Argo Group’s 20-year CEO, Mark Watson, has retired amid investigations by the U.S. Securities and Exchange Commission (SEC) into executive compensation at the specialty insurance company.
The Argo Group board, led by Chairman Gary Woods, released a statement Tuesday saying Watson was stepping down as CEO immediately, but would continue to serve as a member of the board and advisor until the end of the year.
The separation agreement calls for Argo to pay Watson more than $1.75 million, plus allowing his vested stock to be unvested, according to the SEC filings. However, Watson will be required to reimburse the company for certain personal expenses following an investigation.
In 2018, Argo paid Watson $8.3 million in total compensation, including salary, bonuses, and stock options, according to reports based on proxy statements. Watson, 55, was one of the youngest chief executives in the industry.
Argo, a $2.5 billion international underwriter of specialty insurance and reinsurance products, is based in Bermuda and has its offices in the IBC Centre in downtown San Antonio.
In a phone conversation with the Rivard Report on Wednesday, Watson said he woke up that morning “a happy man,” and “looking forward and not in the rearview mirror,” he said.
“There are so many things I’ve wanted to do that I just haven’t had time to do,” Watson said. “Running a public company that’s as broad and vast as Argo, both geographically and the number of subsidiaries, is a full-time job. There’s an Argo office open somewhere in the world six days of the week, 24 hours a day, so it’s a big job.”
The San Antonio native said he will continue to work from an office in San Antonio and hopes to return to his pre-Argo role as a technology investor.
“I’m much more of an entrepreneur, taking small things and making them bigger,” he said. “Right now, tech is finally influencing the financial services industry in a big way. I would like to be an investor, and perhaps operator, in the convergence of tech in our industry.”
But Watson said he also woke up feeling good about the value that the company, during his tenure, created for its shareholders. “Not just for me,” he said.
Argo, a $2.5 billion international underwriter of specialty insurance and reinsurance products, has its offices in the IBC Centre in downtown San Antonio.
Watson, the son of Titan Holdings’ founder Mark Watson Jr., became an Argonaut investor in Argonaut Insurance Exchange in 1998, joined the board in 1999, and took the reins as CEO in 2000. A year later, the Texas native relocated the company to San Antonio.
Between 2001 and 2008, the company entered what Watson called a “hyper-stage of growth,” due to acquisitions and some startup activity. “When fully consolidated, we grew the premium base from $200 million to $2 billion …,” Watson said.
As the company grew, it opened offices around the world – from New York to London and Singapore – and sponsored one of the biggest yachting regattas in the world.
In late 2018, Argo began fending off claims from an activist hedge fund, Voce Capital Management, that its current board and CEO were responsible for a “culture of indulgence” within the company. Voce owned approximately 5.6 percent of Argo’s shares at the time.
Calling for better oversight of the company, Voce kicked off a proxy fight that it essentially lost in May when Argo Group announced that its shareholders had voted to elect all five of its directors to the board.
In August, the board announced changes to the company’s executive compensation program, expanding the review period for performance awards from one year to three, and increasing the CEO’s stock ownership guideline from five times base salary to six times.
The SEC began looking into Argo board governance and executive compensation in October.
A statement from Argo said the board is cooperating with the SEC and continuing to review its compensation program, but believes “the amounts involved are not material to the company’s financial position or results of operations.”
Voce said in a statement Wednesday that the SEC’s investigation “vividly illustrates the need for immediate and sweeping changes” at Argo.
“The abrupt ‘retirement’ of Argo’s CEO yesterday does not resolve our concerns about the Company’s operations, strategy and corporate governance; in fact, it raises more questions than it answers,” Voce stated. “… Needless to say, many crucial decisions lie ahead. It’s imperative that shareholders have full faith and confidence in the group of individuals making those determinations and that simply will not happen with the Board as currently constituted.”
Argo suffered net income losses of nearly $10 million in the second quarter of this year. It will release third-quarter results on Thursday, but has already said that those results were adversely affected by several international catastrophe claims losses.
Argo’s board of directors named Kevin Rehnberg, president of the company’s U.S. operations since Jan. 1, the interim CEO. Rehnberg’s annual base salary will go from $750,000 to $975,000.
“Kevin’s extensive leadership experience, including his strong track record running our Americas business, will ensure a smooth transition and position the Company for continued growth and performance,” Woods said.
On Tuesday, Argo issued a quarterly cash dividend of 31 cents per share on the company’s common stock.