income (loss) before income taxes	$	6.9		$	(14.7)		$	14.6		$	(54.5)
Loss ratio	63.3		%	77.1		%	63.9		%	74.4		%
Expense ratio	39.5		%	38.7		%	40.1		%	42.5		%
Combined ratio	102.8		%	115.8		%	104.0		%	116.9		%


	For the Three Months Ended September 30,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	163.9			$	146.7




Losses and loss adjustment expenses, as reported	$	103.8	63.3	%	$	113.0	77.1	%
Less:
Favorable (unfavorable) prior accident year loss development	(2.0)		(1.2)	%	5.6		3.8	%
Catastrophe losses, including COVID-19	(17.3)		(10.5)	%	(44.9)		(30.6)	%
Current accident year non-catastrophe losses (non-GAAP)	$	84.5	51.6	%	$	73.7	50.3	%
Expense ratio			39.5	%			38.7	%
Current accident year non-catastrophe combined ratio (non-GAAP)			91.1	%			89.0	%


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Amount		Ratio		Amount		Ratio
Earned premiums	$	471.1			$	410.8




Losses and loss adjustment expenses, as reported	301.2		63.9	%	305.6		74.4	%
Less:
Favorable (unfavorable) prior accident year loss development	(0.1)		—	%	4.5		1.1	%
Catastrophe losses, including COVID-19	(53.0)		(11.2)	%	(85.9)		(21.0)	%
Current accident year non-catastrophe losses (non-GAAP)	$	248.1	52.7	%	$	224.2	54.5	%
Expense ratio			40.1	%			42.5	%
Current accident year non-catastrophe combined ratio (non-GAAP)			92.8	%			97.0	%

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,
	2021				2020
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	87.3	$	28.3	$	161.0	$	44.3
Liability	69.2		33.5		73.4		26.7
Professional	62.5		43.8		49.7		29.9
Specialty	93.9		58.3		63.6		45.8
Total	$	312.9	$	163.9	$	347.7	$	146.7


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Gross Written		Net Earned		Gross Written		Net Earned
Property	$	247.8	$	104.2	$	416.5	$	115.6
Liability	192.0		99.2		185.8		73.0
Professional	168.7		113.3		156.7		88.0
Specialty	273.4		154.4		257.2		134.2
Total	$	881.9	$	471.1	$	1,016.2	$	410.8

The decrease in gross written premiums for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 was primarily due to the sale of Ariel Re. The sale of Ariel Re also drove the decrease in net earned premiums for the three months ended September 30, 2021 as compared to the same period in 2020. The decrease in net earned premiums for the nine months ended September 30, 2021 as compared to the same period in 2020 was driven by the sale of Ariel Re, partially offset by growth in Syndicate 1200 due to reducing our use of third-party capital at Lloyd’s, continued improvement in the rate environment and a reduction in ceded premium due to the non-renewal of a multi-year reinsurance contract following the reductions in gross catastrophe exposures during the first quarter of 2021. However, a mid-year property catastrophe reinsurance cover was purchased on a groupwide basis to manage exposures through the windstorm season.

The reduction in gross written premiums for the three months ended September 30, 2021 as compared to the same period in 2020 was primarily due to the sale of Ariel Re and lower premium from our European Operations where we have stopped writing new business. This was partially offset by growth in Syndicate 1200, where for 2021 we introduced the International Casualty Treaty Reinsurance Business. The increase in gross written premiums for the nine months ended September 30, 2021 as compared to the same periods in 2020 was driven by the aforementioned premium growth in Syndicate 1200, combined with growth in Bermuda Insurance where we are benefiting from favorable rate changes and new business accounts, partially offset by lower premiums due to the sale of Ariel Re and placing our European Operations into run-off. These factors also drove the increase in net earned premiums for the three and nine months ended September 30, 2021 as compared to the same period in 2020.

The increase in gross written premiums for the three months and nine months ended September 30, 2021 as compared to the same period in 2020 was driven by Syndicate 1200 as a result of favorable rate changes and increased new business opportunities, partially offset by lower premium from our European Operations, which have been placed into run-off. The increase in net earned premiums for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 was due to increases in Syndicate 1200 from reducing our use of third-party capital at Lloyd’s and the favorable rate environment, as well as growth in Bermuda Insurance driven by favorable rate changes and new business opportunities.

The increase in gross written premiums for the three months ended September 30, 2021 as compared to the same period in 2020 was driven by growth in Syndicate 1200 arising from political risks, and the new political violence class of business. The increase in gross written premiums for the nine months ended September 30, 2021 as compared to the same period in 2020 was primarily driven by growth in Syndicate 1200, arising from political risks and the new political violence class of business, partially offset by lower premium due to the sale of Ariel Re. The increase in net earned premiums for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 was driven by Syndicate 1200 due to the aforementioned premium growth and decreased use of third-party capital at Lloyd’s, as well as our Latin American operation as a result of growth in our Brazilian cargo marine business.

Loss and loss adjustment expenses were $103.8 million and $113.0 million for the three months ended September 30, 2021 and 2020, respectively. The loss ratio for the third quarter of 2021 was 63.3% compared to 77.1% for the third quarter of 2020. The decreased loss ratio was driven by a 20.1 loss ratio point decrease in catastrophe losses, which includes COVID-19 claims, partially offset by a 1.3 loss ratio point increase in the current accident year non-catastrophe loss ratio, and a 5.0 loss ratio point period-over-period increase in the net unfavorable prior-year reserve development.

Loss and loss adjustment expenses were $301.2 million and $305.6 million for the nine months ended September 30, 2021 and 2020, respectively. The loss ratios for the nine months ended September 30, 2021 and 2020 were 63.9% and 74.4%, respectively. The decreased loss ratio in the first nine months of 2021 was driven by a 9.8 loss ratio point decrease in catastrophe losses, which includes COVID-19 claims and a 1.8 loss ratio point decrease in the current accident year non-catastrophe loss ratio, partially offset by a 1.1 loss ratio point period-over-period increase in the net unfavorable prior-year reserve development.

The current accident year non-catastrophe loss ratios for the three and nine months ended September 30, 2021 were 51.6% and 52.7%, respectively, compared to 50.3% and 54.5% for the three and nine months ended September 30, 2020. The increase in the ratio for the comparative three month periods is primarily due to ceded reinsurance reinstatement premiums associated with Hurricane Ida in 2021. Also, the three months ended September 30, 2020 benefited from reduced claim activity due to the economic slowdown. The decrease in the ratio for the comparative nine month period is primarily due to rate improvements achieved over the last several quarters and a decrease in large loss activity in Syndicate 1200.

Net unfavorable prior-year reserve development was $2.0 million for the third quarter of 2021, primarily related to $7.2 million in unfavorable development due to a one-time accounting adjustment, partially offset by favorable liability experience in Syndicate 1200. Net unfavorable prior-year reserve development was $0.1 million for the first nine months of 2021, primarily related to unfavorable development due to the one-time accounting adjustment and large claim movements at Argo Insurance Bermuda, partially offset by favorable development in property lines, including losses associated with prior year catastrophe losses. Net unfavorable 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.

Underwriting, acquisition and insurance expense were $64.7 million and $188.8 million for the three and nine months ended September 30, 2021, respectively, compared to $56.9 million and $174.8 million for the same periods in 2020. The expense ratio for the three and nine months ended September 30, 2021 were 39.5% and 40.1%, respectively, compared to 38.7% and 42.5% for the same periods in 2020. The increase in the expense ratio for the three months ended September 30, 2021 was primarily driven by decreased earned premiums due to reinstatement premiums on outwards placed reinsurance. The improvement in the expense ratio for the nine months ended September 30, 2021 was driven by growth in net earned premiums, which exceeded the growth in non-acquisition expenses and were coupled with reduced acquisition expense ratios primarily due to mix of business.

The following table summarizes the results of operations for Run-off Lines:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in millions)	2021		2020		2021		2020
Earned premiums	$	0.1	$	0.1	$	0.4	$	0.3
Losses and loss adjustment expenses	4.0		10.4		6.6		11.1
Underwriting, acquisition and insurance expenses	0.5		0.5		0.8		1.6
Underwriting loss	(4.4)		(10.8)		(7.0)		(12.4)
Net investment income	0.9		1.5		2.8		2.8
Interest expense	(0.1)		(0.2)		(0.3)		(0.7)

Loss before income taxes	$	(3.6)	$	(9.5)	$	(4.5)	$	(10.3)

Losses and loss adjustment expenses for the three months ended September 30, 2021 were the result of unfavorable loss reserve development on prior accident years in risk management workers compensation and an individual environmental loss. Loss and loss adjustment expenses for the three months ended September 30, 2020 were the result of 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 lines, partially offset by favorable development in risk management workers compensation.

Losses and loss adjustment expenses for the nine months ended September 30, 2021 were the result of unfavorable loss reserve development on prior accident years in risk management workers compensation, other run-off lines and an individual environmental loss. Losses and loss adjustment expenses for the nine months ended September 30, 2020 were the result of unfavorable loss reserve development on prior accident years in asbestos and environmental and other run-off lines, partially offset by favorable development in risk management workers compensation.

The following table represents a rollforward of total gross and net reserves for the asbestos and environmental exposures in our Run-off Lines, along with the ending balances of all other reserves within Run-off Lines. Amounts in the net column are reduced by reinsurance recoverables.


	For the Nine Months Ended September 30,
	2021				2020
(in millions)	Gross		Net		Gross		Net
Asbestos and environmental:
Loss reserves, beginning of the year	$	59.3	$	50.6	$	52.6	$	43.8
Incurred losses	2.5		2.4		20.0		17.1
Losses paid	(9.2)		(7.9)		(8.7)		(6.9)
Loss reserves - asbestos and environmental, end of period	52.6		45.1		63.9		54.0
Risk-management reserves	165.6		103.2		164.4		102.2
Run-off reinsurance reserves	—		—		0.5		0.5
Other run-off lines	12.3		7.3		15.7		10.1
Total loss reserves - Run-off Lines	$	230.5	$	155.6	$	244.5	$	166.8

Underwriting, acquisition and insurance expenses for Run-off Lines consist primarily of administrative expenses. The decreases in underwriting expenses for the three and nine months ended September 30, 2021, as compared to the same periods ended 2020, were primarily attributable to lower overhead expenses.

Liquidity and Capital Resources

The primary sources of our cash flows are premiums, reinsurance recoveries, proceeds from sales and redemptions of investments and investment income. The primary cash outflows are claim payments, loss adjustment expenses, reinsurance costs, purchases of investments and operating expenses. Additional cash outflow occurs through payments of underwriting and acquisition costs such as commissions, taxes, payroll and general overhead expenses. Our management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows for at least the next twelve months. Should the need for additional cash arise, we believe we will have access to additional sources of liquidity.

Our liquidity and capital resources were not materially impacted by COVID-19 and related economic conditions during the first nine months of 2021.

On October 12, 2020, ArgoGlobal, the Lloyd’s insurer and member of Argo Group, announced a RITC transaction with legacy specialist RiverStone. Upon completion of the transaction, RiverStone undertook an RITC of ArgoGlobal’s Syndicate 1200 for 2017 and prior years with net technical provision of approximately $250.0 million. The transaction received regulatory approval on February 1, 2021, with the RITC becoming effective on January 1, 2021, and had no impact on our consolidated results of operations.

Cash provided by operating activities can fluctuate due to timing differences in the collection of premiums and reinsurance recoveries and the payment of losses, expenses and outward reinsurance premiums. For the nine months ended September 30, 2021 and 2020, net cash provided by operating activities was $40.8 million and $101.4 million, respectively. The decrease in net cash flows provided by operating activities for the first nine months of 2021, as compared to the same period in 2020, was attributable to various fluctuations within our operating activities, and primarily related to the timing of reinsurance recoveries and premium cash receipts in the respective periods.

For the nine months ended September 30, 2021 and 2020, net cash provided by investing activities was $50.6 million and $80.7 million, respectively. The decrease in cash provided by investing was mainly the result of the decrease in the proceeds from sale of fixed maturities and short-term investments, partially offset by a decrease in cash used to purchase fixed maturities and an increase in the proceeds from maturities of fixed maturities. As of September 30, 2021, $508.6 million of the investment portfolio was invested in short-term investments.

For the nine months ended September 30, 2021 and 2020, net cash used in financing activities was $39.4 million and $13.8 million, respectively. During the nine months ended September 30, 2021 and 2020, we did not repurchase any common shares. We paid cash dividends to our common shareholders totaling $32.7 million and $32.2 million during the nine months ended September 30, 2021 and 2020, respectively. We paid cash dividends to our preferred shareholders totaling $7.9 million and $2.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Argo Common Shares and Dividends

For the nine months ended September 30, 2021, our Board of Directors declared quarterly cash dividends in the aggregate amount of $0.93 per share. Cash dividends paid for the nine months ended September 30, 2021 totaled $32.7 million.

On November 5, 2021, our Board of Directors declared a quarterly cash dividend in the amount of $0.31 on each share of common stock outstanding. The dividend will be paid on December 15, 2021 to our shareholders of record on November 30, 2021.

On May 3, 2016, our Board of Directors authorized the repurchase of up to $150.0 million of our common shares (“2016 Repurchase Authorization”). The 2016 Repurchase Authorization superseded all the previous repurchase authorizations. The program allows the Company to repurchase its shares opportunistically from time to time when it believes that doing so would enhance long-term shareholder value. The repurchase authorization does not have a fixed expiration. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions with financial institutions or a combination of the foregoing. Shares purchased are being held as treasury shares in accordance with the provisions of the Bermuda Companies Act 1981. As of September 30, 2021, availability under the 2016 Repurchase Authorization for future repurchases of our common shares was $53.3 million.

Preferred Stock Dividends

For the nine months ended September 30, 2021, our Board of Directors declared quarterly cash dividends in the aggregate amount of $1,312.500 per share on our Series A Preference Shares. Cash dividends paid for the nine months ended September 30, 2021 totaled $7.9 million.

On November 5, 2021, our Board of Directors declared a quarterly cash dividend in the amount of $437.500 per share on our Series A Preference Shares. Holders of Depositary Shares each representing a 1/1,000th interest in a share of Series A Preferred Stock will receive $0.437500 per Depositary Share. The dividend will be paid on December 15, 2021 to our shareholders of record on November 30, 2021.

Revolving Credit Facility and Term Loan

On November 2, 2018, each of Argo Group, Argo Group U.S., Inc., Argo International Holdings Limited, and Argo Underwriting Agency Limited (the “Borrowers”) entered into a $325 million credit agreement (the "Credit Agreement") with JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement replaced the prior $325 million Credit Agreement (the “Prior Agreement”), dated as of March 3, 2017. In addition, the Credit Agreement provided for a $200 million revolving credit facility, and the commitments thereunder shall expire on November 2, 2023 unless extended in accordance with the terms of the Credit Agreement.

Borrowings under the Credit Agreement may be used for general corporate purposes, including working capital and permitted acquisitions, and each of the Borrowers have agreed to be jointly and severally liable for the obligations of the other Borrowers under the Credit Agreement.

The Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers could be required to repay all amounts outstanding under the Credit Agreement. Lenders holding at least a majority of the loans and commitments under the Credit Agreement could elect to accelerate the maturity of the loans and/or terminate the commitments under the Credit Agreement upon the occurrence and during the continuation of an event of default. No defaults or events of defaults have occurred as of the date of this filing.

Included in the Credit Agreement is a provision that allows up to $200.0 million of the revolving credit facility to be used for letters of credit (“LOCs”), subject to availability. As of September 30, 2021, there were no borrowings outstanding and $40.3 million in LOCs against the revolving credit facility.

In September 2012, Argo Group (the “Parent Guarantor”), through its subsidiary Argo Group US (the “Subsidiary Issuer”), issued ~~$143,750,000~~$144 million 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, “Simplifying the Presentation~~

(in millions)

September 30, 2017

December 31, 2016

Senior unsecured fixed rate notes

Principal

$
143.8

$
143.8

Less: unamortized debt issuance costs

(4.2
)

(4.3
)
Senior unsecured fixed rate notes, less unamortized debt
issuance costs

$
139.6

$
139.5

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 and 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	$	15.0	$	3,863.4	$	1,435.1	$	—	$	5,313.5
Cash	1.9		38.2		161.9		—		202.0
Accrued investment income	—		16.8		4.1		—		20.9
Premiums receivable	—		318.8		383.1		—		701.9
Reinsurance recoverables	—		1,798.4		1,155.6		—		2,954.0
Goodwill and other intangible assets, net	—		118.5		89.3		—		207.8
Current income taxes receivable, net	—		—		3.8		—		3.8
Deferred tax assets, net	—		11.8		31.0		—		42.8
Deferred acquisition costs, net	—		106.2		69.5		—		175.7
Ceded unearned premiums	—		358.1		214.0		—		572.1
Operating lease right-of-use assets	5.6		58.4		23.7		—		87.7
Other assets	7.2		106.9		117.3		—		231.4
Assets held for sale	—		4.2		0.3		—		4.5
Intercompany notes receivable	—		70.6		(70.6)		—		—
Investments in subsidiaries	1,893.1		—		—		(1,893.1)		—
Total assets	$	1,922.8	$	6,870.3	$	3,618.1	$	(1,893.1)	$	10,518.1
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	—	$	3,543.6	$	1,895.9	$	—	$	5,439.5
Unearned premiums	—		1,002.8		537.4		—		1,540.2
Funds held and ceded reinsurance payable, net	—		481.4		356.6		—		838.0
Debt	28.4		284.6		144.1		—		457.1
Current income taxes payable, net	—		9.5		(9.5)		—		—

Accrued underwriting expenses and other liabilities	3.2		111.7		140.3		—		255.2
Operating lease liabilities	5.5		66.3		28.7		—		100.5
Due to (from) affiliates	(1.9)		(0.7)		0.7		1.9		—

Total liabilities	35.2		5,499.2		3,094.2		1.9		8,630.5
Total shareholders' equity	1,887.6		1,371.1		523.9		(1,895.0)		1,887.6
Total liabilities and shareholders' equity	$	1,922.8	$	6,870.3	$	3,618.1	$	(1,893.1)	$	10,518.1

(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 BALANCE SHEET

DECEMBER 31, ~~2016~~

2020

(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	$	3,628.8	$	1,626.4	$	—	$	5,255.8
Cash	3.0		17.4		128.4		—		148.8
Accrued investment income	—		16.7		5.1		—		21.8
Premiums receivable	—		267.5		412.3		—		679.8
Reinsurance recoverables	—		1,761.2		1,247.8		—		3,009.0
Goodwill and other intangible assets, net	—		118.5		89.3		—		207.8
Current income taxes receivable, net	—		(5.6)		8.6		—		3.0
Deferred tax assets, net	—		(4.6)		21.3		—		16.7
Deferred acquisition costs, net	—		97.1		66.5		—		163.6
Ceded unearned premiums	—		340.6		234.5		—		575.1
Operating lease right-of-use assets	6.2		51.7		24.1		—		82.0
Other assets	14.5		153.5		126.7		—		294.7
Assets held for sale	—		7.4		0.3		—		7.7
Intercompany note receivable	—		59.0		(59.0)		—		—
Investments in subsidiaries	1,881.9		—		—		(1,881.9)		—
Total assets	$	1,906.2	$	6,509.2	$	3,932.3	$	(1,881.9)	$	10,465.8
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment expenses	$	—	$	3,348.7	$	2,057.3	$	—	$	5,406.0
Unearned premiums	—		951.2		513.6		—		1,464.8
Funds held and ceded reinsurance payable, net	—		489.0		526.1		—		1,015.1
Debt	28.4		284.5		145.8		—		458.7


Accrued underwriting expenses and other liabilities	6.3		67.8		93.5		—		167.6
Operating lease liabilities	6.2		60.4		29.2		—		95.8
Due to (from) affiliates	7.5		0.9		(0.9)		(7.5)		—

Total liabilities	48.4		5,202.5		3,364.6		(7.5)		8,608.0
Total shareholders' equity	1,857.8		1,306.7		567.7		(1,874.4)		1,857.8
Total liabilities and shareholders' equity	$	1,906.2	$	6,509.2	$	3,932.3	$	(1,881.9)	$	10,465.8

~~CONDENSED CONSOLIDATING STATEMENT OF LOSS~~

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

~~(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.~~

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

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

(2)Includes all Argo Group parent company eliminations.

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF INCOME

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

~~(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.~~

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

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

2021

(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


	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	$	—	$	947.9	$	476.0	$	—	$	1,423.9
Net investment income	—		101.1		42.1		—		143.2

Net realized investment (losses) gains	—		26.3		6.2		—		32.5
Total revenue	—		1,075.3		524.3		—		1,599.6
Expenses:
Losses and loss adjustment expenses	—		580.3		310.6		—		890.9
Underwriting, acquisition and insurance expenses	0.4		339.8		190.6		—		530.8
Non-operating expenses	1.3		17.7		1.9		—		20.9
Interest expense	0.9		11.1		4.3		—		16.3
Fee and other expense (income), net	—		(0.2)		(1.6)		—		(1.8)
Foreign currency exchange losses	—		—		4.4		—		4.4
Total expenses	2.6		948.7		510.2		—		1,461.5
(Loss) income before income taxes	(2.6)		126.6		14.1		—		138.1
Provision (benefit) for income taxes	—		26.2		(10.1)		—		16.1
Net (loss) income before equity in earnings of subsidiaries	(2.6)		100.4		24.2		—		122.0
Equity in undistributed earnings of subsidiaries	124.6		—		—		(124.6)		—
Net income (loss)	$	122.0	$	100.4	$	24.2	$	(124.6)	$	122.0
Dividends on preferred shares	$	7.9	$	—	$	—	$	—	$	7.9
Net income (loss) attributable to common shareholders	$	114.1	$	100.4	$	24.2	$	(124.6)	$	114.1

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

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

~~CONDENSED CONSOLIDATING STATEMENT OF INCOME~~

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

~~(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.~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

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

~~(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.~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

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

~~(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.~~

~~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 compared with the three and nine months ended September 30, 2016, and also a discussion of our financial condition as of September 30, 2017. 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 filed with the Securities and Exchange Commission (“SEC”) on February 24, 2017, including the audited Consolidated Financial Statements and notes thereto.

~~Forward Looking Statements~~

Management’s Discussion and Analysis of Financial Condition and Results 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 looking 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 significant 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 relating to existing agreements, heightened competition, changes in pricing environments and changes in asset valuations. For a more detailed discussion of risks and uncertainties, see our public filings made with the SEC. We undertake no obligation to publicly update any forward looking statements.

~~Consolidated Results of Operations~~

For the three and nine months ended September 30, 2017, we reported a net loss of $61.3 million ($2.04 per diluted share) and net income of $21.4 million ($0.69 per diluted 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, we reported net income of $55.2 million ($1.80 per diluted share) and $113.8 million ($3.68 per diluted share), respectively.

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Gross written premiums

$
805.1

$
585.4

$
2,090.9

$
1,665.8

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

(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

Loss ratio

83.8
%

57.9
%

66.7
%

56.8
%
Expense ratio

42.7
%

38.3
%

40.6
%

38.4
%
Combined ratio

126.5
%

96.2
%

107.3
%

95.2
%

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

For the Three Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
245.1

$
75.5

$
145.8

$
81.8

Liability

333.5

182.8

267.3

170.7

Professional

89.0

53.5

75.0

43.6

Specialty

137.5

77.5

97.3

62.6

Total
$
805.1

$
389.3

$
585.4

$
358.7

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 consolidated gross written premiums 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 consolidated earned premiums for the three and nine months ended September 30, 2017 includes Ariel Re earned premiums of $26.0 million and $90.9 million, respectively. Partially offsetting these increases was the reduction in our participation percentage for the Syndicate 1200 operations, from 53.5% for 2016 to 46.0% for 2017. Additionally, during 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 compared to the same period ended 2016 was primarily attributable to decreased investment income from our alternative investment portfolio and increased investment related expenses, partially offset by increased investment income on fixed maturities. For the three months ended September 30, 2017, net investment income from our alternative investment portfolio decreased $4.0 million, from $9.8 million for the same period ended 2016, 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 compared to the same period ended 2016 was primarily attributable to a $14.0 million increase in the net investment income of our alternative investment portfolio and a $7.0 million increase in income from our fixed maturities portfolio, partially offset by increased investment 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 the nine months ended September 30, 2017.

Consolidated net realized investment and other gains of $6.0 million for the three months ended September 30, 2017 consisted of $9.7 million in realized gains from the sale of equity and fixed maturity securities and $1.3 million in realized gains from other invested assets, primarily options. Partially offsetting these realized gains was $4.8 million of realized loss on our foreign currency forward contracts. For the three months ended September 30, 2017, we recognized $0.2 million in other-than-temporary impairment losses within our equity and fixed maturity portfolios. Consolidated net realized investment and other gains of $17.7 million for the three months ended September 30, 2016 consisted of $24.9 million in realized gains from the sale of fixed maturity and equity securities and $0.4 million from other invested assets. Partially offsetting these realized gains was $5.2 million of foreign currency losses, primarily from the sale of fixed maturities. Additionally, for the three months ended September 30, 2016, we recognized $2.4 million in other-than-temporary impairment losses within our fixed maturity and equity portfolios. Consolidated net realized investment and other gains of $25.1 million for the nine months ended September 30, 2017 consisted of $44.6 million in realized gains from the sale of fixed maturity 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, including $10.4 million on our foreign currency forward

contracts and $7.9 million on our fixed maturity and equity securities portfolios. Additionally, 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 with respect to prior year loss reserves by line of business for the nine months ended September 30, 2017.~~

(in millions)

2016
Net Reserves

Net Reserve
Development
(Favorable)/
Unfavorable

Percent of
2016 Net
Reserves

General and professional liability

$
1,028.9

$
10.0

1.0
%
Workers compensation

312.9

(7.6
)

-2.4
%
Lloyd's liability

198.1

11.4

5.8
%
Commercial multi-peril

156.6

(2.6
)

-1.7
%
Commercial auto liability

113.6

(6.5
)

-5.7
%
Property

83.6

11.0

13.2
%
Reinsurance - nonproportional assumed property

65.6

(4.1
)

-6.3
%
Fidelity/Surety

38.4

(6.7
)

-17.4
%
All other lines

182.5

(0.5
)

-0.3
%
Total

$
2,180.2

$
4.4

0.2
%

Consolidated gross reserves for losses and loss adjustment expenses were $4,305.9 million (including $273.3 million of reserves attributable to our Lloyd’s Syndicate 1200’s trade capital providers) and $3,284.8 million (including $142.7 million of reserves attributable to our Lloyd’s Syndicate 1200’s trade capital providers) as of September 30, 2017 and 2016, 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 favorable or unfavorable loss development, which may be material, will not occur.

Consolidated underwriting, insurance and acquisition expenses were $166.1 million and $474.4 million for the three and nine months ended September 30, 2017, respectively compared to $137.4 million and $403.0 million for the same periods ended 2016. Ariel Re contributed $8.3 million and $24.5 million in underwriting expenses for the three and nine months ended September 30, 2017, respectively. The expense ratio for the three and nine months ended September 30, 2017 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 purchased 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 expenses 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 million and $20.4 million for the three and nine months ended September 30, 2017, respectively, compared to $4.9 million and $14.6 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, 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, the U.S. Dollar weakened against the British Pound, the Euro, the Canadian Dollar and the Australian Dollar. For the nine months ended September 30, 2017, the U.S. Dollar weakened against all major currencies. For the three and nine months ended September 30, 2016, the U.S. Dollar weakened against all major currencies, except for the British Pound.

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 provision for income taxes represents taxes on the net income or loss for our Belgium, Brazil, Ireland, Luxembourg, Malta, Switzerland, United Kingdom and United States 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 million and $21.1 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 million and $0.4 million of tax benefit for Ariel Re for the three and nine months ended September 30, 2017, respectively.

~~Segment Results~~

As discussed in Note 1 “Basis of Presentation” and Note 17 “Segment Information,” during the first quarter of 2017, we evaluated and modified the presentation of our reportable segments to reflect our new operating framework and management structure. As a result, 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, the Run-off Lines and Corporate segments include all other activity of Argo Group International Holdings, Ltd. and are included 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.

all intercompany eliminations.

~~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. 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,~~(2)Includes all Argo ~~underwrites worldwide casualty risks primarily exposed in the United Kingdom, Canada, and Australia.~~

~~Professional includes various professional lines products including Errors and Omissions, Management Liability (including Directors and Officers) and Cyber coverages.~~

~~Specialtyincludes niche insurance coverages including Marine & Energy, Accident & Health and Surety product offerings.~~

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

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 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,

(in millions)

2017

2016

2017

2016

Gross written premiums

$
428.9

$
360.8

$
1,128.9

$
970.2

Earned premiums

$
242.6

$
216.3

$
692.9

$
629.7

Losses and loss adjustment expenses

148.4

117.5

394.2

348.1

Underwriting, acquisition and insurance expenses

88.6

71.3

243.0

202.7

Underwriting income

5.6

27.5

55.7

78.9

Net investment income

18.8

20.3

66.0

55.8

Interest expense

(3.8
)

(2.2
)

(10.3
)

(6.8
)
Fee and other income

11.6

5.1

16.0

13.1

Fee and other expense

(3.5
)

(4.8
)

(8.5
)

(14.8
)
Income before income taxes

$
28.7

$
45.9

$
118.9

$
126.2

Loss ratio

61.2
%

54.3
%

56.8
%

55.3
%
Expense ratio

36.5
%

33.0
%

35.1
%

32.2
%
Combined ratio

97.7
%

87.3
%

91.9
%

87.5
%

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

For the Three Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
68.1

$
26.8

$
69.2

$
28.6

Liability

277.2

160.2

226.7

146.3

Professional

46.2

30.8

35.3

21.3

Specialty

37.4

24.8

29.6

20.1

Total
$
428.9

$
242.6

$
360.8

$
216.3

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

~~Property~~

The decline in gross written and earned premiums for property for the three months ended September 30, 2017 as compared to the same period ended 2016 was primarily attributable to planned reductions due to increased competition and the pressure on rates. Additionally, the 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 U.S. Operations by $5.2 million. The increase in gross written premiums for property for the nine months ended September 30, 2017 as compared to the same period ended 2016 was primarily attributable to growth in our fronting programs, which do not impact earned premiums, but result in a ceding commissions received. The decline in earned premiums for property for the nine months ended September 30, 2017 as 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 gross written premiums for the non-fronting programs which were primarily driven by increased competition and pressure on rates.

~~Liability~~

The increase in gross written and earned premiums for liability for the three and nine months ended September 30, 2017 as compared to the same periods ended 2016 was primarily attributable to capitalizing on targeted growth initiatives in the specialty and general casualty lines, growth in writings due to the upturn in the coal market and the introduction of new products in our programs division.

~~Professional~~

The increase in gross written and earned premiums within professional for the three and nine months ended September 30, 2017 as compared to the same periods ended 2016 was primarily attributable to new business within our management liability and errors and omissions lines.

~~Specialty~~

The increase in gross written and earned premiums for specialty 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.

The increase in 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, as well as lower net favorable loss reserve development on prior accident years. Catastrophe losses for the third quarter of 2017 totaled $17.2 million, primarily from Hurricanes Harvey and Irma, as compared to $4.5 million for the third quarter of 2016, mainly attributable to the Louisiana floods. Included in losses 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. Catastrophe losses during the first nine months of 2017 totaled $22.1 million, primarily from Hurricanes Harvey and Irma, as compared to $11.5 million for the same period ended 2016, which were mainly attributable to the Louisiana floods and other U.S. storms. Included in losses 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.

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 for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 primarily due to closing a transaction in the third quarter of 2017 related to transferring to a third party the distribution rights and operations of certain business managed on behalf of unaffiliated insurance companies.

~~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
%

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

For the Three Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
177.1

$
48.8

$
76.6

$
53.2

Liability

56.3

22.6

40.5

24.3

Professional

42.8

22.7

39.7

22.3

Specialty

100.1

52.7

67.7

42.5

Total
$
376.3

$
146.8

$
224.5

$
142.3

For the Nine Months Ended September 30,

2017

2016

(in millions)
Gross Written

Net Earned

Gross Written

Net Earned

Property
$
390.3

$
168.9

$
273.1

$
153.8

Liability

126.6

60.1

109.9

65.8

Professional

120.4

70.4

111.2

71.8

Specialty

324.7

175.5

201.1

127.1

Total
$
962.0

$
474.9

$
695.3

$
418.5

Ariel Re contributed $136.0 million of gross written premiums and $26.0 million of earned premiums for the three months ended September 30, 2017, and $255.5 million of gross written premiums and $90.9 million of 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 as compared to the same period in 2016 due to premiums written by Ariel Re, partially offset by reduced premiums 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.

~~Liability~~

The increase in gross written premiums for liability for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 was primarily attributable to growth 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 earned premiums for liability for the three and nine months ended September 30, 2017 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 in gross written premiums for professional lines for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 was primarily attributable to growth in our Bermuda, Brazil and European professional lines, directors and officers and cyber lines, partially offset by a decline in professional indemnity. Earned premiums for professional lines for the third quarter 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.

~~Specialty~~

The increase in gross written and earned premiums for specialty lines for the three and nine months ended September 30, 2017 as compared to the same periods ended 2016 was primarily attributable to premiums written by Ariel Re. For the three months ended September 30, 2017 Ariel Re contributed specialty lines gross written premiums of $32.6 million and earned premiums of $15.1 million, respectively. For the nine months ended September 30, 2017 Ariel Re contributed specialty lines gross written premiums 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 reductions in the aerospace division due to planned reductions to these exposures, as well as offshore energy due to continuing soft market conditions.

Included in losses 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 for the three and nine months ended September 30, 2017 as 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 related to the acquisition of Ariel Re. These adjustments increased the expense ratio by 4.6 percentage points and 1.4 percentage points for the three and nine months ended September 30, 2017, respectively. Conversely, Ariel Re’s earned premiums relative to the associated underwriting expenses favorably impacted our expense ratio for both the third quarter and first nine months of 2017. Ariel Re contributed $8.3 million and $24.5 million in underwriting expenses for the three and nine months ended September 30, 2017, respectively. Excluding the results of operations for Ariel Re and the $17.4 of earned premium adjustments recorded in the third quarter of 2017, the adjusted expense ratio for the three months ended September 30, 2017 was 39.9%. The adjusted expense ratio for the nine months ended September 30, 2017 was 39.7%. The increase in the adjusted expense ratio for both the third quarter 2017 and first nine months of 2017 as compared to the same periods in 2016 was primarily due to writing more binder business in Syndicate 1200, which has higher acquisition rates, as well as increased personnel expenses, outside services and depreciation charges.

Fee income and other income represent fees and profit commission derived from the management of third party capital for our underwriting syndicate at Lloyd’s. The decline in fee and other income for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 was primarily due to reduced profitability of our Lloyd’s syndicate. Fee and other expenses were comparable for the periods presented.

~~Run-off Lines~~

~~The following table summarizes the results of operations for the Run-off Lines segment:~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in millions)

2017

2016

2017

2016

Earned premiums

$
(0.1
)

$
0.1

$
—

$
0.3

Losses and loss adjustment expenses

12.0

11.4

16.1

17.6

Underwriting, acquisition and insurance
expenses

2.2

1.5

6.2

5.0

Underwriting loss

(14.3
)

(12.8
)

(22.3
)

(22.3
)
Net investment income

2.0

3.2

7.0

8.8

Interest expense

(0.4
)

(0.4
)

(1.1
)

(1.1
)
Loss before income taxes

$
(12.7
)

$
(10.0
)

$
(16.4
)

$
(14.6
)

Losses and loss adjustment expenses for the three months ended September 30, 2017 was the result of net unfavorable loss reserve development on prior accident years driven by $13.6 million for our asbestos exposure due to increasing defense costs and increase in the time claims remain open and $3.0 million in the other run-off lines, partially offset by net favorable loss reserve development on prior accident years of $4.6 million for the run-off risk management lines. Loss and loss adjustment expenses for the three months ended September 30, 2016 included net unfavorable loss reserve development on prior accident years of $5.7 million for our asbestos exposure due to greater than expected defense costs on our primary exposures, $3.7 million development in our risk management lines and $2.0 million in our other run-off lines.

Losses and loss adjustment expenses for the nine months ended September 30, 2017 was the result of net unfavorable loss reserve development on prior accident years driven by $13.6 million for our asbestos exposure due to increasing defense costs and increase in the time claims remain open and $5.2 million in other run-off lines, partially offset by net favorable loss reserve development on prior accident years of $2.7 million for the run-off risk management lines. Losses and loss adjustment expenses for the nine months ended September 30, 2016 included net unfavorable loss reserve development on prior accident years of $9.0 million for our asbestos exposure due to increased defense costs and a final settlement agreement with a large primary insured, $6.0 million in our risk management lines and $2.6 million in other run-off lines.

~~The following table represents a reconciliation of total gross and net reserves for the Run-off Lines. Amounts in the net column are reduced by reinsurance recoverable.~~

Nine Months Ended September 30,

2017

2016

(in millions)

Gross

Net

Gross

Net

Asbestos and environmental:

Loss reserves, beginning of the year

$
48.4

$
40.6

$
46.4

$
43.5

Incurred losses

12.5

15.2

15.6

10.5

Losses paid

(1.6
)

(5.2
)

(10.0
)

(10.0
)
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

Run-off reinsurance reserves

1.8

1.8

2.2

2.2

Other run-off lines

4.9

4.9

4.2

4.2

Total loss reserves - Run-off Lines

$
288.1

$
195.9

$
299.8

$
201.8

Underwriting, acquisition and insurance expenses for the Run-off Lines segment consists primarily of administrative expenses. The increase in underwriting expense for three and nine months ended September 30, 2017 as compared to the same periods ended 2016 was primarily attributable to increased overhead expenses and decreased policyholder dividends. In addition, underwriting expenses for the three and nine months ended September 30, 2016 were favorably impacted a $0.2 million and $0.5 million, respectively, primarily from the reduction in bad debt expenses due to the collection of a premiums receivable balance that was previously written off.

~~Liquidity and Capital Resources~~

The primary sources of our cash flows are premiums, reinsurance recoveries, proceeds from sales and redemptions of investments and investment income. The primary cash outflows are claim payments, loss adjustment expenses, reinsurance costs and operating expenses. Additional cash outflow occurs through payments of underwriting and acquisition costs such as commissions, taxes, payroll and general overhead expenses. Management believes that cash receipts from premiums, proceeds from investment sales and redemptions and investment income are sufficient to cover cash outflows in the foreseeable future. Should the need for additional cash arise, we believe we have access to additional sources of liquidity.

Cash provided by operating activities can fluctuate due to a timing difference in the collection of premiums and reinsurance recoveries and the payment of losses and expenses. For the nine months ended September 30, 2017, net cash provided by operating activities was $252.4 million, as compared to net cash provided by operating activities of $150.8 million for the nine months ended September 30, 2016. The increase in cash flows from operating activities in 2017 from 2016 is attributable to various fluctuations within our operating activities, primarily driven by the timing of reinsurance premium payments, reinsurance recoveries and premium cash receipts in the respective periods.

Net cash used in investing activities was $166.0 million for the nine months ended September 30, 2017, as compared to net cash used in investing activities of $83.4 million for the nine months ended September 30, 2016. Included in the $82.6 million net increase in cash used in investing activities was the $235.3 million cash outflow related to the purchase of Maybrooke, net of $130.1 million of cash acquired. The remaining increase in cash used in investing was mainly the result of the increase in cash used to purchase fixed maturity investments, partially offset by the proceeds from sales, maturities and calls of fixed maturities and short-term investments. As of September 30, 2017, $386.0 million of the investment portfolio was invested in short-term investments.

For nine months ended September 30, 2017, net cash provided by financing activities was $64.4 million, as compared to net cash used in financing activities of $64.5 million for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we borrowed $125.0 million as a term loan under our credit facility to help fund the acquisition of Maybrooke. During the nine months ended September 30, 2017 and 2016, we repurchased 565,534 and 815,196 shares of our common stock for a total cost of $36.6 million and $45.3 million, respectively. We paid cash dividends to our shareholders totaling $24.9 million and $19.8 million during the nine months ended September 30, 2017 and 2016, respectively.

~~Effective February 6, 2017, we completed the acquisition of Maybrooke Holdings, S.A. for $235.3 million. We drew $125.0 million under our Credit Agreement~~ in order to help fund the acquisition and paid the remaining $110.3 million with available cash on hand. In addition to the cash needs related to this acquisition, we will have continuing cash needs for administrative expenses, the payment of principal and interest on borrowings, shareholder dividends and taxes. Funds to meet these obligations will come primarily fromGroup parent company ~~cash, dividends and other payments from our insurance company subsidiaries and from our line of credit.~~

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 million credit agreement (“Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement replaced and terminated the original $175 credit agreement. The 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 Credit Agreement. In addition, the Credit Agreement includes a $125 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 credit agreement to help fund the acquisition of Maybrooke. At September 30, 2017, the $125.0 million drawn on this term loan remained outstanding, with a maturity date of March 3, 2019. The term loan bears interest based on a variable rate, which resets and is payable based on reset options we select pursuant to the terms of the Credit Agreement. ~~As of September 30, 2017, the interest rate on this debt was equal to the two-month LIBOR (1.30% at September 30, 2017) plus 150 basis points, or 2.80%.~~

Borrowings under the Credit Agreement may be used for general corporate purposes, including working capital and permitted acquisitions, and each of the Borrowers has agreed to be jointly and severally liable for the obligations of the other Borrowers under the Credit Agreement.

Included in the Credit Agreement is a provision that allows up to $200.0 million of the revolving credit facility to be used for letters of credit (“LOCs”), subject to availability. As of September 30, 2017, there were no borrowings outstanding and $0.5 million in LOCs against the revolving credit facility.

eliminations.

Recent Accounting Standards and Critical Accounting Estimates

New Accounting Standards

The discussion of the adoption and pending adoption of recently issued accounting policies is included in Note 2, “Recently Issued Accounting ~~Standards,~~Pronouncements,” in the Notes to the Consolidated Financial Statements, included in Part I, Item 1 - “Consolidated Financial Statements (unaudited).”

Critical Accounting Estimates

Refer to “Critical Accounting Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 that weArgo Group filed with the SEC on ~~February 24, 2017~~March 15, 2021 for information on accounting policies that we consider critical in preparing our consolidated financial statements. These policies include significant estimates made by management using information available at the time the estimates were made. However, these estimates could change materially if different information or assumptions were used.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We believe that we are principally exposed to four types of market risk: interest rate risk, credit risk, equity price risk and foreign currency risk.

Our primary market risk exposure is the exposure of our fixed maturity investment portfolio to interest rate risk and the changes in interest rates. Fluctuations in interest rates have a direct impact on the fair ~~valuation~~value of these securities. As interest rates rise, the fair value of our fixed maturity portfolio falls and the converse is also true. We manage interest rate risk through an active portfolio management strategy that involves the selection of investments with appropriate characteristics such as duration, yield, currency and liquidity that are tailored to the anticipated cash outflow characteristics of our liabilities. A significant portion of our investment portfolio matures each year, allowing for reinvestment at current market rates. The model duration of the assets comprising our fixed maturity investment portfolio was ~~2.52~~3.00 years and ~~2.58~~2.78 years at September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

We have exposure to credit risk on losses recoverable from reinsurers and receivables from insureds. Our controls to mitigate this risk include limiting our exposure to any one counterparty, evaluating the financial strength of our reinsurers, generally requiring minimum credit ratings and in certain cases receiving collateral from our reinsurers and insureds.

We also have exposure to credit risk in our investment holdings. Our risk management strategy and investment policy attempts to mitigate this risk by primarily investing in debt instruments of high credit quality issuers, limiting credit concentration, monitoring the credit quality of issuers and counterparties and diversifying issuers. The weighted average rating of our fixed maturity investments was A+ with ~~88.4%~~90.6% and ~~87.1%~~91.2% rated investment grade or better (BBB- or higher) at September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively.

We review our investments to identify and evaluate those that may have credit impairments on a quarterly basis, considering the historical performance of the security, available market information, and credit ratings, among other things. For fixed maturity securities, the review includes consideration of current ratings and actions of major rating agencies (Standard & Poor's, Moody's and Fitch). If a security has two ratings, the lower rating is used. If a security has three ratings, the middle rating is used. The following table reflects the credit quality of our fixed maturity portfolio at September 30, 2021:


Other Fixed Maturities	Book Value		Fair Value
AAA	$	553.5	$	560.8
AA	301.7		306.6
A	800		816.4
BBB	774.9		789.5
BB/B	250.4		252.7
CCC and Below	24.3		21.4
Unrated	95.4		90.6
Other Fixed Maturities	$	2,800.2	$	2,838.0

Structured Securities	Book Value		Fair Value
AAA	$	1,119.5	$	1,131.8
AA	82.7		85.1
A	69.8		69.5
BBB	43.5		43.3
BB/B	18.7		18.8
CCC and Below	0.4		0.5
Unrated	10.4		10.3
Structured Securities	$	1,345.0	$	1,359.3

Total Fixed Maturities	Book Value		Fair Value
AAA	$	1,673.0	$	1,692.6
AA	384.4		391.7
A	869.8		885.9
BBB	818.4		832.8
BB/B	269.1		271.5
CCC and Below	24.7		21.9
Unrated	105.8		100.9
Total Fixed Maturities	$	4,145.2	$	4,197.3

Our portfolio also includes alternative investments with a carrying value at September 30, ~~2017~~2021 and December 31, ~~2016~~2020 of ~~$562.6~~$425.8 million and ~~$539.0~~$429.4 million ~~(11.7%~~(8.0% and ~~12.5%~~8.2% of total invested assets), respectively. We may invest in both long and short equities, corporate debt securities, currencies, real estate, commodities and derivatives. We attempt to mitigate our risk by selecting managers with extensive experience, proven track records and robust controls and processes. We also attempt to mitigate our risk by diversifying through multiple managers and different types of assets and asset classes.

We hold a diversified portfolio of equity securities with a fair value of ~~$480.5~~$181.8 million and ~~$447.4~~$176.7 million ~~(10.0%~~(3.4% and ~~10.3%~~3.4% of total invested assets) at September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively. Our equity securities are exposed to equity price risk which is defined as the potential for loss in fair value due to a decline in equity prices. We believe the diversification of our equity securities among various industries, market segments and issuers, as well as the use of multiple outside investment managers, mitigates our exposure to equity price risk.

Foreign Currency Risk

We have exposure to foreign currency risk in our insurance contracts, invested assets and to a lesser extent, a portion of our debt. We attempt to manage our foreign currency risk by seeking to match our liabilities under insurance and reinsurance contracts that are payable in currencies other than the U.S. Dollar with cash and investments that are denominated in such currencies. We also use foreign exchange forward contracts to attempt to mitigate this risk. We recognized ~~$0.1~~gains in the investment portfolio of $0.2 million and ~~$12.0~~$11.5 million ~~in losses from movements in foreign currency rates~~ for the three and nine months ended September 30, ~~2017, respectively. We recognized $3.3 million and $19.3 million in losses~~2021 from movements in foreign currency ~~rates~~rates. We recognized losses in the investment portfolio of $8.7 million and $6.2 million for the three and nine months ended September 30, ~~2016, respectively.~~2020 from movements in foreign currency rates. We recognized ~~$4.8~~losses of $4.2 million and ~~$10.4~~$7.8 million ~~in losses on our foreign currency forward contacts~~ for the three and nine months ended September 30, ~~2017, respectively. We recognized $0.3 million in gains and $11.5 million in losses~~2021 on our foreign currency forward ~~contacts~~contracts. We recognized gains of $1.4 million and losses of $0.8 million for the three and nine months ended September 30, ~~2016, respectively.~~

2020 on our foreign currency forward contracts.

Item 4. Controls and Procedures

Argo Group, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of our ~~“disclosure~~disclosure controls and ~~procedures” (as defined in Rules~~procedures as of the end of the period covered by this report. Rule 13a-15(e) ~~and 15d-15(e)~~ under the Securities Exchange Act of 1934, as amended (“Exchange Act”)), defines “disclosure controls and procedures” as ~~of the end of the period covered by this report. In designing and evaluating these disclosure~~ controls and procedures ~~Argo Group and its management recognize~~“designed to ensure that ~~any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was~~information required to ~~apply its judgment~~be disclosed by the issuer in ~~evaluating~~the reports it files or submits under the Exchange Act is recorded, processed, summarized and ~~implementing possible controls~~reported, within the time periods specified in the Commission’s rules and ~~procedures.~~forms.” Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were not effective ~~at the reasonable assurance level to ensure that information required~~as of December 31, 2020, and continue to be ~~disclosed by Argo Group~~not effective as of September 30, 2021, because of the material weakness in ~~the reports filed or submitted~~internal control over financial reporting, as further described under ~~the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.~~

“Remediation” below.

There were no changes in ~~the~~ internal control over financial reporting made during the quarter ended September 30, ~~2017~~2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting. We review~~reporting, other than the remediation efforts described below.

Please refer to Part II, Item 9A of our ~~disclosure controls and procedures, which may include~~Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 15, 2021 for a description of our remediation plan to address the material weakness identified during our audit of internal controls ~~over financial reporting, on an ongoing basis. From~~for the year then ended. The weakness will not be considered remediated, until the applicable controls operate for a sufficient period of time ~~to time,~~and management ~~makes changes to enhance the effectiveness of~~has concluded, through testing, that these controls ~~and ensure~~are operating effectively. We expect that ~~they continue~~the remediation of this material weakness will be completed prior to ~~meet~~ the ~~needs~~end of ~~our business activities over time.~~

2021.

PART II. OTHER INFORMATION

Throughout this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “Argo Group,” “Argo,” “we,” “us,” “our” or the “Company” mean Argo Group International Holdings, Ltd. and all of its subsidiaries, taken together as a whole.

	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, 2021						Outstanding at January 1, 2021	370,027	$	44.22
Granted		239,997		$	62.91	Granted	159,382	$	54.97
Vested and issued		(154,706	)	$	41.65	Vested and issued	(142,705)	$	45.94
Expired or forfeited		(34,970	)	$	48.80	Expired or forfeited	(92,039)	$	44.41
Outstanding at September 30, 2017		752,351		$	49.07
Outstanding at September 30, 2021						Outstanding at September 30, 2021	294,665	$	49.15

	Shares			Weighted-Average Exercise Price
Outstanding at January 1, 2017		1,982,695		$	34.80
Exercised		(396,355	)	$	31.52
Expired or forfeited		(105,024	)	$	40.62
Outstanding at September 30, 2017		1,481,316		$	35.26


	September 30, 2021		December 31, 2020		September 30, 2020
Book value per common share	$	50.01	$	49.40	$	49.17

	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

(in millions)	2016 Net Reserves		Net Reserve Development (Favorable)/ Unfavorable			Percent of 2016 Net Reserves
General and professional liability	$	1,028.9	$	10.0			1.0	%
Workers compensation		312.9		(7.6	)		-2.4	%
Lloyd's liability		198.1		11.4			5.8	%
Commercial multi-peril		156.6		(2.6	)		-1.7	%
Commercial auto liability		113.6		(6.5	)		-5.7	%
Property		83.6		11.0			13.2	%
Reinsurance - nonproportional assumed property		65.6		(4.1	)		-6.3	%
Fidelity/Surety		38.4		(6.7	)		-17.4	%
All other lines		182.5		(0.5	)		-0.3	%
Total	$	2,180.2	$	4.4			0.2	%

	Nine Months Ended September 30,
	2017						2016
(in millions)	Gross			Net			Gross			Net
Asbestos and environmental:
Loss reserves, beginning of the year	$	48.4		$	40.6		$	46.4		$	43.5
Incurred losses		12.5			15.2			15.6			10.5
Losses paid		(1.6	)		(5.2	)		(10.0	)		(10.0	)
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
Run-off reinsurance reserves		1.8			1.8			2.2			2.2
Other run-off lines		4.9			4.9			4.2			4.2
Total loss reserves - Run-off Lines	$	288.1		$	195.9		$	299.8		$	201.8

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, 2021	—	$	—	—	$	53,281,805
August 1 through August 31, 2021	339	$	52.07	—	$	53,281,805
September 1 through September 30, 2021	5,424	$	52.95	—	$	53,281,805
Total	5,763			—

Exhibit Number	~~Description~~
Exhibit Number		Description
~~12.1~~ 10.1		~~Statements of Computation of Ratios of Earnings to Fixed Charges~~Separation Agreement and ~~Earnings to Combined Fixed Charges~~General Release between Argo Management Services, Inc. and ~~Preferred Share Dividends~~Timothy Carter, dated August 27, 2021 †
~~31.1~~ 10.2		Separation Agreement by and between Matthew Harris and Argo Management Services Limited dated August 9, 2021(incorporated by reference to Exhibit 10.1 to Argo Group International Holdings, Ltd.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 12, 2021)*†
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~~ 8, 2021	By	/s/ ~~Mark E. Watson III~~ Kevin J. Rehnberg
		~~Mark E. Watson III~~ Kevin J. Rehnberg
		President and Chief Executive Officer

November ~~7, 2017~~ 8, 2021	By	/s/ ~~Jay S. Bullock~~ Scott Kirk
		~~Jay S. Bullock~~ Scott Kirk
		~~Executive Vice President and~~ Chief Financial Officer