28 February 2020 Insurance

SRL puts Argo's Lloyd’s Syndicate 1200 under review for possible downgrade

Syndicate Research (SRL), which provides independent research on all active syndicates trading at Lloyd’s, has placed the B (Average), negative outlook of Lloyd's syndicate 1200 (Argo Managing Agency) under review for a possible downgrade.

The move comes after the announcement of further deterioration on the syndicate’s reserves and of revisions to the syndicate’s ex-catastrophe current accident year loss ratios at Q4 2019.

For Q4 2019 Argo announced that its share of the syndicate’s prior accident year adjustment at Q4 2019 was $21.4 million, also confirming an increase in its international operations ex-catastrophe accident year loss ratio from 60.4 percent in Q4 2018 to 72 percent for Q4 2019 related to its syndicate 1200 and other international businesses.

Syndicate 1200 is 69 percent by Argo Group International Holdings and 31 percent by third party capital, which operates within the Lloyds of London insurance market. It writes a non-marine property casualty orientated book, and has a 2020 capacity of £450 million.

Explaining the rating action, SRL said: "In light of the announcement of further deterioration on the syndicate’s reserves and revisions to the syndicate’s ex-catastrophe current accident year loss ratios at Q4 2019 and the potential continued underperformance of syndicate 1200 relative to its Continuity Opinion peer group, SRL has therefore placed syndicate 1200’s B (Average), negative outlook, Continuity Opinion under review for possible downgrade pending confirmation of the syndicate’s 2019 annual results."

SRL noted that two other rating agencies had also recently placed the group’s operating entities financial strength ratings on negative outlook. Full Year losses from the group’s international operations were $137m compared to a profit of $139m in its US operations.

SRL expects further material deterioration in syndicate 1200’s reserves and results.

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