15.

Information Provided in Connection with Outstanding Debt of Subsidiaries

In September 2012, through our wholly owned subsidiary Argo Group US, we issued $125,000,000 aggregate principal amount of Argo Group US’s 6.5% Senior Notes due September 15, 2042 (the “Notes”). Subsequently on September 25, 2012, the underwriters of the offering exercised their option to purchase an additional $18,750,000 aggregate principal amount of Notes, which were issued on September 26, 2012. The Notes bear interest at 6.5%, payable quarterly in cash in arrears on the 15th day of March, June, September and December of each year, beginning on December 15, 2012. The Notes are unsecured and unsubordinated obligations of Argo Group US and rank equally in right of payment with all of Argo Group US’s other unsecured and unsubordinated debt. The Notes are guaranteed on a full and unconditional senior unsecured basis by Argo Group. The Notes may be redeemed, for cash, in whole or in part, on or after September 15, 2017, at Argo Group US’s option, at any time and from time to time, until 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 following tables present condensed consolidating financial information at September 30, 2012 and December 31, 2011 and for the three and nine months ended September 30, 2012 and 2011, for Argo Group (the “Parent Guarantor”) and Argo Group US (the “Subsidiary Issuer”). The Subsidiary Issuer is an indirect 100 percent-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor’s investment accounts and earnings. The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer. Condensed consolidating financial information of the Subsidiary Issuer is presented on a consolidated basis and consists principally of the net assets, results of operations, and cash flows of operating insurance company subsidiaries.

CONDENSED CONSOLIDATING BALANCE SHEET

September 30, 2012

(in millions)


	Argo Group International Holdings, Ltd (Parent Guarantor)		Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Assets
Investments	$	3.0	$	2,925.7	$	1,416.2		$	0.0		$	4,344.9
Cash		0.1		127.8		14.8			0.0			142.7
Premiums receivable		0.0		153.2		249.7			0.0			402.9
Reinsurance recoverables		0.0		1,143.3		(126.8	)		0.0			1,016.5
Goodwill and other intangible assets		0.0		136.1		106.1			0.0			242.2
Current income taxes receivable, net		0.0		7.1		14.2			0.0			21.3
Deferred acquisition costs, net		0.0		57.3		50.4			0.0			107.7
Ceded unearned premiums		0.0		88.9		124.1			0.0			213.0
Other assets		4.4		106.2		48.0			0.0			158.6
Due from affiliates		0.0		0.7		(0.7	)		0.0			0.0
Intercompany note receivable		0.0		102.9		(102.9	)		0.0			0.0
Investment in subsidiaries		1,640.2		0.0		0.0			(1,640.2	)		0.0

Total assets	$	1,647.7	$	4,849.2	$	1,793.1		$	(1,640.2	)	$	6,649.8

Liabilities and Shareholders’ Equity
Reserves for losses and loss adjustment expenses	$	0.0	$	2,238.4	$	989.5		$	0.0		$	3,227.9
Unearned premiums		0.0		432.0		355.0			0.0			787.0
Funds held and ceded reinsurance payable, net		0.0		579.8		(182.1	)		0.0			397.7
Long-term debt		64.4		391.6		63.8			0.0			519.8
Deferred tax liabilities, net		0.0		42.8		6.9			0.0			49.7
Accrued underwriting expenses and other liabilities		10.6		81.0		34.2			0.0			125.8
Due to affiliates		3.6		0.0		0.0			(3.6	)		0.0
Intercompany note payable		27.2		25.0		(25.0	)		(27.2	)		0.0

Total liabilities		105.8		3,790.6		1,242.3			(30.8	)		5,107.9

Total shareholders’ equity		1,541.9		1,058.6		550.8			(1,609.4	)		1,541.9

Total liabilities and shareholders’ equity	$	1,647.7	$	4,849.2	$	1,793.1		$	(1,640.2	)	$	6,649.8

⁽¹⁾	Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations

⁽²⁾	Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2011

(in millions)


	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)		Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Assets
Investments	$	(0.8	)	$	2,778.5	$	1,369.8		$	0.0			4,147.5
Cash		0.0			85.1		15.8			0.0			100.9
Premiums receivable		0.0			151.2		157.8			0.0			309.0
Reinsurance recoverables		0.0			1,140.5		3.6			0.0			1,144.1
Goodwill and other intangible assets		0.0			137.2		109.6			0.0			246.8
Current income taxes receivable, net		0.0			0.0		11.2			0.0			11.2
Deferred acquisition costs, net		0.0			55.8		45.7			0.0			101.5
Ceded unearned premiums		0.0			77.2		102.2			0.0			179.4
Other assets		6.8			88.5		42.6			0.0			137.9
Due from affiliates		0.0			0.0		0.3			(0.3	)		0.0
Intercompany note receivable		0.0			90.8		(90.8	)		0.0			0.0
Investment in subsidiaries		1,530.6			0.0		0.0			(1,530.6	)		0.0

Total assets	$	1,536.6		$	4,604.8	$	1,767.8		$	(1,530.9	)	$	6,378.3

Liabilities and Shareholders’ Equity
Reserves for losses and loss adjustment expenses	$	0.0		$	2,291.2	$	999.9		$	0.0		$	3,291.1
Unearned premiums		0.0			397.8		260.4			0.0			658.2
Funds held and ceded reinsurance payable, net		0.0			562.8		(102.5	)		0.0			460.3
Long-term debt		64.4			247.9		64.7			0.0			377.0
Current income taxes payable, net		0.0			1.8		(1.8	)		0.0			0.0
Deferred tax liabilities, net		0.0			13.4		5.1			0.0			18.5
Accrued underwriting expenses and other liabilities		8.9			81.7		19.6			0.0			110.2
Due to affiliates		0.3			0.6		(0.6	)		(0.3	)		0.0

Total liabilities		73.6			3,597.2		1,244.8			(0.3	)		4,915.3

Total shareholders’ equity		1,463.0			1,007.6		523.0			(1,530.6	)		1,463.0

Total liabilities and shareholders’ equity	$	1,536.6		$	4,604.8	$	1,767.8		$	(1,530.9	)	$	6,378.3

⁽¹⁾	Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations

⁽²⁾	Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012

(in millions)


	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Premiums and other revenue:
Earned premiums	$	0.0		$	108.1		$	196.2		$	0.0		$	304.3
Net investment income		0.0			21.2			7.8			(0.1	)		28.9
Fee income, net		0.0			2.4			0.6			0.0			3.0
Net realized investment (losses) gains		(0.5	)		4.2			4.6			0.0			8.3

Total revenue		(0.5	)		135.9			209.2			(0.1	)		344.5

Expenses:
Losses and loss adjustment expenses		0.0			78.0			108.3			0.0			186.3
Other reinsurance-related expenses		0.0			0.0			7.0			0.0			7.0
Underwriting, acquisition and insurance expenses		10.1			41.8			66.1			0.0			118.0
Interest expense		0.1			4.1			1.7			(0.1	)		5.8
Foreign currency exchange (gain) loss		0.0			(0.1	)		9.8			0.0			9.7

Total expenses		10.2			123.8			192.9			(0.1	)		326.8

(Loss) income before income taxes		(10.7	)		12.1			16.3			0.0			17.7
Provision for income taxes		0.0			2.5			1.8			0.0			4.3

Net (loss) income before equity in earnings of subsidiaries		(10.7	)		9.6			14.5			0.0			13.4
Equity in undistributed earnings of subsidiaries		24.1			0.0			0.0			(24.1	)		0.0

Net income (loss)	$	13.4		$	9.6		$	14.5		$	(24.1	)	$	13.4


⁽¹⁾Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations
⁽²⁾Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF (LOSS) INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 (in millions)

	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Premiums and other revenue:
Earned premiums	$	0.0		$	111.9		$	159.0		$	0.0		$	270.9
Net investment income		0.0			21.6			8.8			(0.4	)		30.0
Fee income, net		0.0			0.9			0.5			0.0			1.4
Net realized investment gains		0.0			2.2			1.7			0.0			3.9

Total revenue		0.0			136.6			170.0			(0.4	)		306.2

Expenses:
Losses and loss adjustment expenses		0.0			77.7			121.9			0.0			199.6
Other reinsurance-related expenses		0.0			0.0			2.7			0.0			2.7
Underwriting, acquisition and insurance expenses		4.7			38.0			61.5			0.0			104.2
Interest expense		1.3			3.8			0.9			(0.4	)		5.6
Foreign currency exchange gain		0.0			0.0			(1.9	)		0.0			(1.9	)

Total expenses		6.0			119.5			185.1			(0.4	)		310.2

(Loss) income before income taxes		(6.0	)		17.1			(15.1	)		0.0			(4.0	)
Provision for income taxes		0.0			6.3			0.5			0.0			6.8

Net (loss) income before equity in losses of subsidiaries		(6.0	)		10.8			(15.6	)		0.0			(10.8	)
Equity in undistributed losses of subsidiaries		(4.8	)		0.0			0.0			4.8			0.0

Net (loss) income	$	(10.8	)	$	10.8		$	(15.6	)	$	4.8		$	(10.8	)

⁽¹⁾	Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations

⁽²⁾	Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(in millions)


	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Premiums and other revenue:
Earned premiums	$	0.0		$	327.0		$	544.8		$	0.0		$	871.8
Net investment income		0.1			65.3			25.1			(0.2	)		90.3
Fee income, net		0.0			2.4			2.4			0.0			4.8
Net realized investment (losses) gains		(0.5	)		11.8			7.4			0.0			18.7

Total revenue		(0.4	)		406.5			579.7			(0.2	)		985.6

Expenses:
Losses and loss adjustment expenses		0.0			220.9			307.0			0.0			527.9
Other reinsurance-related expense		0.0			0.0			20.8			0.0			20.8
Underwriting, acquisition and insurance expenses		21.4			127.9			197.0			0.0			346.3
Interest expense		2.9			11.8			2.5			(0.2	)		17.0
Foreign currency exchange loss		0.0			0.1			2.7			0.0			2.8

Total expenses		24.3			360.7			530.0			(0.2	)		914.8

(Loss) income before income taxes		(24.7	)		45.8			49.7			0.0			70.8
Provision for income taxes		0.0			10.4			3.4			0.0			13.8

Net (loss) income before equity in earnings of subsidiaries		(24.7	)		35.4			46.3			0.0			57.0
Equity in undistributed earnings of subsidiaries		81.7			0.0			0.0			(81.7	)		0.0

Net income (loss)	$	57.0		$	35.4		$	46.3		$	(81.7	)	$	57.0


⁽¹⁾Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations
⁽²⁾Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF (LOSS) INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 (in millions)

	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Premiums and other revenue:
Earned premiums	$	0.0		$	330.0		$	474.0		$	0.0		$	804.0
Net investment income		0.1			67.3			30.2			(1.3	)		96.3
Fee income, net		0.0			0.4			1.4			0.0			1.8
Net realized investment gains		0.0			25.7			12.0			0.0			37.7

Total revenue		0.1			423.4			517.6			(1.3	)		939.8

Expenses:
Losses and loss adjustment expenses		0.0			223.5			440.9			0.0			664.4
Other reinsurance-related expense		0.0			0.0			3.1			0.0			3.1
Underwriting, acquisition and insurance expenses		16.0			123.6			175.1			0.0			314.7
Interest expense		4.1			11.6			2.1			(1.3	)		16.5
Foreign currency exchange (gain) loss		0.0			(0.5	)		11.6			0.0			11.1

Total expenses		20.1			358.2			632.8			(1.3	)		1,009.8

(Loss) income before income taxes		(20.0	)		65.2			(115.2	)		0.0			(70.0	)
Provision (benefit) for income taxes		0.0			18.0			(4.7	)		0.0			13.3

Net (loss) income before equity in losses of subsidiaries		(20.0	)		47.2			(110.5	)		0.0			(83.3	)
Equity in undistributed losses of subsidiaries		(63.3	)		0.0			0.0			63.3			0.0

Net (loss) income	$	(83.3	)	$	47.2		$	(110.5	)	$	63.3		$	(83.3	)

⁽¹⁾	Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations

⁽²⁾	Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(in millions)


	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Net cash flows from operating activities	$	(17.9	)	$	13.7		$	40.4		$	27.3		$	63.5

Cash flows from investing activities:
Proceeds from sales of investments		0.0			458.9			439.6			0.0			898.5
Proceeds from maturities and mandatory calls of investments		0.0			253.9			111.0			0.0			364.9
Purchases of investments		0.0			(712.1	)		(539.3	)		0.0			(1,251.4	)
Change in short-term investments and foreign regulatory deposits		(0.1	)		(64.3	)		(34.6	)		0.0			(99.0	)
Settlements of foreign currency exchange forward contracts		(0.6	)		0.0			0.0			0.0			(0.6	)
Acquisitions		0.0			(1.4	)		0.0			0.0			(1.4	)
Issuance of intercompany note		0.0			(10.0	)		10.0			0.0			0.0
Other, net		0.0			(21.6	)		(2.6	)		0.0			(24.2	)

Cash provided (used) by investing activities		(0.7	)		(96.6	)		(15.9	)		0.0			(113.2	)

Cash flows from financing activities:
Borrowings under intercompany note		27.3			25.0			(25.0	)		(27.3	)		0.0
Proceeds from issuance of senior unsecured fixed rate notes		0.0			139.2			0.0			0.0			139.2
Activity under stock incentive plans		0.7			0.0			0.0			0.0			0.7
Repurchase of Company’s common shares		0.0			(38.6	)		0.0			0.0			(38.6	)
Excess tax expense from share-based payment arrangements		0.0			0.0			0.0			0.0			0.0
Payment of cash dividend to common shareholders		(9.3	)		0.0			0.0			0.0			(9.3	)

Cash used by financing activities		18.7			125.6			(25.0	)		(27.3	)		92.0

Effect of exchange rate changes on cash		0.0			0.0			(0.5	)		0.0			(0.5	)

Change in cash		0.1			42.7			(1.0	)		0.0			41.8
Cash, beginning of period		0.0			85.1			15.8			0.0			100.9

Cash, end of period	$	0.1		$	127.8		$	14.8		$	0.0		$	142.7


⁽¹⁾Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations
⁽²⁾Includes all Argo Group parent company eliminations

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 (in millions)

	Argo Group International Holdings, Ltd (Parent Guarantor)			Argo Group US, Inc. and Subsidiaries (Subsidiary Issuer)			Other Subsidiaries and Eliminations ⁽¹⁾			Consolidating Adjustments ⁽²⁾			Total
Net cash flows from operating activities	$	(20.4	)	$	14.7		$	34.8		$	27.1		$	56.2

Cash flows from investing activities:

Proceeds from sales of investments		0.0			705.2			348.0			0.0			1,053.2
Proceeds from maturities and mandatory calls of investments		0.0			190.5			106.2			0.0			296.7
Purchases of investments		0.0			(893.3	)		(433.2	)		0.0			(1,326.5	)
Change in short-term investments and foreign regulatory deposits		(0.1	)		37.8			(29.9	)		0.0			7.8
Settlements of foreign currency exchange forward contracts		2.6			0.0			6.4			0.0			9.0
Issuance of intercompany note		0.0			(3.5	)		3.5			0.0			0.0
Acquisition		0.0			(0.5	)		0.0			0.0			(0.5	)
Other, net		(0.1	)		(7.4	)		(2.1	)		0.0			(9.6	)

Cash provided (used) by investing activities		2.4			28.8			(1.1	)		0.0			30.1

Cash flows from financing activities:
Borrowings under intercompany note		27.1			10.0			(10.0	)		(27.1	)		0.0
Activity under stock incentive plans		0.9			0.0			0.0			0.0			0.9
Repurchase of Company’s common shares		0.0			(35.9	)		0.0			0.0			(35.9	)
Excess tax expense from share-based payment arrangements		0.0			(0.1	)		0.0			0.0			(0.1	)
Payment of cash dividend to common shareholders		(10.0	)		0.0			0.0			0.0			(10.0	)

Cash used by financing activities		18.0			(26.0	)		(10.0	)		(27.1	)		(45.1	)

Effect of exchange rate changes on cash		0.0			0.0			(4.9	)		0.0			(4.9	)

Change in cash		0.0			17.5			18.8			0.0			36.3
Cash, beginning of period		0.0			61.6			21.9			0.0			83.5

Cash, end of period	$	0.0		$	79.1		$	40.7		$	0.0		$	119.8

⁽¹⁾	Includes all other subsidiaries of Argo Group International Holdings, Ltd and all intercompany eliminations

⁽²⁾	Includes all Argo Group parent company eliminations