ARGO - Argo Group: Strategic Repositioning Coming Along Shares Still Undervalued

• Argo announced better than expected second quarter results; while the majority of the earnings beat was driven by the investment portfolio, underwriting income was still better than expected.
• Argo is leaning into a hard market, using strong rates to write E&S business in its new core markets like professional lines, casualty, construction, and surety.
• Argo may not return to double-digit ROEs until 2023 or 2024, which is a negative for sentiment, but the underwriting profitability of the new U.S. core operations is attractive.
• Long-term core earnings growth of around 9% and a 10% ROE in 2023 can both support a fair value in the low $60s today and longer-term annualized returns in the double digits.

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