Argonaut Group Announces Third Quarter Earnings and Declares Quarterly Dividend.Business Editors SAN ANTONIO--(BUSINESS WIRE)--Oct. 23, 2001 Argonaut Group, Inc. (Nasdaq:AGII) today announced consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: net income of $1.3 million ($0.06 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share) on total revenue of $72.4 million for the third quarter of 2001, compared to a consolidated net loss of $900,000 ($0.04 per diluted common share) on total revenue of $50.5 million for the same quarter last year. For the nine months ended September September: see month. 30, 2001, the Company recorded consolidated net income of $3.5 million ($0.16 per diluted common share) on total revenue of $173.5 million, compared to a net loss of $44.3 million ($2.00 per diluted common share) on total revenue of $162.8 million for the same period in 2000. Third quarter results include an increase in workers compensation loss reserves at Argonaut Insurance Company of $5 million for claims related to the September 11 World Trade Center attack. After a thorough review of potential claims, total losses are not expected to exceed this amount. The Company previously reported an initial estimate of $10 million. Apart from these losses, Argonaut's workers compensation business has performed consistent with expectations during the quarter. The financial results for the third quarter include one month of operating activity for the Colony colony, any nonself-governing territory subject to the jurisdiction of a usually distant country. The term is also applied to a group of nationals who settle in a foreign country or territory but retain political or cultural connections with their parent state. Insurance Group and the Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Group as subsidiaries of Argonaut following the closing of the Company's purchase of Front Royal, Inc., effective August 31, 2001. The results are consistent with the Company's previously announced expectations that the $165 million acquisition would be accretive to earnings per share. Commenting on these results, Mark E. Watson III, President and Chief Executive Officer of Argonaut Group said, "With the addition of Colony and Rockwood and their expertise in their respective markets, the Company continues to execute on its strategy of establishing itself as a leading presence in the specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. insurance market." Consolidated operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. after tax was $2.9 million for the quarter ended September 30, 2001, compared with a consolidated operating loss of $2.5 million for the same period last year. For the month of September, 2001, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from Front Royal subsidiaries was $1.3 million after tax. For the nine months ended September 30, 2001, the consolidated operating loss after tax was $5.3 million, compared with a consolidated operating loss of $58.9 million for the same nine-month period last year. Operating income or loss excludes gains on the sale of investments. Total revenue includes gains on sales of investments of $6.3 million for the current quarter, compared with $2.4 million for the third quarter of 2000. For the nine months ended September 30, 2001, gains on sales of investments were $13.5 million, compared with $22.5 million for the same period last year. Under its stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program announced in 1989, the Company has acquired 7,906,236 out of an aggregate authorization The right or permission to use a system resource; the process of granting access. See access control. of ten million shares. As of September 30, 2001, 21,557,385 common shares were outstanding, compared with 21,758,812 shares as of December December: see month. 31, 2000. Argonaut Group also announced today that its Board of Directors has declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly cash dividend of $0.15 per common share. This dividend will be payable November November: see month. 27 to shareholders of record November 13, 2001. On the reduced dividend amount, the Company noted that not only is the capital needed to support its current business, but that improving insurance rates are presenting new internal growth opportunities. Also, the acquisition of the Front Royal companies offers additional opportunities for expansion in the excess and surplus lines marketplace. In this environment, the Board believes that the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. interests of the Company and its shareholders will be better served through the internal deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of capital. This news release contains "forward looking statements" which are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation and regulations, developments relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. For a more detailed discussion of risks and uncertainties, see the Company's public filings made with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward looking statements. Argonaut Group is a national provider of specialty insurance products focused on high-quality customer service for specific niches of property-casualty insurance. The Company has superior financial strength with assets of $1.8 billion, no debt, and financial strength of its principal subsidiary rated "A (Excellent)" by A.M. Best and "A" by Standard & Poor's. Argonaut Group is traded on NASDAQ's National Market System, ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors AGII. More information can be found on their website at www.argonautgroup.com.
ARGONAUT GROUP, INC.
Financial Highlights
(In Millions)
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2001 2000 2001 2000
---- ---- ---- ----
Direct Written Premiums $ 73.0 $ 43.4 $ 166.8 $ 117.2
Net Written Premiums 61.7 37.8 141.7 104.1
Earned Premiums $ 52.9 $ 32.8 $ 120.4 $ 93.0
Net Investment Income 13.1 15.3 39.6 47.3
Gain on Sale of
Investments 6.4 2.4 13.5 22.5
-------- -------- -------- --------
Total Revenue 72.4 50.5 173.5 162.8
Losses and Loss
Adjustment Expenses 47.1 28.8 107.9 169.2
Underwriting, Acquisition,
and Insurance
Expenses 22.7 22.8 59.3 60.6
Other Expenses 0.7 0.7 2.1 2.1
-------- -------- -------- --------
Total Expenses 70.5 52.3 169.3 231.9
Income (Loss) Before Tax 1.9 (1.8) 4.2 (69.1)
Income Tax Provision 0.6 (0.9) 0.7 (24.8)
-------- -------- -------- --------
Net Income (Loss) $ 1.3 $ (0.9) $ 3.5 $ (44.3)
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Net Income (Loss):
From Operations (2.9) (2.5) (5.3) (58.9)
From Sale of Investments 4.2 1.6 8.8 14.6
-------- -------- -------- --------
Total Net Income (Loss) $ 1.3 $ (0.9) $ 3.5 $ (44.3)
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Net Income (Loss) per
Common Share (Diluted):
From Operations $ (0.13) $ (0.11) $ (0.24) $ (2.66)
From Sale of Investments 0.19 0.07 0.40 0.66
-------- -------- -------- --------
Total $ 0.06 $ (0.04) $ 0.16 $ (2.00)
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Net Income (Loss) per
Common Share (Basic): $ 0.06 $ (0.04) $ 0.16 $ (2.00)
======== ======== ======== ========
Weighted Average Common
Shares (000's):
Basic 21,572.5 22,001.2 21,628.9 22,136.8
======== ======== ======== ========
Diluted 21,579.4 22,001.2 21,635.9 22,136.8
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