Argo Group had been under fire for months over allegations that its board spent excessively on executive compensation when Kevin Rehnberg became interim CEO in November 2019.

Three months later, Rehnberg was named as its full-time leader. Less than a week after, he was on the firing line after Argo’s money-losing Q4 and its $114 million underwriting loss. His response? Rehnberg was blunt, explaining that Argo was addressing unnecessary spending, pursuing a culture of “results and accountability,” and a reference to Q4 results that were “clearly unacceptable.”

Rehnberg’s remarks gave analysts and investors an early sign of what they were getting in their new, 56-year-old CEO: a straight shooter who didn’t mince words about Argo’s performance and the direction in which it needed to go.

“That’s how I operate,” Rehnberg explained in a Carrier Management telephone interview shortly after his formal debut as CEO during Argo’s 2019 Q4 earnings call on Feb. 25.

Argo’s results, he said, “are pretty black and white, and if they’re not good, I’m going to acknowledge they’re not good, because if we don’t acknowledge they’re not good, how can we go address the problem if everyone thinks that there’s not a problem?”

Argo booked a $103.3 million net loss in the 2019 fourth quarter. On the U.S. side, the company faced increases in liability, professional and property lines loss ratios. The company’s U.S. operations reported a 104.8 combined ratio in Q4 versus 92 in Q4 2018. Its international combined ratio was 149.1 compared to 104.5 the year before.

Voce and “Very, Very Thorough Research”

Argo started to face increased scrutiny in early February 2019, after activist shareholder Voce Capital management LLC alleged excessive spending on areas including a corporate jet and luxury housing for former CEO Mark Watson III. Watson and the company both denied the allegations, though Watson abruptly resigned in November 2019. Argo has since moved to address Voce’s criticisms, including a plan for independent directors to review governance and compensation issues, and it also has since inked a cooperation agreement with Voce that addresses the matter. The U.S. Securities and Exchange Commission is also investigating Argo’s disclosures about executive compensation.

Rehnberg noted that shareholders “can raise any issues they want” and reiterated that Argo has been open about talking about them, including during its Q4 2019 earnings call.

“Everybody’s got a right to raise issues, and then we have a discussion about it,” Rehnberg said. He later added that Voce and others have acknowledged positive progress, and he credited the firm with doing its homework.

“I would say that the [Voce] research was very, very thorough, and, while there could be some debate about every single item, in large part they were asking questions that should be asked,” Rehnberg said.

Leadership Approach

Rehnberg said his leadership approach is one of transparency, openness and flexibility.

“I like to lead by example, and like to be clear in my expectations and reviews,” he said. “I like to gather a lot of different points of view, and I’m always open to new and emerging information that comes up.”

In other words, Rehnberg is collaborative, an approach he said has developed over time.

“I’ve had to learn, both on the job and through courses or through mentors, and develop a natural style that works [for me],” he said.

Rehnberg said he expects that leaders need to adapt and keep learning, and said the process can often be rewarding.

“I still learn things all the time,” he said. “The world’s continually evolving, as technology and societal norms change. We’ve got to adapt. It’s actually fun…You’re learning new things and dealing with issues that may be different than they were yesterday.”

One of the most important things he’s learned: “to listen to all points of view and to be clear and decisive.”

Argo Evaluation

Rehnberg said Argo’s U.S. operations are a high point, with a combined ratio averaging 91 over the last seven years, offering a “good return, solid return.” He also gave the operation’s underwriting and claims system positive markets.

He noted again that Argo needs to do better managing its expenses.

“We definitely fall short on expense management and not moving as quickly as we could to integrate some things that were acquired over the years, whether those be in the U.S. or in our international operation,” Rehnberg said.

Argo is in good shape to remain an independent entity, Rehnberg said.

“We are of a size and scale that we can handle the growth that we’re looking at right now and we remain independent,” Rehnberg said. “That’s just fine—unless somebody wants to come along and thinks there’s an attractive way to put us together themselves, we will listen.”

As well, Rehnberg said, Argo could theoretically consider additional acquisitions should opportunities present themselves.

“That’s been part of our game plan since the company was moved out of a single state, single product [status] and it will continue,” he noted.

Looking ahead, Rehnberg reiterated that Argo is generally staying its course and focused on improving its operations.

“We are a specialty insurer and reinsurer that’s largely U.S. focused, based on 80 percent of our premium being written for risks that are domiciled in the U.S., so that’s not going to change,” Rehnberg said. “What we’re looking to change is to have the returns be adequate because they’re not right now.”

Argo’s culture is something that Rehnberg values as well, though he sees a push for change in certain segments.

“A lot of people talk about culture, but culture is defined by the people that are in the organization and we’ve got a lot of people that are part of successful parts of the organization. Does the culture need to change in those areas? No,” Rehnberg said. “Does it need to change in areas where there’s been more leeway or more runway in terms of performance? Yes, but that’s happening.”

There have been “specific targets, through expectations and holding people accountable for their actions and the results, as well as putting appropriate timeframes around returns,” Rehnberg said.