Bermuda’s unsustainable healthcare costs continues to take a bite out of earnings for one of island’s leading insurance firms.

Half year results reported by the Argus Group  released today, saw the company’s Financial Strength Rating upgraded to A- (Excellent) with a stable outlook. But the company incurred a $2.3 million net loss for the six months ended September 30, 2017, compared with net earnings of $8.2 million for the same period last year.

Net benefits and claims increased by $6.7 million, and the company’s health division was “the primary driver of this increase”

According to the latest report, “the utilisation of medical services increased due to both the high incidence of chronic disease, and an ageing population who require a greater number of medical services”, in their senior years.

While the Group’s combined operating ratio increased from 85.4 percent last year to 93.6 percent for the current period, the company’s Chief Executive Officer, Alison Hill said: “Argus continues to be deeply concerned about the unsustainable cost of the healthcare system in Bermuda.

Alison Hill, CEO of The Argus Group

“We continue to invest in our population health management initiatives such as partnering with the Premier Health and Wellness Centre for Diabetes Reversal Programme which is free to eligible Argus members,” said Ms Hill.

“While the Group was spared from one of the most devastating hurrican seasons of recent times, it was hit with non-storm related large claims within its Property and Casualty Division. However, our risk mitigation programme and comprehensive reinsurance arrangements have significantly reduced the financial impact of these losses.”

Despite “the short-term decline in earnings, the CEO said she “delighted” to report the upgrade.

“This rating reflects the strength of our balance sheet, our expertise risk management program and our consistent favourable operating performance,” said Ms Hill. “Argus always seeks to generate attract long-term returns while managing short-term volatility.

“We will continue to deliver on our objective of long-term sustainable value in a dynamic and rapidly evolving global market place with the continued focus on our strategic pillars of Growth, Advocacy and Innovations. We continue to apply prudent underwriting principles and maintain high client retention levels in increasingly competitive markets.”

Overall, the report stated that the Group “successfully managed short term volatility within its investment portfolio and has generated investment income of $7.7 million for the six months to September 30, 2017”. And the company’s investment portfolio reported “a positive total return, including appreciation, of $14.3 million in an environment where credit spreads tightened, and global equities rallied”.

Combined fee income  was generated from Argus’ Employee Benefits, Wealth Management and Insurance Brokerage businesses of $10.5 million, representing an increased 17 percent over the previous year. Client retention, new business, and investment growth have resulted in an increase in Assets Under Management which is a key driver for the increase in the combined fee income.

Ms Hill also noted that the Group’s investment portfolio is designed “to ensure funds are readily available” to satisfy their promises to policyholders and “to enhance shareholder value by generating long-term risk-adjusted yields”.

“In the prior year, we did the right thing for our Pension members by reducing fees to enhance their savings and are now seeing this translate into real long-term value,” she said.

On the consolidated balance sheet, total assets including segregated fund assets stand at $2.3 billion. Shareholders’ equity attributable to shareholders of the company has increased to $134 million, substantially in excess of the statutory capital required to conduct the Group’s insurance and financial services business by the regulatory bodies to whom the Argus Group reports.

The Board has declared a dividend of nine cents per share payable on January 12, 2018 for shareholders of record on December 27, 2017. This represents a total dividend of 18 cents per share based upon the audited financial statements of the Group for the year ended March 31, 2017 and an annualized dividend yield of 4.3 percent.