The SEC’s decision to subpoena Argo Group. International Holdings about its executive compensation practices is drawing the attention of Standard & Poor’s.

S&P said it has revised the outlook for Argo Group and its subsidiaries to stable, from positive, citing “a combination of increased governance risk, and execution risks related to performance improvement initiatives.”

Standard & Poor’s action follows an Oct. 8 disclosure that the U.S. Securities and Exchange Commission’s subpoenaed Argo, as well as news that Argo’s independent directors would start reviewing its governance and compensation policies.

Standard & Poor’s noted that the subpoena’s scope seems to be narrowly focused and pointed out that Argo’s assessment of its potential financial impact is modest. But it remained concerned about SEC anyway, as well as a push by Argo to improve its profitability that S&P said is moving slower than initially expected.

A full ratings downgrade could happen if the governance and disclosure reviews lead to more problems, and Argo’s operating results come in much weaker than expected, S&P said.

At the same time, Standard & Poor’s also affirmed its ‘BBB-‘ long-term issuer credit rating on Argo Group U.S. Inc. (Argo U.S.) and its ‘A-‘ long-term financial strength and issuer credit ratings on Argo U.S. core operating subsidiaries.

Scrutiny of Argo’s executive compensation went public in February, after activist shareholder Voce Capital clamored for greater oversite after the practice after alleged spending abuses such as a corporate art collection and luxury home/corporate jet travel for Argo CEO Mark Watson.

Argo has consistently denied any wrongdoing.

Source: Standard & Poor’s