The Police and Fire Retirement System for the City of Detroit late last week filed a class-action lawsuit against Argo Group International Holdings Inc, the Bermuda international underwriter of property and casualty insurance with offices on Pitts Bay Road.

This, after the bottom fell out of the Argo stock price, falling precipitously some 60 per cent this year.

And the plaintiffs are demanding a jury trial in the case against Argo and five officers and former officers of the company.

The securities class action complaint names Argo, Thomas A. Bradley, Scott Kirk, Kevin J. Rehnberg, Mark E. Watson III, and Jay S. Bullock.

The suit alleges the defendants defrauded investors by issuing false and misleading statements concerning the company’s ability to set appropriate reserves, changing its underwriting policies, and writing policies outside of its “core” business.

Leading investor law firm Grant & Eisenhofer filed the action in federal court in the United States District Court for the Southern District of New York.

The action is said to be on behalf of all persons or entities who purchased or otherwise acquired Argo common stock during the period from February 13, 2018 through August 9, 2022.

The firm publicly provided some advice to such persons through Businesswire on Friday. The statement and/or the filing are on line (See Offshore Alert copy in Related Media).

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Detroit v. Argo Bermuda et al - Class Action.pdf

The wire service said the lawsuit alleges that throughout the Class Period, the defendants touted that they closely monitored Argo’s underwriting policies and had the ability to set appropriate reserves. It said Argo cultivated a narrative that it had a long history of successfully managing its reserves and that the company had a prudent reserving philosophy.

The statement continued: “However, this narrative created by Argo was false and misleading. Argo’s reserves were wholly inadequate, its underwriting standards were not prudent as represented, and Argo had dramatically changed its underwriting policies on certain US construction contracts as far back as 2018.

“Further, these policies were underwritten outside of the company’s “core” business including in certain states and for certain exposures that were far riskier than investors understood and that the company no longer would service moving forward.

“The truth was partially disclosed on February 8, 2022, when Argo reported that its fourth quarter results for 2021 would be negatively impacted by $130 million to $140 million worth of prior year reserve development and non-operating charges.

“The company admitted that the largest reserve increases were related to construction defect claims within Argo’s US Operations, in addition to reserve increases in the run-off segment.

“The company also admitted that the prior year reserve increase for construction defect primarily related to the 2017 and prior underwriting years in business lines that had either been significantly remediated or discontinued.

“When investors learnt the truth about Argo’s reserves and underwriting practices, the price of its common stock fell $7.11 per share (or 13.7 per cent) in one day, dropping from a closing price of $51.87 per share on February 8, 2022 to close at $44.76 per share, on February 9, 2022.

“On February 10, 2022, the price of Argo’s common stock declined to $42.82 per share, for a two-day drop of $9.05 per share (or 17.5 per cent) wiping out over $315 million in market capitalisation.

“Just months later, on August 8, 2022, Argo again shocked its investors when it announced that it had entered into a Loss Portfolio Transfer agreement with a wholly owned subsidiary of Enstar Group Limited covering a majority of the company’s US casualty insurance reserves.

“On this news, the price of Argo’s common stock declined $9.12 per share (or 28.3 per cent) from an August 8, 2022 closing price of $32.22 to close at $23.10 per share on August 10, 2022.

“This drop caused the company’s market capitalisation to fall another $320 million. Argo’s stock price is down more than 60 per cent this year, trading near its 52-week low.”