Argo Group International (ARGO-PA) 8-K Financial statements and exhibits

CSFB 2004 Insurance Seminar
March 24, 2004

Safe Harbor Statement

Cautionary Statement under “Safe Harbor,” Provision of the Private Securities Litigation Act of 1995: This presentation contains various forward-looking statements and includes assumptions concerning our operations, future results and prospects. Statements included herein, as well as statements made by or on our behalf in press releases, written statements or other documents filed with the Securities and Exchange Commission (the “SEC”), or in our communications and discussions with investors and analysts at this conference or in the normal course of business through meetings, phone calls and conference calls, which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements, identified by words such as “intend,” “believe,” “anticipate,” or “expects” or variations of such words or similar expressions are based on current expectations and are subject to risk and uncertainties. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this presentation should not be considered as a representation by us or any other person that our objectives or plans will be achieved. We caution investors and analysts that actual results or events could differ materially from those set forth or implied by the forward-looking statements. For further information regarding cautionary statements and factors affecting future operating results, please refer to PXRE Group’s public filings with the SEC.

1

Business Overview

2

Highlights

	High quality franchise with longstanding market presence
	Growth and profitability in core cat and risk excess business
		NPW growth of 46% for 2003
		ROE of 23% for 2003
		Loss Ratio of 27% for 2003
	Overall ROE of 19.2% for 2003
	“A” ratings from S&P and A.M. Best
	Attractive market fundamentals
	Experienced and proven management team
	Sound balance sheet, over $720 million of capital

PXRE is highly profitable, focused and
growing faster than its competitors

3

Strategy

	Focus on core profitable short-tail segments
	Leverage status as leading reinsurer
	Maintain strict risk controls
	Apply extensive technical analysis to underwriting
	Disciplined use of capital across underwriting cycles

A proven strategy generating long-term profits

4

Experienced Management Team

	Underwriters have an average of 22 years of underwriting experience
	Interests are aligned with shareholders

		Years of
Officer	Title / Responsibility	Experience
Jeffrey Radke	CEO and President	16
Gerald Radke	Chairman	35
Guy Hengesbaugh	Chief Operating Officer	19
John Daly	EVP, International Operations	27
Peter Kiernan	SVP, North America Operations	15
Andrew Stapleton	SVP, Marine and Aerospace	16
John Modin	EVP, CFO	17
Bruce Byrnes	General Counsel	11

5

Underwriting Philosophy

	Focus on business we know
	High severity / low frequency, broad spread of risk
	Highly technical underwriting and portfolio analysis: Crucible
	Team approach – utilize collective experience of underwriters
		All transactions approved through underwriting committee
	Gross line underwriters
	Maintain strong reputation among clients and brokers
		Depth of underwriters allows for superior service

6

Composition of Business

2003 Net Premiums Written = $278 million

7

Performance Through the Cycle

Cumulative Cat & Risk Loss Ratio 1987 to Present = 47%

8

Growth

	PXRE outperformed in the face of new competition, dramatically increasing market presence
		Increased average line size per program 2002 to 2003: 53%
		Increased number of programs led: 35
		Initial market impact of new players now concluded
	Year over year growth rates in core short-tail business exceeded peers in 2002 and 2003
	Profitable growth: 2003 cat and risk excess combined ratio = 54%

PXRE’s client relationships and relatively smaller line sizes
enable us to continue to grow

9

Business Summary

($ in millions)

		Property Catastrophe		Property Retrocession		Specialty Risk		Property Risk Excess
NPW 2003(1)		$134		$86		$40		$25
Market Commentary	•	Large international	•	Data quality improving	•	Marine terms poor	•	Difficult market
		book, strong quoting role	•	Proprietary models required	•	Aviation pricing strong	•	Loss leader for many insurers
	•	North American book growing, quotation role increasing	•	Relationships and experience are critical	•	Capacity shortage insatellites	•	Information often suspect
			•	Largest risk premium	•	Large risk premium	•	Low risk premium
	•	Attractive risk premium	•	Rates flat	•	Rates increasing insatellites; declining (but still attractive), in aviation	•	Rates down
	•	Rates flat to down

(1) Before unallocated ceded excess of loss reinsurance.

10

Risk Management

	Closely monitor and manage risk profile in order to maintain financial strength
	Aggregate exposure control system utilizing third party and proprietary information systems
	Measure impact of each program on overall portfolio through proprietary Crucible risk management system
	Model each and every transaction to determine appropriate risk adjusted pricing
	Apply experienced underwriting judgment through team approach
	Adjust underwriting commitments to reflect underwriting cycle

11

Financial Overview

12

Financial Strategy

	Maintain strong claims paying ratings
	Conservative investment strategy
	Manage capital to support growth
	Risk management – interest rate, credit
	Operating expense management

Target ROE of 15% over the cycle

13

Financial Performance

($ in millions)

	Year Ended			Year Ended
	December 31,			December 31,
	2003			2002
Gross Premiums Written	$	339		$	367
Net Premiums Earned		321			269
Net Premiums Earned – Cat & Risk Excess		254			176
Net Investment Income		27			25
Underwriting Income – Cat & Risk Excess		156			108
Net Income		97			65
Earnings per Share	$	4.10		$	3.28
Loss Ratio	50		%	47		%
Expense Ratio	25		%	31		%
Combined Ratio	75		%	78		%
Loss Ratio on Cat & Risk Excess	27		%	30		%

14

Operating Metrics

Net Income
Return on Equity

15

Strong Financial Position

($ in millions)

	December 31, 2003		December 31, 2002
Cash and Investments		$1,012			$    805
Reinsurance Recoverables		162			237
Total Assets		1,360		1,237
Loss and Loss Adjustment Expense Reserves		451			448
Debt		—			—
Trust Preferred Securities		157			94
Mandatory Convertible Preferred		172			159
Total Shareholders’ Equity		565			453
Book Value per Share		$22.24		$20.33

16

High Quality Investment Portfolio

17

Diversified Hedge Fund Approach

	Mariner Capital - Fund of funds approach - low correlation with investment indices
	Focused on strategies with better risk adjusted returns than fixed income or straight equity
	Only one down quarter (3rd quarter of 1998 - negative 2.2%)

	S&P 500	CISDM Index	PXRE Portfolio
Average Annual Return	8.57%	7.99%	11.56%
Standard Deviation	22.22%	6.02%	6.94%

18

Capital Structure

	Raised $27 million (including shoe) in common equity during 2003
	Issued $62.5 million of trust-preferred securities during 2003
	Weighted average after-tax cost of debt is 6.67%
	Capital has grown 70% since year end 2000

Growth and Composition of Capital (in $ millions)

19

Summary

	Strong core operating results
	Solid financial platform
	Exited lines results behind us
	Steps taken in 2004 to reduce expenses
	Successful follow-on offering completed in December 2003
		Increased liquidity
		High quality shareholders
	2004 guidance of $4.45 to $4.85 represents ROE of 19% to 21%

20