S&P revises Argo outlook in wake of SEC probe

S&P Global Ratings on Friday said it has revised its outlook to stable from positive on Argo Group US Inc. and its core operating subsidiaries but said that potential governance issues will remain “an overhang” on its view of the insurer’s creditworthiness.

The development comes after Bermuda-based insurer Argo Group International Holdings Ltd. on Oct. 8 confirmed it had received a subpoena from the U.S. Securities and Exchange Commission over its executive pay compensation practices and said that its independent directors were now conducting a governance and compensation review.

“The stable outlook reflects our expectation that the company will continue to make progress on its strategic initiatives, which will sustain its strong competitive position and very strong capitalization,” S&P said in a statement.

S&P’s BBB- long-term issuer credit rating on Argo Group US Inc. and A- long-term financial strength and issuer credit ratings on Argo US’ core operating subsidiaries have been affirmed, the ratings agency said.

The ratings could be lowered in the next two years if there is a “material adverse development” rising from the current governance and disclosure reviews, or if Argo’s operating results are “significantly weaker” than expectations or “substantially worse than peers,” S&P said in the statement.

S&P could also consider an upgrade if the SEC investigation and board review conclude without any meaningful findings, it said.

“While the subpoena is narrow in its scope, and the amounts involved do not appear to be material, there remains the possibility that the SEC’s focus may broaden over the course of its investigation,” S&P said.