OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Argus Insurance Company Limited (Argus Insurance) and Bermuda Life Insurance Company Limited (Bermuda Life). Both companies are subsidiaries of Argus Group Holdings Limited (Argus Group) [BSE: AGH.BH]. Concurrently, AM Best has affirmed the Long-Term ICR of Argus Group of “bbb-”. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Hamilton, Bermuda.
The ratings reflect Argus Group and its subsidiaries’ balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The companies’ balance sheet strength is driven by the maintenance of solid although declined risk-adjusted capital measures, whereby the company was able to absorb an unusually high amount of high cost claims in its employee benefits sector and a large write-off of non-performing assets at the end of the previous fiscal year ended March 31, 2018. The group’s focus also has been on reducing its exposure to illiquid assets and redeploying capital into high quality and marketable securities to increase liquidity, which adds to more financial flexibility. While impairment changes resulted in a 20% decline in shareholder’s equity in fiscal-year 2018, risk-adjusted capitalization remained very strong, supported in part by the company’s reduced level of asset risk. In 2018, there were losses reported in the employee benefits segment, stemming from high-dollar health claims; however, the earnings from its property/casualty line partially offset those losses, reflected in its diversified sources of income. The property/casualty segment has operated profitably over the medium term as the company has not incurred any significant catastrophic losses during that time. Argus Group has responded to the losses in its health line by implementing corrective actions, which include rate increases, enhancements in its medical management of complex conditions and improved contractual arrangements with overseas providers to address rising costs. Operating performance showed improvement through six month of fiscal-year 2019.
The business Argus writes is concentrated in Bermuda, a jurisdiction with limited growth potential and exposure to catastrophic events. This adds to its limited business profile. In addition, there is product concentration with more than 70% of net premium generated by Argus Group’s health segment. However, over the last several years, geographic diversification increased through the company’s property/casualty segment’s growing presence in Malta and Gibraltar. Argus garners approximately one-third of the health insurance market share in Bermuda, which is a leading measure among the competing insurance companies.
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