Recent Acquisitions, Disposals & Other Transactions

12 Months Ended

Dec. 31, 2021

Business Combinations [Abstract]

Recent Acquisitions, Disposals & Other Transactions

Recent Acquisitions, Disposals & Other Transactions

Sale of Trident Brand and Platform

On April 30, 2020, we sold our Trident brand and underwriting platform to Paragon Insurance Holdings, LLC (“Paragon”) and received $38 million in cash, with additional consideration in future periods depending on performance post-closing. In connection with the terms of agreement to sell the Trident brand, Paragon continues to write business on Argo paper (Argonaut Insurance Company, Argonaut Great Central Insurance Company, Argonaut Midwest Insurance Company and Peleus Insurance Company) through a managing general agency agreement. During the second quarter of 2021, the parties to the transaction agreed to amend the transaction and other related agreements associated with the sale of Trident to eliminate certain lines of business from the transaction. As a result, we recognized a pre-tax loss of $10.5 million reduction in the original gain on sale for the year ended December 31, 2021. This transaction is included in "Net realized investment gains (losses)" in our Consolidated Statements of Income (Loss) for the year ended December 31, 2021. We recognized a pre-tax gain of $31.8 million related to the sale, for the year ended December 31, 2020. Trident is reported within our U.S. Operations reporting segment.

Acquisition of Ariel Indemnity Limited

Effective June 12, 2020, Argo Group and our subsidiary Argo Re, Ltd. (“Argo Re”) acquired 100% of the capital stock of Ariel Indemnity Limited (“AIL”) for consideration of $55.6 million. The acquisition of AIL was made pursuant to the former owners (the “Sellers”) of Maybrooke Holdings, S.A. (“Maybrooke”) exercising a put option within the Administrative Services Agreement (“ASA”) between the Company and the Sellers. The ASA was part of the stock purchase agreement between the Company and the Sellers related to our February 6, 2017 acquisition of Maybrooke, the since-liquidated holding company of the Ariel Re platform. The $55.6 million sales price is equal to the 2019 year-end tangible net worth of AIL, less certain administrative costs. Upon acquiring AIL, we dissolved AIL and merged it into Argo Re.

The acquisition was accounted for in accordance with ASC 805, “Business Combinations.” Purchase accounting, as defined by ASC 805, requires that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values disclosed herein were determined based on management’s best estimates and the finalization of certain valuation analyses during the fourth quarter of 2020. Provisional fair values were recorded in the Company’s interim consolidated financial statements and notes for the period ended September 30, 2020. AIL’s financial position, results of operations, and cash flows were not material to our consolidated financial results as of and for the year ended December 31, 2020. No goodwill or intangible assets were recognized from this transaction.

Reinsurance-to-close ("RITC") of ArgoGlobal Syndicate 1200

On October 12, 2020, ArgoGlobal, the Lloyd’s insurer and member of Argo Group, announced a reinsurance-to-close (“RITC”) transaction with legacy specialist RiverStone. RiverStone provided an RITC of ArgoGlobal’s Syndicate 1200 for 2017 and prior years with net technical provision of approximately $219.7 million. The transaction received regulatory approval on January 29, 2021, with the RITC becoming effective on January 1, 2021.

Sale of Ariel Re

On November 25, 2020, we completed the sale of Ariel Re, to Pelican Ventures and J.C. Flowers & Co. Under the terms of the agreement, we received $30 million at closing. Ariel Re is the reinsurance platform through which Lloyd’s Syndicate 1910 reinsurance business is underwritten. We recognized a loss of $9.4 million related to the sale, which is included in "Net realized investment (losses) gains" in our Consolidated Statements of Income (Loss) for the year ended December 31, 2020. Ariel Re is one of the business units within our International Operations reporting segment. Pelican Ventures and affiliates capitalized the 2021 year of account, and Argo Group maintains responsibility for all years of account 2020 and prior. Additionally, in accordance with the transaction agreement, Ariel Re’s equity interests in ArgoGlobal Services (Hong Kong) Limited (“AGSL”) and Ariel Re Bda Limited (“ARBL”) were transferred to Pelican Ventures and J.C. Flowers & Co. AGSL is authorized in Hong Kong by the Insurance Agency of Hong Kong as an insurance agent and is a Lloyd's approved coverholder. ARBL is an exempted company limited by shares, incorporated in Bermuda and registered as an insurance agent under the Bermuda Insurance Act.

Sale of Argo Seguros Brasil S.A.

On February 15, 2022, we completed the sale of our Brazilian operations, Argo Seguros, to Spice Private Equity Ltd., an investment company focused on global private equity investments, for a purchase price of 160 million Brazilian Reais (approximately $30.5 million), subject to the terms and conditions set forth in the purchase agreement. Argo Seguros is one of the units within our International Operations reporting segment. The Company realized a loss on the fair value of Argo Seguros of $6.3 million (including other costs of $0.7 million), which is reflected in the income statement and adjusted the carrying value of deferred acquisition cost by $5.6 million. The Company expects to incur a tax loss in connection with the sale of Argo Seguros. However, due to Irish tax rules regarding the disposition of subsidiary stock, the Company does not expect to utilize this loss for tax purposes, and as such is estimating no material net tax impact as a result of the sale.