Bermudian Argo surpassed the expectations of analysts in the second quarter with a $32.9mn profit driven by an improvement in the combined ratio.

The $0.95 per share result was ahead of the $0.91 that had been forecast by five analysts surveyed by financial news site MarketWatch.

However, it lagged behind the $1.14 per share - or $40.7mn headline - profit the group reported this time last year.

A slight 1 point deterioration in the loss ratio for the quarter was more than offset by an improvement in the expense ratio to deliver a 96.3 percent combined ratio that was just below the 96.6 percent the group reported for Q2 2017.

The loss ratio increased in spite of elevated reserve releases, which more than doubled to $2.4mn, and a catastrophe bill that came to just over a third of last year’s total at $1.7mn.

“The overall expense ratio improved by 1.3 points in the second quarter of 2018 to 37.5 percent compared to the same period in 2017, reflecting the streamlining of operations, our digital initiatives and use of technology, all while making continued investments in our strategic growth areas,” said Argo CEO Mark Watson.

The group’s top line grew by 2.3 percent to hit $702.8mn in the second quarter. That was driven by increases in Argo’s US division, which saw premiums of $410mn during the period, up 12.3 percent on last year.

“This growth was driven by all major lines of business, reflecting the continued execution of strategic growth initiatives, our digital initiatives, and appropriate risk selection and exposure management actions,” Argo said.

Meanwhile, reinsurance spend in the division fell proportionate to gross premiums as net premiums surged by 16.5 percent to $267mn.

The US segment’s loss ratio gained 5 points as lower catastrophe losses failed to offset a dip in reserve releases, which were just $3.1mn for the quarter - well below the $12.8mn it freed up last year.

“In our US operations, gross written premiums were up over 12% in the quarter with continued strong underlying margins,” Watson said.

Argo said the premium reduction beyond the US reflected a change in the group’s capital structure to accommodate third-party capacity brought in following last year’s acquisition.

This third party capital receives a corresponding proportion of the gross written premiums,” Argo said.

“As such, this structure has the effect of reducing the gross written premiums reported in our financial statements,” the group went on.

“In exchange, we receive certain remuneration for generating this business and for the underlying underwriting performance.”

It said that around $30mn in premium was attributable to third party capital providers in the second quarter of 2018.

“The decline in gross written premiums also reflects the effects of corrective underwriting actions within the Syndicate 1200 property D&F business and the non-renewal of certain casualty line accounts in Bermuda,” Argo said.

But it added that those factors were partly offset by increased premiums in Europe, growth in Syndicate 1200’s specialty lines, and growth in professional and property insurance lines written out of Bermuda - driven by new business and better rates.

“In our International Operations, we reduced exposure to select risks, and allocated capital and resources where we can earn more attractive returns. In addition, we are making progress in our ongoing expense initiatives,” said Watson.