A.M. Best Affirms Ratings Of Argus Group
Rating company A.M. Best has affirmed the financial strength rating of B++ [Good] and the issuer credit ratings [ICR] of “bbb” of Argus Insurance Company Limited [Argus Insurance] and Bermuda Life Insurance Company Limited [Bermuda Life], both of which are subsidiaries of Argus Group Holdings Limited [Argus Group]. Concurrently, A.M. Best has affirmed the ICR of “bb” for the Argus Group. The outlook for all ratings is stable. All companies are domiciled in Hamilton, Bermuda.
A statement from the ratings agency said, “The ratings affirmation reflects Argus Group’s consolidated profitable operating results, the strengthening of its capital metrics and improvement of its asset quality. On a consolidated basis, Argus Group’s underwriting and net income results turned positive in 2012, improved substantially in 2013 and continue to remain favorable.
“The improved results are primarily driven by strong underwriting performance combined with the lack of asset valuation write-downs. In addition, Argus Group has been transitioning its investment portfolio to higher quality lower risk assets. As a result, asset valuation write-downs have been minimal, and the stabilization of the investment portfolio has resulted in improved investment income. Furthermore, the transition of the investment portfolio also is achieving better asset-liability matching. The positive net income has allowed the organization to strengthen its capital level through retained earnings.
“The earnings results for Argus Group’s insurance operations continue to be positive, although the level of premiums and fee-based income growth has slowed, pressured by continuous weakness of the Bermuda economy. Bermuda Life [the organization’s domestic life, annuity, pension and health insurance subsidiary] reported strong net income results, which were driven primarily by a lower loss ratio for its health business and positive results from its invested assets.
“The favorable earnings, as well as the amalgamation with Somers Isles Insurance Company in 2013, has strengthened the capital level for Bermuda Life. Argus Insurance, the group’s domestic property/casualty writer, continues to record favorable underwriting results and maintains more than adequate risk-adjusted capitalization.
“Offsetting factors are the inter-company receivables at the insurance subsidiaries, which while improved, still comprise a relatively high percentage of overall capital. In addition, although the consolidated assets quality improved over the past several years, an exposure to some low liquid mortgage loans persists and the holding company liquidity remains low, although the Argus organization does have working capital/overdraft facility with a local Bermuda bank.
“Factors that may lead to positive rating actions include continued favorable underwriting and net income results, capital growth, improved quality of invested assets and better asset-liability matching.
“Factors that may lead to negative rating actions include earnings deterioration, increase in inter-company receivables and material investment write-downs that could lead to a decline in equity and capitalization.”
