Voce swings at Argo again with ‘roadmap to unlock shareholder value’

In another attack on Argo and its board, activist investor Voce Capital Management has published a detailed plan explaining how, it claims, Argo could “unlock substantial shareholder value”.

In the documents, the investor shared an in-depth roadmap for the board. Proposals include a “starter kit” of actions the board could “take immediately” to boost value and “instill a culture of accountability”, which the investor has repeatedly stated it believes is missing from the company's leadership.

To improve allegedly “substandard return on equity (ROE)”, Voce urged the insurer to reduce expenses by $100 million to “allow Argo to earn a double digit ROE”, which it said would be “significantly higher than its 10-year average ROE of 5.7 percent”.

It called for a thorough review of the insurer’s capital allocation and portfolio of businesses and even a potential divestiture of its international business, with an exit of underperforming lines and potential capital return. It also claimed that there is 110 basis points (bps) of ROE opportunity from enhanced capital allocation and 220 bps from portfolio rationalisation.

Changes suggested by Voce “would allow Argo to achieve an ROE of over 13 percent”, the investor said, and these proposals “could result in a share price approximately 75-90 percent above its unaffected stock price on 1 February 2019”.

An Argo spokesperson responded: “The numbers [Voce principal J. Daniel] Plants has put forward are fantasy.”

In a further swipe at Argo, Voce said that Argo’s corporate and other underwriting expenses “substantially exceed peers and its purported expense reductions are illusory”. The investor believes that the company has “simply transferred costs from its underwriting business and buried them in its investment portfolio”.

It has based these assumptions on figures showing that since 2014, invested assets have grown at 4 percent annually, while investment expenses have grown at 25 percent annually.

In its material, Voce said it can “provide further evidence” of attempts by the insurer to “mislead shareholders” over an alleged luxury penthouse for its CEO in New York, something the company has denied.

Voce has published the details on its website www.Argo-SOS.com.

The investor urged shareholders to vote for its board nominations and its proposals using the blue proxy cards it sent out ahead of the annual general meeting on 24 May 2019.

The row is unlikely to de-escalate in the run up to the AGM.

Earlier this month, Argo gave a detailed rebuttal to many of the claims put forward by Voce. It urged shareholders to “end Voce Capital’s destructive and distracting campaign” by only using the white proxy voting cards the company had sent out.

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