Rating agency A.M. Best Co. Inc. downgraded the financial strength rating of Argo Re Ltd. and its various insurance subsidiaries to A- from A citing a lack of transparency and “collateral damage” following an executive pay controversy at the insurer.

In a statement Wednesday, Oldwick, New Jersey-based Best said Argo’s expense ratio, “although improving, is consistently higher than its peers.” The rating agency also downgraded various credit ratings of parent Argo Group International Holdings Ltd.

Bermuda-based Argo, a specialty insurer and reinsurer, was buffeted last year by allegations from an institutional shareholder that former CEO Mark Watson misused corporate assets and had excessive expenses and a probe into its executive compensation practices by the U.S. Securities and Exchange Commission.

Mr. Watson resigned last November and was replaced by Kevin J. Rehnberg.

On Tuesday, Argo reported a loss of $103.3 million for the fourth quarter of 2019 compared with a $43.6 million loss in the same period in 2018. For the full year, Argo reported a loss of $8.4 million compared with a $63.6 million profit in 2018. Its expense ratio was 38.5% in 2019 compared with 37.8% in 2018.

In its downgrade statement, Best said the downgrade is “a follow up to actions taken in November 2019 in response to a recent subpoena issued by the (SEC) as it relates to the nondisclosure of certain compensation-related perquisites involving Argo and its departed CEO, and also considers the fourth quarter earnings and the host of events leading up to this quarter.”

Best noted that the new management had made significant changes to “correct past practices, culture and governance.”

The downgrade to A-, which is widely regarded as the lowest rating a mainstream insurer can have and remain on brokers’ secure insurers lists, also reflects the fourth-quarter results announcement and $77 million of unfavorable prior-year loss reserve development, the statement said.

“A portion of this fourth-quarter charge was related to its Lloyd’s operation, which over the years has had a number of challenges,” Best said.