Argo touted its closely monitored underwriting policies and prudent reserving philosophy without disclosing that its reserves were wholly inadequate and it had dramatically changed some underwriting policies as well as its “core” business

An institutional investor, the Police & Fire Retirement System City of Detroit, has filed a class action lawsuit today against international underwriter Argo Group International Holdings, Ltd. (“Argo” or the “Company”)(NYSE: ARGO), alleging it defrauded investors by issuing false and misleading statements concerning the Company’s ability to set appropriate reserves, changing of its underwriting policies, and writing of policies outside of its “core” business.

The suit, brought in federal court in the United States District Court for the Southern District of New York, was filed by leading investor law firm Grant & Eisenhofer.

The action is brought on behalf of all persons or entities who purchased or otherwise acquired Argo common stock between February 13, 2018 and August 9, 2022 (the “Class Period”). The action is captioned: The Police & Fire Retirement System City of Detroit v. Argo Group International Holdings, Inc., Thomas A. Bradley, Scott Kirk, Kevin J. Rehnberg, Mark E. Watson, III and Jay S. Bullock, 1:22-cv-08971 (S.D.N.Y.).

The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Specifically, the lawsuit alleges that throughout the Class Period, Defendants touted that they closely monitored Argo’s underwriting policies and had the ability to set appropriate reserves. Argo cultivated a narrative that it had a long history of successfully managing its reserves and that the Company had a “prudent reserving philosophy.”

However, this narrative created by Argo was false and misleading. Argo’s reserves were wholly inadequate, its underwriting standards were not prudent as represented, and Argo had dramatically changed its underwriting policies on certain U.S. construction contracts as far back as 2018. Further, these policies were underwritten outside of the Company’s “core” business including in certain states and for certain exposures that were far riskier than investors understood and that the Company no longer would service moving forward.

The truth was partially disclosed on February 8, 2022, when Argo reported that its fourth quarter results for 2021 would be negatively impacted by $130 to $140 million worth of prior year reserve development and non-operating charges. The Company admitted that the largest reserve increases were related to construction defect claims within Argo’s U.S. Operations, in addition to reserve increases in the Run-off segment. The Company also admitted that the prior year reserve increase for construction defect primarily related to the 2017 and prior underwriting years in business lines that had either been significantly remediated or discontinued.

When investors learned the truth about Argo’s reserves and underwriting practices, the price of its common stock fell $7.11 per share (or 13.7%) in one day, dropping from a closing price of $51.87 per share on February 8, 2022 to close at $44.76 per share, on February 9, 2022. On February 10, 2022, the price of Argo’s common stock declined to $42.82 per share, for a two-day drop of $9.05 per share (or 17.5%) wiping out over $315 million in market capitalization.

Just months later, on August 8, 2022, Argo again shocked its investors when it announced that it had entered into a Loss Portfolio Transfer agreement with a wholly owned subsidiary of Enstar Group Limited covering a majority of the company’s U.S. casualty insurance reserves. On this news, the price of Argo’s common stock declined $9.12 per share (or 28.3%) from an August 8, 2022 closing price of $32.22 to close at $23.10 per share on August 10, 2022. This drop caused the Company’s market capitalization to fall another $320 million. Argo’s stock price is down more than 60% this year, trading near its 52-week low.

For investors who purchased or acquired Argo common stock during the Class Period, you are a member of this proposed Class and may be able to seek appointment as lead plaintiff, which is a court-appointed representative for the Class, by complying with the relevant provisions for the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). See 15 U.S.C. Section 78u-4(a)(2)(A)(i)-(iv). If you wish to serve as lead plaintiff, you must move the Court by no later than December 19, 2022, which is the first business day on which the U.S. District Court for the Southern District of New York is open that is at least sixty days after the publication of this notice. You do not need seek to become a lead plaintiff in order to share in any possible recovery. You may also retain counsel of your choice to represent you in this action.

If you wish to discuss this action or have any questions concerning this notice or your rights, please contact Caitlin M. Moyna at Grant & Eisenhofer at 646-722-8513, or via email at cmoyna@gelaw.com.

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