Argo Group is reporting a healthy increase in net income for its 2019 first quarter even as activist shareholder Voce Capital Management continues to allege excessive spending practices by the company’s board of directors.

The Bermuda-based property/casualty insurer and reinsurer booked $91.3 million in net income, or $2.63 per diluted share, versus $24.8 million, or $0.71 per diluted share in the 2018 first quarter. Argo Group said the income surge included pre-tax net gains connected to changes in the fair value of equity securities of $54.2 million, compared to pre-tax net losses relating to changes in the fair value of equity securities of just under $31 million a year ago.

Argo’s combined ratio was 94.8 during the quarter, compared to 95.8 in Q1 2018.

In prepared remarks, CEO Mark Watson III said the gains also stemmed from solid premium increases and improvements in other business fundamentals.

“These results were enabled by a 7.1 percent increase in gross written premiums, with a 10.2 percent rise in the U.S. operations, an improvement in our expense ratio, and a 26.6 percent increase in our underwriting income,” Watson said. “We expect our strategy to continue to deliver superior and sustainable returns to shareholders.”

Argo issued its financial results on May 1, the same day Voce published another release detailing how Argo’s board could boost shareholder value and reverse a “self-indulgent culture of entrenchment, commingling of personal and business activities and disregard for shareholder interests.” Voce first began publicly criticizing Argo in February, accusing the company’s board of supporting a pricy corporate art collection and luxury home/corporate jet travel for Argo CEO Mark Watson. Argo has repeatedly denied Voce’s accusations.

Voce has also nominated its own slate of independent board member candidates. In its May 1 release, the firm said Argo’s board could use its proposals to boost shareholder value through “immediate expense reductions, compensation reforms, capital allocation improvements, portfolio rationalizations and sweeping corporate governance enhancements.” Among Voce’s specific recommendations: the potential sale of its international business, which it argues could help Argo achieve a return on investment of over 13 percent.

Voce also urged board members to vote for its five nominees for independent director during Argo’s 2019 annual meeting on May 24.

Here are highlights of Argo’s Q1 2019 consolidated results:

• Gross written premiums came in at $760.8 million, more than 7 percent higher than the $710.5 million generated during the 2018 first quarter.
• Catastrophe losses were $5.5 million, versus $4.3 million a year ago.
• Net investment income was just under $34 million, compared to $36 million in the 2018 first quarter. Argo attributed the decline to securities market volatility in the 2018 fourth quarter.
• Argo said its U.S. Operations division grew 10.2 percent during Q1, with International Operations achieving a 3.7 percent increase.

Source: Argo, Voce