Q4 2021 Argo Group International Holdings Ltd Earnings Call
Sure.
Good morning. Thank you for attending today's Argo group fourth quarter 2021 earnings call. My name is Quito and I'll be your moderator for today's call. All lines will be muted then a presentation portion of the call, but the opportunity for questions and answers at the end. If you would like to ask a question. Please press star followed by one on your telephone keypad I would now like.
To pass the conference over to your host Greg choppy too with Argo Group. Please go ahead Greg.
Thanks, and good morning, welcome to Argo Group's conference call for the fourth quarter and year ended December 2021.
After the market closed last night, we issued a press release on our earnings which is available in the investors section of our website at Www Dot Argo group Dotcom and was filed with the SEC.
Presenting on today's call is Kevin Brian Bird, Chief Executive Officer, and Scott Kirk Chief Financial Officer.
As the operator mentioned this call is being recorded.
As a result of this conference call Argo management may make comments that reflect their intentions beliefs and expectations for the future.
Such forward looking statements are qualified by the inherent risks and uncertainties surrounding future expectations generally and may materially differ from actual future results involving any one or more of such statements.
Arguably undertakes no obligation.
These forward looking statements as a result of events or developments subsequent to this call.
For a more detailed discussion of such risks and uncertainties. Please see Argo group's filings with the SEC.
Also note that we will be referencing certain non-GAAP financial information.
More information regarding these non-GAAP measures are provided in.
In our earnings release.
I will now turn the call over to Kevin Ryan Burke, Chief Executive Officer of Argo Group.
Good morning, Thank you for the introduction Greg.
To everyone on the call on today's call I will reflect on the progress we have made.
Towards the strategic goals, we have set for Argo over the past two years and review the operating highlights from the quarter and year, Scott Kirk, Our Chief Financial Officer, who will take us through additional detail on the financials and I will provide some closing remarks before we begin the Q&A.
Our strategy continues to focus on growth in earned premium reducing volatility expanding our margins and generating higher earnings although our fourth quarter results are below expectations.
We remain encouraged by several strengths on the comparable to the ongoing business, having just completed my second full year as CEO I would like to begin by reflecting on the progress we've made against these goals.
Argo as a stronger simpler operation, we have made meaningful progress toward our expense ratio target and expect to realize continued benefits in 2022 from our cost reduction efforts. Our expense reduction efforts are not complete and there are several areas that we're focusing on to drive additional expense savings over the coming year.
Argo today as a U S focused specialty insurer with leading positions in very profitable specialty lines over the past two years Argo has divested its reinsurance operations significantly reduced its property exposure through divestitures of U S specialty property in contract binding business units.
Exited noncore lines of business and lower volatility of its business model.
As a result, we are in the fourth quarter of our journey and I'm confident in the underlying strength and profitability of our ongoing business.
Second we completed the majority of our work towards reducing volatility in our underwriting results, our strategic focus on reducing volatility through exiting in divesting noncore businesses is evident in 2021 catastrophe loss results.
Despite elevated industry.
Losses year over year, our catastrophe losses were down significantly and then the ongoing businesses net catastrophe losses have averaged $18 million annually over the last five years.
And third I would like to point out the strong progress we are making on growing our most profitable businesses. In fact gross written premium has increased by approximately 15% and the full year of 2021 and the ongoing businesses.
These are all notable milestones, which we will describe in more detail throughout the call.
Let's begin by discussing our efforts to simplify the organization and reduce expenses.
We have implemented.
Our current year.
Accident combined ratio.
Which improved three points from the 2021 and fourth quarter.
This was primarily driven by improvement in our expense ratio and to a lesser extent modest improvements in our current accident year ex cat loss ratio, which marks the seventh consecutive quarter of year over year improvement.
The benefits from expense reduction efforts continued to materialize in the fourth quarter results as expense ratio improved two nine points to 35, 3%.
Both the acquisition and general and administrative expense ratios contributed to the improvement and we are making meaningful progress on several focus areas.
We continued to reduce our future real estate expense base with the reduction of our real estate footprint in the UK as announced two weeks ago.
Occupancy costs are expected to be down $8 million or 40% in 2022, when compared to 2019, our head count has decreased approximately 20% or just under 300 employees.
Since July of 2020, including the divested businesses.
Included in the fourth quarter nonoperating expenses were charges related to certain information technology assets. Although we'll continue to focus resources on core lines of business as we right size, our asset base and exit certain locations expenses related to information technology are expected to decrease nearly 20% in 2022.
As compared to such expenses incurred in 2019.
When we began our expense reduction efforts some of the identified savings will be invested back into the businesses.
To facilitate our growth.
Improve efficiency.
Now turning to our focus on reducing volatility in our underwriting results. We are continuously looking at ways to optimize our portfolio and allocate capital and resources to business units within the highest risk adjusted returns.
There are several cases, where.
We have taken appropriate action and lines of business that are profitable contributors today. If we can obtain the results. We require we will exit the lines or business as we have previously demonstrated.
While we always review our lines of business and respond to environmental changes in the marketplace, we feel confident in.
What comprises our ongoing business today the results.
We achieved in our international operations further demonstrates the progress we've made after taking swift remedial action.
In the 2021 fourth quarter International operations generated underwriting income of $36 million.
As highest quarterly underwriting income in company history. The improvement was a result of favorable prior year loss development, a significant reduction in catastrophe losses, and an improved expense ratio I am pleased to announce 200 was a strong contributor to these results generating positive underwriting income in both the 2002.
<unk> fourth quarter and for the full year.
Good conditions, which have compounded over the past three years have allowed us to grow premiums, while maintaining or reducing the amount of risk exposed.
We expect the strategic transformation Argo has undergone in conjunction with current market conditions to drive improvement in underwriting results as we move forward.
Now to share more detail on our growing most.
Our most profitable businesses, our topline in the quarter continued to reflect targeted growth in our prioritized business segments.
Overall gross written premiums increased two 3% in the quarter. However, ongoing business premiums grew approximately 11% during the fourth quarter of 2021.
Net written and net earned premium outpaced gross written premium in the fourth quarter, driven by strategic actions and business mix shifts towards the lines of business with higher premium retention.
Growth was more pronounced in our ongoing business as net written premium and net earned premium grew 24 and 20% respectively.
Yes, gross written premium growth was one 8% in the fourth quarter of 2021, due mainly to growth in specialty casualty and professional lines, while premiums and property lines declined.
Gross written premium in our U S ongoing business increased approximately 12% in the fourth quarter of 2021.
In the U S. We continue to see solid rate increases in the mid single digits on average we feel very good about the rates, we're seeing in the direction of our markets. It is worth noting the cumulative rate change for U S operations business written in the fourth quarter over the past three years has been 23, 9%.
Turning to international reported gross premium increased three 3% in the fourth quarter.
The increase in gross written premiums was primarily attributable to higher rates, which averaged high single digits. During the 2021 fourth quarter, partially offset by the impact of the exited businesses.
And the ongoing business extremely increased share of syndicate, two hundred's capacity.
Written premium was broadly in line with the prior year fourth quarter over the past three years cumulative rate change for international operations business.
For the fourth quarter has been 55%.
We reported very strong results on the investment side, driven by a significant contribution from our alternative investments portfolio.
Notably net investment income from our bond portfolio increased in the fourth quarter encouraging reversal from the trend experienced in the first nine months 2021.
We have seen a recovery and reinvestment rates that has continued into the current quarter for context reinvestment yields were hovering around one 1% in the first half of 2021 today are closer to two 5%.
Fourth quarter underwriting results included reserve strengthening of $132 million or 27 points on the loss ratio with adverse development coming from U S operations and run off lines.
As previously mentioned this was partially offset by favorable development in our international operations.
We believe the reserve actions, we've taken during 2021 fourth quarter reflect all the latest and up to date information that was included in the fourth quarter Reserve review.
We conduct reserve reviews of all ongoing businesses each quarter.
Maintain a continuous feedback loop between actuarial underwriting claims and reinsurance operations that enhances our ability to react quickly to the findings of the reserve reviews.
Our reserves the best estimates and believe they reflect the trends both positive and negative that we observed across our lines of business.
Proximately $77 million.
Of the adverse prior year development was driven by construction defect claims within Argos U S operations, a large portion of the reserve increase for construction defect was associated with businesses that have either been discontinued.
Including contract binding in October of 2021 or have been significantly mitigated.
The Remediated portion was previously underwritten by our casualty business.
We established Argo construction kind of a standalone business unit.
June of 2018.
To focus on the construction market with a greater depth of talent and knowledge most of the claims associated with contract binding and casualty written outside of the core construction business.
Over 95% of the construction defect prior year adverse development in 2021 fourth quarter applied to 2017 in prior years.
We started taking underwriting action on construction defects at the end of 2017, including strengthening underwriting guidelines placed significant restrictions on certain states and exposures much.
Much of the adverse reserve development was a result of analysis performed in the fourth quarter, which include among other things new <unk> updated information.
Received relating to construction defect claims.
As a result of the underwriting actions and the change profile of the book I would like to note that more recent accident years are performing within expectations.
Management liability accounted for nearly $30 million of the adverse development in our U S operations in the 2021 fourth quarter.
The reserve increase applied to accident years 2016 to 2018, the balance of adverse development in our U S operations was primarily driven by our U S specialty programs business, but we also took action in the current year.
Prior year losses also include the conclusion of Argo's annual runoff review of reserves, which resulted in a $38 million reserve increase for the 2021 fourth quarter included in our run off line segment of claims related to risk management work comp.
Coverage.
Some environmental liabilities and other runoff lines more than 55% of runoff net reserves are related to our risk management business, which has performed within expectations.
During the fourth quarter, we engaged an internationally recognized third party actuarial firm to perform an in depth review of our reserves across the company as of the end year end 2021.
Our carried reserve total as of December 31, 2021 was above their central estimate when including a reserve strengthening actions in the 2021 and fourth quarter.
This is not an indication of any future performance, but it does give more confidence following the actions we took last year.
I will now turn the call over to Scott to discuss our results in more detail.
Thank you, Kevin and good morning, everybody.
As most of you already know, we pre announced certain items related to our fourth quarter earnings two weeks ago.
As a result, I'll focus my comments today on providing more detail on the overall financial results for the quarter.
I'll turn first to our consolidated operating results.
While we reported a net loss for the quarter of 118.8, indulge and an operating loss of $61 $8 million. Our full year 2021 reported net loss was $4 7 million.
And then operating income of $41 $5 million.
The modest full year 2021 net loss benefited from strong earnings during the first nine months 2021.
This compares to a net loss of $59 million and an operating loss of $10 million for the full year 2020.
Gross written premiums increased two 3% in the fourth quarter of 2021. The increase in gross written premium is attributed to modest growth in both the U S and international operations.
Premiums in our ongoing business grew approximately 11% during the fourth quarter of 2021 compared to the same period in 2020.
Net written and net earned premium grew approximately 9% and 4% in the fourth quarter of 2021, respectively.
The growth in gross premiums as we discussed previously this reflects strategic actions and business mix shifts towards higher premium retention launch.
In the fourth quarter and full year of 2021, our retention by ship.
<unk> net written premium divide by gross written premium increased four points and six points to 65% and 62% respectively.
This was primarily the result of increased retention of our international operations, resulting mainly from the south area where you.
Where we retained very little of the risk on a net basis. In addition to our increased participation in syndicate 1200 results.
The U S segment also contributed to the retention increase due to shifts in business mix towards focus launch business, where we retain more of the risk on a net basis.
In the fourth quarter of 2021, where we reported a loss ratio of 87, 1% an increase of approximately 17 points from 69, 8% during the fourth year prior quarter.
The increase reflected adverse prior year reserve development, partially offset by lower catastrophe losses.
Our catastrophe losses totaled $6 $8 million or one four points of the combined ratio in the fourth quarter of 2021.
Of which $6 $4 million related to natural catastrophes, and 400000 related to the impact from Covid.
This compares favorably to cat losses of $51 million 11 points on the combined ratio in the prior year quarter.
Which included $38 $3 million related to natural catastrophes, and just under $13 million related to Covid.
As Kevin mentioned, the successful implementation of our strategy to reduce property cat related exposures as a resulted in a significant reduction in our catastrophe losses in 2021.
<unk> increased industry cat loss activity.
Adverse prior year reserve development totaled $132 $3 million in the fourth quarter of 2021.
This was driven by $121 $6 million of adverse reserve development in our U S operations.
$37 $7 million of adverse reserve development in our run off loans.
This was partially offset by $27 million of favorable reserve development the international operations.
Prior year quarter included $1 $6 million of adverse reserve development.
The ex cat current accident year loss ratio came in at 50 58, 5% in the fourth quarter and was broadly in line with the prior year quarter.
<unk> 2021, and the ex cat current accident year loss ratio was $56, 8% down.
Down from 57, 4% in 2020 with the improvement reflecting the benefits from our re underwriting actions. In addition to the impact of continued rate increases.
Yeah.
Turning now to expenses.
Expense ratio was 35, 3% in the fourth quarter of 2021.
Two nine.
Compared to the prior year quarter.
Our acquisition expense and general and administrative expense ratios improved versus the 2024th quarter.
This marks the fourth consecutive quarter of sequential improvement in our expense ratio and a full year expense ratio now stands at 36, 8%.
Current accident year ex cat combined ratio for the fourth quarter 2021 was 93 point I think pay with 96, 8% in the fourth quarter 2020, with the improvement attributable to reduction in the expense ratio.
The current accident year combined ratio, including cats.
With 95, 2% in the fourth quarter of 2021 down from 107, 7% in the fourth quarter of 2020 with the improvement attributable to a reduction in our cat losses. In addition to the expense ratio improvement.
Yeah.
As we announced two weeks ago, we also incurred $22 8 million nonoperating expenses, mainly related to the reduction in our real estate footprint and you tight and the impairment of certain information technology assets.
The actions are part of our strategic efforts to create a simpler and leaner argon and we expect the benefits of these actions to materialize in the expense ratio in 2022.
We have taken action to reduce our use of third party services, and our real estate footprint, which positions us well to take further actions on the expense ratio in 2022.
We believe the 36% expense ratio target that we set ourselves in 2022 is within reach and we continue to review and execute on opportunities for further efficiencies in the organization.
Turning now to our segment results.
In the U S. Gross written premiums were up one point I think comparable to fourth quarter 2020, net written premiums and net earned premiums in the U S increased by 6%, 9% respectively versus the prior year quarter.
U S operations reported an underwriting loss of $94 $9 million and a combined ratio of 128, 6% in the fourth quarter of 2021.
The loss ratio increased 31, seven points to 98 point bump on primarily driven by adverse prior year development.
The expense ratio of 30 odd percent decreased 230 basis points from the prior year quarter and was driven by improvement in both the acquisition ratio and the general and administrative expense ratio.
The improvement any acquisition ratio was primarily related to changes in business mix and the improvement in the G&A ratio was due to a combination of the execution of expense reduction initiatives and increased net premiums.
Turning now to our international operations gross written premiums increased three 3% in the fourth quarter 'twenty, one 'twenty 2021, compared with the fourth quarter of 2020.
The increase reflects higher rates and increased participation in syndicate 1200 capacity and was partially offset by the impact of previously announced sales and exits.
International.
Operations net written premium increased nearly 15% versus the prior year fourth quarter. The increase was mainly attributable to growth in syndicate 200, where we retain more of the risk net.
While net written premiums increased nearly 15% net earned premiums fourth quarter decreased 4% or a decrease in net earned premiums that is attributable to business exits.
We have announced.
International operations reported underwriting income of $36 $3 million in the fourth quarter 2021, compared to an underwriting loss of $28 $1 million in the prior year quarter.
The combined ratio decreased to 49 percentage points to 76, 5% in the fourth quarter of 2021.
This decline was driven by favorable prior year reserve development, a reduction in cat losses, and an improvement in the expense ratio was competitive the fourth quarter of 2020.
Current accident year ex cat loss ratio was 54, 5% and was broadly in line with time period last year.
Catastrophe losses during the fourth quarter of 2021 with $3 $6 million or two four percentage points on the combined ratio compared to cat losses of $37 1 million or 23 points on the combined ratio in the prior year fourth quarter.
The expense ratio of 37, 1% decreased 420 basis points from the prior year quarter, driven by changes in business mix benefiting the acquisition ratio.
We've previously spoken about exiting businesses with higher acquisition costs and the benefits of these actions continue to earn through and benefit the acquisition ratio in the international segment.
The fourth quarter of 2021 included a $43 $2 million impairment of goodwill and intangibles related to AGA Syndicate 1200 business unit.
This represents just under half of the total goodwill and intangible assets associated with the syndicate before the impairment charge.
We performed an annual assessment of intangible assets and goodwill on our balance sheet.
While we feel that syndicate 1200, just made significant improvements over the last several years, we have stress tested the future cash flows that business in light of our trading history at Lloyd's the size and scope of the business side and more recent transactions involving other Lloyd's syndicates.
As a result, we believe the impairment as appropriate.
Now moving on to investments, we reported net investment income of $44 $4 million in the 2021 full quarter.
This included $27 million won't come from alternative investments.
And although we're certainly pleased with this result, we recognize that the outperformance of alternative investments for the last six quarters might not continue for an extended period and could revert to long term historical levels.
While the recent volatility in the equity markets returns from alternatives alternative investments might be more challenged over the next few quarters.
Net investment income for the remainder of the portfolio was $23 $7 million in the fourth quarter of 2021, a slight increase compared to prior quarter.
And finally, let me touch on capital.
Prior year adverse loss development. We discussed early has clearly had an impact on our quarterly earnings.
Full year of a it's only a small net loss, which benefited from strong earnings during the first time up to 2020.
The reduction in shareholders' equity during the fourth quarter 2021.
It is largely attributable to a reduction in the unrealized gains in the investment portfolio.
Book value per share it was $45 16 as of December 31, 2021 down from $49 40 at the end of 2020.
Tangible book value per share was $40 98, a decrease of 3%. When you include dividends over the same period.
Finally, we engage in regular communication and maintain strong relationships with our writing agencies regulators and we remain committed to maintaining a strong capital position.
I'll now turn the call back over to Kevin for some concluding remarks.
Scott. Thank you very much we remain encouraged by the continued growth and underlying strength of our ongoing businesses. As we look to 2022, we plan to continue strengthening and simplifying the organization with a focus on disciplined expense management, we remain focused on reducing volatility in our underwriting result.
<unk> and pursuing profitable growth.
Turning to our guidance for 2022, we expect to reach double digit net earned premium growth when excluding the impact of previously announced business sales and exits of roughly $280 million. We are targeting an operating return on common equity in the range of 9% to 11% and our combined ratio.
And the range of 92% to 95% for the full year 2022.
We continue to target a 36% expense ratio for 2022 expense reduction story does not end here. However, we believe there are incremental savings we can achieve across our business.
In closing I would like to note that Argo group today is positioned significantly stronger in just a few years ago, we're growing profitably in the lines of business, we view most attractive and I am pleased with the progress we've been able to make on our strategic objectives.
Those are stronger and leaner company with less complexity today than we laid out when we laid out our strategic plan three years ago, we are positioned well to take advantage of the favorable underwriting opportunities. We're seeing little place operator that concludes our prepared remarks, we're now ready to take questions.
Absolutely if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.
Minder may speak.
Speaker phone, please remember to pick up your handset before asking your question. We were positive briefly ask questions are registered.
The first question is from Greg Peters with Raymond James You May proceed.
Yes, good morning.
So.
Morning.
The progress that you've made in international is undeniable and is to be applauded.
Promise, we can't really use that sugarcoat, the supply surprise reserve charge, Kevin and.
And in the U S business, which had been thought of traditionally is one of the crown jewels of the company. So.
Yes, I guess, there's a whole host of questions. One can ask regarding what happened but.
You said in your prepared remarks that you do quarterly reserve.
Reviews, and then so you I presume youre doing this every quarter last year.
And then between November and February of this year all of a sudden.
You uncover.
This tremendously.
Well.
<unk>.
The black hole of this reserve charge that you've announced so I guess my question is what happened. If you can give us sort of inside baseball view on this and then secondly.
How can we gain confidence.
It feels like we might have to wait until the fourth quarter of 2022 before we when you get through the another annual reserve review before we have any visibility on whether things have stabilized or not so.
Kind of a couple of different questions embedded into that but I think you know where I'm going with it.
No I absolutely do.
So.
As we mentioned we conduct reserve reviews of all of the ongoing businesses each quarter as you pointed out and there is a continuous feedback loop between actuarial underwriting claims and reinsurance operations that enhances our ability to react to the findings of the reserve reviews. So we book the reserves the best estimates.
And believe they reflect trends both positive and negative that we observe on the lines it should be noted.
The reserve strengthening is associated.
With the <unk>.
CD business as you just discussed so 30.
$31 million of that was from discontinued lines or contract mining at $46 million was that it.
Mediated businesses.
And then construction in previous casualty so.
The significant amount of business Thats written for covering Insureds in the construction industry is subject to claims alleging construction defects.
We estimate to the liabilities with these claims are subject to greater inherent variability typically remained revenue, but we look at some of the factors that contributed to the high degree of variability include but arent limited necessarily to multiple plaintiffs defendants often involved in the claims difficulty in determining the law states.
What we saw in the quarter was increased in the third and fourth quarter last half of the year and the increase in.
The number of claims.
Claims and so for the fourth quarter as the paid and case reserve started to deviate and saw a lot of oscillation in the book of business, we engaged a third party.
As we mentioned and using all of that information the third party and the best estimates that we had.
We came up with the number that we did now in terms of remediation of this book as we mentioned.
Years involved go back.
From 2017 and prior to.
The majority of between 12, and 17 and <unk>.
We started some underwriting actions in the.
End of 2017, when a task force was convened on.
CD, which had previously been underwritten in our liability area.
Which included construction and.
In our contract mining line of business. So we broke out construction as a separate business and started underwriting more specifically.
On this business and change the underwriting guidelines around.
What had happened so the book we have today.
Not as exposed its Scott.
We're writing in terms and conditions different approaches to it so while I understand there is a concern about it we have been working on the underwriting side of this for the past five years and we mentioned in the recent years that has been performing according to expectations. Scott would you like to add anything here.
Yeah.
I don't Kevin actually that is a key.
Prehensile answer from my perspective.
So just just a follow up for clarification on that.
Kevin because these are older claims if I'm not mistaken there is like a 10 year tail on this.
Our claims can be filed.
Is.
Do we have any sense that the.
The actuaries.
You guys have seen the peak claims from these older accident years or is.
Is it the expectation in this reserve charge that you are expecting a further increase in claim counts for this.
What pieces of business that causes the most problems.
Yeah actually really good question Greg.
What we've seen is that yes, there are statutes of limitations that are long on these things, but the overall claim counts.
Between.
This time, two years ago and in the fourth or gone up.
In the high teens, and they're now back down to where they were.
So back to two years ago, so while there wasn't an increase.
Some of it may have been statutes may have been.
People.
Filing claims and some catch up from previous years, but it's more normalized now with what we expected and where we are currently.
We've got <unk>.
Really robust claims group associated with this that are on these very complicated claims.
<unk>.
It's the frequency issue more of a severity issue and we are watching that closely but we do believe what we've done is appropriate.
Sure.
Got it.
The second question would be around the expense ratio and I think you guys gave some very specific.
Numbers, but you did.
Regarding.
Where do you think thats going to go for this year I mean, you talked about.
So if you're going to generate off the real estate footprint. So if I go through if I just look in your consolidated income statement.
And I look at like the general and administrative expense that was up.
I look at non operating expense that was up for the full year right and I assume some of those expenses that you've just discussed the one times are running through that I guess, when we think about those numbers for 2022, the general and administrative just on a consolidate basis and the non.
<unk>.
Do you expect those to be.
<unk> with 2020, do you expect them to be down or should I look at 2021 as a base year.
Directionally, just trying to understand where the resets happening in the expense ratio yeah. Yeah. No. That's a good question I think the change in the book makeup I'm going to start with the acquisition ratio for us because we shouldn't ignore it right.
There is going to be reflected in the mix of business and we're really focused on what we want so we're not hung up on that but the G&A expense ratio, we have more work to do in the areas. We've talked about even though we produce a lot of head count we still have some work to do with some home office and group staff. We've got some corporate structure things, we can take out we've got continue.
Jude.
Potential on the real estate side and third party vendors so.
It is something that we're working at.
I'll, let Scott answer it more specifically if he wants to do here.
Yes, thanks, Kevin.
Greg maybe I'll just jump in a little bit there now if we cast our mind back really about six to nine months ago. When we talked about this this process we said.
The expense ratio improvement was going to come from two key sources right. The first one being the increase in net earned premiums.
And that is that has happened you've seen the impact of that come through in in this year and secondly, we would say.
Our expense initiatives take hold now I feel good about the levels of head count reductions and clearly.
Service charges and.
And the real estate footprint.
Look if you if you use.
2021, as your baseline I think that's probably a good starting point and go from there.
You also asked about nonoperating expenses.
Clearly we've taken some of those.
The hard to predict by by nature, but look I think.
Kevin Inda greatly that from a real estate perspective, I think a large chunk of that is.
Don.
We'll let you know as any others come up.
As we go forward in terms of non operating numbers.
Got it thanks for the thanks for the answers on that I guess, the final question and I know others wanted to ask questions so would be around.
Capital management and the stock price is clearly now.
Depressed.
And you have a plan for.
Earnings this year and capital generation.
What.
And then you are balancing that with the rating agency, what's your view towards capital and the potential for share repurchase in 2022.
Yes, so the capital that we have at the moment is appropriate for us to go.
Trade through the business I think we in terms of just reiterating what Scott said discussions we have with the regulators and rating agencies.
As Ben.
Very transparent and we have good relationships with them.
So as far as uses of the capital at the moment, it's all business for us if we get to a point in the year were.
There is not as many business opportunities.
Would consider a number of things.
Okay.
Got it alright, well thanks for the answers.
Yeah. Thanks, Greg.
Thank you.
Next question is from Casey Alexander with Compass point, you May proceed.
Good morning case, Hi, good morning, Good morning, Greg did ask a couple of my questions, but I do have a couple more.
On your.
Presentation.
On.
On the financial objectives objectives.
<unk> for double digit net earned premium growth on the existing business lines.
And so my question is you have a greater.
Insight into.
The businesses that have been taken out of the business how those premiums would have earned in.
Can you give us some idea of how that translates to actual any P versus 2021, I mean is it flat is it down a shade is it appreciated versus 2021 once you pull out.
Those businesses that had been taken out of the business.
Okay.
It is up.
And I think that's why we talked about that.
And.
Scott do you want to provide some specific commentary here.
Yeah look case, it's a good question.
Obviously, there is noise in those numbers now what I would say is.
If trajectory in the U S as being a fairly constant.
And obviously, we've tightened some actions on the international side of the house.
Which which certainly makes it look.
Potentially a little more lumpy right you got to factor in the fact that we've exited or largely put in runoff al European operations multi Italy and then in addition to that we just announced the <unk>.
All of our Brazilian operations right. So.
On that basis, you've got affected those components again.
But then obviously with volumes out of the way you've got the underlying Dwight story that Kevin has talked about.
Okay.
Secondly, roughly going to be roughly in line right. I mean is what we're trying to do is emphasize the fact that the business that we've got we're looking at we're going to be retaining more of because.
There is.
Yes.
Reinsurance associated with those and there is also.
Good growth prospects in these ongoing businesses. So we feel really good about that but when you strip it all away.
Because of the $280 million, that's going away, it's going to be about the same.
Okay.
The write down of amortization and goodwill Syndicate 1200.
You mentioned that was.
In line with.
Some <unk>.
Similar businesses that you had seen transact.
Syndicate 200 are part of <unk>.
Potentially the program to simplify the business and does the write down make it more palatable given the transactions that you've seen with other companies.
Yes, so I think.
I've been asking that question for two years and given.
Given the same answer and we still.
Going to be the same right. We look at every business every quarter and we try to see what are the opportunities for this in the near and midterm and the amount of work that's gone into that business and the work that's been done by the team has been fantastic as seen in the fourth quarter and some challenges earlier in the year, but there are.
Does it come down.
Underwriting margins are improving and we're getting out of the more categories those businesses, where we haven't done much.
All that being said there is an expense issue associated with it which we still are working on and so we'll continue to look at that versus other businesses and where opportunities are and we've had.
Movable or change.
Sales of our exits from different businesses in the U S and outside.
As long as they are performing well it.
It'll continue to be part of our specialty focus business.
Okay and my last question I think I answered your question completely.
I'm not sure.
Yes, you have Kevin Casey.
Connect the impairment.
And what Kevin just said.
The impairment is really driven by the accounting rules and regs around that and not as I said in my prepared remarks, we stress test the future cash flows of these businesses and why.
Paul.
Obviously trading history.
And other items.
You can't connect all my voice is not simply to that anyway.
Yes.
My last question is it seems like you engaged the third party actuarial firm in the fourth quarter because it was consequential based upon what you were finding and you felt like you needed. Some additional help to ferreted out so would it be fair to say that at least at this point in time.
It would be unlikely to be engaging a third party actuarial firm at the end of this year.
What we said when we first did it we did it.
Beginning of 2020 after I've gotten into the job and we said at that point, we would do it on a regular basis going forward.
Regular means sometime in the future.
So Scott coming on board and Us closing out a year.
With the.
The noise that was in there it made sense to do it at that point in time and so we'll continue to do it from time to time as we go forward and I think it is good practice for us.
Okay, great. Thank you for taking my questions I appreciate it.
Yes.
Have a good day.
Thank you.
There are no additional questions waiting at this time I would like to pass the conference back over to the management team for any additional remarks.
Okay I'd like to thank everyone for your interest in the company your good questions and thank you.
Regulators rating agencies shareholders.
Policyholders employees and other supporters of the organization and we look forward to catching up with you in the near future take care.
That concludes the Argo group fourth quarter 2021 earnings call. Thank you for your participation you may now disconnect your line.
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