A.M. Best Revises Outlooks to Positive for Argus Group Holdings Limited and Its Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “bbb+” of Argus Insurance Company Limited (Argus Insurance) and Bermuda Life Insurance Company Limited (Bermuda Life). Each company is a subsidiary of Argus Group Holdings Limited (Argus Group) [BSX:AGH.BH]. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the Long-Term ICR of “bb+” of the Argus Group. All companies are domiciled in Hamilton, Bermuda.

The outlook revisions and Credit Ratings (ratings) of Bermuda Life are based on the company’s long-standing, solid position within Bermuda’s life/health insurance market, favorable operating results, improved balance sheet quality and senior leadership’s emphasis on risk management. Bermuda Life has been operating in the domestic health, life and pension insurance markets for over 50 years, where it has a leading share of the health market. The trend of stable net operating earnings has been driven by strong results in the employee benefits segment, and within that segment, its health insurance line of business, which has benefited from consistent premium growth and moderated medical expenses. Furthermore, net income was enhanced further by Bermuda Life’s favorable performance of its life, annuity and pension operations. Bermuda Life has improved its investment portfolio quality through a series of write-downs and divestitures of its Bermuda-domiciled companies’ equity positions. The company has reduced its exposure to Bermuda equities from approximately 50% prior to 2013 to less than 3% in the second half of 2016. Stronger financial results and lack of significant impairments have led to capital growth and improved risk-adjusted capitalization. Corporate risks are managed actively by Bermuda Life’s parent company, Argus Group. Argus Group’s senior leadership team places heavy emphasis on risk management of current and emerging risk exposures of internal and external sources. A.M. Best views this favorably and supportive of the ratings.

Offsetting rating factors include limited growth potential and concentration of premium in its domestic health line of business, increased operating expenses, and mortgage loan exposure. More than 80% of premium in the employee benefits segment is driven by the health line of business, and Bermuda Life lacks geographic diversification, as it is tied to the insular Bermuda market, with several well-established competitors vying for business. The company’s investments in technology have driven operating costs higher; however, this is expected to be temporary as efficiencies are gained and cost savings realized over time. The company’s exposure to Bermuda equities has declined over the medium term; however, its investment portfolio remains exposed to investment risks of residential and commercial mortgages, where approximately half of the mortgages are held in a single parcel of commercial mortgage property.

The ratings of Argus Insurance are based upon its supportive balance sheet strength, excellent operating performance and strong market profile in Bermuda as one of the top property and auto writers in that country. The ratings and outlooks are also reflective of the company’s strategic role within the Argus Group organization and the synergies it derives from common ownership, management, operations and brand name recognition with its life/health sister company. These positive rating factors are partially offset by Argus Insurance’s concentration of underwriting risk in Bermuda. This subjects the company to a higher potential for influence from changes in the regulatory, economic, legal and competitive environments, especially during this period of soft pricing and weak interest rates. In addition, the company has significant exposure in Bermuda to loss from catastrophic weather events, which is materially mitigated by a comprehensive reinsurance program backed by quality reinsurers.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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A.M. Best
Wayne Kaminski, +1 908-439-2200, ext. 5061
Senior Financial Analyst – L/H
[email protected]
or
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Charles M. Huber, +1 908-439-2200, ext. 5122
Director – P/C
[email protected]
or
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
[email protected]

Source: A.M. Best

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