2015 was a year of many changes and no surprises.
Having said that, we stayed true to our strategy of being a specialty insurer with multichannel distribution and global reach. We made wide-scale changes to our systems and processes, built a stronger, more focused team, invested in technology and innovation, introduced new platforms and products and, above all else, spent time getting to know our customers and developing better solutions for their risk needs.
Our purpose all along has been to help businesses stay in business. We do that by mitigating the risks inherent in what they do. Argo is a specialty insurer, and our customers have remarkably different needs and ambitions. The products we provide them must be highly targeted, and the underwriters who serve them must have deep domain expertise in a broad variety of disciplines. This year, we began simplifying how we do business; we still have a lot of work to do. We also continued making the sweeping improvements that allow us to be leaner, smarter and more profitable. We believe these changes will put a team in place with better tools than ever before.
The strength of our underwriting results and our record underwriting profits for a second consecutive year prove the merit of our efforts. We grew our premiums to more than $2 billion in 2015, another record for our company. We achieved this growth even as we deliberately exited several lines of business during the year. As such, we now have evidence of solid, underlying growth within most of our business segments. Our overall underwriting income grew from $51.5 million the year prior to $66.2 million this year, a 28.5% gain and a record level for Argo. We achieved a net income of $5.72 per diluted share and operating earnings per share of $3.70. To you, our shareholders, we delivered a return on average shareholder equity just shy of 10% for the third consecutive year.
The most important factor in that achievement was risk selection and underwriting discipline. In 2015, we posted a combined ratio of 95.2%, just a hair off a goal we set in 2012 of delivering five points of underwriting profit. A significant contributor was the companywide program of systems and process improvement — a global effort to simplify the way we operate. Our mandate was to abandon any procedure or step that does not produce something our customers need, want and value. And as I mentioned earlier, simplification was also key to lowering our expenses, an achievement reflected in our improved expense ratio of 39.4%.
Excess & Surplus
In our Excess & Surplus Lines business, gross written premiums were up 11.9% for the year. We achieved growth in our casualty unit, our largest business by volume within E&S, of 22% against a backdrop of a market with slow to no growth. This is due in great part to our investment in technology and overall process improvement. We also benefited from growth initiatives in our professional lines business Argo Pro, which is an area we’ve been focusing on for the past few years.
2015 was a year of improvement in most businesses within our Commercial Specialty segment. Overall, premiums were up 5.8% in the calendar year, driven by our program and public-entity businesses. While we continue to see growth in our underwriting results, strong competition made it impossible to achieve the rate increases we would have liked. We continue our focus on profitable relationships in this segment, driving results through deeper customer knowledge, particularly with our policyholders.
Our Syndicate grew modestly in 2015 with gross written premiums up 3.8% as competition remained robust in the Lloyd’s market. This year, we stayed focused on expanding our core business while establishing new products in areas where our strengths should serve us well. We did this by building on our strong relationships with our brokers, continuing to attract new trade capital, and by pursuing new Lloyd’s business around the world. Positive growth came from the North American property account and new specialty classes of risk added in recent years, including international casualty treaty and the launch of our platform in Asia. Looking ahead, we see additional opportunities to grow by collaborating with other Argo Group business segments, in particular the U.S. to deliver unique solutions to meet customer needs.
Performance in our International Specialty segment showed a decline of 3.9% over that in 2014. Part of this reflects the challenging economic environment in Brazil, including weak local currency. In response to market conditions, we made selective changes to the business and are beginning to see positive results. For example, the combined ratio in this segment improved to 84.9%, a consequence of lower losses and loss adjustment expenses. International Specialty continued to explore new technologies aimed at helping to identify and capitalize on underwriting opportunities more quickly and easily. We continued advancing our Protector platform as an innovative online offering that taps into new segments for us. We also launched a digital product platform for our directors and officers liability insurance product in Western Europe. Despite the challenging market, we believe our business is positioned for growth in 2016.
Our team gets better every year, and this year we were pleased to welcome Stuart Boyne as Senior Vice President and Chief Human Resources Officer. Stuart will take a leading role in modernizing our HR function, giving our teams the support they need to be efficient and innovative. Alex Hindson joined as our Chief Risk Officer to spearhead a wide-reaching program of enterprise risk management with a goal of building on our strong set of risk management processes and enhancing our risk-aware culture. Phil Vedell will serve as Chief Operating Officer, responsible for overseeing operations in the U.S. And David Lang was appointed to serve as Chief Operating Officer at ArgoGlobal, leading an ambitious growth agenda for our Syndicate 1200 business in 2016.
Of culture and community
Even as company operations undergo deep changes to ensure that Argo stays innovative, responsive and profitable, many aspects of our culture remain unchanged. An important example is the commitment of our team members to the communities in which they live and work. This year our Argo Foundation in Bermuda and Community Relations Committees in London, San Antonio and Richmond provided more than 70 local community organizations with Argo funding. Elsewhere, the Team Argo Employee Volunteer Program rallied Argo professionals in project-specific groups to assist in community development around the world. And once again, our Argo Matching Gift Program supported the causes of greatest personal interest to our team by matching their donations with funds paid directly to charities. We are proud of the responsibility shown by our employees last year and remain committed to encouraging and supporting them in their efforts.
Confident and ready to improve
This year’s comprehensive program to bring simplification, automation and unwavering customer focus into every corner of the company is elemental to our strategy. We continuously improve the way our company operates. As such, we will go on making tough decisions, confident that the reasons we were better this year are the same reasons we can continue improving.
Our investments in business processes, technology and people allow us to serve our clients better, faster and easier. We can now better select risk and better manage our portfolio mix. Our investment in people has built a more nimble team than we had even three years ago. By outsourcing all but core functions, that team now has the time to focus on making better decisions. We have a better distribution platform today and better business processes to support everything we do.
After 12 consecutive quarters of deliberate, solid, consistent growth, we are confident and inspired to do better. I offer my sincere gratitude to the Argo team for a year of extraordinary effort. The work is paying off.
Mark E. Watson III
Chief Executive Officer