Annual Report A Change, for Good. 2018 We are making a change, for good. Change that will make a short-term loss for long-term benefi t. Change that supports our strategy of placing Argus on the global stage. Able to provide sustainable, quality solutions for the community and a strong return for partners, for all our futures. AAnnnnuuaal lR Reeppoorrtt 2 2001818 Contents Performance Measurements Welcome 2 Chairman’s Statement 4 $18.6m 90.6% Our Mission 6 Net Loss Combined Operating Ratio The Markets We Serve 8 $0.5m $17.9m The Territories We Cover 10 Operating Profi t Operating Cash Flow Our Strategy 12 Chief Executive Offi cer’s Strategic Review 14 $24.6m 4.5% Chief Financial Offi cer’s Report 18 Combined Fee Income Dividend Yield Our Strategy: Our Action 24 (15.8%) A— (Excellent) The Value We Create For Our Stakeholders 30 Return on Average Equity Financial Strength Rating Long-Term Goals 32 Governance and Leadership 34 Five-Year Summary 36 Financial Section 38 11 AAArrrggguuusss G GGrrrooouuuppp H HHoooldllddiniingngsgs sL L iLmimimitietietdedd Welcome Welcome to Argus. Argus Group 1950 We support our customers in providing fi nancial Date of Foundation security, physical well-being and peace of mind. 234 Number of Employees We do this through products and services in 87% employee benefi ts, global property and casualty Employee Engagement insurance and wealth management. We are a business born in Bermuda, but we continue to grow internationally to ensure we are in the strongest position for sustainable value and growth. 22 AAnnnnuuaal lR Reeppoorrtt 2 2001818 Bermuda Gibraltar Malta #1 #1 #2 Market Leader for Property & Casualty Insurer Insurance Broker International Clients 40% 12% #1 Non-life Market Share Non-life Market Share Provider for Employee 22 16% Benefi ts Solutions Number of Employees Broker Market Share Top 3 60 Employer in Bermuda Number of Employees 152 Number of Employees 33 Argus Group Holdings Limited Chairman’s Statement We have experienced yet another year of unprecedented change around the globe. President Trump has continued to implement impactful policies ranging from withdrawing from agreements with Paris and Iran to tax reform and proposing protectionist tariffs. Brexit continues to drive confusion and uncertainty, as do the broad range of coalition governments being formed as populations lose their confidence in established government. In addition to the market uncertainty caused by global change, the low-growth Bermuda economy added to economic pressures. Against this backdrop, we are reporting a $18.6 million net loss attributable to shareholders. This was caused by losses in healthcare, which is inherently volatile, and actions taken to restructure our balance sheet. We have decided it is time to sell underperforming assets to better utilise the capital elsewhere. Whilst this has a negative impact in this financial year, I am confident its redeployment will lead to greater growth in the future. In addition, over the last two years we tracked what we believed was a trend of slowing health claims inflation, which we hoped was the beginning of a long-term trend. In response to this and in line with our strategy to ‘do the right thing, the right way, “I am extremely for all, always’, we decided to maintain healthcare premiums, passing on the benefit to our confident that customers, rather than increase premiums as our competitors did. Regrettably, volatility in the we have taken the Bermuda healthcare industry continues to be challenging, due to the small Bermuda population and the unusually high instances of severe claims, resulting in significant losses during the right actions in fiscal year. As you would expect from our team, they have reacted swiftly and decisively. We the short term to are increasing premiums immediately to bring our healthcare business back into profit, while ensuring that our premium increases continue to trend below the rate of medical inflation. ensure sustainable profitability and I am extremely confident that we have taken the right actions in the short term to ensure growth in the sustainable profitability and growth in the long term. long term.” 4 Annual Report 2018 My confidence in the health of Argus relates directly to my confidence in the Argus Board. Difficult decisions had to be made this year in relation to the future success of the business and the Argus Board has acted decisively, defining a strategy that I believe will give us a strong presence on the global stage and manage risk whilst providing growth and greater return to our shareholders. The Argus Board continues to go from strength to strength and we remain focused on having the right skills and experience to support the Board strategy. Over the last year we have welcomed three new members, Barbara Merry, Keith Abercromby and Kim Wilkerson, whilst saying our goodbyes and thank you to Wendall Brown and Jamie Jardine, who both retired from the Board this year. Our confidence in the future means that, despite the losses recorded this year, the Group remains in a healthy Capital Position, and we are pleased to declare a dividend of nine cents per share for shareholders of record as of July 31, 2018, payable on August 15, 2018. This matches the dividend last year and equates to annualised yield of 4.5% based on the current average share price. I would like to take this opportunity to thank the Argus management team and staff for their hard work under challenging circumstances, my fellow Board members for their professionalism and strategic capability, and, most of all, my sincere appreciation to each Argus shareholder for your continued loyalty, support and confidence. Sheila E. Nicoll Chairman 5 AArrgguuss G Grroouupp H Hooldldininggss L Limimitietedd Our Mission Our Mission is to give more and more people the freedom to do what matters most to them. We will accomplish this by providing fi nancial services that predict and protect for the future. Leading the way with innovative forecasting tools to help our stakeholders avoid storms that may threaten their life, health or wealth. Striving to always deliver best-in-class products and processes to protect our stakeholders in those instances when storms are inevitable. We aim to build strong, long-term, one-on-one relationships with our clients, customers and community, based on loyalty, service and trust. We’ll do this through what we believe makes us truly different; our commitment to doing the right thing, for all, always, behaving with honesty, openness and fairness in everything we do. 666 AAAAnnnnnnnnuuuuaaaal lllR RRReeeeppppoooorrrrtttt 2 222000018111888 “Our Interest is You.” This reinforces the fact that Argus puts people fi rst. It communicates that we care deeply about our staff, our clients, our shareholders and our community. It affi rms that we will always aim to do what is in everyone’s best interests, and not just our own. It is this innate desire to take care of people that makes Argus the unique company that it is. 777 AArrgguuss G Grroouupp H Hooldldininggss L Limimitietedd The Markets We Serve We serve a wide variety of needs, helping businesses and individuals predict and protect for the future. Argus is unique in its position as a provider of expertise rather than mere products. Keeping You Healthy and Productive Keeping Your Business Running Keeping Your Possessions Safe Going beyond traditional healthcare by Simple combined commercial policies, Expertise and active advice on how to supporting you through initiatives such which effectively manage the risks protect your assets. Delivering policies as Annual Health Checks, Population in your business with swift and that don’t nickel and dime. Health, Diabetes Management, Thrive. comprehensive claims resolution. and Case Management. $132m $30m $10bn Paid in Health Benefi ts Commercial Premium Property insured $21m 5,824 40,000 Paid for Preventative Programmes Commercial Clients covered Vehicles covered 23% Reduction in claims for members in our Case Management Programme 88