Best: Negative Outlook For Argus Group
Ratings agency A.M. Best Co. today [Mar.30] revised the outlook to negative from stable and affirmed the financial strength rating of B++ [Good] and issuer credit ratings [ICR] of “bbb” of Argus Insurance Company Limited, Somers Isles Insurance Company Limited and Bermuda Life Insurance Company Limited, all subsidiaries of Argus Group Holdings Limited.
Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of “bb” of Argus Group. All companies are domiciled in Hamilton, Bermuda.
Best analysts said the negative outlook reflects the decline in liquidity and financial flexibility of the Argus Group.
Over the last three years, the Argus Group has recorded negative net income and a decline in capital mainly attributed to asset valuation writedowns. Although losses have declined, the reduced asset valuations pressure the overall liquidity of the group as well as that of its subsidiaries.
Conversely, consolidated net losses have moderated, and insurance subsidiary asset quality and capital levels are improving. Additionally, the earnings results for the insurance operations continue to be positive, and premiums and fee-based income have shown a good level of growth.
Best said Bermuda Life, the organisation’s domestic life, annuity and pension subsidiary, is again reporting positive net earnings and is anticipated to show additional improvement based on its operating performance and a more stable investment portfolio.
Somers Isles, the group’s domestic health insurer, has reported stabilization in its loss ratio as a result of product design, rate actions and medical management programs undertaken by the company.
Argus Insurance, the group’s domestic property/casualty writer, continues to record favorable underwriting results. Although the company maintains more than adequate risk-adjusted capitalization, A.M. Best remains concerned with potential liquidity issues if a catastrophe loss or multiple catastrophe losses occur.
Best said Argus Group’s outlook could be revised to stable if there is a successful transition of the invested assets portfolio to more liquid and higher quality investments that better match the liabilities of each insurance entity; or there is increased liquidity at the holding company.
Key rating factors that could result in negative rating actions include unfavorable earnings from operations, additional losses due to asset valuation or any further decline in capital levels on a consolidated basis or at the insurance subsidiary level.
