Argo rallies shareholder support ahead of May meeting

Argo Group’s board has written to shareholders urging them to vote against the proposals put forward by activist investor Voce Capital ahead of the company’s annual shareholder meeting on 24 May.

This morning, Argo filed its definitive proxy materials with the Securities and Exchange Commission before its shareholder meeting, now scheduled for 24 May. To accompany the proxy filing, Argo’s board  sent a letter to shareholders calling on them to rebuff Voce’s proposals.

“At Argo’s annual general meeting of shareholders on May 24, 2019, you will be asked to make an important decision regarding the future of your investment,” Argo’s letter stated, calling on shareholders to support the board’s efforts at the helm of the business.

“The Argo board that you know and have seen in action has overseen strong underwriting results, prudent company spending, investments that drive growth, and opportunities that drive efficiency each step of the way,” the group said.

“Your board and management team are committed to delivering substantial and enduring value for our shareholders. The strategy your board has been pursuing has yielded best-in-class [total shareholder return], improved operating margins, and will continue to drive opportunity for all of us going forward.”

The statement from Argo’s board reiterated comments made by the Bermudian (re)insurer in its  preliminary proxy filings, dismissing the accusations levelled against it by Voce and its principal.

“Similar to other activist campaigns initiated by Voce Capital, the firm’s principal, J Daniel Plants, has put forward a series of poorly researched claims with little regard for the truth,” Argo’s board highlighted in its letter.

“Like so many other assertions in its initial press release, Voce’s representations to shareholders on this topic are rife with material misstatements of fact and demonstrate either a reckless disregard for the truth, gross negligence in fact-checking, or a combination of both,” the board stated.

At the end of May, Voce continued its campaign of criticism against Argo and its alleged “shockingly high” corporate expenses, and demanded a shake-up of the insurer’s board. That reshuffle would see  chairman Gary Woods and directors Hector De Leon, John Power and Mural Josephson depart and be replaced by Nicholas Walsh, Carol McFate, Rear Admiral Kathleen Dussault, and Bernard Bailey. Voce also seeks to elect Charles Dangelo.

Argo’s board is composed of 13 directors, five of whose terms expire at the annual shareholder’s meeting: Sedgwick Browne, Samuel Liss, Kathleen Nealon, Al-Noor Ramji and John Tonelli.

The back and forth between Argo and Voce began back in early February when the San Francisco-based business grew its stake in the carrier to 5.6 percent with the intent to “enhance shareholder value” in the company.

Shortly after, Voce released a public letter criticising alleged misuse of Argo funds and calling for a board makeover to improve the (re)insurer’s return on equity.

Criticisms from Plants included allegations surrounding Argo’s corporate expenses, which he said were “not only shockingly high – they are also shockingly inappropriate”.

In that letter to Argo’s shareholders, Plants pointed to the personal use of company-owned property including aircraft and housing, “gross misallocations of capital on wasteful items and frivolous vanity sponsorships” as featuring among an “overall spendthrift culture that misdirects company assets to support the lifestyle and hobbies of the company’s CEO at the expense of shareholders”.

In the new letter, Argo’s board explained how the company’s corporate aircraft programme “is managed in an effective manner to operate our global diversified business platform”.

“Contrary to Voce Capital’s uninformed claims, the company did not use corporate aircraft to transport our CEO to all of the destinations described by Mr Plants in Voce Capital’s initial press release,” the Argo directors’ letter states.

Another notable allegation Voce levelled at Argo concerned a penthouse apartment the activist investor claimed was constructed as part of the renovation of the (re)insurer’s New York headquarters. There is no apartment, although there is a penthouse meeting room.

The new letter from Argo’s board highlights the carrier’s total shareholder return (TSR) over the past five years, describing it as “exceptional on both an absolute and relative basis”.

Argo said its TSR had exceeded its peers’ mean by 28 percent, 58 percent and 130 percent respectively over a one-, three- and five-year period.

“The sound returns the company has provided to its shareholders reflect the company’s ability to deliver strong fundamentals over the long run,” Argo’s board stated.

“Our strategy of positioning our insurance operations for competitive advantage in the markets and geographies we serve has been reflected in improved underwriting performance, growth in profitability and return of excess capital to our shareholders.”

The board added: “Argo is committed to best-in-class corporate governance practices. We have been proactively refreshing our board of directors in a deliberate manner, adding five new directors over the past three years, consciously reflecting on the skills and experience necessary to drive our enterprise forward. We believe our shareholders are being well served by these changes.”

Again, Argo’s board underlined what it regards as the company’s successes.

“Between stock buybacks and dividends paid, we returned $645mn of capital to shareholders between 2010 and 2018; over this same time frame, we grew our equity base by $400mn from $1.4bn to $1.8bn or a combined increase in capital generated of over $1.2bn. Additionally, the market value of Argo has grown from just under $1.2bn in 2010 to over $2.4bn today.”

In signing off the letter, Argo’s 12 directors insisted the (re)insurer had the right management and board in place to deliver what it said would be a “stellar performance”.

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