1
<PAGE>
FORM 10-K/A-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from ________ to ________
Commission file number: 0-14950
Argonaut Group, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 95-4057601
(State or other jurisdiction of (I.R.S. Employer incorporation or organization)
Identification No.)
250 Middlefield Road
Menlo Park, California 94025-3500
(Address of principal executive offices) (Zip code)
(650) 858-6600
(Registrant's telephone number including area code)
Securities registered pursuant to section 12(g) of the Act:
Title of Securities
Common Stock, par value of $.10 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|
As of March 20, 2000, registrant had 22,157,756 shares of Common Stock
outstanding, and the aggregate market value of the voting stock held by
nonaffiliates was approximately $414.1 million.
DOCUMENTS INCORPORATED BY REFERENCE
Part II: Excerpts from Argonaut Group, Inc.'s Annual Report to Shareholders for
the Year Ended December 31, 1999. Part III: Excerpts from Argonaut Group, Inc.'s
Proxy Statement for the Annual Meeting of Shareholders to be held on April 25,
2000.
<PAGE>
3
Reserves for Losses and Loss Adjustment Expenses
Incorporated herein by reference is the information set forth under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition-Results of Operations" in the Annual Report to Shareholders of
Argonaut Group for the fiscal year ended December 31, 1999 and in "Note 4 -
Reserves for Losses and Loss Adjustment Expenses" in the Notes to the
Consolidated Financial Statements of the Annual Report. See Exhibit Index.
During the fourth quarter of 1999, the Company increased workers compensation
loss reserves by $31.7 million, reflecting higher than anticipated loss
development for accident years 1998 and 1999, particularly in California.
Preliminary indications in the first quarter of 2000 show continued adverse
development of these accident years. If these trends continue, additional
strengthening of these reserves will be required.
Reserves for environmental claims were $91.3 million and $96.3 million at
December 31, 1999 and 1998, respectively. Reserves for asbestos claims were
$75.3 and $76.6 million at December 31, 1999 and 1998.
In the opinion of management, the Company's reserves for each of these liability
issues represent the Company's best estimate of its ultimate liabilities, based
on currently known facts, current law, current technology, and assumptions
considered reasonable where facts are not known. Due to significant
uncertainties and related management judgments, however, there can be no
assurance that future loss development, favorable or unfavorable, can be
accurately predicted.
The following tables on page 8 and 9 indicate the manner in which reserves for
losses and loss adjustment expenses at the end of a particular year change as
time passes. The first table (Table I) presented is net of the effects of
reinsurance. The second table (Table II) presented includes only amounts related
to direct insurance.
The first line shows the reserves as originally reported at the end of the
stated year. The second section shows the cumulative amounts paid as of the end
of successive years related to those reserves. The third section shows the
original recorded reserves as of the end of successive years adjusted to reflect
facts and circumstances later discovered. The last line, cumulative deficiency
or redundancy, compares the adjusted reserves to the reserves as originally
established and shows that the reserves as originally recorded were either
inadequate or excessive to cover the estimated cost of claims as of December 31,
1999.
Conditions and trends that have affected the development of these reserves in
the past will not necessarily recur in the future. It would not be appropriate
to use this cumulative history in the projection of future performance.
Page 7
<PAGE>
4
Table I
Analysis of Losses and Loss Adjustment Expenses (LAE) Development
(in millions) (Net of Reinsurance) Amended 3/31/2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserves for Losses
and LAE (a) $1,348.5 $1,287.8 $1,201.9 $1,107.6 $976.6 $858.1 $951.0 $884.0 $763.2 $706.5
Cumulative Amount
Paid as of: (b)
One year later 313.1 307.3 276.9 259.9 239.7 214.2 179.0 172.7 149.8
Two years later 537.5 525.8 489.2 444.7 417.9 356.2 309.7 278.7
Three years later 698.5 697.6 638.9 588.8 531.5 468.6 392.7
Four years later 835.7 821.4 759.5 684.1 623.9 537.9
Five years later 940.1 919.5 839.9 758.5 682.9
Six years later 1,021.3 991.0 906.8 814.8
Seven years later 1,082.7 1,051.3 962.7
Eight years later 1,134.2 1,106.0
Nine years later 1,182.6
Reserves Re-estimated
As of:
One year later 1,358.3 1,285.2 1,197.1 1,086.8 996.5 1,073.6 934.0 819.2 785.4
Two years later 1,356.9 1,311.9 1,202.0 1,083.0 1,180.8 1,038.9 895.5 851.1
Three years later 1,381.9 1,315.9 1,203.0 1,283.4 1,159.2 1,014.1 916.0
Four years later 1,374.1 1,325.9 1,403.1 1,277.3 1,152.5 1,033.8
Five years later 1,384.9 1,514.9 1,400.6 1,268.2 1,154.6
Six years later 1,572.0 1,524.3 1,396.2 1,262.2
Seven years later 1,575.6 1,518.8 1,391.3
Eight years later 1,572.8 1,516.7
Nine years later 1,570.9
Cumulative (Deficiency)
Redundancy: (c) ($222.4) ($228.9) ($189.4) ($154.6) ($178.0) ($175.7) $35.0 ($32.9) ($22.2)
</TABLE>
(a) Reserves for losses and LAE, net of reserves for reinsurance.
(b) Cumulative amount paid, net of reinsurance payments.
(c) Represents changes of net reserves between the original estimate
(for each accident year) of the indicated year and the reserve
re-estimated as of the end of the current year. Re-estimated reserves
are calculated by adding cumulative amount paid to unpaid loss and LAE
and incurred but not reported (IBNR) at year end for each accident
year.
Page 8
<PAGE>
5
Table II
Analysis of Losses and Loss Adjustment Expenses (LAE) Development (in millions)
(Direct Insurance Only)
Amended 3/31/2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Reserves for Losses
and LAE (a) $1,561.8 $1,494.4 $1,390.9 $1,284.1 $1,161.5 $1,026.1 $1,158.8 $1,063.2 $935.8 $897.4
Cumulative Amount
Paid as of: (b)
One year later 384.7 355.7 325.6 288.3 267.5 245.2 234.7 197.0 177.8
Two years later 656.2 621.6 564.4 499.3 474.8 437.8 389.3 329.6
Three years later 862.6 818.2 739.3 668.9 625.4 572.1 498.5
Four years later 1,023.5 965.1 884.2 787.9 737.5 665.5
Five years later 1,149.2 1,086.1 983.5 881.4 817.9
Six years later 1,252.8 1,174.5 1,069.3 951.1
Seven years later 1,327.6 1,253.6 1,134.2
Eight years later 1,396.5 1,314.3
Nine years later 1,450.8
Reserves Re-estimated
as of:
One year later
1,619.3 1,512.6 1,414.2 1,291.7 1,179.7 1,300.3 1,159.7 1,006.2 990.1
Two years later 1,645.8 1,570.2 1,448.8 1,278.8 1,423.1 1,282.8 1,134.3 1,069.7
Three years later 1,702.3 1,603.7 1,440.6 1,533.8 1,404.1 1,267.2 1,182.5
Four years later 1,719.7 1,604.2 1,694.5 1,526.6 1,412.1 1,317.3
Five years later 1,723.6 1,841.5 1,687.5 1,532.5 1,440.9
Six years later 1,956.8 1,850.4 1,698.0 1,546.4
Seven years later 1,958.8 1,859.5 1,708.6
Eight years later 1,970.0 1,869.4
Nine years later 1,980.8
Cumulative (Deficiency)
Redundancy: (c) ($419.0) ($375.0) ($317.7) ($262.3) ($279.4) ($291.2) $23.7 ($6.5) ($54.3)
</TABLE>
(a) Reserves for losses and LAE, excluding effects of reinsurance.
(b) Cumulative amount paid, excluding effects of reinsurance.
(c) Represents changes of direct reserves between the original estimate
(for each accident year) of the indicated year and the reserve
re-estimated as of the end of the current year. Re-estimated reserves
are calculated by adding cumulative amount paid to unpaid loss and LAE
and incurred but not reported (IBNR) at year end for each accident
year.
Page 9
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ARGONAUT GROUP, INC.
By /s/ James B Halliday
- --------------------------
James B Halliday Vice
President and Treasurer
Date: March 31, 2000
<PAGE>
6
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<DEBT-HELD-FOR-SALE> 745
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 427
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1176
<CASH> 31
<RECOVER-REINSURE> 27
<DEFERRED-ACQUISITION> 3
<TOTAL-ASSETS> 1625
<POLICY-LOSSES> 897
<UNEARNED-PREMIUMS> 44
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 0
0
0
<COMMON> 2
<OTHER-SE> 626
<TOTAL-LIABILITY-AND-EQUITY> 1625
93
<INVESTMENT-INCOME> 69
<INVESTMENT-GAINS> 3
<OTHER-INCOME> 0
<BENEFITS> 121
<UNDERWRITING-AMORTIZATION> 3
<UNDERWRITING-OTHER> 66
<INCOME-PRETAX> (25)
<INCOME-TAX> (10)
<INCOME-CONTINUING> (91)
<DISCONTINUED> (1)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-BASIC> (1)
<EPS-DILUTED> (1)
<RESERVE-OPEN> 936
<PROVISION-CURRENT> 118
<PROVISION-PRIOR> 57
<PAYMENTS-CURRENT> 36
<PAYMENTS-PRIOR> 178
<RESERVE-CLOSE> 897
<CUMULATIVE-DEFICIENCY> (54)
</TABLE>
