ARGO Argo Group International Holdings, Ltd. - 10-K

Item 1A. Risk Factors

Summary of Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below, that could adversely affect our business, financial condition, results of operations, and cash flows. Stakeholders should carefully consider these risks, along with the other information included in this Form 10-K and in our other filings with the SEC, before making an investment decision regarding our securities. There may be additional risks of which we are currently unaware or that we currently consider immaterial. All of these risks could have a material adverse effect on our financial condition, results of operations and cash flows.

• Insurance Underwriting Risks . Insurance underwriting risks include risks related to adverse changes in the value of insurance liabilities, including risks related to an excess or shortage of underwriting capacity, unexpected changes in the claims, legal or social environment, changes to distribution channels, sufficiency of reserves, our ability to compete effectively, and breach of the obligations of our agents.

• Operational Risks. Operational risks include risks related to employee retention and changes in key personnel, strategies and processes to mitigate insurance risks, ineffective internal controls, information technology, failure to protect confidential information and outsourcing relationships.

• Financial Risks. Financial risks cover our market, credit, investment and liquidity risks, which include risks related to the performance of Argo Group’s investment portfolio as well as risks related to the performance of financial markets, economic and political conditions, foreign currency fluctuations, impairments in investments, performance of counterparties, and the availability of reinsurance.

• Strategic Risks. Strategic risks include risks related to Argo Group’s inability to implement appropriate business plans and strategies, and include risks related to the macroeconomic environment, risk-based capital requirements, the Company’s debt, holding company structure, ratings and strategic transactions.

• Cybersecurity Risks. Cyber security risks include technology-related events that could compromise the integrity, confidentiality, and availability of Argo Group’s financial data, including data breaches and ransomware attacks, phishing and social engineering, Denial of Service (DoS) attacks, and exploits to third-party service providers.

• Reputational Risks. Reputational risks include risks related to the risk of potential loss through a deterioration of Argo Group’s reputation, and include risks related to potential violations of sanctions, anti-corruption or AML regulations.

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• Legal, Regulatory and Litigation Risks. Legal, regulatory and litigation risks include risks related to the outcome of legal and regulatory proceedings, including regulatory constraints on Argo Group’s business, such as constraints imposed on our Bermuda, U.S., or other subsidiaries, risk-based capital and solvency requirements, the outcome of legal proceedings, and limitations on a potential change of control due to Argo Group’s corporate structure.

• Taxation Risks . Taxation risks include risks related to the Company and its subsidiaries’ potential exposure to various taxes, including as a result of new, and changes to existing, tax legislation, treaties, and regulations in the jurisdictions in which the Company, its subsidiaries, and certain of their affiliates have a taxable presence, challenges by tax authorities to our current and historical tax positions and practices, U.S. federal withholding taxes on distributions paid to our non-U.S. stockholders, and any additional amounts that we may be required to pay to such stockholders, changes to, or our eligibility to qualify for benefits under, any income tax treaties on which we rely; and changes in tax laws in jurisdictions in which we have a taxable presence as a result of the implementation of the Pillar I and Pillar II proposals by the OECD.

We may be adversely affected by changes in economic and political conditions, including inflation and changes in interest rates.

The effects of inflation could cause the cost of claims to rise in the future. Our reserve for losses and loss adjustment expenses (“LAE”) includes assumptions about future payments for settlement of claims and claims handling expenses, such as medical treatments and litigation costs. To the extent inflation causes these costs to increase above reserves established for these claims, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified. Furthermore, if we experience deflation or a lack of inflation going forward and interest rates are low or decline, we could experience low portfolio returns because we hold fixed income investments of fairly short duration.

Additionally, our operating results are affected, in part, by the performance of our investment portfolio. Our investment portfolio may be adversely affected by inflation or changes in interest rates. Such adverse effects include the potential for realized and unrealized losses in a rising interest rate environment or the loss of income in an environment of prolonged low interest rates. Such effects may be further impacted by decisions made regarding such things as portfolio composition and duration given the prevailing market environment. Although we attempt to take measures to manage the risks of investing in changing interest rate environments, we may not be able to mitigate interest rate sensitivity effectively. If Argo Re’s ECR ratio falls below the Company’s risk tolerance, Argo Re’s ability to pay dividends to the Company will be restricted. Economic and political conditions, including inflation and fluctuation in interest rates or failure to maintain Argo Re’s ECR ratio in excess of the Company’s risk tolerance would have a material adverse effect on our business, results of operations, financial condition and our ability to pay dividends to stockholders.

Our insurance subsidiaries are subject to risk-based capital and solvency requirements in their respective regulatory domiciles and any failure to comply with these requirements may have a material adverse effect on our business.

A risk-based capital system is designed to measure whether the amount of available capital is adequate to support the inherent specific risks of each insurer. Risk-based regulatory capital is calculated at least annually. Authorities use the risk-based capital formula to identify insurance companies that may be undercapitalized and thus may require further regulatory attention. The formulas prescribe a series of risk measurements to determine a minimum capital amount for an insurance company, based on the profile of the individual company. The ratio of a company’s actual policyholder surplus to its minimum capital requirements will determine whether any regulatory action is required based on the respective local thresholds. The application and methods of calculating risk-based regulatory capital are subject to change, and the ultimate impact on our solvency position from any future material changes cannot be determined at this time.

We may have future capital requirements that may not be available to us on commercially favorable terms. Regulatory capital and solvency requirements for our future capital requirements depend on many factors, including our ability to underwrite new business, risk propensity and ability to establish premium rates and accurately set reserves at levels adequate to cover expected losses. To the extent that the funds generated by insurance premiums received and sale proceeds and income from our investment portfolio are insufficient to fund future operating requirements and cover incurred losses and loss expenses, we may need to raise additional funds through financings or curtail our growth and reduce in size. Uncertainty in the equity and fixed maturity securities markets could affect our ability to raise additional capital in the public or private markets. Any future financing, if available at all, may be on terms that are not favorable to us and our stockholders. In the case of equity financing, dilution to current shareholdings could result, and the securities issued may have rights, preferences and privileges that are senior or otherwise superior to those of our shares of common stock.

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Failure to comply with the capital requirement laws and regulations in any of the jurisdictions where we operate, including the U.S., the E.U., or Bermuda could result in remedial plans to rectify any capital level shortfalls that could require capital contributions and/or other actions, administrative actions and/or penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to our reputation, restrictions or prohibitions on the payment of dividends or other forms of distributions, or interruption of our operations, any of which could have a material and adverse impact on our business, financial position, results of operations, liquidity and cash flows.

The outcome of legal and regulatory proceedings, investigations, inquiries, claims and litigation related to our business operations, and changes in the legal environment, may have a material adverse effect on our results of operations and financial condition.

We are regularly subject to, and are currently involved in, legal and regulatory proceedings, investigations, inquiries, claims and litigation in connection with our business operations. Due to the inherent uncertainty of the outcomes of such matters, there can be no assurance that the resolution of any particular claim or proceeding would not materially adversely affect our results of operations and financial condition. Determining legal reserves or possible losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable outcomes. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material adverse effect on our financial position, results of operations and cash flows. Investigations, inquiries, disputes, claims and regulatory and legal and arbitration proceedings, including securities, derivative action and class action litigation, can be expensive and disruptive and could materially adversely affect our financial position, results of operations and cash flows. Such matters, even if pending or not ultimately substantiated or if indemnified or insured, may adversely impact us, including by disrupting our operations, diverting management resources and harming our reputation.

Significant changes in the legal environment could cause our ultimate liabilities to change from our current expectations. Such changes could be judicial in nature, like trends in the size of jury awards, developments in the law relating to tort liability or the liability of insurers, and rulings concerning the scope of insurance coverage or the amount or types of damages covered by insurance. In addition, changes in federal or state laws and regulations relating to the liability of insurers or policyholders, including state laws expanding “bad faith” liability and state “reviver” statutes, extending statutes of limitations for certain abuse claims, could result in changes in business practices, additional litigation, or could result in unexpected losses, including increased frequency and severity of claims. It is impossible to forecast such changes reliably, much less to predict how they might affect our loss reserves or how those changes might adversely affect our ability to price our insurance products appropriately. Thus, significant judicial or legislative developments could adversely affect our business, financial condition, results of operations and liquidity.

Insurance Underwriting Risks

Insurance underwriting risks are defined as the risk of loss, or adverse change in the value of insurance liabilities, due to inadequate pricing and/or reserving practices. These risks may be caused by the fluctuations in timing, frequency and severity of insured events and claim settlements in comparison to the expectations at the time of underwriting.

We may incur income statement charges (or benefits) if the reserves for losses and loss adjustment expenses are insufficient (or redundant). Such income statement charges could be material, individually or in the aggregate, to our financial condition and operating results in future periods.

General Loss Reserves

We maintain reserves for losses and loss adjustment expenses to cover estimated ultimate unpaid liabilities with respect to reported and unreported claims incurred as of the end of each balance sheet date. Reserves do not represent an exact calculation of liability, but instead represent management’s best estimates, which take into account various statistical and actuarial projection techniques as well as other influencing factors. Multiple actuarial methods are used in developing the ultimate claims liability. Each method has its own set of assumption variables and its own advantages and disadvantages. The relative strengths and weaknesses of a particular estimation method when applied to a particular group of claims can also change over time. Variables in the reserve estimation process can be affected by both internal and external events, such as changes in claims handling procedures, economic and social inflation, legal precedent and legislative changes.

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Social, economic, political and environmental issues, including rising income inequality, climate change, prescription drug use and addiction, exposures to new substances or those previously considered to be safe, along with the use of social media to proliferate messaging around such issues, has expanded the theories for reporting claims, which may increase our claims administration and/or litigation costs. State and local governments' increased efforts aimed to respond to the costs and concerns associated with these types of issues, may also lead to expansive, new theories for reporting claims or may lead to the passage of “reviver” statutes that extend the statute of limitations for the reporting of these claims, including statutes passed in certain states with respect to abuse claims. In addition, these and other social, economic, political and environmental issues may either extend coverage beyond our underwriting intent or increase the frequency or severity of claims.

In addition, many of these items are not directly quantifiable, particularly on a prospective basis, and there may be significant reporting lags between the occurrence of an insured event and the time it is actually reported to the insurer. During such a time lag, there may be development of claims that varies from that which was expected when loss reserves were established, adverse legal rulings which may impact the liability under insurance contracts beyond that which was anticipated when the reserves were established, and development of new theories related to coverage which may increase liabilities under insurance contracts beyond that which were anticipated when the loss reserves were established. Given the long-tail nature of some of our claims, judgement used in selecting actuarial assumptions and weighing the indications of the various actuarial methods in developing our ultimate loss selection may have a material impact on our reserves. Construction defect and professional liability claims are two examples where determining the ultimate claims liability can be complex and challenging. Claims on these lines are subject to greater inherent variability than is typical of the remainder of the Company’s reserves, and are highly dependent upon court settlements, economic conditions, and the predictability of those results inherently have a larger range of potential outcomes. For example, for the construction defect lines the Company’s reserve estimates for recent accident years rely heavily on expected loss ratios that are derived from analysis of rate changes, changes in underwriting, and other factors which are all effected by market conditions. While the Company believes the methods used to measure these changes are reasonable with input from the claims and underwriting departments, it is difficult to precisely measure the potential impacts on the Company’s reserves. Although reserve estimates are continually reevaluated in a regular ongoing process, because the calculation and setting of the reserves for losses and loss adjustment expenses is an inherently uncertain process dependent on estimates, our existing reserves may be insufficient or redundant and estimates of ultimate losses and loss adjustment expenses may increase or decrease over time. While we actively manage our risk exposure through underwriting limits and processes and further mitigate it through the purchase of reinsurance protection, including loss portfolio transfers, our losses could exceed our reinsurance limits which may have a material adverse impact on our business, results of operations and/or financial condition.

In light of these inherent uncertainties and as a result of our 2024 reserve review, we recorded prior year reserve development of $254.9 million for the year ended December 31, 2024. The largest reserve increases were primarily driven by our Run-off and Casualty segments related to professional and construction lines, respectively, including the impact of large losses. Such reserves were established in accordance with applicable insurance laws and U.S. GAAP. For further discussion of our loss reserves, please see Part II, Item 7 “Management’s discussion and analysis of financial condition and results of operations — Critical accounting policies, estimates and recent accounting pronouncements” and “Management’s discussion and analysis of financial condition and results of operations — Reserves for losses and loss adjustment expenses.”

Asbestos and Environmental Liability Loss Reserves

In addition to the previously described general uncertainties encountered in estimating reserves, there are significant additional uncertainties in estimating the amount of our potential losses from asbestos and environmental claims. Reserves for asbestos and environmental claims cannot be estimated with traditional loss reserving techniques that rely on historical accident year development factors due to the uncertainties surrounding these types of claims.

Among the uncertainties impacting the estimation of such losses are:

• difficulty in identifying sources of or exposure to environmental or asbestos contamination;

• uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure;

• changes in underlying laws and judicial interpretation of asbestos-related laws, including with respect to the interpretation and application of insurance coverage; and

• difficulty in properly allocating responsibility and/or liability for environmental or asbestos damage.

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Although we have established reserves to account for our exposure to asbestos and related environmental liability claims, management believes these factors continue to render traditional actuarial methods less effective at estimating reserves for asbestos and environmental losses than reserves on other types of losses. In addition, there is no assurance that future adverse development will not occur, and such development may have an adverse effect on our results of operations.

Black Lung Disease Loss Reserves

Through workers compensation coverage provided to coal mining operations by our subsidiary Rockwood, we have exposure to claims for black lung disease. Those diagnosed with black lung disease are eligible to receive workers compensation benefits from various U.S. federal and state programs. These programs are continually being reviewed by the governing bodies and may be revised without notice in such a way as to increase our level of exposure.

As described above, estimates of ultimate losses and loss adjustment expenses may increase in the future. Such changes in estimates could be material, individually or in the aggregate, to our future operating results and financial condition. We can provide no assurances such capital will be available.

Additional information relating to our reserves for losses and loss adjustment expense is included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 7, “Reserves for Losses and Loss Adjustment Expenses,” in the Notes to Consolidated Financial Statements.

We operate in a highly competitive environment and no assurance can be given that we will continue to be able to compete effectively in this environment.

We compete with numerous companies that provide casualty, property and specialty lines of insurance and related services. Some of those companies have a larger capital base and are more highly rated than we are. No assurance can be given that we will be able to continue to compete successfully in the insurance market. Increased competition in these markets could result in a change in the supply and/or demand for insurance, affect our ability to price our products at risk-adequate rates and retain existing business or underwrite new business on favorable terms. If this increased competition limits our ability to transact business, our operating results could be adversely affected.

Our insurance subsidiaries have exposure to unpredictable and unexpected changes in the claims environment or catastrophes and terrorist acts that can materially and adversely affect our business, results of operations and/or financial condition.

Emerging Claims

Changes in industry practices and legal, judicial, social, technological and other environmental conditions may have an unforeseeable adverse impact on claims and coverage issues. This could include the impact of “social inflation,” which is generally described by the rising costs of insurance claims due to societal trends which may result in increased litigation, broader definitions of liability and contractual interpretations, plaintiff-friendly legal decisions, larger compensatory jury awards, and larger awards for non-economic damages. These issues may adversely affect our business, such as by extending coverage beyond the intended scope at the time of underwriting business or increasing the number or size of expected claims. In some instances, these changes may not become apparent until sometime after insurance contracts that are affected were issued and hence cannot be appropriately factored into the underwriting decision. As a result, the full extent of liability under such insurance contracts may not be known for many years after these contracts have been issued, and our financial position and results of operations may be materially and adversely affected in such future periods. We maintain an emerging risk identification, analysis and reporting process, overseen by our Emerging Risk Review Group, as part of our enterprise risk framework, which seeks to provide an early identification of such trends. The effects of these and other unforeseen evolving or emerging claims and coverage issues are inherently difficult to predict.

Catastrophic Losses

We are subject to claims arising out of catastrophes that may have a significant effect on our business, results of operations and/or financial condition. Catastrophes can be caused by various events, including, but not limited to, tornadoes, hurricanes, windstorms, tsunamis, earthquakes, hailstorms, explosions, power outages, severe winter weather, wildfires and man-made events, including civil unrest. The incidence and severity of such catastrophic events are inherently unpredictable, and our losses from catastrophes could be substantial. Logistical challenges in responding to such events, resource constraints and other difficulties in resolving associated claims may ultimately result in higher claim amounts than expected. Insurance companies are generally not permitted to reserve for probable catastrophic events until they occur. Therefore, although we will actively manage our risk exposure to catastrophes through underwriting limits and processes, and further mitigate it through the purchase of reinsurance protection and other hedging instruments, an especially severe catastrophe or series of catastrophes could exceed our reinsurance or hedging protection and may have a material adverse impact on our business, results of operations and/or financial condition.

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Terrorism

We are exposed to the risk of losses resulting from acts of terrorism. Reinsurers are able to exclude coverage for terrorist acts or price that coverage at rates that we consider attractive. However, direct insurers, like our primary insurance company subsidiaries, might not be able to likewise exclude coverage of terrorist acts because of regulatory constraints. Terrorism exclusions are not permitted in the U.S. for worker’s compensation policies under U.S. federal law or under the laws of any state or jurisdiction in which we operate. When underwriting existing and new workers compensation business, we consider the added potential risk of loss due to terrorist activity, including foreign and domestic, and this may lead us to decline to underwrite or to renew certain business. However, even in lines where terrorism exclusions are permitted, our clients may object to a terrorism exclusion in connection with business that we may still desire to underwrite without an exclusion, some or many of our insurance policies may not include a terrorism exclusion. Given the reinsurance retention limits imposed under the TRIA and its subsequent legislative extensions, and that some or many of our policies may not include a terrorism exclusion, future foreign or domestic terrorist attacks may result in losses that have a material adverse effect on our business, results of operations and/or financial condition. See “Item 1. Business — Regulation” for a description of the applicability of the TRIA and the Terrorism Risk Insurance Program Reauthorization Act of 2014 to the Argo Group of Companies and its U.S. operations.

In the event coverage of terrorist acts cannot be excluded, we, in our capacity as a primary insurer, would have a significant gap in our own reinsurance protection with respect to potential losses as a result of any terrorist act. It is impossible to predict the occurrence of such events with statistical certainty and difficult to estimate the amount of loss per occurrence they will generate. If there is a future terrorist attack, the possibility exists that losses resulting from such event could prove to be material to our financial condition and results of operations. Terrorist acts may also cause multiple claims, and there is no assurance that our attempts to limit our liability through contractual policy provisions will be effective.

Global climate change, as well as increasing related regulation, may have an adverse effect on our business, financial results and operations.

We are exposed to physical and transition risks as a result of global climate change, and classify climate change as a material emerging risk. Physical risks arise from the direct effects of climate change, such as the destruction of property and infrastructure, which may result in a business interruption. Transition risks arise from the process of transitioning towards a low-carbon economy, primarily from extensive policy, legal/regulatory, technology, social and market changes in support of this transition. In addition, we may be exposed to losses in the value of our investments arising from the physical and transition impacts of climate change, including 'stranded assets', on the companies and securities in which we invest. We manage a well-diversified portfolio, both geographically and by sector, and we monitor our investment-allocation strategies as the economy transitions toward long-term decarbonization, allowing us to adjust our exposure to sectors and/or geographical areas that face severe risks due to climate change. Despite these efforts, there remains a risk that our financial condition or operating performance may be impacted by changes in our business model arising from climate change transition, and by the performance of strategies we put in place to manage this transition.

Physical Risks

A rise in the frequency of extreme weather events has increased natural disaster-related insurance claims, particularly from underwriting property insurance, requiring us to consider changes in premiums, product coverages, underwriting practices, and reinsurance utilization. Changes in climate conditions may also cause our underlying modeling data to no longer appropriately reflect the frequency and severity, limiting our ability to effectively evaluate and manage the related risks, of catastrophes and severe weather events.

Over the longer term, climate change may also have an impact on the economic viability of certain lines of business if suitable adjustments in price and coverage cannot be achieved. Climate change has been, and continues to be, a significant factor in the property insurance and reinsurance businesses and is something we have considered when reassessing our lines of business and our risk appetite for catastrophe-exposed property insurance. The effects of climate change could also lead to increased credit risk of other counterparties we transact business with, including reinsurers.

Transition Risks

We may face market pressure to contribute to a low-carbon economy, including, to no longer underwrite risks for carbon-intensive business (reducing insurance liability exposure) and to no longer invest in carbon-intensive business (reduce insurance asset portfolio exposure). There is a risk that certain elements of our business cease to be viable as a result of such climate change ‘transition’. Additionally, government policies or regulations to slow climate change, such as emission controls or technology mandates, may have an adverse impact on sectors such as utilities, transportation and manufacturing, affecting demand for our products and our investments in these sectors.

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As part of the transition risks, we may also face liability associated with allegations of failure to mitigate or adapt to climate change risk or associated disclosure failures. We are subject to complex and changing laws, regulation and public policy debates relating to climate change which are difficult to predict and quantify and may have an adverse impact on our business. Changes in regulations relating to climate change or our own decisions implemented as a result of assessing the impact of climate change on our business may result in an increase in the cost of doing business or a decrease in premiums in certain lines of business. Because there is significant variability associated with the impacts of climate change, we cannot predict how legal, regulatory and social responses may impact our business.

Because our business is dependent upon insurance and reinsurance agents and brokers, we are exposed to certain risks arising out of distribution channels that could cause our results to be adversely affected.

We market and distribute some of our insurance products and services through a select group of wholesale agents who have limited quoting and binding authority and who, in turn, sell our insurance products to insureds through retail insurance brokers. These agencies can bind certain risks that meet our pre-established guidelines. If these agents fail to comply with our underwriting guidelines and the terms of their appointment, we could be bound on a particular risk or number of risks, that were not anticipated, when we developed the insurance products. Such actions could adversely affect our results of operations. Additionally, in any given period, we may derive a significant portion of our business from a limited number of agents and brokers and the loss of any of these relationships, or significant changes in distribution channels resulting in loss of access to market through those agents and brokers, could have a significant impact on our ability to market our products and services.

In accordance with industry practice, we may pay amounts owed on claims under our insurance and reinsurance contracts to brokers and/or third-party administrators who in turn remit these amounts to our insureds or reinsureds. Although the law is unsettled and depends upon the facts and circumstances of each particular case, in some jurisdictions in which we conduct business, if an agent or broker fails to remit funds delivered for the payment of claims, we may remain liable to our insured or reinsured ceding insurer for the deficiency. Likewise, in certain jurisdictions, when the insured or reinsured pays the remitting funds to our agent or broker in full, our premiums are considered to have been paid in full, notwithstanding that we may or may not have actually received the premiums from the agent or broker. Consequently, we assume a degree of credit risk associated with certain agents and brokers with whom we transact business.

The insurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates; conversely, we may have a shortage of underwriting capacity when premium rates are strong, both of which could adversely impact our results.

Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse trends in litigation, regulatory constraints, general economic conditions and other factors. The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry. As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels. Demand for reinsurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, introduction of new capital providers, general economic conditions and underwriting results of primary insurers. The supply of reinsurance is related to prevailing prices, recent loss experience and capital levels. All of these factors fluctuate and may contribute to price declines generally in the reinsurance industry.

We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates that we consider appropriate and commensurate relative to the risk assumed. If we cannot underwrite insurance at appropriate rates, our ability to transact business would be materially and adversely affected. Any of these factors could lead to an adverse effect on our business, results of operations and/or financial condition.

Our agents, producers, or other third parties may exceed their underwriting authorities, commit fraud or otherwise breach obligations owed to us, which could adversely affect our results of operations and financial condition.

We authorize managing general agents, general agents and other producers to write business on our behalf from time to time within underwriting authorities we prescribe. We rely on the underwriting controls of these agents and producers to write business within these underwriting authorities. Our monitoring efforts may not be adequate and our agents and producers may exceed their underwriting authorities or otherwise breach obligations owed to us. There is also the risk that we may be held responsible for obligations that arise from the acts or omissions of third parties if they are deemed to have acted on our behalf. In addition, our agents, producers, insureds or other third parties may commit fraud or otherwise breach their obligation to us. To the extent that our agents, producers, insureds or other third parties exceed their authorities, commit fraud or otherwise breach obligations owed to us, our operating results and financial condition may be materially adversely affected.

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Operational Risks

Operational risk refers to the risk of loss arising from inadequate or failed internal processes, people, systems or the operational impact of external events. This risk encompasses all exposures faced by functions and services rendered in the course of conducting business including, but not limited to, underwriting, accounting and financial reporting, business continuity, claims management, information technology and data processing, legal and regulatory compliance, outsourcing and reinsurance purchasing.

We may be unable to attract and retain qualified employees and key executives.

We depend on our ability to attract and retain experienced underwriting talent, skilled employees and seasoned key executives who are knowledgeable about our business. The pool of highly skilled employees available to fill our key positions may fluctuate based on market dynamics specific to our industry and overall economic conditions. As such, higher demand for internal leaders and employees having desired talents could lead to increased compensation expectations for existing and prospective personnel, making it difficult for us to recruit and retain key employees and/or maintain labor costs at desired operating levels. If we are unable to attract and retain such talented team members and leaders, we may be unable to maintain our current competitive position in the specialized markets in which we operate and be unable to expand our operations into new markets, which could adversely affect our results.

Argo Re has operations that require highly skilled personnel to work in Bermuda. The ability to fill certain highly skilled key positions in Bermuda is constrained by Bermuda law, which provides that non-Bermudians are not permitted to engage in any occupation in Bermuda without an approved work permit from the Bermuda Department of Immigration. If the Bermuda Department of Immigration changes its current policies with respect to work permits, and as a result these key employees are unable to work in Bermuda, our operations could be disrupted and our financial performance could be adversely affected.

In addition, offices in foreign jurisdictions, such as Bermuda, may have residency and other mandatory requirements that affect the composition of its local boards of directors, executive teams and choice of third-party service providers. Due to the competition for available talent in such jurisdictions, we may not be able to attract and retain personnel as required by our business plans, which could disrupt operations and adversely affect our financial performance.

Loss of our executive officers or other key personnel or other changes to our management team could disrupt our operations or harm our business.

We depend on the efforts of our executive officers and certain key personnel. Any unplanned turnover or our failure to develop an adequate succession plan or business continuity plan for one or more of our executive officers or other key positions could deplete our institutional knowledge base and erode our competitive advantage. The loss or limited availability of the services of one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future, could, at least temporarily, have a material adverse effect on our operating results and financial condition. Leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers and employees.

Our strategies and processes to mitigate insurance risk may fail and have an adverse effect on our business.

We use a number of strategies and processes to mitigate our insurance risk exposure including:

• engaging in disciplined and rigorous underwriting within clearly defined risk parameters and subject to various levels of oversight by experienced underwriting professionals;

• undertaking technical analysis to inform pricing decisions;

• carefully evaluating terms and conditions of our policies;

• focusing on our risk aggregations by geographic zones, industry type, credit exposure and other bases; and

• ceding insurance risk to reinsurance companies.

However, there are inherent limitations to the effectiveness of these strategies and processes. No assurance can be given that a failure to maintain or follow such processes or controls, an unanticipated event or series of such events will not result in loss levels that could have a material adverse effect on our financial condition or results of operations.

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If we fail to maintain an effective system of disclosure controls and procedures and internal controls over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

We are required to maintain effective disclosure controls and procedures and internal control over financial reporting. Effective internal controls are necessary for us to provide reliable financial reports and aid in preventing fraud.

Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. As a result of the inherent limitations in all control systems, our evaluation of controls cannot provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons or by collusion of two or more people. Additionally, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. As a result, our internal controls over financial reporting may have gaps or other deficiencies.

Any such gaps or deficiencies may require significant resources to remediate, could cause delays in our filing of quarterly or annual financial results, require the attention of management, and may also expose us to litigation, regulatory fines or penalties, or other losses. Inadequate process design or a failure in operating effectiveness could result in a material misstatement of our financial statements due to, but not limited to, poorly designed systems, changes in end-user computing, poorly designed IT reports, ineffective oversight of outsourced processes, failure to perform relevant management reviews, accounting errors or duplicate payments, any of which could result in a restatement of financial accounts. If our management team is unable to assert that our internal control over financial reporting is effective as of the end of a fiscal year, investor confidence in the accuracy and completeness of our financial statement and reports could be negatively impacted, which may have an adverse effect on our reputation and stock price.

We are dependent on our information technology systems, which could fail or suffer a cybersecurity breach, that could adversely affect our business, reputation, results of operations or financial condition or result in the loss of sensitive information.

Our business is highly dependent upon the successful and uninterrupted functioning of our computer and data processing systems for various purposes, including accounting, policy administration, actuarial and other modeling functions necessary for underwriting business, and claims and payment processing. Certain of our operations are also dependent upon systems operated by third parties, including administrators, market counterparties and their sub-custodians and other service providers, and our service providers may also depend on information technology systems. Notwithstanding the diligence that we perform on our service providers, we may not be in a position to verify all of the potential risks or reliability of such information technology systems.

While we are not aware of a material cybersecurity breach to date, we have no assurance that such a breach will not occur.

We must continuously monitor and develop our information technology networks and infrastructure in an effort to prevent, detect, address and mitigate the risk of threats to our data and systems, including malware and computer virus attacks, ransomware, unauthorized access, business e-mail compromise, misuse, denial-of-service attacks, system failures and disruptions. Incidents of publicly reported cyber security incidents have increased recently and the insurance sector as a whole is more exposed than in the past. Over time, and particularly recently, the sophistication of these threats has continued to increase. Although we have implemented multiple layers of protection to minimize the risks to systems, personal data and the privacy of individuals, including robust training, review, and audit procedures, there is no assurance that our security measures, including information security policies, will provide fully effective protection from such events.

We continuously monitor international risks associated with our global operations, including impacts from military conflicts or political instability. Although we cannot predict the ultimate impacts, military conflicts or political instability may create a heightened risk of threats resulting in cyber activities against our operations. In addition, with the increasing adoption of Artificial Intelligence (“AI”), Argo Group has implemented an AI Policy with associated guidance on best practices and continues to monitor how AI developments might impact our security program, especially to combat the threat of deepfake audio and video schemes intending to impersonate Company employees with the aim of gaining unauthorized system access or defrauding the Company.

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The potential consequences of a material cybersecurity incident include disruption to business operations, a loss of confidential information, reputational damage, litigation with third parties, and remediation costs, which in turn could have a material impact on our results of operation or financial condition. While we continue to maintain and review our cyber liability insurance protection, providing for first party and third-party losses, such insurance may not provide insurance coverage for all of the costs and damages associated with the consequences of a cybersecurity incident. In some cases, such unauthorized access may not be immediately detected. This may impede or interrupt our business operations and could adversely affect our consolidated financial condition or results of operations.

Any failure to protect the confidential customer information that we handle routinely could adversely affect our business, reputation, results of operations or financial condition.

We are subject to a number of data privacy laws and regulations enacted in the jurisdictions in which we do business. See “Item 1. Business — Regulation” for a description of the applicability of certain cybersecurity and data protection regulations and requirements on the Argo Group.

We are not aware of a material privacy breach to date, and specifically no material events involving Personal Information (“PI”) or customer information, but we have no assurance that such a breach will not occur in the future. A misuse or mishandling of personal information being sent to or received from a client, employee or third party could damage our businesses or our reputation or result in significant monetary damages, regulatory enforcement actions, fines and criminal prosecution in one or more jurisdictions. We routinely transmit, receive and store certain types of personal information by email and other electronic means. Although we attempt to protect this personal information and have implemented robust privacy protection standards and training programs to mitigate the risk of a privacy breach, we may be unable to protect personal information in all cases, especially with customers, business partners, and other third parties who may not have or use appropriate controls to protect personal information.

We are continuously evaluating and enhancing systems and creating new systems and processes, including to maintain or upgrade our business continuity plans (including, for example, use of cloud services), as our business depends on our ability to maintain and improve our technology systems for interacting with customers, brokers and employees. Due to the complexity and interconnectedness of these systems and processes, these changes, as well as changes designed to update and enhance our protective measures to address new threats, increase the risk of a system or process failure or the creation of a gap in the associated security measures. Any such failure or gap could adversely affect our business operations and the advancement of our business or strategic initiatives.

The potential consequences of a material privacy incident include reputational damage, litigation with third parties, regulatory fines, and penalties and associated remediation costs, which in turn could have a material impact on our results of operation or financial condition. While we continue to maintain and review our cyber liability insurance protection, such insurance may not provide insurance coverage for all of the costs and damages associated with the consequences of personal information being compromised, such as investigations, sanctions and regulatory and law enforcement action, and result in reputational harm and loss of business, which could have a material adverse effect on our business, cash flows, financial condition and results of operations.

Furthermore, certain of our businesses are subject to compliance with laws and regulations enacted by various regulatory organizations or exchanges relating to the privacy and security of the information of clients, employees or others. The variety of applicable privacy and information security laws and regulations exposes us to heightened regulatory scrutiny and requires us to incur significant technical, legal and other expenses in an effort to ensure and maintain compliance. If we are found not to be in compliance with these laws and regulations, we could be subjected to significant civil and criminal liability and exposed to reputational harm.

We may experience issues with outsourcing relationships, which could negatively impact our business, results of operations, and financial condition.

We outsource a number of technology and business process functions to third-party providers and we may continue to do so in the future. If we do not effectively select, develop, implement and monitor our outsourcing relationships, or if we experience technological or other issues with transition, or if third-party providers do not perform as anticipated, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs (including litigation costs), and a loss of business that may have an adverse effect upon on our operations or financial condition.

Also, we periodically negotiate amendments and renewals of such relationships, and there can be no assurance that such terms will remain acceptable to us or such third parties. If third-party providers experience disruptions or do not perform as anticipated, or we experience problems with a transition to a third-party provider, we may experience operational difficulties, an inability to meet obligations (including, but not limited to, policyholder obligations), a loss of business, litigation, and increased costs, or suffer other negative consequences, all of which may adversely affect our business and results of operations.

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Our outsourcing of certain technology and business process functions to third parties may expose us to enhanced risk related to data security, which could result in adverse monetary, reputational and/or regulatory consequences, which in turn could have an adverse effect on our operations or financial condition. If we do not effectively monitor these relationships, third party providers do not perform as anticipated, technological or other problems occur with an outsourcing relationship, we may not realize expected productivity improvements or cost efficiencies and may experience operational difficulties. In addition, our ability to receive services from third-party providers based in different countries could be impacted by political instability, unanticipated regulatory requirements or policies inside or outside of the U.S., which could adversely affect our business.

Financial Risks

The performance of our investment portfolio is subject to a variety of risks, including market risk, credit risk, investment risk and liquidity risk. Market risk is the risk of loss or adverse change in our financial position due to fluctuations in the level and volatility of market prices of assets, liabilities and financial instruments. This risk may be caused by fluctuations in interest rates, foreign exchange rates or equity, property and securities values.

Credit risk is the risk of loss or adverse change in our financial position due to fluctuations in the credit standing of issuers of securities, counterparties or any other debtors, including risk of loss arising from an insurer’s inability to collect funds from debtors.

Investment risk is the uncertainty associated with making an investment that may not yield the expected returns or performance, including the risk that an investment will decline in value, result in a loss or result in liability or other adverse consequences for the investor.

Liquidity risk is the risk of loss or our inability to realize investments and other assets in order to meet our financial obligations when they fall due or the inability to meet such obligations except at excessive cost.

A prolonged recession or a period of significant turmoil in the U.S. and international financial markets, could adversely affect our business, liquidity and financial condition and our share price.

U.S. and international financial market disruptions such as the ones experienced in the last global financial crisis along with the possibility of a prolonged recession, may potentially affect various aspects of our business, including the demand for and claims made under our products, our counterparty credit risk and the ability of our customers, counterparties and others to establish or maintain their relationships with us, our ability to access and efficiently use internal and external capital resources and our investment performance. Volatility in the U.S. and other securities markets may also adversely affect our share price. Depending on future market conditions, we could incur substantial realized and unrealized losses in future periods, which may have an adverse impact on our results of operations, financial condition, debt and financial strength ratings, insurance subsidiaries’ capital levels and our ability to access capital markets.

We may be adversely affected by changes in economic and political conditions, including inflation and changes in interest rates.

The effects of inflation could cause the cost of claims to rise in the future. Our reserve for losses and loss adjustment expenses (“LAE”) includes assumptions about future payments for settlement of claims and claims handling expenses, such as medical treatments and litigation costs. To the extent inflation causes these costs to increase above reserves established for these claims, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified. Furthermore, if we experience deflation or a lack of inflation going forward and interest rates remain very low or continue to decline, we could experience low portfolio returns because we hold fixed income investments of fairly short duration.

Additionally, our operating results are affected, in part, by the performance of our investment portfolio. Our investment portfolio may be adversely affected by inflation or changes in interest rates. Such adverse effects include the potential for realized and unrealized losses in a rising interest rate environment or the loss of income in an environment of prolonged low interest rates. Such effects may be further impacted by decisions made regarding such things as portfolio composition and duration given the prevailing market environment. Although we attempt to take measures to manage the risks of investing in changing interest rate environments, we may not be able to mitigate interest rate sensitivity effectively. Fluctuation in interest rates could have a material adverse effect on our business, results of operations and/or financial condition.

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Our investment portfolio is subject to significant market and credit risks which could result in an adverse impact on our financial position or results.

Although our investment policies stress diversification of risks, conservation of principal and liquidity, our investments are subject to general economic conditions and market risks as well as risks inherent to particular securities.

For example, to the extent there is an economic downturn affecting a certain area in which our investment portfolio is concentrated, the risk that certain investments may default or become impaired would increase. Such defaults and impairments could reduce our net investment income and result in realized investment losses. Our investment portfolio is also subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, increasing the risk that the fair value of certain of our investments may not be readily determinable.

Our investments in fixed maturity and short-term securities may be adversely affected by changes in inflation and/or interest rates which, in turn, may adversely affect operating results. The fair value and investment income of these assets fluctuate with general economic and market conditions. Generally, the fair value of fixed maturity securities will decrease as interest rates increase. Some fixed maturity securities have call or prepayment options, which represent possible reinvestment risk in declining rate environments. Other fixed maturity securities such as mortgage-backed and asset-backed securities carry prepayment risk.

We also invest in marketable equity securities. These securities are carried on our balance sheet at fair value and are subject to potential losses and declines in market value. Our invested assets also include investments in limited partnerships, privately held securities and other alternative investments. Such investments entail substantial risks.

Risks for all types of securities are managed through application of the investment policy, which establishes investment parameters that include, but are not limited to, maximum percentages of investment in certain types of securities, minimum levels of credit quality and option-adjusted duration guidelines. There is no guarantee of policy effectiveness.

In addition, there can be no assurance that our investment objectives will be achieved, and results may vary substantially over time. Although we seek investment strategies that are correlated with our insurance and reinsurance exposures, losses in our investment portfolio may occur at the same time as underwriting losses and, therefore, exacerbate such losses’ adverse effect on us. See “Item 1. Business—Investments.”

We may be adversely affected by foreign currency fluctuations.

Although our foreign subsidiaries’ functional currency is the U.S. Dollar, with the exception of our Italian subsidiary whose functional currency is the Euro, certain premium receivables and loss reserves include business denominated in currencies other than U.S. Dollars. We are exposed to the possibility of significant claims in currencies other than U.S. Dollars. We may experience losses in the form of increased claims costs or devaluation of assets available for paying claims resulting from fluctuations in these non-U.S. currencies, which could materially and adversely affect our operating results.

We face a risk of non-availability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition.

We purchase reinsurance for our own account in order to mitigate the effect of certain large and multiple losses upon our financial condition. As is common practice within the insurance industry, we transfer a portion of the risks insured under our policies to other companies through the purchase of reinsurance or other, similar risk-mitigating hedging instruments. This reinsurance is maintained to protect the insurance and reinsurance subsidiaries against the severity of losses on individual claims, unusually serious occurrences in which a number of claims produce an aggregate extraordinary loss and catastrophic events. Although reinsurance does not discharge our subsidiaries from their primary obligation to pay for losses insured under the policies they issue, reinsurance does make the assuming reinsurer liable to the insurance and reinsurance subsidiaries for the reinsured portion of the risk.

Our reinsurers or capital market counterparts are dependent on their ratings in order to continue to write business and some have suffered downgrades in ratings in the past as a result of their exposures. Our reinsurers or capital market counterparties may also be affected by adverse developments in the financial markets, which could adversely affect their ability to meet their obligations to us. Insolvency of these counterparties, their inability to continue to write business or reluctance to make timely payments under the terms of their agreements with us could have a material adverse effect on us because we remain liable to our insureds or cedants in respect of the reinsured risks. Market conditions beyond our control may impact the availability, quality and cost of the reinsurance we purchase. No assurances can be made that reinsurance will remain continuously available to us to the same extent and on the same terms and rates as is currently available.

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An impairment in the carrying value of intangible assets could negatively impact our consolidated results of operations and stockholders’ equity.

Intangible assets are originally recorded at fair value. Intangible assets are reviewed for impairment at least annually or more frequently if indicators are present. Management, in evaluating the recoverability of such assets, relies on estimates and assumptions related to margin, growth rates, discount rates and other data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. Intangible asset impairment charges can result from declines in operating results, divestitures or sustained market capitalization declines and other factors. Impairment charges could materially affect our financial results in the period in which they are recognized.

The determination of the estimate of allowances and impairments taken on our investments is highly subjective and could materially impact our operating results or financial position.

We perform a detailed analysis each reporting period end to assess declines in the fair values of available for sale debt securities in accordance with applicable accounting guidance regarding the recognition and presentation of current expected losses. The process of determining an allowance for available for sale securities requires judgment and involves analyzing many factors. Assessing the accuracy of the allowances reflected, in our financial statements is inherently uncertain given the subjective nature of the process. Furthermore, additional impairments may need to be taken or allowances provided in the future with respect to events that may impact specific investments. Future material impairments or any error in accurately accounting for such impairments may have a material adverse effect on our financial condition or results of operations.

Our financial condition and operating results may be adversely affected by the failure of one or more reinsurers or capital market counterparties to meet their payment obligations to us.

We are subject to credit risk with respect to our ability to recover amounts due from reinsurers to the extent that any reinsurer is unable or unwilling to meet the obligations assumed under the reinsurance contracts. The collectability of reinsurance is subject to the solvency of the reinsurers, interpretation and application of contract language and other factors. Despite strong ratings, the financial condition of a reinsurer may change based on market conditions. In certain instances we also require assets in trust, letters of credit or other acceptable collateral to support balances due, however, there is no certainty that we can collect on these collateral agreements in the event of a reinsurers default. It is not always standard business practice to require security for balances due; therefore, certain balances are not collateralized. A reinsurer’s insolvency or inability to make payments under the terms of a reinsurance contract could have a material adverse effect on our business, results of operations and/or financial condition.

We may be adversely affected by the replacement of benchmark indices.

The withdrawal and replacement of widely used benchmark indices with alternative benchmark rates could adversely affect our business. For example, as a result of the phase-out of the London Interbank Offered Rate (“LIBOR”), we recognize that we have some related risk exposure within our investment portfolio and corporate debt structures, including that there remains the possibility that certain instruments and contracts without succession or alternative rate provisions could be adversely impacted from this transition, and that there are significant differences between how LIBOR and certain successor rates are calculated. The withdrawal and replacement of widely used benchmark indices with alternative benchmark rates may have an adverse effect on our business, results of operations or financial condition.

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Strategic Risks

Strategic risk means the risk of our inability to implement appropriate business plans and strategies, make decisions, allocate resources or adapt to changes in the business environment. Strategic risk includes the risk of the current or prospective adverse impact on earnings or capital arising from business decisions, improper execution of decisions or lack of responsiveness to industry changes.

Uncertain conditions in the global economy may adversely affect our business, results of operations and financial condition.

Economic imbalances and financial market turmoil affecting the global banking system and global financial markets could result in a new or incremental tightening in the credit markets, low liquidity, extreme volatility in fixed maturity, credit, currency, and equity markets and volatility in share prices. Major public health issues could harm our operations and have a major impact on the global economy and financial markets. These circumstances could lead to a decline in asset value and potentially reduce the demand for insurance due to limited economic growth prospects. These circumstances could adversely impact our ability to obtain financing. Even if financing is available, it may only be available on terms that are not favorable to us, which could decrease our profitability. Global and local economic conditions could also increase the number and size of claims made under our policies, our counter-party credit risk, and the ability of our counterparties to establish or maintain their relationships with us.

Net investment income and net realized and unrealized gains or losses also could vary materially depending on market conditions; impairment charges resulting from revaluations of debt and equity securities and other investments; interest rates; inflation; cash balances; and changes in the fair value of financial and derivative instruments. Increased volatility in the financial markets and overall economic uncertainty would increase the risk that the actual amounts realized in the future on our financial instruments could differ significantly from the fair values assigned to them.

Adverse developments in the broader global economy could create significant challenges to the insurance industry. If policy responses in Europe, the U.S. and other jurisdictions are not effective in mitigating these conditions, the insurance sector could be adversely affected by the resulting financial and economic environment. The ultimate impact of such conditions on the insurance industry in general, and on our operations in particular, however, cannot be fully or accurately quantified at this time.

We may not realize the anticipated benefits from the Merger.

Following the closing of the Merger in November 2023, we became an indirect wholly-owned subsidiary of Brookfield Wealth Solutions Ltd. We may fail to realize the anticipated benefits of the Merger, including due to factors that may be outside of our control, such as changes in laws or regulations or in the interpretation of existing laws or regulations, general economic, political, legislative or regulatory conditions, the loss or limited availability of the services of one or more of our executive officers or other key personnel, and other factors described in this report. Failure to realize the anticipated benefits of the Merger could adversely affect our business, financial condition and results of operations.

We may incur significant additional indebtedness which may adversely impact our results of operations and financial condition, including our access to capital and liquidity.

We may seek to incur additional indebtedness either through the issuance of public or private debt or through bank or other financing. The funds raised by the incurrence of such additional indebtedness may be used to repay existing indebtedness, including amounts borrowed under our credit facility, outstanding subordinated debt and floating rate loan stock or for our general corporate purposes, including additions to working capital, capital expenditures, investments in subsidiaries or acquisitions.

This additional indebtedness, particularly if not used to repay existing indebtedness, could limit our financial and operating flexibility, including as a result of the need to dedicate a greater portion of our cash flows from operations to interest and principal payments. It may also be more difficult for us to obtain additional financing on favorable terms, if at all, limiting our ability to capitalize on significant business opportunities and making us more vulnerable to economic downturns.

We may enter into future private debt arrangements containing restrictive business and financial covenants and complying with these covenants could limit our financial and operational flexibility. Our failure to comply with these covenants could also result in an increased cost of borrowing under the applicable agreement or an event of default under the credit facilities, which could result in us being required to repay any amounts outstanding under the credit facilities or debt arrangement prior to maturity. Such an event could have an adverse effect on our results of operations and financial condition, including our access to capital and liquidity. Our credit facilities and our outstanding notes are described in more detail in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources."

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We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.

Our future capital requirements depend on many factors, including our ability to write new business successfully, deploy capital into more profitable business lines, identify acquisition opportunities, manage investments and preserve capital in volatile markets, and establish premium rates and reserves at levels sufficient to cover losses. To the extent our funds are insufficient to fund future operating requirements or cover claims losses, we may need to raise additional funds through corporate finance transactions or curtail our growth and reduce our liabilities. Any such financing, if available at all, may be on terms that are not favorable to us. Our ability to raise such capital successfully would depend upon the facts and circumstances at the time, including our financial position and operating results, market conditions and applicable regulatory filings and legal issues. If we cannot obtain adequate capital on favorable terms, or obtain it at all, our business, financial condition and operating results could be adversely affected.

Our holding company structure and certain regulatory and other constraints affect our ability to pay dividends and make other payments.

Argo Group is a holding company and conducts substantially all of its operations through its subsidiaries. Argo Group’s only significant assets are the capital stock of its subsidiaries. Because substantially all of our operations are conducted through our insurance subsidiaries, substantially all of our consolidated assets are held by our subsidiaries and most of our cash flow, and consequently, our ability to meet our ongoing cash requirements, including any debt service payments or other expenses, and the ability to pay dividends to our stockholders, is dependent on the earnings of those subsidiaries and the transfer of funds by those subsidiaries to us in the form of distributions or loans.

In addition, if we fail to comply, or if and to the extent payment of dividend would cause us to fail to comply, with applicable laws, rules and regulations (including, in respect of Argo Re, any applicable capital adequacy guidelines established by the BMA) we may not declare, pay or set aside for payment dividends. As a result, if payment of dividends would cause us to fail to comply with any applicable law, rule or regulation, we will not declare or pay a dividend, including dividends on our shares of Series A Preferred stock (the “preferred stock”) for such dividend period. In addition, the ability of our insurance subsidiaries to make distributions to us is limited by applicable insurance laws and regulations. These laws and regulations and the determinations by the regulators implementing them may significantly restrict such distributions, and, as a result, adversely affect our overall liquidity. The ability of our subsidiaries to make distributions to us may also be restricted by, among other things, other applicable laws and regulations and the terms of our bank loans and our subsidiaries’ bank loans. Refer to “Legal, Regulatory and Litigation Risks—Our insurance subsidiaries are subject to risk-based capital and solvency requirements in their respective regulatory domiciles and any failure to comply with these requirements may have a material adverse effect on our business” below and also “Item 1. Business―Regulation,” for additional details on restrictions on our ability to make distributions.

Any ratings downgrades could result in an adverse effect on our business, financial condition and operating results.

Ratings with respect to claims paying ability and financial strength are important factors in establishing the competitive position of insurance companies and will also impact the cost and availability of capital to an insurance company. Ratings by A.M. Best and S&P represent an important consideration in maintaining customer confidence in us and in our ability to market insurance products. Rating organizations regularly analyze the financial performance and condition of insurers.

A.M. Best is a widely recognized insurance company rating agency and some policyholders are required to obtain insurance coverage from insurance companies that have an “A-” (Excellent) rating or higher from A.M. Best. In addition, certain of our credit facilities require that all significant insurance subsidiaries of Argo Group U.S. maintain an A.M. Best Financial Strength Rating of at least “B++”. FSR reflect the rating agency’s assessment of an insurer’s ability to meet its financial obligations to policyholders. All of our insurance companies have an FSR of “A-” (Excellent), with positive outlook, from A.M. Best. Argo Group U.S. insurance companies have an FSR of “A-” (Strong), with a stable outlook, from S&P. See “Item 1. Business — Ratings” for a detailed description of our ratings.

Our ability to refinance our existing debt or obtain new debt in the capital markets is impacted by any credit ratings. Any credit rating downgrade would result in higher borrowing costs. Additionally, many producers are prohibited from placing insurance with companies that are rated below “A-” (Excellent). We may also be required to maintain a greater amount of capital in order to maintain our existing ratings or become subject to a ratings downgrade if we experience weaker than-expected underwriting performance, our capital adequacy position decline for a prolonged period, our financial leverage materially increases or our liquidity materially decreases, among other factors.

A.M. Best and S&P continually monitor their ratings and may revise or withdraw their ratings at any time. Any future downgrade in our ratings could impair our ability to sell insurance policies and materially and adversely affect our competitive position in the insurance industry, future financial condition and operating results.

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Our use of strategic transactions to further our growth strategy may not succeed, which may result in underperformance relative to our expectations and have a material adverse effect on our business, financial condition or results of operations.

Our strategy for growth may include mergers and acquisitions, as well as divestitures. This strategy presents risks that could have a material adverse effect on our business, financial performance and results of operations, including: (1) the diversion of management’s attention, (2) our ability to execute a transaction effectively, including the integration of operations and the retention of employees, (3) our ability to retain key employees, (4) the contingent and latent risks associated with the past operations of and other unanticipated problems arising from an acquisition partner, and (5) the uncertainty of retained financial obligations associated with divested business or run-off.

Our future acquisitions could involve a number of additional risks that we may not be able to identify during the due diligence process, such as potential losses from unanticipated litigation, levels of covered claims or other liabilities and exposures, an inability to generate sufficient investment income and other revenue to offset acquisition costs and financial exposures in the event that sellers breach their representations and warranties and/or are unable or unwilling to meet their indemnification, reinsurance and other contractual obligations to us. We cannot predict whether we will be able to identify and complete a future transaction on terms favorable to us. We cannot know if we will realize the anticipated benefits of a completed transaction or if there will be substantial unanticipated costs associated with such a transaction. In addition, strategic transactions may expose us to increased litigation risks. A future merger or acquisition may result in tax consequences at either or both the stockholder and Argo Group level, potentially dilutive issuances of our equity securities, the incurrence of additional debt and the recognition of potential impairment of intangible assets. Each of these factors could adversely affect our financial position.

We have recently divested or placed in run-off several business lines. In connection with these actions, we have retained certain financial liabilities and contractual obligations related to these divested or discontinued business lines. We have quantified our exposures and an expectation that these exposures will decrease over time. There is no assurance, however, that prior to that time the amount of these obligations will not increase by an amount greater than we expect or that the process of ending these business lines will not take longer than we expect. The impact of such an increase could cause our exposure to be greater than expected. If the actual time periods and cost values are greater than the amounts we expect, our profitability could be adversely affected.

Our business strategy involves focusing on expense targets and generally reducing our expense ratio. We may be unable to execute on our expense targets. Strategic acquisitions and growth may not reduce our expense ratio, while strategic divestitures may not reduce overall expenses as much as we anticipate prior to any sale.

Reputational Risks

Reputational risk is the risk of potential loss through a deterioration of our reputation or standing due to a negative perception of our image among customers, counterparties, stockholders or supervisory authorities, and includes risk of adverse publicity regarding our business practices and associations. While we assess the reputational impact of all reasonably foreseeable material risks within our risk management processes, we also recognize a number of specific reputational risks.

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We are subject to laws and regulations relating to sanctions, anti-corruption and money laundering, the violation of which could adversely affect our operations.

Our activities are subject to applicable economic and trade sanctions, money laundering regulations, and anti-corruption laws in the jurisdictions where we operate, including Bermuda, the U.K. and the European Community and the U.S., among others. For example, we are subject to The Bribery Act, 2016 of Bermuda, the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, which, among other matters, generally prohibit corrupt payments or unreasonable gifts to foreign governments or officials. New sanction regimes may be initiated, or existing sanctions expanded, at any time, which can impact our business activities. We believe we maintain strong oversight and control through the deployment of our Code of Conduct and Business Ethics and associated policies and procedures including the Company’s whistleblower policies and continuous education and training programs. However, although we have in place systems and controls designed to ensure compliance with applicable laws and regulations, there is a risk that those systems and controls will not always be effective to achieve full compliance. It is also possible that an employee or intermediary could fail to comply with applicable laws and regulations. Failure to accurately interpret or comply with or obtain appropriate authorizations and/or exemptions under such laws or regulations could subject us to investigations, criminal sanctions or civil remedies, including fines, injunctions, loss of an operating license and other sanctions, all of which could damage our business or reputation, and have a material adverse effect on our financial condition and results of operations.

Any failure to meet investor and stakeholder expectations regarding environmental, social and corporate governance (“ESG”) matters may damage our reputation.

There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters. Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow. If our ESG practices fail to meet stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, climate risk management, Board and employee diversity, human capital management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted. Additionally, investors may reconsider their capital investment in our Company, and customers and partners may choose to stop doing business with us, which could have a material adverse effect on our reputation, business or financial condition.

Legal, Regulatory and Litigation Risks

The regulation and regulatory measures that would apply to Argo Group and its subsidiaries are discussed above under “Item 1. Business―Regulation.”

Legal and Regulatory Risk means the risk arising from our (1) failure to comply with statutory or regulatory obligations; (2) failure to comply with our Amended and Restated Bylaws; or (3) failure to comply with any contractual agreement.

Litigation Risk means the risk that acts or omissions or other business activity of Argo Group and our key functionaries and employees could result in legal proceedings to which we are a party, the uncertainty surrounding the outcome of such legal proceedings and the risk of an adverse impact on us resulting from such legal proceedings.

Our insurance subsidiaries are subject to risk-based capital and solvency requirements in their respective regulatory domiciles and any failure to comply with these requirements may have a material adverse effect on our business.

A risk-based capital system is designed to measure whether the amount of available capital is adequate to support the inherent specific risks of each insurer. Risk-based regulatory capital is calculated at least annually. Authorities use the risk-based capital formula to identify insurance companies that may be undercapitalized and thus may require further regulatory attention. The formulas prescribe a series of risk measurements to determine a minimum capital amount for an insurance company, based on the profile of the individual company. The ratio of a company’s actual policyholder surplus to its minimum capital requirements will determine whether any regulatory action is required based on the respective local thresholds. The application and methods of calculating risk-based regulatory capital are subject to change, and the ultimate impact on our solvency position from any future material changes cannot be determined at this time.

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As a result of these and other requirements, we may have future capital requirements that may not be available to us on commercially favorable terms. Regulatory capital and solvency requirements for our future capital requirements depend on many factors, including our ability to underwrite new business, risk propensity and ability to establish premium rates and accurately set reserves at levels adequate to cover expected losses. To the extent that the funds generated by insurance premiums received and sale proceeds and income from our investment portfolio are insufficient to fund future operating requirements and cover incurred losses and loss expenses, we may need to raise additional funds through financings or curtail our growth and reduce in size. Uncertainty in the equity and fixed maturity securities markets could affect our ability to raise additional capital in the public or private markets. Any future financing, if available at all, may be on terms that are not favorable to us and our stockholders. In the case of equity financing, dilution to current shareholdings could result, and the securities issued may have rights, preferences and privileges that are senior or otherwise superior to those of our common stock.

Failure to comply with the capital requirement laws and regulations in any of the jurisdictions where we operate, including the U.S., the E.U., or Bermuda could result in remedial plans to rectify any capital level shortfalls that could require capital contributions and/or other actions, administrative actions and/or penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to our reputation, or interruption of our operations, any of which could have a material and adverse impact on our business, financial position, results of operations, liquidity and cash flows. See “Item 1. Business—Regulation.”

Restrictions on Dividends and Distributions

Argo Re is prohibited from declaring or paying any dividends or making a distribution out of contributed surplus to Argo Group during any financial year if there are reasonable grounds for believing that (1) Argo Re is, or would after the payment be, unable to pay its liabilities as they become due or (2) the realizable value of its assets would thereby be less than its liabilities. Further, as a Class 4 insurer, Argo Re is prohibited from declaring or paying any dividends or making a distribution out of contributed surplus during any financial year if it is in breach of its ECR, general business solvency margin or minimum liquidity ratio or if the declaration or payment of such dividends would cause such a breach. If it has failed to meet its minimum margin of solvency or minimum liquidity ratio on the last day of any financial year, Argo Re will be prohibited, without the approval of the BMA, from declaring or paying any dividends during the next financial year. In addition, Argo Re is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files (at least seven days before payment of such dividends) with the BMA an affidavit stating that it will continue to meet the required margins.

As discussed above under “Item 1. Business―Regulation,” Argo Group and its various subsidiaries are considered to be an affiliated group for purposes of the BMA’s Group Supervision regime. This Group Supervision regime stipulates solvency margins, capital requirements and eligible capital requirements at the consolidated Argo Group level that may affect the calculation of similar solvency and capital requirements at the Argo Re level. The methodology for applying these solvency and capital requirements, particularly in regard to the eligibility, and classification of certain capital instruments within an affiliated group, is subject to ongoing refinement and interpretation by the BMA. The applicable rules and regulations for this regime, and the manner in which they will be applied to Argo Group, are subject to change, and it is not possible to predict the ultimate impact of future changes on Argo Group’s operations and financial condition.

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The outcome of legal and regulatory proceedings, investigations, inquiries, claims and litigation related to our business operations, and changes in the legal environment, may have a material adverse effect on our results of operations and financial condition.

We are involved in legal and regulatory proceedings, investigations, inquiries, claims and litigation in connection with our business operations. Due to the inherent uncertainty of the outcomes of such matters, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on our results of operations or financial condition. If one or more of such matters were decided against us, the effects could be material to our results of operations in the period in which we would be required to record or adjust the related liability and could also be material to our cash flows in the periods that we would be required to pay such liability.

Significant changes in the legal environment could cause our ultimate liabilities to change from our current expectations. Such changes could be judicial in nature, like trends in the size of jury awards, developments in the law relating to tort liability or the liability of insurers, and rulings concerning the scope of insurance coverage or the amount or types of damages covered by insurance. In addition, changes in federal or state laws and regulations relating to the liability of insurers or policyholders, including state laws expanding “bad faith” liability and state “reviver” statutes, extending statutes of limitations for certain abuse claims, could result in changes in business practices, additional litigation, or could result in unexpected losses, including increased frequency and severity of claims. It is impossible to forecast such changes reliably, much less to predict how they might affect our loss reserves or how those changes might adversely affect our ability to price our insurance products appropriately. Thus, significant judicial or legislative developments could adversely affect our business, financial condition, results of operations and liquidity.

Bermuda Subsidiaries

Argo Re is registered as a Class 4 Bermuda insurance company. As such, Argo Re subject to specific laws, rules and regulations promulgated by the Bermudian authorities according to the Insurance Act. Changes in Bermuda’s statutes, regulations and policies could result in restrictions on our ability to pursue our business plans, strategic objectives, execute our investment strategy and fulfill other stockholders’ obligations.

U.S. Subsidiaries

Our U.S. insurance subsidiaries are subject to regulation, which may reduce our profitability or inhibit our growth. If we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. Changes in the level of regulation of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities could adversely affect our ability to pursue our business plan and operate our U.S. insurance subsidiaries.

From time to time, various laws and regulations are proposed for application to the U.S. insurance industry, some of which could adversely affect the results of reinsurers and insurers. Additionally, the NAIC has been responsible for establishing certain regulatory and corporate governance requirements, which are intended to result in a group-wide supervision focus and include the Model Insurance Holding Company System Regulatory Act and the Insurance Holding Company System Model Regulation, the Requirements for ERM Report within the Annual Holding Company Registration (i.e., Form F), the Supervisory College, the Risk Management and ORSA Model, the CGAD and the Revisions to Annual Financial Reporting Model Regulation to expand the corporate audit function to provide reasonable assurance of the effectiveness of enterprise risk management, internal controls, and corporate governance. We are unable to predict the potential effect, if any, such legislative or regulatory developments may have on our future operations or financial condition.

In addition, regulatory authorities have relatively broad discretion to deny, suspend or revoke licenses for various reasons, including the violation of regulations. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, insurance regulatory authorities may preclude or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us. This could adversely affect our ability to operate our business.

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Taxation Risks

Our aggregate tax liability and effective tax rate could be adversely affected in the future by changes in the tax laws of the countries in which we operate, including as a result of ongoing efforts by the member countries of the OECD.

We have operations in various countries that have differing tax laws and rates. Our tax reporting is supported by current domestic tax laws in the countries in which we operate and the application of tax treaties between the various countries in which we operate. Our income tax reporting is subject to audit by domestic and foreign authorities. Our effective tax rate may change from year to year based on changes in the mix of activities and income earned among the different jurisdictions in which we operate, changes in tax laws in these jurisdictions, changes in the tax treaties between various countries in which we operate, changes in our eligibility for benefits under those tax treaties, and changes in the estimated values of deferred tax assets and liabilities. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, or other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. Such changes could result in a substantial increase in our aggregate tax liability and the effective tax rate on all or a portion of our income.

In recent years, the OECD, with the support of the G20, has developed proposals to address perceived base erosion and profit shifting (“BEPS”). BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to locations with low or no tax and little or no economic activity, for the purpose of reducing a multinational group’s aggregate tax liability. In 2021, the OECD/G20 Inclusive Framework on BEPS published a statement updating and finalizing the key components of a “two pillar” plan for global tax reform, as agreed among a number of countries across the globe. Pillar I addresses tax nexus and the allocation of profits for tax purposes. Under Pillar II, a global minimum tax at the rate of 15% would be imposed on certain companies whose revenues exceed a threshold. EU member states have agreed to adopt the OECD’s minimum tax rules under the Pillar II Framework, which began going into effect in 2024. Several other countries, including Bermuda, have changed or are also considering changes to their tax laws to implement the OECD’s minimum tax proposal.

Under current Bermuda law, the Company does not pay any tax on income or profits in Bermuda. We have obtained from the Bermuda Minister of Finance, under The Exempted Undertakings Tax Protection Act 1966 of Bermuda, an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to our Bermuda subsidiaries, until March 31, 2035.

On December 15, 2023, the Bermuda government passed the CIT Act, which became fully operative with respect to the imposition of corporate income tax on January 1, 2025. Under the CIT Act, Bermuda corporate income tax will be chargeable in respect of fiscal years beginning on or after January 1, 2025, and will apply only to Bermuda entities and permanent establishments that are part of multinational enterprise (MNE) groups with EUR 750 million or more in annual revenues in at least two of the four fiscal years immediately preceding the fiscal year in question (a “Bermuda Constituent Entity Group”). Where corporate income tax is chargeable to a Bermuda Constituent Entity Group, the amount of corporate income tax chargeable for a fiscal year shall be (a) 15% of the net taxable income of the Bermuda Constituent Entity Group less (b) tax credits applicable to the Bermuda Constituent Entity Group under Part 4 of the CIT Act, or as prescribed.

The Bermuda Government announced in its Second Public Consultation that the new CIT Act tax regime would supersede existing Tax Assurance Certificates held by entities within the scope of the new Bermuda corporate income tax, such as those issued to us. Given the potential for the new Bermuda corporate income tax to supersede existing Tax Assurance Certificates, it is likely that the Company’s Bermuda Constituent Entity Group will be subject to Bermuda tax for tax years beginning on or after January 1, 2025.

The Company, a previously Bermuda domiciled entity, redomiciled to the United States during the period ending December 31, 2023 and will not be subject to the CIT Act. Additionally, Argo Re, a Bermuda domiciled entity, filed an Internal Revenue Code Section 953(d) election to treat the entity as a U.S. taxpayer. Any tax incurred by Argo Re in the United States via Internal Revenue Section 953(d) is expected to be fully creditable against the CIT Act. As a result, we do not anticipate the CIT Act to materially impact our aggregate tax liability and the effective tax rate.

Changes in U.S. tax law may have a material adverse effect on us or our stockholders.

The tax treatment of our company and its subsidiaries may be affected by future U.S. tax legislation. We cannot predict whether any particular proposed legislation will be enacted or, if enacted, what the specific provisions or the effective date of any such legislation would be, or whether it would have any effect on our company or its subsidiaries. No assurance can be provided that future legislative, administrative, or judicial developments will not result in an increase in the amount of U.S. tax payable by our company, its subsidiaries, or stockholders. Any such developments could have a material adverse effect on stockholders or our business, financial condition, and operating results.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion provides an analysis of the Company's financial condition, results of operations and cash flows from management's perspective and should be read in conjunction with the Consolidated Financial Statements and related notes beginning on page F-1. Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.

Merger

On February 8, 2023, we entered into the Merger Agreement with Brookfield Wealth Solutions Ltd. and Merger Sub, a wholly-owned subsidiary of Brookfield Wealth Solutions Ltd. The Merger Agreement provides for the merger of the Merger Sub with and into us, which we refer to as the “Merger,” with us surviving the Merger as an indirect wholly-owned subsidiary of Brookfield Wealth Solutions Ltd.

On November 16, 2023 (“Merger Date”), we completed the Merger, which resulted in a change to the Company’s ownership.

Brookfield Wealth Solutions Ltd. elected to push-down its purchase accounting, which resulted in the Company reflecting the fair market value of its assets and liabilities as of the Merger Date, in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The application of push-down accounting created a new basis of accounting for all of our assets and liabilities. As such, the Company’s financial position, results of operations, and cash flows subsequent to the acquisition are not comparable with those prior to November 16, 2023, and therefore have been separated to indicate pre-acquisition and post-acquisition periods. The pre-acquisition period through November 15, 2023 is referred to as the Predecessor period. The post-acquisition period, November 16, 2023 and forward, includes the impact of push-down accounting and is referred to as the Successor period.

As a result, the following discussion regarding the results of operations of the Successor Company will be for the year ended December 31, 2024. The Successor Company will not be compared to previous periods due to the new basis of accounting it was created on, nor will it be compared to the period November 16, 2023 through December 31, 2023 (Successor) as these periods represent a full year versus forty-five days of operations, respectively.

Refer to Note 1, “Business and Significant Accounting Policies” within the Consolidated Financial Statements for additional information regarding the Merger.

For discussion of our results of operations and changes in financial conditions for the period January 1, 2023 through November 15, 2023 (Predecessor) compared to year ended December 31, 2022 and discussion for our results of operations for the period November 16, 2023 through December 31, 2023 (Successor) refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Merger with AGIH Merger Sub, Inc.

On September 25, 2024, the Company and AGIH Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“AGIH Merger Sub”), entered into an Agreement and Plan of Merger, pursuant to which, among other things, AGIH Merger Sub merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger with AGIH Merger Sub, Inc.”). The purpose of the Merger with AGIH Merger Sub, Inc., was to reduce the Company’s annual franchise taxes in the State of Delaware by reducing the number of authorized shares of the Company’s common stock and preferred stock. In connection with the consummation of the Merger with AGIH Merger Sub, Inc., the number of authorized shares of the Company’s common stock decreased from 2,000,000,000 to 1,000, each share of the Company’s common stock, par value $1.00 per share, of the Company was converted into and became one hundred millionth (1/100,000,000) of a validly issued, fully paid, and non-assessable share of common stock, par value $0.01 per share, of the Company, and the number of authorized shares of the Company’s preferred stock decreased from 30,000,000 to 10,000.

Forward-Looking Statements

This report includes forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as “expect,” “intend,” “plan,” “believe,” “do not believe,” “aim,” “project,” “anticipate,” “seek,” “will,” “likely,” “assume,” “estimate,” “may,” “continue,” “guidance,” “growth,” “objective,” “remain optimistic,” “improve,” “progress,” “path toward,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” “on track” and similar expressions of a future or forward-looking nature.

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Such statements are subject to certain risks and uncertainties that could cause actual events or results to differ materially including, but not limited to, recent changes in interest rates and inflation, the outcome of our exploration of strategic alternatives, the adequacy of our projected loss reserves, employee retention and changes in key personnel, the ability of our insurance subsidiaries to meet risk-based capital and solvency requirements, the outcome of legal and regulatory proceedings, investigations, inquiries, claims and litigation and other risks and uncertainties discussed in our filings with the SEC. For a more detailed discussion of such risks and uncertainties, see Part I, Item 1A, “Risk Factors.” The inclusion of a forward-looking statement herein should not be regarded as a representation by the Company that the Company’s objectives will be achieved. Argo Group undertakes no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on any such statements.

Consolidated Results of Operations (Successor)

For the year ended December 31, 2024, we reported net loss attributable to holder of common stock of $158.6 million.

The following is a comparison of selected data from our results of operations for the relevant periods:

Successor

(in millions)

For the Year Ended

Period from

December 31, 2024

November 16, 2023 through December 31, 2023

Net earned premiums

Net investment income

Net investment and other gains (losses)

Total consolidated revenues

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Net Earned Premiums

Consolidated net earned premiums were $1,089.8 million for the year ended December 31, 2024. The majority of net earned premiums came from our Casualty segment, with a portion coming from the Specialty segment due to a significant portion of our Specialty business being from Fronting programs.

Our gross written and earned premiums are further discussed by reporting segment below under the heading “Segment Results.”

Net Investment Income

Consolidated net investment income was $249.8 million for the year ended December 31, 2024, primarily driven by $69.0 million of accretion income from the application of purchase accounting to fixed maturities and short-term investments. Additionally, a change in investment manager and investment strategy, including increased allocations to mortgage and private loan asset classes, further contributed to increased yield in the portfolio. Additionally, the Company acquired equity securities and other investments following a shift in our investment strategy under our new investment manager.

Total invested assets were $4,094.8 million compared to $3,481.2 million at December 31, 2024 and December 31, 2023, respectively. The $613.6 million increase was primarily due to a $300.0 million capital contribution from Brookfield Wealth Solutions Ltd. in the fourth quarter of 2024, resulting in a rise in private loans.

Net Investment and Other Gains and Losses

Consolidated net investment and other gains (losses) was $20.0 million for the year ended December 31, 2024, primarily driven by net realized gains on fixed maturities and equity securities of $9.5 million and $16.7 million, respectively, offset partially by credit losses on our private loan investments. Net realized gains from the sale of fixed maturities were the result of purchase accounting adjusted book values. Equity securities gains were driven by a holding gain on a single real estate joint venture investment.

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Losses and Loss Adjustment Expense

Consolidated losses and loss adjustment expenses were $1,018.3 million for the year ended December 31, 2024.

The consolidated loss ratio was 93.4% for the year ended December 31, 2024. Net unfavorable prior year development, primarily driven by higher-than-expected loss experience in our Run-off and Casualty Lines, contributed 23.4 percentage points to our loss ratio.

Catastrophe losses of $27.2 million (2.5 percentage points) for the year ended December 31, 2024, were attributable to U.S. storms.

The following table summarizes the above referenced prior-year loss reserve development for the year ended December 31, 2024 with respect to net loss reserves by segment carried as of December 31, 2023. The net unfavorable prior-year reserve development of $254.9 million is made up of unfavorable prior year reserves development of $87.7 million in Casualty Lines, $3.1 million in Specialty Lines and $164.1 million in Run-off Lines. Our losses and loss adjustment expenses, including the prior-year loss reserve development shown in the following table, are further discussed by reporting segment under the heading “Segment Results” below.

(in millions)

Net Reserves 2023

Net Reserve

Development

(Favorable)/

Unfavorable

Percent of 2023 Net Reserves

Casualty Lines

Specialty Lines

Run-off Lines

Total

In determining appropriate reserve levels for the year ended December 31, 2024, we maintained the same general processes and disciplines that were used to set reserves at prior reporting dates. No significant changes in methodologies were made to estimate the reserves since the last reporting date; however, at each reporting date we reassess the actuarial estimate of the reserve for loss and loss adjustment expenses and record our best estimate. Consistent with prior reserve valuations, as claims data becomes more mature for prior accident years, actuarial estimates were refined to weigh certain actuarial methods more heavily in order to respond to any emerging trends in the paid and reported loss data. While prior accident years’ net reserves for losses and loss adjustment expenses for some lines of business have developed favorably in recent years, this does not imply that more recent accident years’ reserves also will develop favorably; pricing, reinsurance costs, legal environment, general economic conditions including changes in inflation and many other factors impact our ultimate loss estimates.

Consolidated gross reserves for losses and loss adjustment expenses were $5,798.6 million at December 31, 2024 as compared to $5,544.5 million at December 31, 2023. The increase was primarily driven by net unfavorable prior-year reserve development during compared to year ended 2023. Management has recorded its best estimate of loss reserves at each date based on current known facts and circumstances. Due to the significant uncertainties inherent in the estimation of loss reserves, there can be no assurance that future loss development, favorable or unfavorable, will not occur.

Underwriting, Acquisition and General Expenses

Consolidated underwriting, acquisition and general expenses were $477.0 million for the year ended December 31, 2024.

The consolidated expense ratio was 43.8% for the year ended December 31, 2024, which includes amortization expense of value of business acquired (“VOBA”) and other intangible assets.

Income Tax Provision

The consolidated income tax provision represents the income tax expense or benefit associated with our operations based on the tax laws of the jurisdictions in which we operate. Therefore, the consolidated provision for income taxes represents taxes on net income for our Ireland, Italy, U.K. and U.S. operations. The consolidated benefit for income taxes was $42.2 million for the year ended December 31, 2024. The consolidated effective tax rate was 22.2% for the year ended December 31, 2024, which was primarily aligned with statutory tax rates.

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Consolidated Results of Operations (Predecessor)

For the period January 1, 2023 through November 15, 2023 (Predecessor), we reported a net loss attributable to holders of common stock of $220.9 million ($6.28 per diluted share of common stock) as compared to a net loss attributable to holders of common stock of $185.7 million ($5.31 per diluted share of common stock) for the year ended December 31, 2022.

The following is a comparison of selected data from our results of operations, as well as book value per share of common stock, for the relevant periods:

Predecessor

Period from

For the Year Ended

(in millions)

January 1, 2023 through November 15, 2023

December 31, 2022

Gross written premiums

Net earned premiums

Net investment income

Net investment and other gains (losses):

Net realized investment and other gains (losses)

Change in fair value recognized

Change in allowance for credit losses on fixed maturity securities

Total net investment and other gains (losses)

Total revenue

Income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

Less: Dividends on preferred shares

Net income (loss) attributable to common stockholders

GAAP ratios:

Loss ratio

Expense ratio

Combined ratio

The table above includes ratios in accordance with U.S. generally accepted accounting principles (“GAAP”) that we use to measure our profitability. We believe that they enhance an investor’s understanding of our profitability. They are calculated as follows:

• Loss ratio: the ratio of claims and claims expense to premiums earned. Loss ratios include the impact of catastrophe losses.

• Expense ratio: the ratio of underwriting, acquisition and general expenses to premiums earned.

• Combined ratio: the sum of the loss ratio and the expense ratio. The difference between 100% and the combined ratio represents underwriting income (loss) as a percentage of net earned premiums, or underwriting margin (loss).

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Gross Written and Net Earned Premiums

Consolidated gross written and net earned premiums by our four primary insurance lines were as follows:

Predecessor

Period from

For the Year Ended

January 1, 2023 through November 15, 2023

December 31, 2022

(in millions)

Gross Written

Net Earned

Gross Written

Net Earned

Property

Liability (1)

Professional

Specialty

Total

(1) Ceded premium in 2022 of $121.0 million for the U.S. LPT has been included in the Liability line to align with the majority of the subject reserves covered under the agreement.

Gross written premiums decreased $899.7 million, or 31.6%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease in gross written premiums is primarily attributable to the sale of Argo Underwriting Agency Limited (“AUA”), Argo Seguros, and AGSE as well as businesses we have exited. Additionally, there were reductions in gross written premium in our U.S. operations primarily due to proactive actions taken in certain lines to prioritize improving profitability, partially offset by growth in several other businesses. Remaining decrease is attributable to the shortened Predecessor period.

Consolidated net earned premiums decreased $514.5 million, or 29.6%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease is driven by the aforementioned reasons for gross written premiums.

Our gross written and earned premiums are further discussed by reporting segment and major lines of business below under the heading “Segment Results.”

Net Investment Income

For the period January 1, 2023 through November 15, 2023 (Predecessor), net investment income decreased $8.5 million, or 6.5%, as compared to the year ended December 31, 2022. The decrease is primarily attributable to the periods compared as a result of the Merger. Overall, compared to 2022, net investment income for the 2023 Predecessor period benefited from higher interest rates, partially offset by a decrease in income from our alternative investment portfolio which includes earnings from both private equity and hedge fund investments.

Total invested assets were $3,481.2 million compared to $3,651.9 million at December 31, 2023 and December 31, 2022, respectively. The decrease of $170.7 million is driven by post Merger push-down accounting. The Company re-classified $747.8 million of short-term investments with maturities of 90 days or less from Short-term investments to Cash, restricted cash and cash equivalents in our Consolidated Balance Sheets. The decrease due to the aforementioned re-classification was offset by an increase to our investments driven by higher interest rates.

Net Investment and Other Gains and Losses

Consolidated net investment and other losses decreased $92.6 million for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. Consolidated net realized investment losses of $22.7 million for the period January 1, 2023 through November 15, 2023 (Predecessor), were primarily driven from the sale of AUA, which included $20.3 million of pre-tax realized losses that were previously recognized in accumulated other comprehensive income, resulting in no impact to total stockholders’ equity from this reclassification. The remaining decrease was driven by the transactions during the year ended December 31, 2022, which included consolidated net realized investment losses related to the sale of Argo Seguros and AGSE, of which $31.8 million related to historical foreign currency translation losses which were previously recognized in accumulated other comprehensive income, resulting in no impact to total stockholders’ equity from this reclassification. The Company also recognized $37.6 million of realized losses from the sale of assets transferred to Enstar as part of the U.S. LPT transaction, of which $34.2 million was an impairment recognizing losses that were previously included in accumulated other comprehensive income.

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Losses and Loss Adjustment Expense

Consolidated losses and loss adjustment expenses decreased $123.7 million, or 10.6%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The consolidated loss ratio was 85.1% for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to 67.0% for the year ended December 31, 2022. The increase in the loss ratio was driven by an increase in net unfavorable prior year development for the period January 1, 2023 through November 15, 2023 (Predecessor) as compared to 2022 (18.2 percentage points). Catastrophe losses of $28.6 million for the period January 1, 2023 through November 15, 2023 (Predecessor), were attributable to Hawaii wildfires, Tropical Storm Ophelia, Hurricane Idalia, and other U.S. storms. Catastrophe losses of $44.0 million for the year ended December 31, 2022 were attributable to Hurricane Ian, Winter Storm Elliott, the Ukraine/Russia conflict, and other small events.

Consolidated gross reserves for losses and loss adjustment expenses were $5,544.5 million at December 31, 2023 as compared to $5,051.6 million at December 31, 2022. The increase was primarily driven by net unfavorable prior-year reserve development during the period January 1, 2023 through November 15, 2023 (Predecessor) as compared to year ended 2022 and retroactive reinsurance contracts the Company entered into with AUA subsidiaries. Management has recorded its best estimate of loss reserves at each date based on current known facts and circumstances. Due to the significant uncertainties inherent in the estimation of loss reserves, there can be no assurance that future loss development, favorable or unfavorable, will not occur.

Underwriting, Acquisition and General Expenses

Consolidated underwriting, acquisition and general expenses decreased $251.7 million, or 37.5%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022.

The consolidated expense ratio decreased 4.4% to 34.2% for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to 38.6% the year ended December 31, 2022. This decrease is primarily driven by the change in business mix resulting from the sale of AUA, Argo Seguros and our Malta operations.

Non-Operating Expenses

Non-operating expenses represent costs not associated with our ongoing insurance or other operations, including severance expenses, certain legal costs, merger and acquisition and other transaction-related expenses, and certain non-recurring expenses. As such, non-operating expenses have been excluded from the calculation of our expense ratio. These non-recurring costs are included in the line item Non-operating expenses in the Company’s Consolidated Statements of Income (Loss).

Non-operating expenses were $41.1 million for the period January 1, 2023 through November 15, 2023 (Predecessor) and $51.5 million for the year ended December 31, 2022.

For the period January 1, 2023 through November 15, 2023 (Predecessor), our non-operating expenses consisted primarily of advisory and legal fees related to the Merger of the Company with Brookfield Reinsurance. For the year ended December 31, 2022, our non-operating expenses consisted primarily of advisory fees driven by the exploration of the Company’s strategic alternatives announced in the second quarter of 2022 and the contested proxy process.

Interest Expense

Consolidated interest expense increased $3.0 million, or 11.2%, to $29.8 million for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The year-over-year increase was primarily attributable to higher short-term interest rates in 2023.

Foreign Currency Exchange Gain (Loss)

Consolidated foreign currency exchange loss was $1.8 million for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to a $5.0 million foreign currency exchange gain the year ended December 31, 2022. The changes in the foreign currency exchange gains were due to fluctuations of the U.S. Dollar, on a weighted average basis, against the Canadian Dollar, Euro and the British Pound as well as disposal of several businesses transacting in foreign currencies.

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Impairment of Goodwill and Intangible Assets

As a result of the announced sale of Argo Underwriting Agency Limited and its Lloyd’s Syndicate 1200, an estimated fair value was established for Syndicate 1200 that was below its carrying value. As such, we recorded a $28.5 million impairment charge in the third quarter of 2022, consisting of $17.3 million of indefinite lived intangible assets and $11.2 million of goodwill. There were no such impairments for the period January 1, 2023 through November 15, 2023 (Predecessor).

Income Tax Provision

The consolidated income tax provision represents the income tax expense or benefit associated with our operations based on the tax laws of the jurisdictions in which we operate. Therefore, the consolidated provision for income taxes represents taxes on net income for our Ireland, Italy, U.K. and U.S. operations. The consolidated provision for income taxes was $0.3 million for the period January 1, 2023 through November 15, 2023 (Predecessor), compared to a benefit of $8.0 million for the year ended December 31, 2022. The consolidated effective tax rates were 0.1% and 4.3% for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, respectively. The primary driver for the fluctuation in the effective tax rate was a Base Erosion and Anti-Abuse Tax Liability incurred as the result of our U.S. operations entering into a loss portfolio transfer with a Bermuda related party. This liability was ultimately reversed through purchase accounting, however the impact was recorded in our income tax provision through the period ending November 15, 2023. Additionally, non-deductible compensation under Internal Revenue Code Section 162(m) also contributed to a variance in our effective tax rate. Excluding the Base Erosion and Anti-Abuse Tax Liability and non-deductible compensation adjustments, the effective tax rate for the period ending November 30, 2023 was more aligned with statutory tax rates.

Segment Results

As a result of the Company’s merger with Brookfield Wealth Solutions Ltd, and overall strategic assessment of the business, the Company changed its internal segments in a manner that caused the composition of its reporting segments to change in the fourth quarter of 2024. The Company’s reporting segments were realigned to three reportable segments—Casualty Lines, Specialty Lines, and Run-off Lines. The Company has recast all applicable Successor periods for comparability.

For additional segment information, refer to Note 15 , “Segment Information” in the Notes to the Consolidated Financial Statements.

Casualty Lines

The following table summarizes the results of operations for the Casualty Lines segment:

Successor

For the Year Ended

Period from

(in millions)

December 31, 2024

November 16, 2023 through December 31, 2023

Net earned premiums

Net investment income

Total segment revenues

Less:

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Other segment items (1)

Segment operating income (loss)

(1) Includes interest expense and fee and other expense (income), net.

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Net Earned Premiums

Net earned premiums were $546.1 million for the year ended December 31, 2024. Premiums were primarily attributable to our casualty, construction, environmental, Rockwood and Bermuda businesses. Casualty experienced a favorable rate environment in all businesses except for Rockwood.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses were $432.2 million for the year ended December 31, 2024.

The loss ratio for the year ended December 31, 2024 was 79.1%. Net unfavorable prior year development, primarily driven by the recognition of higher-than-expected loss experience, mainly in our construction line of business, along with updates to the expectations for future loss experience and development for Bermuda Casualty, contributed 16.1% percentage points to our loss ratio.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses were $145.5 million for the year ended December 31, 2024. The expense ratio was 26.7% for the same period.

Specialty Lines

The following table summarizes the results of operations for the Specialty Lines segment:

Successor

For the Year Ended

Period from

(in millions)

December 31, 2024

November 16, 2023 through December 31, 2023

Net earned premiums

Net investment income

Total segment revenues

Less:

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Other segment items (1)

Segment operating income (loss)

(1) Includes interest expense and fee and other expense (income), net.

Net Earned Premiums

Net earned premiums were $257.8 million for the year ended December 31, 2024. Premiums were primarily attributable to our property, garage, inland marine, and programs. Garage and inland marine benefited from a single-digit rate increase environment while Bermuda Property experienced single-digit declines.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses were $165.7 million for the year ended December 31, 2024. The loss ratio for the year ended December 31, 2024 was 64.3% and included 10.6 percentage points from catastrophe losses which were primarily attributable to U.S storms.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses were $66.2 million for the year ended December 31, 2024. The expense ratio was 25.7% for the year ended December 31, 2024.

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Run-off Lines

The following table summarizes the results of operations for the Run-off Lines segment:

Successor

For the Year Ended

Period from

(in millions)

December 31, 2024

November 16, 2023 through December 31, 2023

Net earned premiums

Net investment income

Total segment revenues

Less:

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Other segment items (1)

Segment operating income (loss)

(1) Includes interest expense and fee and other expense (income), net.

Net Earned Premiums

Net earned premiums were $285.9 million for the year ended December 31, 2024. Premiums were primarily from professional lines, surety and public entity business.

Losses and Loss Adjustment Expenses

Losses and loss adjustment expenses were $420.4 million for the year ended December 31, 2024.

The loss ratio for the year ended December 31, 2024 was 147.0%. Net unfavorable prior year development, primarily driven by the recognition of higher-than-expected loss experience, including U.S. and Bermuda professional lines, Trident, and assumed business from our former Malta operations sold in 2022, along with updates to the expectations for future loss experience and developments, contributed 57.4% percentage points to our loss ratio.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses were $91.0 million for the year ended December 31, 2024. The expense ratio was 31.9% for the same period.

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U.S. Operations

The following table summarizes the results of operations for the U.S. Operations segment:

Predecessor

Period from

For the Year Ended

(in millions)

January 1, 2023 through November 15, 2023

December 31, 2022

Gross written premiums

Net earned premiums

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Underwriting income (loss) (non-GAAP)

Net investment income

Interest expense

Fee and other expense (income), net

Income (loss) before income taxes

GAAP ratios:

Loss ratio

Expense ratio

Combined ratio

The table above includes underwriting income (loss) which is an internal performance measure that we use to measure our insurance profitability. We believe underwriting income (loss) enhances an investor’s understanding of insurance operations profitability. Underwriting income (loss) is calculated as earned premiums less losses and loss adjustment expenses less underwriting, acquisition and general expenses. Although underwriting income (loss) does not replace net income (loss) computed in accordance with GAAP as a measure of profitability, management uses underwriting income (loss) to focus our reporting segments on generating operating income.

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Gross Written and Net Earned Premiums

Gross written and net earned premiums by our four primary insurance lines were as follows:

Predecessor

Period from

For the Year Ended

January 1, 2023 through November 15, 2023

December 31, 2022

(in millions)

Gross Written

Net Earned

Gross Written

Net Earned

Property

Liability (1)

Professional

Specialty

Total

(1) In 2022, ceded premium of $121.0 million for the U.S. LPT has been included in the Liability line to align with the majority of the subject reserves covered under the agreement.

Property

Gross written premiums for property decreased $5.4 million, or 2.5%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022 primarily as a result of the shortened Predecessor period as compared to a full year of results in 2022. The decrease in net earned premiums for the period January 1, 2023 through November 15, 2023 (Predecessor), compared to the year ended December 31, 2022 was mainly attributed to the shortened Predecessor period coupled with the sale of the contract binding and excess and surplus property businesses in 2021 partially offset by growth in the inland marine business.

Liability

Gross written premiums for liability decreased $175.4 million, or 16.3%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease was mainly from reductions in the construction business unit and delegated authority programs, partially offset by growth in environmental, casualty, and workers’ compensation lines. Net earned premiums increased for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The increase was primarily due to ceded premium of $121.0 million for the U.S. LPT during the fourth quarter of 2022.

Professional

Gross written premiums for professional lines decreased $131.0 million, or 31.9%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The primary decrease is due to lower production in management liability and errors and omission lines, and delegated authority programs, as well as increased competition. The decrease in net earned premium for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022, was also due to the reduced production from the lines noted above.

Specialty

Gross written premiums decreased $50.0 million or 20.7%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease was driven by surety, partially offset by an increase in fronted programs. The decrease in net earned premiums for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022, was primarily a result of the shortened Predecessor period coupled with a decrease in surety lines, partially offset by an increase in delegated authority programs.

Loss and Loss Adjustment Expenses

Loss and loss adjustment expenses were $935.1 million and $870.1 million for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, respectively. The loss ratios for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, were 84.9% and 72.0%, respectively. The higher loss ratio in 2023 was driven by increased net unfavorable prior-year reserve development versus 2022 (17.1 percentage points increase), an increase in catastrophe losses (0.7 percentage point increase), partially offset by a decrease in the current accident year non-catastrophe loss ratio (4.9 percentage point decrease).

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The current accident year non-catastrophe loss ratios for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, were 60.7% and 65.6%, respectively. The current accident year non-catastrophe loss ratio for the year ended December 31, 2022 included 6.0 percentage points from the one-time cost for the 2022 U.S. LPT transaction. Excluding that impact, the current accident year non-catastrophe loss ratio for the period January 1, 2023 through November 15, 2023 (Predecessor), was 1.5 percentage points higher than the year ended December 31, 2022, driven by a large loss and the impact of rate decreases in professional lines and expectations of claims inflation given current macro-economic conditions, partially offset by improved results in property lines.

Net unfavorable prior-year reserve development included in the income statement, for the period January 1, 2023 through November 15, 2023 (Predecessor), was $246.3 million (22.4 percentage points). The net unfavorable prior-year reserve development for the period January 1, 2023 through November 15, 2023 (Predecessor), primarily related to liability lines and professional lines partially offset by favorable development in specialty lines. The liability lines movement was driven by actual losses greater than expected, including the impact of large claims, and was largely due to business we have exited. The unfavorable liability lines development from ongoing businesses was driven by accident years 2020 and prior with the biggest movements in our Environmental and delegated authority programs businesses. The professional lines movement was driven by large management liability claims primarily impacting accident years 2019 through 2021 and errors and omissions business driven by actual losses greater than expected primarily impacting accident years 2020 and 2021.

The net unfavorable prior-year reserve development, for the year ended December 31, 2022 was $64.5 million (5.3 percentage points), The net unfavorable prior-year reserve development for the year ended December 31, 2022 was due to liability lines partially offset by favorable development in specialty lines.

Catastrophe losses for the period January 1, 2023 through November 15, 2023 (Predecessor) were $20.2 million (1.8 percentage points) and were mainly attributable to Tropical Storm Ophelia, Hurricane Idalia, and other U.S. storms. Catastrophe losses for the year ended December 31, 2022 were $13.2 million (1.1 percentage points) and were mainly attributable to Hurricane Ian, Winter Storm Elliott, and other U.S. storms.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses were $369.6 million for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to $432.8 million for the year ended December 31, 2022. The expense ratio decreased to 33.5% for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to 35.8% for the year ended December 31, 2022. The improvement in the ratio was mainly due to the decrease in expenses outpacing the decrease in net earned premium.

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International Operations

The following table summarizes the results of operations for the International Operations segment:

Predecessor

Period from

For the Year Ended

(in millions)

January 1, 2023 through November 15, 2023

December 31, 2022

Gross written premiums

Net earned premiums

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Underwriting income (loss) (non-GAAP)

Net investment income

Interest expense

Fee and other expense (income), net

Income (loss) before income taxes

GAAP ratios:

Loss ratio

Expense ratio

Combined ratio

Gross Written and Net Earned Premiums

Gross written and net earned premiums by our four primary insurance lines were as follows:

Predecessor

Period from

For the Year Ended

January 1, 2023 through November 15, 2023

December 31, 2022

(in millions)

Gross Written

Net Earned

Gross Written

Net Earned

Property

Liability

Professional

Specialty

Total

Property

Gross written premiums for property decreased $66.4 million, or 34.8%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease in gross written premiums was primarily due to the sale of AUA, which was partially offset by growth in our Bermuda operations which was driven mainly by favorable rate increases. Net earned premiums for property decreased for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022, mainly driven by the sale of AUA.

Liability

Gross written premiums for liability decreased $125.7 million, or 55.3%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The reduction in gross written premiums was primarily due to the sales of AUA and Argo Seguros which were partially offset by growth in Bermuda as a result of favorable rate increases and new business. Net earned premiums decreased for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022 for the aforementioned sales of AUA and Argo Seguros.

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Professional

Gross written premiums for professional lines decreased $135.2 million, or 64.8%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease in gross written premiums was primarily driven by the sale of AUA. The decrease in net earned premiums for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022 was mainly due to the aforementioned reason.

Specialty

Gross written premiums decreased $210.0 million, or 75.0%, for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022. The decrease in gross written premiums was primarily driven by the sales of AUA and Argo Seguros. The decrease in net earned premiums for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to the year ended December 31, 2022 was mainly driven by the sales of AUA and Argos Seguros.

Loss and Loss Adjustment Expenses

Loss and loss adjustment expenses were $105.5 million and $293.9 million for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, respectively. The loss ratios for the period January 1, 2023 through November 15, 2023 (Predecessor), and year ended December 31, 2022, were 85.1% and 55.4%, respectively. The increase in the loss ratio was driven by net unfavorable prior-year reserve development in 2023 versus net favorable prior-year reserve development in 2022 (17.8 percentage point increase), an increase in the current accident year non-catastrophe loss ratio (10.9 percentage point increase), and an increase in catastrophe losses (1.0 percentage point increase).

The current accident year non-catastrophe loss ratios for the year ended December 31, 2023 and year ended December 31, 2022, were 61.0% and 50.1%, respectively. The loss ratio for the year ended December 31, 2023, includes a different mix of business from 2022 due to the dispositions of various businesses driven by the sale of AUA.

Net unfavorable prior-year reserve development for the period January 1, 2023 through November 15, 2023 (Predecessor), was $21.4 million (17.3 percentage points) related to professional, property, and liability lines in our Bermuda operations partially offset by favorable development in runoff Reinsurance lines. The unfavorable prior-year reserve development in our Bermuda operations was driven by reevaluations of large claims based on new information that emerged during the year including proposed settlements and estimated costs. The property movement included losses associated with catastrophes.

The net favorable prior-year reserve development for the year ended December 31, 2022 was $2.7 million (0.5 percentage points) and primarily related to favorable development in liability and specialty lines, partially offset by unfavorable development from professional lines development included large claim movements in Argo Insurance Bermuda.

Catastrophe losses for the period from January 1, 2023 through November 15, 2023 (Predecessor), was $8.4 million (6.8 percentage points) due to Hawaii wildfires, Hurricane Idalia, Tropical Storm Ophelia and other U.S. storms. Catastrophe losses for the year ended December 31, 2022 were $30.8 million (5.8 percentage points) due to Hurricane Ian, Winter storm Elliott, and the Ukraine-Russia conflict.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses decreased to $26.0 million for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to $205.3 million for the year ended December 31, 2022. The expense ratio decreased to 20.9% for the period January 1, 2023 through November 15, 2023 (Predecessor), as compared to 38.7% for the year ended December 31, 2022. The acquisition expense amount and ratio decrease are driven by the sale of AUA as well as reduced expenses incurred from business lines we have exited.

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Run-off Lines

The following table summarizes the results of operations for the Run-off Lines segment:

Predecessor

Period from

For the Year Ended

(in millions)

January 1, 2023 through November 15, 2023

December 31, 2022

Net earned premiums

Losses and loss adjustment expenses

Underwriting, acquisition and general expenses

Underwriting income (loss)

Net investment income

Interest expense

(Loss) income before income taxes

Run-off Lines includes liabilities associated with other liability policies that were issued in the 1960s, 1970s and into the 1980s, as well as the former risk-management business and other business no longer underwritten. Through our subsidiary Argonaut Insurance Company (“Argonaut”), we are exposed to asbestos liability at the primary level through claims filed against our direct insureds, as well as through its position as a reinsurer of other primary carriers. Argonaut has direct liability arising primarily from policies issued from the 1960s to the early 1980s, which pre-dated policy contract wording that excluded asbestos exposure. The majority of the direct policies were issued on behalf of small contractors or construction companies. We believe that the frequency and severity of asbestos claims for such insureds is typically less than that experienced for large, industrial manufacturing and distribution concerns.

Argonaut assumed risk as a reinsurer, primarily for the period 1970 to 1975, a portion of which was assumed from the London market. Argonaut also reinsured risks on policies written by domestic carriers. Such reinsurance typically provided coverage for limits attaching at a relatively high level, which are payable only after other layers of reinsurance are exhausted. Some of the claims now being filed on policies reinsured by Argonaut are on behalf of claimants who may have been exposed at some time to asbestos incorporated into buildings they occupied, but have no apparent medical problems resulting from such exposure. Additionally, lawsuits are being brought against businesses that were not directly involved in the manufacture or installation of materials containing asbestos. We believe that a significant portion of claims generated out of this population of claimants may result in incurred losses generally lower than the asbestos claims filed over the past decade and could be below the attachment level of Argonaut.

Losses and Loss Adjustment Expenses

The following table represents a roll forward of total gross and net loss reserves for the asbestos and environmental exposures in our Run-off Lines, along with the ending balances of all other reserves within Run-off Lines. Amounts in the net column are reduced by reinsurance recoverables.

Predecessor

Period from

For the Years Ended December 31,

January 1, 2023 through November 15, 2023

(in millions)

Gross

Net

Gross

Net

Asbestos and environmental:

Loss reserves, beginning of the year

Incurred losses

Losses paid

Loss reserves - asbestos and environmental, end of period

Risk-management reserves

Run-off reinsurance reserves

Other run-off lines

Total loss reserves - Run-off Lines

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Losses and loss adjustment expenses for the period January 1, 2023 through November 15, 2023 (Predecessor), included $0.2 million of net unfavorable loss reserve development on prior accident years. The unfavorable prior year loss development was due to $7.5 million in asbestos and environmental lines partially offset by $7.3 million net favorable loss reserve development in risk-management business and run-off liability losses excluding asbestos and environmental. The increase in asbestos and environmental was driven by a large asbestos settlement and changes in estimates on individual asbestos and environmental claims. The decrease in risk-management business was due to workers compensation actual incurred losses lower than expected.

Loss and loss adjustment expenses for the year ended December 31, 2022, included $2.9 million of net unfavorable loss reserve development on prior accident years. The unfavorable prior year loss development was due to $10.5 million in asbestos and environmental lines partially offset by $8.3 million net favorable loss reserve development in run-off liability losses excluding asbestos and environmental. The movement on asbestos and environmental lines was due to higher than expected loss activity and movement on large claims alleging environmental losses. The movement on liability exposures excluding asbestos and environmental was due to analysis of individual claims.

The following table represents the components of gross loss reserves for the Run-off Lines:

Predecessor

For the Year Ended

(in millions)

December 31, 2022

Asbestos:

Direct

Case reserves

Unallocated loss adjustment expense

Incurred but not reported

Total direct written reserves

Assumed domestic

Case reserves

Unallocated loss adjustment expense

Incurred but not reported

Total assumed domestic reserves

Assumed London

Case reserves

Incurred but not reported

Total assumed London reserves

Total asbestos reserves

Environmental reserves

Risk-management reserves

Run-off reinsurance reserves

Other run-off lines

Total loss reserves - Run-off Lines

We perform an extensive actuarial analysis of the asbestos and environmental reserves on at least an annual basis. We continually monitor the status of the claims and may make adjustments outside the annual review period. The review entails a detailed analysis of our direct and assumed exposure. We consider the indications from the various actuarial methods from the review to determine our best estimate of the asbestos and environmental losses and loss adjustment expense reserves. We primarily relied on a method that projects future reported claims and severities, with some weight given to other methods. This method relies most heavily on our historical claims and severity information, whereas other methods rely more heavily on industry information. The method produces an estimate of IBNR losses based on projections of future claims and the average severity for those future claims. The severities were calculated based on our specific data and in our opinion best reflect our liabilities based upon the insurance policies issued.

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Because of the types of coverage within the Run-off Lines of business still being serviced by Argonaut, a significant amount of subjectivity and uncertainty exists in establishing the reserves for losses and loss adjustment expenses. Factors that increase these uncertainties are: (1) lack of historical data, (2) inapplicability of standard actuarial projection techniques, (3) uncertainties regarding ultimate claim costs, (4) coverage interpretations and (5) the judicial, statutory and regulatory environments under which these claims may ultimately be resolved. Significant uncertainty remains as to our ultimate liability due to the potentially long waiting period between exposure and emergence of any bodily injury or property damage and the resulting potential for involvement of multiple policy periods for individual claims. Due to these uncertainties, the current trends may not be indicative of future results. Although we have determined and recorded our best estimate of the reserves for losses and loss adjustment expenses for Run-off Lines, current judicial and legislative decisions continue to broaden liability, expand the scope of coverage and increase the severity of claims payments. As a result of these and other recent developments, the uncertainties inherent in estimating ultimate loss reserves are heightened, further complicating the already complex process of determining loss reserves. The industry as a whole is involved in extensive litigation over coverages and liability issues continue to make it difficult to quantify these exposures.

Underwriting, Acquisition and General Expenses

Underwriting, acquisition and general expenses for the Run-off Lines segment consists primarily of administrative expenses.

Liquidity and Capital Resources

Our insurance and reinsurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and fund operating expenses. For the year ended December 31, 2024, the cash flow used in operations was $144.7 million. We believe our liquidity generated from operations and, if required, from our investment portfolio, will be sufficient to meet our future obligations. We believe we have access to various sources of liquidity including cash, investments and the ability to borrow under our revolving credit facility.

Cash Flows

The Company’s future cash flows largely depend on the availability of dividends or other statutorily permissible payments from subsidiaries. The ability to pay such dividends is limited by the applicable laws and regulations of the various countries and states in which these subsidiaries operate, including, among others, Bermuda.

The primary sources of our cash inflows are premiums, reinsurance recoveries, proceeds from sales and redemptions of investments and investment income. The primary cash outflows are claim payments, loss adjustment expenses, reinsurance costs, underwriting, acquisition and overhead expenses, interest expense, purchases of investments, payment of preferred dividends and income taxes. Management believes that cash inflows are sufficient to cover cash outflows in the foreseeable future. We have access to additional sources of liquidity should the need for additional cash arise.

Cash provided by operating activities can fluctuate due to timing differences in the collection of premiums and reinsurance recoveries and the payment of losses and expenses. For the year ended December 31, 2024, cash used in operating activities was $144.7 million. Net cash used in operating activities in 2024 was primarily driven by the reinsurance payments and recoveries, claim payments and premium cash receipts. The change in premium is a result of a strategic reassessment of our various lines of business. For the period November 16, 2023 through December 31, 2023 (Successor) and January 1, 2023 through November 15, 2023 (Predecessor), cash provided by operating activities was $16.9 million and $293.7 million, respectively.

For the year ended December 31, 2024 net cash used in investing activities was $192.0 million. Net cash used in investing activities in 2024 was primarily driven by purchases of short-term investments, private loan investments, mortgage loans, and other investments offset by net proceeds from fixed maturities investments. For the period November 16, 2023 through December 31, 2023 (Successor), net cash provided by investing activities was $61.8 million. For the period January 1, 2023 through November 15, 2023 (Predecessor), net cash used in investing activities was $359.7 million.

For the year ended December 31, 2024, net cash provided by financing activities was $189.5 million. Net cash provided by financing activities in 2024 was primarily driven by the issuance of our common shares to Brookfield Wealth Solutions Ltd. There was no financing activities for the period November 16, 2023 through December 31, 2023 (Successor). For the period January 1, 2023 through November 15, 2023 (Predecessor), net cash used in financing was $9.5 million.

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We invest excess cash in a variety of investment securities. As of December 31, 2024, our investment portfolio consisted of 50.5% fixed maturities, 5.1% mortgage loans, 14.0% private loans, 10.1% equity securities, 14.1% other investments and 6.2% short-term investments (based on fair value) compared to 74.3% fixed maturities, 4.2% mortgage loans, 0.3% equity securities, 8.9% other investments and 12.3% short-term investments as of December 31, 2023. We classify the majority of our investment portfolio as available-for-sale; resulting in these investments being reported at fair market value with unrealized gains and losses, net of tax, being reported as a component of stockholders’ equity. At December 31, 2024, no investments were designated as trading.

Reinsurance and Collateral Held by Argo Group

We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position. Increases in the costs of this program, or the failure of our reinsurers to meet their obligations in a timely fashion, may have a negative impact on liquidity.

Under certain insurance programs (i.e., large deductible programs and surety bonds) and various reinsurance agreements, collateral and letters of credit (“LOCs”) are held for our benefit to secure performance of insureds and reinsurers in meeting their obligations. At December 31, 2024, the amount of such collateral and LOCs held under insurance and reinsurance agreements was $698.9 million and $1,157.9 million respectively. Collateral can also be provided in the form of trust accounts. As we are the beneficiary of these trust accounts only to secure future performance, these amounts are not reflected in our Consolidated Balance Sheets. Collateral provided by an insured or reinsurer may exceed or fall below the amount of their total outstanding obligation.

On November 9, 2022, the Company closed on the U.S. LPT with Enstar covering a majority of the Company’s U.S. casualty insurance reserves, including construction, for accident years 2011 to 2019. On the closing date, the Company transferred cash and investments to Enstar, a portion of which was deposited into a trust established to secure Enstar’s claim payment obligation to the Company. As such, our reinsurance recoverable with Enstar is fully collateralized.

LOCs have been filed with Lloyd’s by trade capital providers as part of the terms of whole account quota share reinsurance contracts entered into by the trade capital providers. In the event such LOCs are funded, the outstanding balance would be the responsibility of the trade capital providers. The Company sold its AUA business in February 2023.

Holding Company and Intercompany Dividends

Argo Group and its other non-insurance company subsidiaries are dependent on dividends and other permitted payments from their insurance subsidiaries in order to pay cash dividends to their stockholders, for debt service and for their operating expenses. The ability of our insurance subsidiaries to pay dividends is subject to certain restrictions imposed by the jurisdictions of domicile that regulate these subsidiaries and each jurisdiction has calculations for the amount of dividends that our subsidiary can pay without the approval of the insurance regulator.

Argo Re is the primary direct subsidiary of Argo Group International Holdings, Inc. and is subject to Bermuda insurance laws. Argo Ireland is indirectly owned by Argo Re and is a mid-level holding company subject to Irish laws, and its primary subsidiary is Argo Group U.S. Argo Group U.S. is a mid-level holding company subject to Delaware laws. Argo Group U.S. is the parent of all of our U.S. insurance subsidiaries.

The payment of dividends by Argo Re is limited under Bermuda insurance laws which require Argo Re to maintain certain measures of solvency and liquidity. As of December 31, 2024, the statutory capital and surplus of Argo Re was $1,513.6 million, and the amount required to be maintained was $100.0 million, thereby allowing Argo Re the potential to pay dividends or capital distributions within the parameters of the solvency and liquidity margins. We believe that the dividend and capital distribution capacity of Argo Re will provide us with sufficient liquidity to meet the operating and debt service commitments, as well as other obligations.

During 2024, Argo Group International Holdings, Inc. received a dividend of $30.0 million from Argo Re, Argo Re received a dividend of $10.6 million from Argo International Holdings Limited (“AIH”).

During 2025, Argo Group U.S. may be permitted to receive dividends from Argonaut up to $149.8 million without prior approval from the Nebraska Department of Insurance. Argo Group U.S. is permitted to receive dividends from Rockwood of up to $18.9 million, subject to prior approval from the Pennsylvania Department of Insurance. Effective November 26, 2025—two years following the merger with Brookfield Wealth Solutions Ltd.—Rockwood’s dividends will not be subject to this prior approval. Business and regulatory considerations may impact the amount of dividends actually paid and prior approval of dividend payments may be required.

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Revolving Credit Facility and Term Loan

On November 2, 2018, each of Argo Group, Argo Group U.S., AIH, and AUA, collectively (the “Borrowers”) entered into a $325 million credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent. The Credit Agreement includes a one-time borrowing of $125 million for a term loan (the “Term Loan”), and a $200 million revolving credit facility. The Company used most of the net proceeds from the Preferred Stock Offering (as defined in Note 10, “Stockholders’ Equity” of Argo Group’s 2022 Form 10-K) to pay off the Term Loan in September 2020. The Credit Agreement was subsequently amended to increase the revolving credit facility amount to $220 million, and to provide the removal of AIH and AUA as Borrowers upon the sale of AIH and AUA, which occurred on February 2, 2023.

During July 2023, the Credit Agreement was amended to permit the acquisition of Argo Group by Brookfield Wealth Solutions Ltd. pursuant to the Merger Agreement and extend the maturity date of certain commitments under the revolving credit facility from November 2, 2023 to November 2, 2024. The Credit Agreement decreased from $220 million to $200 million effective November 2, 2023.

On February 21, 2024, the Company entered into Amendment No. 6 (“Amendment No. 6”) of the Credit Agreement with the financial institutions party thereto as lenders and JPMorgan Chase Bank, N.A., individually as a lender and as administrative agent (the “Credit Agreement”). Amendment No. 6, among other things, replaced the minimum Tangible Net Worth covenant in the Credit Agreement with a minimum Consolidated Net Worth. The Consolidated Net Worth covenant is tested at the end of each fiscal quarter and has been set at an amount equal to the sum of (i) $872.0 million plus (ii) 50% of positive net income for each fiscal quarter ending after December 31, 2023 plus (iii) 50% of net proceeds received from the issuance and sale of certain equity interests after December 31, 2023.

On February 22, 2024, the Company borrowed $100.0 million from the revolving credit facility and elected a one-month term and interest option, under the terms of the Credit Agreement. The loan had been renewed using the one-month option until May 29, 2024, when the Company repaid the $100.0 million borrowed under the revolving credit facility. The facility was subsequently terminated on June 4, 2024. On June 4, 2024, the Company was named as a party under Brookfield Wealth Solutions Ltd.’s $1.2 billion revolving credit facility.

Senior Notes

In September 2012, Argo Group (the “Parent Guarantor”), through its subsidiary Argo Group U.S. (the “Subsidiary Issuer”), issued $143.8 million aggregate principal amount of the Subsidiary Issuer’s 6.5% Senior Notes due September 15, 2042 (the “Notes”). The Notes are unsecured and unsubordinated obligations of the Subsidiary Issuer and rank equally in right of payment with all of the Subsidiary Issuer’s other unsecured and unsubordinated debt. The Notes are guaranteed on a full and unconditional senior unsecured basis by the Parent Guarantor. The Notes may be redeemed, for cash, in whole or in part at the Subsidiary Issuer’s option, at any time and from time to time, prior to maturity at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date.

Trust Preferred Securities

Through a series of trusts, that are wholly-owned subsidiaries (non-consolidated), we issued trust preferred securities. The interest on the underlying debentures is variable with the rates being reset quarterly and subject to certain interest rate ceilings. Interest payments are payable quarterly. The debentures are all unsecured and are subordinated to other indebtedness. All are redeemable subject to certain terms and conditions at a price equal to 100% of the principal plus accrued and unpaid interest.

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A summary of our outstanding junior subordinated debentures at December 31, 2024 is presented below:

(in millions)

Issue Date

Trust Preferred Pools

Maturity

Rate Structure

Interest Rate at December 31, 2024

Par Amount

Argo Group

PXRE Capital Statutory Trust II

3M SOFR + TSA + 4.10%

PXRE Capital Trust VI

3M SOFR + TSA + 3.90%

Argo Group U.S.

Argonaut Group Statutory Trust I

3M SOFR + TSA + 4.10%

Argonaut Group Statutory Trust III

3M SOFR + TSA + 4.10%

Argonaut Group Statutory Trust IV

3M SOFR + TSA + 3.85%

Argonaut Group Statutory Trust V

3M SOFR + TSA + 3.85%

Argonaut Group Statutory Trust VI

3M SOFR + TSA + 3.80%

Argonaut Group Statutory Trust VII

3M SOFR + TSA + 3.60%

Argonaut Group Statutory Trust VIII

3M SOFR + TSA + 3.55%

Argonaut Group Statutory Trust IX

3M SOFR + TSA + 3.60%

Argonaut Group Statutory Trust X

3M SOFR + TSA + 3.40%

Less: fair value adjustment

Total Outstanding

Subordinated Debentures

Unsecured junior subordinated debentures with a principal balance of $91.8 million were assumed through a previous acquisition (“the acquired debt”). The acquired debt is carried on our Consolidated Balance Sheets at $81.2 million, which represents the debt’s fair value at the Merger Date plus accumulated accretion of discount to par value, as required by accounting for business combinations under ASC 805. At December 31, 2024, the acquired debt was eligible for redemption at par. Interest accrues on the acquired debt based on a variable rate, which is reset quarterly. Interest payments are payable quarterly. A summary of the terms of the acquired debt outstanding at December 31, 2024 is presented below:

(in millions)

Issue Date

Maturity

Rate Structure

Interest Rate at December 31, 2024

Principal at December 31, 2024

Carrying Value at December 31, 2024

3M SOFR + TSA + 3.15%

Letter of Credit Facilities - Argo Re

Argo Re may be required to secure its obligations under various reinsurance contracts in certain circumstances. In order to satisfy these requirements, Argo Re has entered into one committed and one uncommitted secured bilateral LOC facility with commercial banks and generally uses these facilities to issue LOCs in support of non-admitted reinsurance obligations in the U.S. and other jurisdictions. The committed LOC facility has a term of one year and includes customary conditions and event of default provisions. The issuance of LOCs using the uncommitted LOC facility is at the discretion of the lenders. The availability of letters of credit under these secured facilities are subject to a borrowing base requirement, determined on the basis of specified percentages of the market value of eligible categories of securities pledged to the lender. On December 31, 2024, committed and uncommitted LOC facilities totaled $110.0 million.

On December 31, 2024, LOCs totaling $31.2 million were outstanding, of which $19.4 million were issued against the committed secured bilateral LOC facility and $11.9 million were issued against the uncommitted, secured bilateral LOC facility. Collateral with a market value of $40.1 million was pledged to these banks as security against these LOCs.

In addition to the bilateral, secured letters of credit facilities described above, Argo Re can use other forms of collateral to secure these reinsurance obligations including trust accounts, cash deposits, and LOCs issued by commercial banks on an uncommitted basis.

Other Letters of Credit

Other LOCs issued and outstanding on December 31, 2024 were $4.1 million.

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Preferred Stock Offering

On July 9, 2020, the Company issued 6,000 shares of its preferred stock (equivalent to 6,000,000 depositary shares, each representing a 1/1,000th interest in a share of preferred stock) with a $25,000 liquidation preference per share (equivalent to $25 per depositary share) (the “Preferred Stock Offering”).

Net proceeds from the sale of the depositary shares were approximately $144 million after deducting underwriting discounts and estimated offering expenses payable by the Company. The Company used most of the net proceeds to repay its term loan, which had $125 million principal outstanding, and used the remainder of the proceeds for working capital to support continued growth in insurance operations.

Dividends to the holders of preferred stock will be payable on a non-cumulative basis only when, as and if declared by our Board or a duly authorized committee thereof, quarterly in arrears on the 15th of March, June, September, and December of each year, commencing on September 15, 2020, at a rate equal to 7.00% of the liquidation preference per annum (equivalent to $1,750 per share of preferred stock and $1.75 per depositary share per annum) up to but excluding September 15, 2025. Beginning on September 15, 2025, any such dividends will be payable on a non-cumulative basis, only when, as and if declared by our Board or a duly authorized committee thereof, during each reset period, at a rate per annum equal to the Five-Year U.S. Treasury Rate as of the most recent reset dividend determination date (as described in the Company’s prospectus supplement dated July 7, 2020) plus 6.712% of the liquidation preference per annum.

For the year ended December 31, 2024, the Board declared quarterly dividends in the aggregate amount of $1,750 per share of preferred stock. For the year ended December 31, 2024 we paid cash dividends totaling $10.5 million to our holders of preferred stock.

Argo Group Common Stock and Dividends

On February 8, 2023, the Company entered into the Merger Agreement with Brookfield Wealth Solutions Ltd. and Merger Sub. As part of the Merger Agreement, the Company has agreed to suspend any dividends that would otherwise be declared and paid on the Company’s stock during the period from the date of the Merger Agreement through the earlier of the closing of the transaction or the termination of the Merger Agreement.

As of the Merger Date, pursuant to the Merger Agreement, each share of common stock of the Company issued and outstanding immediately prior to the Merger was automatically canceled and converted into the right to receive an amount in cash equal to $30.00.

As a result of the Merger, the Company’s new authorized share capital is 2,000,000,000 shares of common stock with a par value of $1.00 per share. All outstanding shares of common stock are owned by BNRE Triangle Acquisition Inc.

Capital Contribution

On February 20, 2024, Brookfield Wealth Solutions Ltd. made a $100.0 million capital contribution to the Company in exchange for the issuance of 100,000,000 shares of the Company’s common stock.

On February 23, 2024, the Company made a $100.0 million capital contribution to Argo Re for the ultimate benefit of Argonaut.

On May 28, 2024, Brookfield Wealth Solutions Ltd. made another $100.0 million capital contribution to the Company in exchange for the issuance of 100,000,000 shares of the Company’s common stock.

On December 1, 2024, Argo Group U.S. made a $293.0 million capital contribution to BP&C Shared Services, Inc. (formerly known as Argonaut Management Services, Inc,).

On December 23, 2024, Brookfield Wealth Solutions Ltd. made another $300.0 million capital contribution in the form of contributed loans to the Company for the ultimate benefit of the Company’s insurance company subsidiaries.

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Cash Obligations and Commitments

Our estimated contractual obligations and commitments as of December 31, 2024 were as follows:

Payments Due by Period

(in millions)

Total

Less Than 1

Year

1 - 3 Years

Thereafter

Long-term debt:

Junior subordinated debentures (1)

Senior unsecured fixed rate notes (2)

Operating leases

Purchase obligations (3)

Other long-term liabilities:

Claim payments (4)

Partnership commitments (5)

Total contractual obligations

(1) Interest only on Junior Subordinated Debentures through 2037. Interest calculated based on the rate in effect at December 31, 2024. Principal due beginning May 2033.

(2) Interest only on Senior Unsecured Fixed Rate Notes through 2042. Interest calculated based on the rate in effect at December 31, 2024. Principal due September 2042.

(3) Purchase obligations consist primarily of software, hardware and equipment servicing and software licensing fees.

(4) Claim payments do not have a contractual maturity; exact timing of claim payments cannot be predicted with certainty. The above table estimates timing of claim payments based on historical payment patterns and excludes the benefits of reinsurance recoveries.

(5) Argo Group has invested in multiple limited partnership agreements and can be called to fulfill the obligations at any time.

Supplemental Guarantor Financial Information

In September 2012, the Parent Guarantor, through its Subsidiary Issuer, issued $143.8 million aggregate principal amount of the Subsidiary Issuer’s 6.5% Senior Notes due September 15, 2042 (the “Notes”). The Notes are unsecured and unsubordinated obligations of the Subsidiary Issuer and rank equally in right of payment with all of the Subsidiary Issuer’s other unsecured and unsubordinated debt. The Notes are guaranteed on a full and unconditional senior unsecured basis by the Parent Guarantor. The Notes may be redeemed, for cash, in whole or in part at the Subsidiary Issuer’s option, at any time and from time to time, prior to maturity at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. The Company’s ability to repay the Notes largely depends on the availability of dividends or other statutorily permissible payments from subsidiaries.

This summarized financial information has been prepared in accordance with Regulation S-X Rule 13-01, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and is not intended to present the financial position or results of operations of the obligor group in accordance with U.S. GAAP.

The following tables present summarized financial information related to the Senior Notes issued by Argo Group U.S. (the “Subsidiary Issuer") and the Company (the “Parent Guarantor”) on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Guarantor and the Subsidiary Issuer, (ii) equity in undistributed earnings from and investments in any other subsidiaries that are non-obligor group, and (iii) amounts due to, amounts due from, and transactions with (1) non-obligor subsidiaries and (2) affiliates are separately disclosed, as applicable. Obligor group consists of the Subsidiary Issuer and the Parent Guarantor.

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Argo Group International Holdings, Inc. Obligor Group

Balance Sheet Information

(in millions)

December 31, 2024

Total assets (1)

Total liabilities (2)

Series A Preferred stock

(1) Includes $21.8 million of investments, $5.5 million of cash, restricted cash and cash equivalents, and $5.3 million of deferred tax assets, net

(2) Includes $1.5 million and $60.4 million of due to (from) affiliates and intercompany notes payable, respectively, $290.8 million of debt, and $8.5 million of accrued underwriting expenses and other liabilities

Income Statement Information

For the Year Ended

(in millions)

December 31, 2024

Total revenue (1)

Total expenses (2)

Net income (loss)

Dividends on Series A Preferred stock

Net income (loss) attributable to common stockholders

(1) Includes $0.9 million of net investment income

(2) Includes interest expense of $33.1 million

Recent Accounting Pronouncements

ASU 2023-07 – On November 27, 2023, the FASB issued Accounting Standards Update 2023-07— Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The amendments require the disclosure of significant segment expenses by reportable segment, enhance interim and annual disclosure requirements, and clarify circumstances in which an entity can disclose multiple segment measures of profit or loss. This ASU was effective on January 1, 2024 for annual filings (and January 1, 2025 for quarterly filings) and was applied retrospectively to all prior periods presented in our consolidated financial statements for the Successor periods. As a result of adopting this ASU, we added additional information in Note 15 , “Segment Information,” in the Notes to Consolidated Financial Statements.

ASU 2023-09 – On December 14, 2023, the FASB issued Accounting Standards Update 2023-09— Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments improve income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted.

We are currently evaluating the requirements of ASU 2023-09. However, as they apply to disclosure requirements, the adoption of the standard is not anticipated to have a material impact on our profitability, financial position or cash flows.

ASU 2024-03 – On November 4, 2024, the FASB issued Accounting Standards Update 2024-03— Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) : Disaggregation of Income Statement Expenses , to improve interim and annual disclosures about a public business entity’s expenses by requiring more detailed information in the notes to the financial statements about certain expense categories, including purchases of inventory, employee compensation, depreciation, amortization, and selling expenses. We expect to adopt this ASU effective January 1, 2027 and the adoption will not affect our financial position or our results of operations, but will result in additional disclosures.

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Critical Accounting Estimates

Reserves for Losses and Loss Adjustment Expenses

We establish reserves for the estimated total unpaid costs of losses including loss adjustment expenses (“LAE”), for claims that have been reported as well as claims that have been incurred but not yet reported. Unless otherwise specified below, the term “loss reserves” encompasses reserves for both losses and LAE. Loss reserves reflect management’s best estimate. Loss reserves established are not an exact calculation of our liability. Rather, loss reserves represent management’s best estimate of our liability based on application of actuarial techniques and other projection methodologies and taking into consideration other facts and circumstances known at the balance sheet date. The process of establishing loss reserves is complex and necessarily imprecise, as it involves using judgment that is impacted by many internal and external variables such as past loss experience, current claim trends and the prevailing social, economic and legal environments. In determining loss reserves, we give careful consideration to all available data and applicable actuarial analyses including expected loss ratios, loss development factors, settlement patterns and the weighting of actuarial methodologies.

The relevant factors and methodologies used to estimate loss reserves vary significantly by product line due to differences in loss exposure and claim complexity. Much of our business is underwritten on an occurrence basis, which can lead to a significant time lag between the event that gives rise to a claim and the date on which the claim is reported to us. Additional time may be required to resolve the claim once it is reported to us. During these time lags, which can span several years for complex claims, new facts and information specific to the claim become known to us. In addition, general econometric and societal trends including inflation may change. Any one of these factors may require us to refine our loss reserve estimates on a regular basis. We apply a strict regimen to assure that review of these facts and trends occurs on a timely basis so that this information can be factored into our estimate of future liabilities. However, due to the number and potential magnitude of these variables, actual paid losses in future periods may differ materially from our estimates as reflected in current reserves. These differences can be favorable or unfavorable. A more precise estimation of loss reserves is also hindered by the effects of growth in a line of business and uncertainty as to how new business performs in relation to expectations established through analysis of the existing portfolio. In addition to reserving for known claim events, we also establish loss reserves for IBNR. Loss reserves for IBNR are set using our estimates for events that have occurred as of the balance sheet date but have not yet been reported to us. Estimation of IBNR loss reserves is subject to significant uncertainty.

The following is a summary of gross and net loss reserves we recorded by line of business:

December 31, 2024

(in millions)

Gross

Net

Casualty Lines

Specialty Lines

Run-off Lines

Total reserves

December 31, 2023

(in millions)

Gross

Net

Casualty Lines

Specialty Lines

Run-off Lines

Total reserves

Loss Reserve Estimation Methods

The process for estimating our loss reserves begins with the collection and analysis of claim data. The data collected for actuarial analyses includes reported claims, paid losses and case reserve estimates sorted by the year the loss occurred. The data sets are sorted into homogeneous groupings, exhibiting similar loss and exposure characteristics. We primarily use internal data in the analysis but also consider industry data in developing factors and estimates. We analyze loss reserves on a quarterly basis.

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We use a variety of actuarial techniques and methods to determine loss reserves for all lines of business. Each method has its own set of assumptions, and each has strengths and weaknesses depending on the exposures being evaluated. Since no single estimation method is superior to another method in all situations, the methods and assumptions used to project loss reserves will vary by line of business and, when appropriate, by where we attach on a risk. We use what we believe to be the most appropriate set of actuarial methods and assumptions for each product line grouping. While the loss projection methods may vary by product line, the general approach for calculating IBNR remains the same: ultimate losses are forecasted first, and that amount is reduced by the amount of cumulative paid claims and case reserves.

When we initially establish IBNR reserves at the beginning of an accident year for each line of business, we often use the expected loss ratio method. This method is based upon our analyses of historical loss ratios incorporating adjustments for pricing changes, anticipated loss ratio trends, changes in mix of business and any other factors that may impact loss ratio expectations. At the end of each quarter, we review the loss ratio selections and the emerged loss experience to determine if deviating from the loss ratio method is appropriate. In general, we continue to use the loss ratio method until we deem it appropriate to begin to rely on the experience of the accident year (“AY”) being evaluated. This weighing in of the AY experience is typically done by employing the Bornhuetter-Ferguson (“BF”) reserving methodology. The BF methods compute IBNR through a blend of the expected loss ratio method and traditional loss development methods. The BF methods estimate IBNR for an accident year as the product of expected losses (earned premium multiplied by an expected loss ratio) and an expected percentage of unreported losses. The expected percentage of unreported losses is derived from age-to-ultimate loss development factors that result from our analyses of loss development triangles. As accident years mature to the point at which the reported loss experience is more credible, we assign increasing weight to the paid and incurred loss development methods.

For short-tail lines of business such as property, we generally defer to the AY loss experience more quickly as the time from claim occurrence to reporting is generally short. In the event there are large claims incurred, we will analyze large loss information separately to ensure that the loss reserving methods appropriately recognize the magnitude of these losses in the evaluation of ultimate losses.

For long-tail lines such as general liability and automobile liability, the loss experience is not deemed fully credible for several years. At the end of the accident year, we rely primarily on the BF methods and continue to rely on those methods for several years. We assign greater weight to the paid and incurred development methods as the data matures.

Workers compensation is also a long-tail line of business, and is reserved for in keeping with other long-tailed business. However, a portion of the outstanding reserves correspond to scheduled indemnity payments and are not subject to extreme volatility. The portion of reserves that is not scheduled or annuitized is subject to potentially large variations in ultimate loss cost due to the uncertainty of medical cost inflation. Sources of medical cost inflation include increased use, new and more expensive medical testing procedures and prescription drugs costs.

The Run-off Lines segment includes reserves for asbestos, environmental and other latent exposures. These latent exposures are typically characterized by extended periods of time between the dates an insured is first exposed to a loss, a claim is reported and the claim is resolved. For those Run-off Lines segment long-tail loss reserves, there is significant uncertainty involved in estimating reserves for asbestos, environmental and other latent injury claims. We use several methods to estimate reserves for these claims including an approach that projects future calendar period claims and average claim costs and ground-up analysis that relies on an evaluation of individual policy terms and conditions. We also consider survival ratio and market share methods which compare our level of loss reserves and loss payments to that of the industry for similar exposures. We apply greatest weight to the method that projects future calendar period claims and average claim costs because we believe it best captures the unique claim characteristics of our underlying exposures and loss development potential. We perform a full review of our Run-off Lines asbestos, environmental and other latent exposures loss reserves at least once a year and review loss activity quarterly for significant changes that might impact management’s best estimate.

Each business segment is analyzed individually, with development characteristics for each short-tail and long-tail line of business identified and applied accordingly. In comparing loss reserve methods and assumptions used at December 31, 2024 as compared with methods and assumptions used at December 31, 2023, management has not changed or adjusted methodologies or assumptions in any significant manner.

In conducting our actuarial analyses, we generally assume that past patterns demonstrated in the data will repeat themselves and that the data provides a basis for estimating future loss reserves. In the event that we become aware of a material change that may render past experience inappropriate for the purpose of estimating current loss reserves, we will attempt to quantify the effect of the change and use informed management judgment to adjust loss reserve forecasts appropriately.

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Uncertainties in Loss Reserve Estimation

The causes of uncertainty will vary for each product line reviewed. For short-tail property lines of business, we are exposed to catastrophe losses, both natural and man-made. Due to the nature of certain catastrophic loss events, such as hurricanes, earthquakes or terrorist attacks, our normal claims resolution processes may be impaired due to factors such as difficulty in accessing impacted areas and other physical, legal and regulatory impediments. These factors can make establishment of accurate loss reserve estimates difficult and render such estimates subject to greater uncertainty. Additionally, if the catastrophe occurs near the end of a financial reporting period, there are additional uncertainties in loss reserve estimates due to the lack of sufficient time to conduct a thorough analysis. Long-tail casualty lines of business also present challenges in establishing appropriate loss reserves, for example if changes in the legal environment occur over time which broaden our liability or scope of policy coverage and increase the magnitude of claim payments.

In all lines, final claim payments may differ from the established loss reserve. Due to the uncertainties discussed above, the ultimate losses may vary materially from current loss reserves and could have a material adverse or beneficial effect on our future financial condition, results of operations and cash flows. Any adjustments to loss reserves are reflected in the results for the year during which the adjustments are made.

In addition to the previously described general uncertainties encountered in estimating loss reserves, there are significant additional uncertainties in estimating the amount of our potential losses from asbestos and environmental claims. Loss reserves for asbestos and environmental claims normally cannot be estimated with traditional loss reserving techniques that rely on historical accident year development factors due to the uncertainties surrounding these types of claims. Among the uncertainties impacting the estimation of such losses are:

• potentially long waiting periods between exposure and emergence of any bodily injury or property damage;

• difficulty in identifying sources of environmental or asbestos contamination and in properly allocating responsibility and/or liability for damage;

• changes in underlying laws and judicial interpretation of those laws;

• potential for an environmental or asbestos claim to involve many insurance providers over many policy periods;

• long reporting delays from insureds to insurance companies;

• historical data concerning asbestos and environmental losses which is more limited than historical information on other types of claims;

• questions concerning interpretation and application of insurance coverage; and

• uncertainty regarding the number and identity of insureds with potential asbestos or environmental exposure.

Case reserves and expense reserves for costs of related litigation have been established where sufficient information has been developed. Additionally, IBNR has been established to cover additional exposure on known and unknown claims.

We underwrite environmental and pollution coverage on a limited number of policies and underground storage tanks. We establish loss reserves to the extent that, in the judgment of management, the facts and prevailing law reflect an exposure for us.

Risk Factors by Line of Business in Loss Reserve Estimation

The following section details reserving considerations and loss and LAE risk factors for the lines of business representing most of our loss reserves. Each line of business may be present in multiple reportable segments. Each risk factor presented will have a different impact on required loss reserves. Also, risk factors can have offsetting or compounding effects on required loss reserves. For example, introduction and approval of a more expensive medical procedure may result in higher estimates for medical costs. But in the workers compensation context, the availability of that same medical procedure may enable workers to return to work more quickly, thereby lowering estimates for indemnity costs for that line of business. As a result, it usually is not possible to identify and measure the impact that a change in one discrete risk factor may have or construct a meaningful sensitivity expectation around it. We do not make explicit estimates of the impact on loss reserve estimates for the assumptions related to the risk factors described below.

Loss adjustment expenses used in connection with our loss reserves are comprised of both allocated and unallocated expenses. Allocated loss adjustment expenses generally relate to specific claim files. We often combine allocated loss adjustment expenses with losses for purposes of projecting ultimate liabilities. For some types of claims, such as asbestos, environmental, professional liability, and construction defect, allocated loss adjustment expenses consisting primarily of legal defense costs may be significant, sometimes exceeding the liability to indemnify claimants for losses. Unallocated loss adjustment expenses generally relate to the administration and handling of claims in the ordinary course of business. We typically calculate unallocated loss adjustment expense reserves using a percentage of unpaid losses for each line of business.

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Workers Compensation

Workers compensation is generally considered a long-tail coverage as it takes a relatively long period of time to finalize claims from a given accident year. Certain payments, such as initial medical treatment or temporary wage replacement for the injured worker, are generally disbursed quickly. Other payments may be made over the course of several years, such as awards for permanent partial injuries. Some payments continue to take place throughout the injured worker’s life, such as permanent disability benefits and on-going medical care. Although long-tail in nature, claims generally are not subject to long reporting lags, settlements are generally not complex and most of the liability exposure is characterized by high frequency and moderate severity. The largest reserve risks are generally associated with low frequency, high severity claims that require lifetime coverage for medical expense arising from a worker’s injury.

Examples of loss and LAE risk factors that can change over time and cause workers compensation loss reserves to fluctuate include, but are not limited to, the following:

Indemnity claims risk factors:

• Time required to recover from the injury;

• Degree of available transitional jobs;

• Degree of legal involvement;

• Changes in the interpretations and processes of the workers compensation commissions’ oversight of claim;

• Future wage inflation for U.S. states that index benefits;

• Changes in the administrative policies of second injury funds; and

• Changes in benefit levels.

Medical claims risk factors:

• Changes in the cost of medical treatments, including prescription drugs, and underlying fee schedules;

• Frequency of visits to health providers;

• Number of medical procedures given during visits to health providers;

• Types of health providers used;

• Type of medical treatments received;

• Use of preferred provider networks and other medical cost containment practices;

• Availability of new medical processes and equipment;

• Changes in life expectancy;

• Changes in the use of pharmaceutical drugs; and

• Degree of patient responsiveness to treatment.

Book of Business risk factors:

• Injury type mix;

• Changes in underwriting standards; and

• Changing product mix based on insured demand.

Short-tail Specialty Lines

Short-tail specialty lines of business include several different coverages, such as marine and surety. They are considered shorter-tail lines as claims are generally known relatively quickly. However, it can take a longer period of time to finalize and resolve all claims from a given year for lines such as surety. Examples of loss and LAE risk factors associated with Specialty claims that can change over time and result in adjustments to loss reserves include, but are not limited to, the following:

Claims risk factors:

• Changes in claim handling procedures;

• Changes in policy provisions or court interpretation of such provisions;

• Changes in the economy; and

• Changes in inflation.

Book of Business risk factors:

• Incidence of catastrophes;

• Changes in policy provisions (e.g., deductibles, policy limits, endorsements);

• Changes in underwriting standards; and

• Product mix (e.g., size of account, class, industries insured, jurisdiction mix).

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Commercial Automobile Liability

The commercial automobile liability line of business is a long-tail coverage, mainly due to exposures arising out of bodily injury claims. Losses in this line associated with bodily injury claims generally are more difficult to accurately estimate and take longer to resolve. Claim reporting lags also can occur. Examples of loss and LAE risk factors that can change over time and result in adjustments to commercial automobile liability loss reserves include, but are not limited to, the following:

Claims risk factors:

• Trends in jury awards;

• Changes in the underlying court system;

• Changes in case law;

• Litigation trends;

• Subrogation opportunities;

• Changes in claim handling procedures;

• Frequency of visits to health providers;

• Types of medical treatments received;

• Changes in cost of medical treatments; and

• Degree of patient responsiveness to treatment.

Book of Business risk factors:

• Changes in policy provisions (e.g., deductibles, policy limits, endorsements, etc.);

• Changes in mix of insured vehicles;

• Changes in underwriting standards;

• Gasoline prices; and

• Changes in macroeconomic factors including but not limited to unemployment statistics.

Property

Property is considered a short-tail line as claims are generally known quickly and resolved in a short period of time. However, the time to resolve a claim can be longer when the claim involves more difficult to resolve components such as business interruption losses or when the business is written on an excess basis. Examples of loss and LAE risk factors associated with Property claims that can change over time and result in adjustments to loss reserves include, but are not limited to, the following:

Claims risk factors:

• Changes in claim handling procedures;

• Changes in the cost of building materials;

• Changes in the cost of labor available to repair damages;

• Disruptions to the supply chain;

• Demand surge related to catastrophe events;

• Changes in policy provisions or court interpretation of such provisions; and

• Changes in inflation.

Book of Business risk factors:

• Incidence of catastrophes;

• Geographical concentration of risks;

• Changes in policy provisions (e.g., deductibles, policy limits, endorsements);

• Changes in underwriting standards; and

• Product mix (e.g., size of account, class, industries insured, jurisdiction mix).

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Professional Lines

Professional Lines, including errors and omissions and directors and officers coverages, are considered long-tail lines of business, as it takes a relatively long period of time to finalize and resolve all claims from a given year. The speed at which claims are received and then resolved is a function of the specific coverage provided, jurisdiction in which the claim is located and specific policy provisions. There are numerous components underlying the Professional line. Some of these have relatively moderate payout patterns (such as primary coverage written on a claims-made basis) with most of the claims for a given year closed within five to seven years. Others, including business written on an excess basis, can be characterized by longer time lags for payment of claims. Allocated loss adjustment expenses in this line consist primarily of legal costs and may exceed the total amount of the indemnity loss on some claims.

Examples of loss and LAE risk factors associated with Professional Lines claims that can change over time and result in adjustments to loss reserves include, but are not limited to, the following:

Claims risk factors:

• Changes in claim handling procedures;

• Changes in policy provisions or court interpretation of such provisions;

• New or expanded theories of liability;

• Trends in jury awards;

• Changes in the propensity to sue, in general and with specificity to particular issues;

• Changes in statutes of limitations;

• Changes in the underlying court system, including potential impacts from shutdowns associated with COVID-19;

• Changes in tort law;

• Fluctuations in stock prices;

• Lawsuit abuse and third-party litigation finance;

• Changes in the propensity to litigate rather than settle a claim;

• Shifts in lawsuit mix between U.S. federal and state courts; and

• Changes in inflation.

Book of Business risk factors:

• Changes in policy provisions (e.g., deductibles, policy limits, endorsements);

• Changes in underwriting standards; and

• Product mix (e.g., size of account, class, industries insured, jurisdiction mix).

General Liability

General liability is considered a long-tail line of business, as it takes a relatively long period of time to finalize and resolve all claims from a given accident year. The speed at which claims are received and then resolved is a function of the specific coverage provided, jurisdiction in which the claim is located and specific policy provisions. There are numerous components underlying the general liability product line. Some of these have relatively moderate payout patterns with most of the claims for a given accident year closed within five to seven years, while others, including claims alleging construction defect, are characterized by extreme time lags for both reporting and payment of claims. In addition, this line includes asbestos and environmental claims, which are reviewed separately because of the unique character of these exposures. Allocated loss adjustment expenses in this line consist primarily of legal costs and may exceed the total amount of the indemnity loss on some claims.

Major factors contributing to uncertainty in loss reserve estimates for general liability include reporting lags (i.e., the length of time between the event triggering coverage and the actual reporting of the claim), the number of parties involved in the underlying tort action, events triggering coverage that are spread over multiple time periods, the inability to know in advance what actual indemnity costs will be associated with an individual claim, the potential for disputes over whether claims were reasonably foreseeable and intended to be covered at the time the contracts were underwritten and the potential for mass tort claims and class actions. Generally, claims with a longer reporting lag time are characterized by greater inherent risk of uncertainty.

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Examples of loss and LAE risk factors associated with general liability claims that can change over time and result in adjustments to loss reserves include, but are not limited to, the following:

Claims risk factors:

• Changes in claim handling procedures;

• Changes in policy provisions or court interpretation of such provisions;

• New or expanded theories of liability;

• Trends in jury awards;

• Changes in the propensity to sue, in general and with specificity to particular issues;

• Changes in statutes of limitations;

• Changes in the underlying court system;

• Changes in tort law;

• Frequency of visits to health care providers;

• Types of medical treatments received;

• Shifts in lawsuit mix between U.S. federal and state courts; and

• Changes in inflation.

Book of Business risk factors:

• Changes in policy provisions (e.g., deductibles, policy limits, endorsements);

• Changes in underwriting standards; and

• Product mix (e.g., size of account, class, industries insured, jurisdiction mix).

Impact of changes in key assumptions on reserve volatility

We estimate reserves using a variety of methods, assumptions and data elements. The reserve estimation process includes explicit assumptions about a number of factors in the internal and external environment. Across most lines of business, the most important assumptions are future loss development factors applied to paid or reported losses to date. The trend in loss costs is also a key assumption, particularly in the most recent accident years, where loss development factors are less credible.

The following discussion includes disclosure of possible variations from current estimates of loss reserves due to a change in certain key assumptions. Each of the impacts described below is estimated individually, without consideration for any correlation among other key assumptions or among lines of business. Therefore, it could be misleading to take each of the amounts described below and add them together in an attempt to estimate volatility for reserves in total. The estimated variations in reserves due to changes in key assumptions discussed below are a reasonable estimate of possible variations that may occur in the future, likely over a period of several calendar years. It is important to note that the variations discussed herein are not exhaustive and are not meant to be a worst or best case scenario, and therefore, it is possible that future variations may be more than amounts discussed below.

Recorded gross reserves for Casualty Lines were $2,416.6 million as of December 31, 2024. For Casualty losses relating to ongoing operations, loss development patterns are a key assumption for this line of business. Historically, assumptions on loss development patterns have been impacted by, among other things, changes in inflation, and emergence of new types of claims (e.g., construction defect claims) or a shift in the mixture between smaller, more routine claims and larger, more complex claims. We have reviewed the historical variation in loss development patterns for Casualty losses deriving from continuing operations. If the incurred loss development patterns change by 20%, a change that we have experienced in the past and that management considers possible, the estimated net reserve could change by $200.0 million, in either direction.

Specialty reserves are also affected by loss development pattern assumptions. Historically, assumptions on loss development patterns have been impacted by, among other things, movements on individual claims, and economic conditions. We have reviewed the historical variation in loss development patterns for Specialty losses. Recorded gross reserves for Specialty were $643.1 million as of December 31, 2024. If the incurred development patterns underlying our net reserves for this line of business change by 20%, a change that we have experienced in the past and that management considers possible, the estimated net reserve could change by $45.0 million, in either direction.

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Similar to Casualty and Specialty Lines, reserves for Run-off Lines are affected by loss development pattern assumptions. Historically, assumptions on loss development patterns have been impacted by, among other things, changes in inflation, movements on individual claims, emergence of new types of claims, and changes in the mixture between smaller, more routine claims and larger, more complex claims. We have reviewed the historical variation in loss development patterns for Run-off Lines losses. Recorded gross reserves for Run-off Lines were $2,738.9 million, with approximately 2% of that amount related to run-off asbestos and environmental exposures as of December 31, 2024. If the incurred development patterns underlying our net reserves for this line of business change by 20%, a change that we have experienced in the past and that management considers possible, the estimated net reserve could change by $165.0 million, in either direction.

With respect to asbestos and environmental general liability losses, we wrote several different categories of insurance contracts that may cover asbestos and environmental claims. First, we wrote primary policies providing the first layer of coverage in an insured’s general liability insurance program. Second, we wrote excess policies providing higher layers of general liability insurance coverage for losses that exhaust the limits of underlying coverage. Third, we acted as a reinsurer assuming a portion of those risks from other insurers underwriting primary, excess and reinsurance coverage. Fourth, we participated in the London Market, underwriting both direct insurance and assumed reinsurance business. With regard to both environmental and asbestos claims, significant uncertainty limits the ability of insurers and reinsurers to estimate the ultimate reserves necessary for unpaid losses and related expenses. Traditional actuarial reserving techniques cannot reasonably estimate the ultimate cost of these claims, particularly during periods where theories of law are in a state of continued uncertainty. The degree of variability of reserve estimates for these types of exposures is significantly greater than for other more traditional general liability exposures, and as such, we believe there is a high degree of uncertainty inherent in the estimation of asbestos and environmental loss reserves.

In the case of the reserves for asbestos exposures, factors contributing to the high degree of uncertainty include inadequate loss development patterns, plaintiffs’ expanding theories of liability, the risks inherent in major litigation and inconsistent emerging legal outcomes. Furthermore, over time, insurers, including Argo Group, have experienced significant changes in the rate at which asbestos claims are brought, claims experience of particular insureds and value of claims, making predictions of future exposure from past experience uncertain. For example, in the past, insurers in general, including Argo Group, have experienced an increase in the number of asbestos-related claims due to, among other things, plaintiffs’ increased focus on new and previously peripheral defendants and an increase in the number of insureds seeking bankruptcy protection as a result of asbestos-related liabilities. Plaintiffs and insureds have sought to use bankruptcy proceedings, including “pre-packaged” bankruptcies, to accelerate the funding and amount of loss payments by insurers. In addition, some policyholders continue to assert new classes of claims for coverage to which an aggregate limit of liability may not apply. Further uncertainties include insolvencies of other insurers and reinsurers, delays in the reporting of new claims by insurers and reinsurers and unanticipated issues influencing our ability to recover reinsurance for asbestos and environmental claims. Management believes these issues are not likely to be resolved in the near future.

In the case of the reserves for environmental exposures, factors contributing to the high degree of uncertainty include expanding theories of liability and damages, the risks inherent in major litigation, inconsistent decisions concerning the existence and scope of coverage for environmental claims and uncertainty as to the monetary amount being sought by the claimant from the insured.

The reporting pattern for assumed reinsurance claims, including those related to asbestos and environmental claims is much longer than for direct claims. In many instances, it takes months or years to determine that the policyholder’s own obligations have been met and how the reinsurance in question may apply to such claims. The delay in reporting reinsurance claims and exposures adds to the uncertainty of estimating the related reserves.

The factors discussed above affect the variability of estimates for asbestos and environmental reserves including assumptions with respect to the frequency of claims, average severity of those claims settled with payment, dismissal rate of claims with no payment and expense to indemnity ratio. The uncertainty with respect to the underlying reserve assumptions for asbestos and environmental adds a greater degree of variability to these reserve estimates than reserve estimates for more traditional exposures. The process of estimating asbestos and environmental reserves remains subject to a wide variety of uncertainties. Due to these uncertainties, further developments could cause us to change our estimates of our asbestos and environmental reserves, and the effect of these changes could be material to our consolidated operating results, financial condition and liquidity.

Loss Reserve Estimation Variability

After reviewing the output from various loss reserving methodologies, we select our best estimate of reserves. We believe that the aggregate loss reserves at December 31, 2024 were adequate to cover claims for losses that have occurred, including both known claims and claims yet to be reported. As of December 31, 2024, we recorded gross loss reserves of $5,798.6 million and loss reserves net of reinsurance of $3,003.9 million. Although our financial reports reflect our best estimate of reserves, it is unlikely that the final amount paid will exactly equal our best estimate.

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In establishing our best estimate for reserves, we consider facts currently known and the present judicial and legislative environment among other factors. However, given the expansion of coverage and liability by the courts, legislation in the recent past and possibility of similar interpretations in the future, particularly with regard to asbestos and environmental claims, additional loss reserves may develop in future periods. These potential increases cannot be reasonably estimated at the present time. Any increases could have an adverse impact on future operating results, liquidity, risk-based capital ratios and ratings assigned to our insurance subsidiaries by the nationally recognized insurance rating agencies.