ARGO - Argo Group stock slides after Raymond James downgrade on LPT loss overhang

Argo Group International Holdings ( NYSE: ARGO ) stock has dropped 5.5% in early Wednesday trading after Raymond James analyst C. Gregory Peters downgraded the insurance to Market Perform from Outperform. He sees uncertainty associated with a loss portfolio transfer agreement loss corridor weighing on its earnings outlook.

The lower rating also reflects reports of limited interest in a potential sale of the company, Peters wrote in a note to clients. Recall that in April, the insurance company started to explore strategic alternatives, including a potential sale or merger. As well, activist shareholders' best interests may be shifting towards a longer-term recovery strategy as the current stock price "could be substantially below their cost basis," the analyst said.

Its stock has declined 57% year-to-date , steeper than the S&P 500's ( SP500 ) 13% drop.

Argo Group ( ARGO ) said on Monday it entered an LPT agreement with Enstar Group covering a majority of the company's U.S. casualty insurance reserves for accident years 2011 to 2019. It expects to recognize a $100M charge in Q3 related to the transaction. ARGO will retain a loss corridor of $75M up to $821M.

"While we believe the LPT agreement could help add stability to the company’s reserve position on a longer-term basis, we believe there are now additional uncertainties associated with the $75M loss corridor retention which could act as overhang on the outlook for the next 12-24 months," Peters said.

His Market Perform rating aligns with the Quant rating of Hold and diverged from the average Wall Street rating of Buy.

On Monday, Argo ( ARGO ) posted lower than expected Q2 non-GAAP EPS

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