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FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 13, 2023 02:08 PM (EST)
AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” (Excellent) 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) [BSX: AGH.BH]. Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” (Good) of Argus Group. All companies are domiciled in Hamilton, Bermuda. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Argus Group’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Argus Group’s risk-adjusted capitalization is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), as of its March 31, 2022, fiscal year-end, which is in line with fiscal-years 2020 and 2021. Some BCAR volatility is expected over the near term as unrealized investment losses pressure International Financial Reporting Standard’s reported equity. However, Argus Group maintains sufficient liquidity to hold these investments to maturity and is expected to maintain its balance sheet assessment over the medium term.
Supporting the strongest BCAR assessment at the group level is strong regulatory capital in both operating entities, a much more diversified asset portfolio and a comprehensive reinsurance program. While publicly traded, access to public equity markets is limited as the Bermudian stock exchange is thinly traded. However, Argus Group maintains bank lines and cash reserves to increase financial flexibility and ensure that the asset portfolio does not need to be divested to meet policyholder obligations.
Operating results in fiscal-year 2022 were favorable to the prior year due to growth in fee income and annuity reserve releases driven by higher interest rates. Operating favorability continued through the first six-months of fiscal-year 2023 as higher interest rates continued to drive annuity reserve releases positively impacting net income. Core operating profit in interim 2023 was slightly behind fiscal-year 2022 as medical utilization continues to rebound from COVID-19 driven lows, but ahead of projections based on better-than-expected underwriting results. Argus Group also successfully generated moderate premium growth in fiscal-year 2022 and the first half of fiscal-year 2023, which reverses a trend of declining premiums over the prior two-year period. Generating net premium growth has been a challenge for the company recently, especially within Bermuda due to health reform on the island. Management has been expanding the company’s fee-based businesses to generate revenue growth and diversify income sources. This diversification strategy has been largely successful as fees have grown to over 30% of total revenue from just 20% in 2018.
Health reform policy changes remain a high priority for the Bermudian government entering 2023; however, the initially planned second phase of the previous health reform plan has been dropped in favor of a broader health reform strategy. The new strategy has universal coverage as its primary policy goal but appears open to a much more collaborative approach with private industry than the original 2019 plan. While material changes to the health system in Bermuda could place pressure on the company’s ratings, Argus Group still maintains its strong position as a provider of employee benefits and operates as a leading provider of property, auto and employer’s liability insurance. Argus Group’s acquisition of provider practices and development of medical management capabilities partially mitigate the risks of material disintermediation as part of a new healthcare environment on the island by providing additional services to the sector. AM Best acknowledges Argus Group’s drive to expand and diversify premium and earnings. Over the last several years, geographic diversification has increased through its property/casualty segment’s growing presence in Malta and Gibraltar, as well as from the acquisition of the provider practices.
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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.