Hurricanes Hit Argonaut Group’s Bottom Line

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San Antonio, Texas-based Argonaut Group Inc. reported third quarter net income dropped by 62 percent, largely as a result of the four hurricanes that hit Florida in late summer.

Gross written premiums for third quarter 2004 were $261.5 million, an 18.8 percent increase compared to the 2003 third quarter financial results.

However, the group experienced around $20.0 million in catastrophe losses from hurricane activity during the quarter, which adversely affected its GAAP combined ratio. Argonaut said its combined ratio for the quarter was 109.9 percent when hurricane losses were factored in. Exclusive of catastrophe losses, the company’s GAAP combined ratio was 97.3 percent versus 104.3 percent in the third quarter of 2003.

For the three-month period ended Sept. 30, 2004, Argonaut Group reported net income of $9.4 million or $0.31 per diluted common share on 30.8 million shares, down from a net income of $24.7 million or $1.00 per diluted common share on 24.6 million common shares during the same three-month period in 2003.

Total revenue, which includes gains on sales of investments, was $174.5 million during the third quarter of 2004, compared to $209.9 million for the same period in 2003. Increases in earned premiums of $9.4 million and investment income of $2.9 million were offset by a reduction in realized capital gains of $47.7 million versus the third quarter of 2003.

Earned premiums for the three months ended Sept 30, 2004 were $157.5 million compared to $148.1 million during the 2003 third quarter. Total revenue includes realized gains/losses on sales of investments of $0.8 million and $48.5 million for the third quarters of 2004 and 2003, respectively.

For the nine months ended Sept. 30, 2004, Argonaut reported net income after tax of $45.6 million or $1.48 per diluted common share on 30.8 million weighted average shares, compared to $78.0 million or $3.30 per diluted common share on 23.6 million weighted average shares for the first nine months of 2003.

For the first three quarters of 2004, total revenue was $517.7 million versus $569.4 million during the same nine-month period in 2003. Total revenue included $2.8 million of pre-tax net realized gains in the first three quarters of 2004 and $112.2 million of pre-tax net realized gains in 2003.

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