Argo Group (NYSE:ARGO) has been through the wringer, as 2020 saw the bills come due for years of irresponsible underwriting in the international business and allegedly equally irresponsible corporate spending on frivolities like sponsorships, multiple corporate jets, and other perks – issues that ultimately led to the departure of the former CEO and a major shake-up across the business.
Argo has exited the large majority of its international operations and has refocused around its high-quality U.S. specialty insurance business, including placing the former head of those U.S. operations in charge of the entire company. With that, there’s a credible path back to double-digit ROEs and improved returns for shareholders.
Management believes they can get back to double-digit ROE in 2022, and hard specialty markets do help, but I’m taking a more conservative approach with my modeling. Luckily it doesn’t take double-digit ROE in 2022 to make these shares work from a valuation perspective, and while management absolutely has to deliver to unlock more value, I see upside to over $60 even on what should be relatively conservative assumptions.
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Argo Group's Turnaround Story Seems Credible And Worth Considering
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