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Argo Re financial rating under review in wake of SEC action

Under review

A.M. Best Co. Inc. has placed the financial strength rating of Argo Re Ltd., Argo Group International Holdings Ltd.’s Bermuda-based reinsurance unit, and its various subsidiaries under review with negative implications, the ratings agency said Thursday.

The action considers the “serious nature” of the U.S. Securities and Exchange Commission inquiry and the “diminished credibility among Argo stakeholders in light of the board’s actions to keep this inquiry confidential while undergoing an extensive internal investigation on compensation governance matters,” the Oldwick, New Jersey-based ratings agency said in a statement.

The “sudden departure” of Argo CEO Mark Watson was also cited.

Another concern is the potential for further shareholder discontent, which could “lend itself to management and board distraction, the emergence of class action lawsuits and renewed shareholder activist activity,” Best said.

The action also highlights the importance of enterprise risk management, corporate governance and the role that management and the board play to ensure that a proper risk management framework is in place to protect against these types of issues, Best said.

The ratings are likely to remain under review pending follow-up discussions with management and until the SEC inquiry concludes its findings, Best said.

The financial strength rating of A (Excellent) has been placed under review with negative implications for Argo Re Ltd. and subsidiaries ArgoGlobal SE, Argonaut Great Central Insurance Co., Argonaut Insurance Co., Argonaut Limited Risk Insurance Co., Argonaut-Midwest Insurance Co., Argonaut-Southwest Insurance Co., ARIS Title Insurance Corp., Colony Insurance Co., Peleus Insurance Co., Colony Specialty Insurance Co., Rockwood Casualty Insurance Co., Select Markets Insurance Co. and Somerset Casualty Insurance Co.

Mr. Watson’s “retirement” was announced earlier this week as the troubled Bermuda-based insurer named Kevin Rehnberg as interim CEO.





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