Article Top Ad
Reading Time: 7 minutes

Publishes In-Depth Roadmap for the Board to Improve Argo’s ROE by
Nearly 800 basis points

Includes ‘Starter Kit’ of Immediate Actions the Board Could Take to
Drive Value Creation and Instill Culture of Accountability at Company

Provides Further Evidence of Argo’s Attempts to Mislead Shareholders
in Connection with the New York City Luxury Duplex Penthouse it Provides
for CEO

Time is Now to Reverse Self-Indulgent Culture of Entrenchment,
Commingling of Personal and Business Activities and Disregard for
Shareholder Interests

Vote on the BLUE proxy card FOR Voce’s Highly-Qualified Nominees and
FOR Its Proposals

SAN FRANCISCO–(BUSINESS WIRE)–Voce Capital Management LLC (“Voce”), the beneficial owner of
approximately 5.6% of the shares of Argo Group International Holdings,
Ltd. (NYSE: ARGO) (“Argo” or the “Company”), today issued a detailed
presentation, “Righting the Ship,” which outlines a specific, actionable
plan which Argo’s Board could pursue to unlock substantial shareholder
value creation at the Company through a series of immediate expense
reductions, compensation reforms, capital allocation improvements,
portfolio rationalizations and sweeping corporate governance

Voce’s full presentation is available at

Important highlights include the following:

Argo Has Significant Opportunities to Boost its
Substandard Return on Equity:

  • Historically, Argo has failed to cover its cost of capital – meaning
    it is destroying shareholder value. In Voce’s view, expense reductions
    alone can allow Argo to earn a double digit return on equity (“ROE”) –
    significantly higher than its 10-year average ROE of 5.7%.
  • A thorough review of Argo’s capital allocation and portfolio of
    businesses is also required, including a potential divestiture of its
    international business, exit of underperforming lines and potential
    capital return.
  • Voce’s analysis suggests 110 bps of ROE opportunity from enhanced
    capital allocation and 220 bps from portfolio rationalization.
  • Adding capital allocation and potential sale of the international
    business would allow Argo to achieve an ROE of over 13%.
  • If acted upon by the Board, Voce’s ideas could result in a pro forma
    ROE as high as 13.5% which could result in a share price approximately
    75-90% above its unaffected stock price on February 1, 2019, prior to
    Voce’s involvement.

The Company Must Pursue Immediate, Substantial
Expense Reductions:

  • Voce offers a blueprint for immediate, substantial expense reductions
    of $100 million that would boost Argo’s ROE by 460 bps.
  • Normalizing Argo’s OUE to that of its peer average implies a $100
    million expense opportunity (half of which Voce has already
  • Argo’s corporate and other underwriting expenses substantially exceed
    peers and its purported expense reductions are illusory. Voce believes
    the Company has simply transferred costs from its underwriting
    business and buried them in its investment portfolio.
  • Since 2014, invested assets have grown at 4% annually, while
    investment expenses have grown at 25% annually.
  • Reducing Argo’s investment expenses in line with peers would yield $16
    million in savings.
  • $20 million in additional cost savings could be achieved by reigning
    in corporate expenses, including corporate aircraft and housing,
    vanity sponsorships and CEO compensation.

Argo Desperately Needs a Culture of Respect,
not Disdain, for Shareholders:

  • Argo’s handling of Voce’s questions about a potential penthouse
    apartment where CEO Mark E. Watson III lives while in New York City
    demonstrates the Company’s disregard for shareholders and lack of
    respect for honesty when engaging with investors.
  • Argo initially insisted that “The Company did not build, nor have we
    ever had, a penthouse apartment above our New York offices.
    (emphasis added).
  • As has now been independently verified and publicly reported by a news
    outlet, Argo does indeed own a duplex “glass penthouse apartment” in
    New York City – it’s just that it is located a mere six blocks away
    from Argo’s Meatpacking District offices, at 177 Ninth Avenue,
    Penthouse E, New York City, 10011.1
  • The penthouse was purchased for $5.795 million in 2016, which
    corresponds to the initiation of Argo’s disclosure regarding
    unreimbursed personal use of New York housing that began with its 2017
    Proxy Statement regarding the 2016 period. Voce has also independently
    confirmed that it is used as Mr. Watson’s home when in New York City.
  • The penthouse is in the Chelsea Enclave development, “an urban oasis
    in the heart of Chelsea neighborhood with luxury apartments that share
    an enclosed garden with the General Theological Seminary.”2
    The opulent duplex, with its “open views and beaming light from the
    continuous walls of glass pull you from the entry through to the large
    living room and dining room and out onto the 41 foot long terrace.”3
    The original 2016 property listing, including photographs, is
    available on
  • The property was purchased by the same Argo subsidiary, AGI
    Properties, Inc. that bought the three luxury corporate apartments in
    Miami that Voce first uncovered in its April 24th press

Argo’s Shockingly Deficient Corporate
Governance Must be Revitalized:

  • Argo’s Board has, in Voce’s view, abjectly failed to adequately
    oversee CEO Watson and rein in his rampant use of corporate resources
    to fund his personal pursuits, from fine art, to architecture, to race
    cars, to yachting.
  • In its presentation, Voce outlines how Argo’s G-5 corporate jet is
    used frequently for personal reasons – such as a Watson family
    Christmas holiday vacation to India in 2017, which the presentation
    outlines by matching flight logs to Mr. Watson’s hyperactive social
    media presence, including time and geo-stamped family photos he posted
    on Twitter.
  • Voce believes a top-to-bottom investigation of Argo’s corporate
    governance practices is urgently required. This should take the form
    of an immediate investigation into expenses, compensation and
    corporate perquisites by a credible external law firm and overseen by
    a special committee of independent Directors.
  • In Voce’s view, Argo’s Board suffers from docile, over-tenured
    directors who lack independence and whose interests are not aligned
    with those of all shareholders.
  • The reconstitution of the Board and all committees and removal and
    replacement of the “Big 5” legacy directors – with nearly 20 years’
    average tenure – is urgently required.
  • Argo’s flawed excessive executive compensation structure must be
    reformed, and the Board’s stale and ineffective Compensation Committee

Argo’s TSR – The Reality Behind the Numbers:

  • Despite Argo’s attempts to deflect criticism by touting its total
    shareholder return (“TSR”), the Company’s TSR is not materially
    different from that of its peers. Even after its recent stock
    appreciation, Argo still trades near the bottom of its peer set
    because its ROE is also near the bottom. As a result, Argo’s
    historical discount to the multiple of its peers is persistent and
  • More than 100% of Argo’s recent stock returns have come from expansion
    of its P/BV multiple, while actual book value per share has shrunk
    over that period of time.
  • Most of Argo’s P/BV expansion is due to speculation of M&A and Voce’s
    involvement (the stock has gained 18% since Voce’s 13D filing on
    February 4, 2019).


Voce issued the following statement in connection with the release of
“Righting the Ship”:

“As our presentation makes clear, there are abundant opportunities to
drive real value creation for all Argo shareholders – especially through
improving the Company’s poor ROE and reducing its expenses. Change is
needed now to achieve these goals.

We believe the five highly-qualified, fully-independent director
candidates we have nominated for election to Argo’s Board – Bernard C.
Bailey, Charles H. Dangelo, Admiral Kathleen M. Dussault, Carol A.
McFate and Nicholas C. Walsh – will restore accountability, independence
and integrity to the Company and drive substantial shareholder value

Unfortunately, as should be evident from the weeks of public discourse
and patent acts of entrenchment, Argo’s Board and leadership is plagued
by a pervasive culture of disdain for shareholders, disregard for norms
of basic corporate governance and a willingness to tolerate the
hijacking of corporate resources for the CEO’s pursuit of private

The case of Argo’s mysterious New York City luxury duplex penthouse
perfectly illustrates this. Argo should be ashamed of itself for issuing
such a sanctimonious and carefully hedged initial denial of the
penthouse’s existence given it now concedes, after all, that it does own
a swanky glass penthouse in New York. The point all along was not the location
of such corporate housing but rather its existence. While
Argo publicly stated multiple times that there was no penthouse above its
New York offices, it neglected to tell shareholders that it does owns a
penthouse apartment, within walking distance. This type of behavior
demonstrates a fundamental level of dishonesty.

We look forward to continuing to make our case to Argo shareholders in
the coming weeks as we approach this year’s Annual Meeting.”

The 2019 Annual Meeting is scheduled to be held on May 24, 2019. Voce
urges its fellow shareholders to vote on the Blue
proxy card FOR its highly-qualified nominees and FOR its proposals. For
more information, investors can visit

About Voce Capital Management LLC

Voce Capital Management LLC is a fundamental value-oriented,
research-driven investment adviser founded in 2011 by J. Daniel
Plants. The San Francisco-based firm is 100% employee-owned.

Additional Information and Where to Find It

Voce Catalyst Partners LP, Voce Capital Management LLC, Voce Capital
LLC, and J. Daniel Plants, (collectively, the “Participants”) filed with
the Securities and Exchange Commission (the “SEC”) a definitive proxy
statement and accompanying form of proxy on April 12, 2019 to be used in
connection with the solicitation of proxies from the members of Argo
Group International Holdings, Ltd. (the “Company”). All members of the
Company are advised to read the definitive proxy statement and other
documents related to the solicitation of proxies by the Participants
when they become available, as they will contain important information,
including additional information related to the Participants and
information about the Participants’ director nominees. The definitive
proxy statement and an accompanying proxy card will be furnished to some
or all of the Company’s stockholders and are, along with other relevant
documents, available at no charge on the SEC website at

Cautionary Statement Regarding Forward-Looking Statements

All statements contained in this press release that are not clearly
historical in nature or that necessarily depend on future events are
“forward-looking statements,” which are not guarantees of future
performance or results, and the words “anticipate,” “believe,” “expect,”
“potential,” “could,” “opportunity,” “estimate,” “plan,” and similar
expressions are generally intended to identify forward-looking
statements. The projected results and statements contained in this press
release that are not historical facts are based on current expectations,
speak only as of the date of this press release and involve risks that
may cause the actual results to be materially different. In light of the
significant uncertainties inherent in the forward-looking statements,
the inclusion of such information should not be regarded as a
representation as to future results. Voce disclaims any obligation to
update the information herein and reserves the right to change any of
its opinions expressed herein at any time as it deems appropriate. Voce
has not sought or obtained consent from any third party to use any
statements or information indicated herein as having been obtained or
derived from statements made or published by third parties.

1 “Argo corporate housing policy in the spotlight as NY
penthouse revealed,” The Insurance Insider, April 30, 2019 (Link)

2 “Chelsea Enclave,” (Link)

3 “177 Ninth Avenue, Chelsea,” property listing
14295344 (Link)

4 “Voce Capital Addresses Argo’s Attempted Justifications for
Misuse of Corporate Assets,” April 24, 2019 (Link)


Okapi Partners LLC
Bruce H. Goldfarb /
Patrick J. McHugh
(212) 297-0720 or Toll-free (877) 259-6290
[email protected]

& Company
Dan Zacchei / Joe Germani
(212) 486-9500
[email protected]
/ [email protected]