Long-term Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Senior Unsecured Fixed Rate 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, on or after September 15, 2017, 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.

In accordance with ASU 2015-3, “Simplifying the Presentation of Debt Issuance Costs” (Topic 835), we present the unamortized debt issuance costs in the balance sheet as a direct deduction from the carrying value of the debt liability. At December 31, 2022 and 2021, the Notes consisted of the following:

(in millions)	December 31, 2022		December 31, 2021
Senior unsecured fixed rate notes
Principal	$	143.8	$	143.8
Less: unamortized debt issuance costs	(3.3)		(3.5)
Senior unsecured fixed rate notes, less unamortized debt issuance costs	$	140.5	$	140.3

Junior Subordinated Debentures

Through a series of trusts, that are wholly-owned subsidiaries (non-consolidated), we issued debt. The debentures are variable with the rate 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. At December 31, 2022 and 2021, all debentures were eligible for redemption subject to certain terms and conditions at a price equal to 100% of the principal plus accrued and unpaid interest.

A summary of our outstanding junior subordinated debentures is presented below:

December 31, 2022

(in millions)
Issue Date	Trust Preferred Pools	Maturity	Rate Structure	Interest Rate at December 31, 2022	Amount
Argo Group
5/15/2003	PXRE Capital Statutory Trust II	5/15/2033	3M LIBOR + 4.10%	8.71%	$	18.0
11/6/2003	PXRE Capital Trust VI	9/30/2033	3M LIBOR + 3.90%	8.63%	10.3
Argo Group US
5/15/2003	Argonaut Group Statutory Trust I	5/15/2033	3M LIBOR + 4.10%	8.71%	15.5
12/16/2003	Argonaut Group Statutory Trust III	1/8/2034	3M LIBOR + 4.10%	8.18%	12.3
4/29/2004	Argonaut Group Statutory Trust IV	4/29/2034	3M LIBOR + 3.85%	8.50%	13.4
5/26/2004	Argonaut Group Statutory Trust V	5/24/2034	3M LIBOR + 3.85%	8.61%	12.4
5/12/2004	Argonaut Group Statutory Trust VI	6/17/2034	3M LIBOR + 3.80%	8.54%	13.4
9/17/2004	Argonaut Group Statutory Trust VII	12/15/2034	3M LIBOR + 3.60%	8.37%	15.5
9/22/2004	Argonaut Group Statutory Trust VIII	9/22/2034	3M LIBOR + 3.55%	8.30%	15.5
10/22/2004	Argonaut Group Statutory Trust IX	12/15/2034	3M LIBOR + 3.60%	8.37%	15.5
9/15/2005	Argonaut Group Statutory Trust X	9/15/2035	3M LIBOR + 3.40%	8.17%	30.9
	Total Outstanding				$	172.7

December 31, 2021

(in millions)
Issue Date	Trust Preferred Pools	Maturity	Rate Structure	Interest Rate at December 31, 2021	Amount
Argo Group
5/15/2003	PXRE Capital Statutory Trust II	5/15/2033	3M LIBOR + 4.10%	4.26%	$	18.0
11/6/2003	PXRE Capital Trust VI	9/30/2033	3M LIBOR + 3.90%	4.12%	10.3
Argo Group US
5/15/2003	Argonaut Group Statutory Trust I	5/15/2033	3M LIBOR + 4.10%	4.26%	15.5
12/16/2003	Argonaut Group Statutory Trust III	1/8/2034	3M LIBOR + 4.10%	4.22%	12.3
4/29/2004	Argonaut Group Statutory Trust IV	4/29/2034	3M LIBOR + 3.85%	4.00%	13.4
5/26/2004	Argonaut Group Statutory Trust V	5/24/2034	3M LIBOR + 3.85%	4.02%	12.4
5/12/2004	Argonaut Group Statutory Trust VI	6/17/2034	3M LIBOR + 3.80%	4.02%	13.4
9/17/2004	Argonaut Group Statutory Trust VII	12/15/2034	3M LIBOR + 3.60%	3.80%	15.5
9/22/2004	Argonaut Group Statutory Trust VIII	9/22/2034	3M LIBOR + 3.55%	3.76%	15.5
10/22/2004	Argonaut Group Statutory Trust IX	12/15/2034	3M LIBOR + 3.60%	3.80%	15.5
9/14/2005	Argonaut Group Statutory Trust X	9/15/2035	3M LIBOR + 3.40%	3.60%	30.9
	Total Outstanding				$	172.7

Junior Subordinated Debentures from Maybrooke Acquisition

Unsecured junior subordinated debentures with a principal balance of $91.8 million were assumed through the acquisition of Maybrooke (“the acquired debt”). The acquired debt is carried on our Consolidated Balance Sheets at $85.9 million, which represents the debt’s fair value at the date of acquisition plus accumulated accretion of discount to par value, as required by accounting for business combinations under ASC 805. At December 31, 2022, 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 is presented below:

(in millions)
Issue Date	Maturity	Rate Structure	Interest Rate at December 31, 2022		Principal at December 31, 2022		Carrying Value at December 31, 2022
9/13/2007	9/15/2037	3 month LIBOR + 3.15%	7.92	%	$	91.8	$	85.9

(in millions)
Issue Date	Maturity	Rate Structure	Interest Rate at December 31, 2021		Principal at December 31, 2021		Carrying Value at December 31, 2021
9/13/2007	9/15/2037	3 month LIBOR + 3.15%	3.35	%	$	91.8	$	85.5

Other Indebtedness

Our Consolidated Balance Sheets include long-term debt instruments under the caption Other indebtedness, which were reclassified to Liabilities held-for-sale at December 31, 2022. Information regarding the terms and principal amounts of each of these debt instruments is also provided.

(in millions)	December 31,
Debt Type	2022		2021
Floating rate loan stock	$	54.7	$	57.0
Reclassified to liabilities held-for-sale	(54.7)		—
Total other indebtedness	$	—	$	57.0

Floating Rate Loan Stock

Certain unsecured debt was assumed through the acquisition of Argo Underwriting Agency, Ltd. At December 31, 2022 and 2021, all notes were eligible for redemption subject to certain terms and conditions at a price equal to 100% of the principal plus accrued and unpaid interest. Interest on the U.S. dollar and euro notes is due semiannually and quarterly, respectively. These notes have been reclassified to Liabilities held-for-sale. See Note 2, “Recent Acquisitions, Disposals & Other Transactions”. A summary of the notes outstanding at December 31, 2022 and 2021 is presented below:

(in millions)
Currency	Issue Date	Maturity	Rate Structure	Interest Rate at December 31, 2022	Amount
U.S. Dollar	12/8/2004	11/15/2034	6 month LIBOR + 4.2%	7.26%	$	6.5
U.S. Dollar	10/31/2006	1/15/2036	6 month LIBOR + 4.0%	7.06%	10.0
Total U.S. Dollar notes					16.5
Euro	9/6/2005	8/22/2035	3 month Euribor + 4.0%	5.82%	12.7
Euro	10/31/2006	11/22/2036	3 month Euribor + 4.0%	5.82%	11.1
Euro	6/8/2007	9/15/2037	3 month Euribor + 3.9%	5.95%	14.4
Total Euro notes					38.2
Total notes outstanding					$	54.7

(in millions)
Currency	Issue Date	Maturity	Rate Structure	Interest Rate at December 31, 2021	Amount
U.S. Dollar	12/8/2004	11/15/2034	6 month LIBOR + 4.2%	4.35%	$	6.5
U.S. Dollar	10/31/2006	1/15/2036	6 month LIBOR + 4.0%	4.15%	10.0
Total U.S. Dollar notes					16.5
Euro	9/6/2005	8/22/2035	3 month Euribor + 4.0%	3.44%	13.5
Euro	10/31/2006	11/22/2036	3 month Euribor + 4.0%	3.44%	11.8
Euro	6/8/2007	9/15/2037	3 month Euribor + 3.9%	3.30%	15.2
Total Euro notes					40.5
Total notes outstanding					$	57.0

No principal payments have been made since the acquisition of Argo Underwriting Agency, Ltd. The floating rate loan stock denominated in euros fluctuates due to foreign currency movement. The outstanding balance on these loans was $38.2 million and $40.5 million as of December 31, 2022 and 2021, respectively. The foreign currency realized gains or losses are recorded in Foreign currency exchange (gains) losses on our Consolidated Statements of Income (Loss).

The following table presents interest and maturities of long-term debt as of December 31, 2022:

		For the Years Ended
(in millions)	Total	2023	2024	2025	2026	2027	Thereafter
Long-term debt: (1)
Junior subordinated debentures (2)	543.9	22.3	22.3	22.3	22.3	22.3	432.4
Senior unsecured fixed rate notes (3)	325.8	9.3	9.3	9.3	9.3	9.3	279.3

(1) Other indebtedness liabilities reclassified to liabilities held-for-sale. See Note 2 “Recent Acquisitions, Disposals & Other Transactions”.

(2) Interest only on Junior Subordinated Debentures through 2037. Interest calculated based on interest rate forecast. Principal due beginning May 2033.

(3) Interest only on Senior Unsecured Fixed Rate Notes through 2042. Interest calculated based on the fixed rate of the notes. Principal due September 2042.

Borrowing Under Revolving Credit Facility

On November 2, 2018, each of Argo Group, Argo Group U.S., Inc., Argo International Holdings Limited, and Argo Underwriting Agency Limited (the “Borrowers”) entered into a new $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 11, “Shareholders’ Equity”) to pay off the Term Loan in September 2020. The Credit Agreement matures on November 2, 2023.

Borrowings under the Credit Agreement may be used for general corporate purposes, including working capital, permitted acquisitions and letters of credit, and each of the Borrowers has agreed to be jointly and severally liable for the obligations of the other Borrowers under the Credit Agreement.

The Credit Agreement contains customary events of default. If an event of default occurs and is continuing, the Borrowers could be required to immediately repay all amounts outstanding under the Credit Agreement. Lenders holding at least a majority of the loans and commitments under the Credit Agreement could elect to accelerate the maturity of the loans and/or terminate the commitments under the Credit Agreement upon the occurrence and during the continuation of an event of default.

On December 20, 2022, the Borrowers and the lenders executed Amendment No. 3 to the Credit Agreement. This amendment increased the revolving commitments from $200 million to $220 million, with the addition of a new lender. Other revisions to the Credit Agreement included an updated minimum tangible net worth requirement, permitting the sale of Argo Underwriting Agency Limited and its subsidiaries in accordance with the Share Purchase Agreement dated as of September 8, 2022 between AIH and Ohio Farmers Insurance Company and removing AIH and AUA as Borrowers from the Credit Agreement upon such sale, and updating the benchmark interest rate provisions to replace US LIBOR with Term SOFR.

The Credit Agreement allows 100% of the revolving credit facility to be used for letters of credit (“LOCs”), subject to availability. At December 31, 2022 and 2021, there were $0.3 million and $40.3 million of LOCs, respectively, issued against the Credit Facility.

Letter of Credit Facilities - Argo Re

Argo Re may be required to secure its obligations under various reinsurance contracts in certain circumstances. In order satisfy these requirements, Argo Re has entered into one committed and two uncommitted secured bilateral LOC facilities 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 facilities 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, 2022, committed and uncommitted LOC facilities totaled $205 million.

On December 31, 2022, LOCs totaling $135.1 million were outstanding, of which $50.2 million were issued against the committed, secured bilateral LOC facility and $84.9 million were issued by commercial banks against the uncommitted, secured bilateral LOC facilities. Collateral with a market value of $169.8 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, LOCs issued by commercial banks on an uncommitted basis and the Credit Agreement.

On June 22, 2022, we posted collateral in a form of a $50.0 million letter of credit under the terms of the Malta sales agreement. The letter of credit is subject to reimbursement by Argo in the event of a drawdown.

Other Letters of Credit

In November 2021, Argo Group executed a LOC facility with a commercial bank to issue LOCs in favor of Lloyd’s to support its Funds at Lloyd’s requirements. This facility has an initial term of one year, and is unsecured, renewable and includes customary conditions and event of default provisions. An LOC in the amount of £26 million ($35.1 million) was issued in favor of Lloyd’s, which allowed the Company to reduce its other collateral pledged to Lloyd’s by a comparable amount. Argo replaced the FAL LOC with other collateral in December 2022, and requested cancellation of the FAL LOC by Lloyds. Lloyds cancelled the LOC effective December 5, 2022, and the facility was subsequently terminated in January 2023.

Other LOCs issued and outstanding on 12/31/2022 were $4.2 million.