Argo Group International (ARGO-PA) 8-K Keefe, Bruyette & Woods 2008 Insurance Conference

Keefe, Bruyette & Woods 2008 Insurance Conference

September 3, 2008

Exhibit 99.1

2.

Forward-Looking Statements

This

presentation

contains

“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 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, regulations and regulatory investigations into industry

practices,  developments relating to existing agreements, heightened competition, changes in

pricing  environments, and changes in asset valuations.  The Company undertakes no obligation

to publicly update any forward-looking statements as a result of events or developments

subsequent to the presentation.

3.

The Argo Group Story

An international specialty underwriter of property/casualty

insurance and reinsurance focused on niche markets

Headquartered in Bermuda

Operations in 50 states and worldwide

Total capitalization of $1.8 billion

Operations conducted through four business segments

Our Strategy

Deploy capital in the international specialty market for maximum

return

Continuous focus on new business development and organic growth

Grow strategically through acquisitions

Prudent management of our balance sheet and investment portfolio

Major business

segment locations

Headquarters

Bermuda

Brussels

London

Maximize shareholder value through our focus on Return on Capital

4.

Successful Strategy Execution

Goal

Execution

Status

•

Expand US Excess and Surplus

franchise and broaden US

specialty platform

•

Acquired Colony and Rockwood in 2001

•

Acquired the assets of Interstate and

Grocers in 2005 and 2003

•

Launched Public Entity business in 2001

•

Acquired Massamont in 2008

•

Completed 8 acquisitions of companies

and asset purchases over seven years

•

PXRE transaction in 2007

•

Launched Argo Re in 2008

•

Establish Bermuda Platform

•

Establish Lloyd’s Platform

•

Heritage acquisition in 2008

•

Enhance Argo’s risk profile

•

Significantly managed down run-off / A&E

exposures

•

Significantly reduced non-earning assets

•

Proactively reduced sub-prime exposure in Q2:07

•

Sold PXRE’s legacy casualty exposure in 2008

•

Hired CFO in 2008

•

Hired Andrew Carrier as Argo Re President in

2008

•

Gained significant management talent from

Heritage acquisition

•

Bolster management ranks

5.

Argo Today –

A Diversified Business Model

Domestic      International

1

1

as of 2Q 2008

Note: Based on gross written premiums (GWP)

Insurance      Reinsurance

Property      Casualty

E&S     Admitted

13%

87%

70%

30%

54%

46%

13%

87%

6.

What We Do?

Combined

Ratio*

Insureds

Segment Profile

Excess and

Surplus Lines

•Commercial Property and

Casualty

•Primarily on a non-admitted

basis

•Distribution through wholesale

agents and brokers

Commercial

Specialty

International

Specialty

•Heritage Underwriting Agency

plc

•Short-tail risks with an emphasis

on commercial specialty, and

non-US professional indemnity

insurance

92%

64%

Reinsurance

•Insureds include domestic

regional carriers and international

multi-line carriers

•Argo Re (class 4 specialty

reinsurance platform out of

Bermuda)

•Provides property CAT

reinsurance, property per risk

reinsurance, and proportional

property reinsurance

89%

*

as of 2Q 2008

1

Excluding storm losses

2

One month of 2008

%

GWP*

46%

32%

13%

10%

91%

•Insureds include restaurants,

contractors, day care centers,

apartment complexes, and

others

•Commercial Property and

Casualty

•Primarily on an admitted basis

•Distribution through select

independent agents, brokers,

wholesalers and program

managers

•Food and hospitality, specialty

retail, religious institutions,

grocery stores, mining industry

and public entities

•Insureds include domestic and

international small/medium

commercial businesses,

transportation, fine arts and

specie, financial institutions and

others

1

1

2

7.

Pre-Tax Operating Income

($mm)

Excess & Surplus Lines

Largest and Most Profitable Segment

Status

Combined ratio in low 90% range

Colony & Argonaut Specialty

Competitive advantages

Excellent infrastructure

Underwriting expertise

Controlled distribution

Rated ‘A’

(Excellent) by A.M. Best

92.6%

88.9%

89.3%

Combined ratio

* Includes $6.1mm of U.S. storm losses in Q2

$58

$102

$113

2005

2006

2007

2008 YTD OI: $47.3mm*

2007 YTD OI: $58.8mm

8.

Pre-Tax Operating Income

($mm)

Commercial Specialty

Consistently Profitable Segment

Status

Combined ratio in low 90% range

Primarily retail-driven

Competitive advantages

Expertise in niche markets

–

grocery stores

–

mining operations

–

laundry & dry cleaners

–

small/medium-size public entities

92.6%

89.4%

88.7%

$38

$50

$61

2005

2006

2007

Combined ratio

*  Includes $10.3mm of U.S. storm losses in Q2

2008 YTD OI: $17.5mm*

2007 YTD OI: $26.2mm

9.

Argo Re

Positioned Well At Outset

Immediate Strengths

A rating by A.M. Best

Began 2008 with approx. $1.3B in capital

Appointed Andrew Carrier as Argo Re President

–

New underwriting team in place

–

Proven record of leadership

–

Built diversified books of business

Utilize established infrastructure

Contributed $94 million of GWP and $15.5 million of

operating income in first half of 2008

10.

International Specialty

Heritage Brings Immediate Strategic Benefits

Enhances EPS and ROE

Further diversifies Argo Group’s business mix and geographic

markets through Lloyd’s platform

Extends Argo Group’s market reach through Heritage’s distribution

network

Provides Heritage with access to a Bermudian underwriting platform

and additional capital

Provides Argo Group with additional skills, scale and flexibility to take

advantage of potential opportunities throughout the insurance cycle

11.

Combined Business Mix

Unique platform to prudently write business

worldwide and penetrate niche markets

Specialty Insurance

Excess & Surplus Lines

Commercial Specialty

Reinsurance

Quota share reinsurance

of business partners

Property reinsurance

Prospective insurance

opportunities

~70%

~10%

~20%

International Specialty (Lloyd’s)

Worldwide property

Non-U.S. liability

12.

$3

$144

2001

2007

Impressive Growth Story

Net Premium Earned

Gross Written Premium

Net Income

Investment Income

$186

$1,181

2000

2007

30%

CAGR

$125

$860

2000

2007

32%

CAGR

$62

$134

2000

2007

12%

CAGR

($mm)

92%

CAGR

13.

  94.3%*

94.0%*

92.7%

   92.1%**

90%

or less

2004

2005

2006

2007

Target Across

Cycle

Solid and Constantly Improving Underwriting Profitability

Combined Ratio for Ongoing Segments

* Exclusive of losses from hurricane activity

** Exclusive of merger-related expenses

14.

Significant Increases in Capital Relative to Operating Metrics

$1,259

$1,624

$1,816

$2,203

$2,558

$3,598

$860

$1,759

$992

$717

$567

$328

$1,181

$1,156

$1,056

$903

$788

$622

2.5x

3.8x

2.9x

2.0x

2.6x

2.6x

0.7x

1.2x

1.2x

1.3x

1.4x

1.9x

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2002

2003

2004

2005

2006

2007

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

Total Capitalization

Earning Assets

Gross Premiums Written

EA Multiple

GPW Multiple

($mm)

15.

Investment Portfolio 

Fixed income (92%)

Equities (8%)

Total: $3.6bn

Total: $0.3bn

•

Average Rating of AA+

•

Duration of 3.6 years

•

Less than 1% subprime

•

Internally and externally managed

•

Conservative focus on large cap

31%

12%

21%

16%

15%

U.S. Government

State / Muni

Corporate

Structured

Short Term

Other

5%

Financials

Industrial & Other

8%

86%

Unitized/Mutual Funds

6%

16.

Minimal Sub-prime Exposure

Total Argo Group Investment Portfolio -

$3.9 billion

Sub-prime/Alt-A Exposure only 2.2% of Shareholder Equity

–

Total exposure approximately $31mm (< 1% of total portfolio)

–

41% Alt-A / 59% Sub-prime

–

97% are AAA or AA rated

–

Only 20% are 2005-2006 Vintage

All are AAA rated

17.

$45.85

$45.15

$23.40

$27.22

$30.35

$33.51

$39.08

2002

2003

2004

2005

2006

2007

30-Jun-08

*

Book

value

per

common

share

-

outstanding,

includes

the

impact

of

the

Series

A

Mandatory

Convertible

Preferred

Stock

on

an as if converted basis.  Preferred stock had fully converted into common shares as of Dec. 31, 2007.

Consistent Growth of Book Value

Book Value Per Share

13.0%

CAGR

18.

Argo Group 2007 Financial Highlights

2006

2007

Change

Gross Written Premium

$ 1.15B

$ 1.18B

2%

Net Earned Premium

$ 813M

$ 860M

6%

Total Revenue

$ 939M

$ 1.0B

6%

Net Investment Income

$ 105M

$ 134M

28%

Net Income Per Share

$ 4.82

$ 5.58

16%

19.

Argo Group Six Month 2008 Financial Highlights

2007

Six Months

2008

Six Months

Change

Gross Written Premium

$ 564M

$ 744M

32%

Net Earned Premium

$ 415M

$ 481M

16%

Total Revenue

$ 476M

$ 557M

17%

Net Investment Income

$

57M

$

75M

32%

Net Income Per Share (diluted)

$ 2.07

$ 1.94*

7%

* Impacted by losses from 15 U.S. storms in 2008-Q2 of $16.4M pre-tax

20.

Dec 31, 2007

2,425

21.0%

1,754

1,385

5,124

$3,598

369

$45.15

Dec 31, 2006

2,029

14.5%

992

848

3,722

$2,558

144

$39.08

Strong Balance Sheet and Capital Base

Reserves

Total Leverage

Total Capital

Shareholders’

Equity

Total Assets

Investment Portfolio

Indebtedness

Book Value Per Share

In millions, except for book value and leverage data

June 30, 2008

2,899

21.9%

1,796

1,402

6,234

$3,951

394

$45.85

21.

Drivers for Future Growth and Profitability

•

Expand domestic specialty presence and product offerings

by leveraging indemnity “know-how”

•

Capitalize on international platform to drive premium growth

and profitability

•

Prudently and opportunistically increase reinsurance writings

•

Continue balance sheet optimization and capital

redeployment

efforts

•

Improve expense management

•

Continue prudent acquisition strategy of companies and

assets to complement organic growth

22.

Why Argo?

•

Broadly diversified insurance and reinsurance platform

•

Deep product expertise in niche focus areas

•

Proven track record of growth and profitability

•

Proven ability to manage through insurance cycle

•

Prudent risk management and controls

•

Strong leadership

•

Significant room for future growth

•

ROE driven focus

Thank you

Q&A