Things are looking for up for Argus Group, according to AM Best.

The rating agency has improved its outlook from stable to positive for the insurer and pension provider, while affirming its financial strength rating at B++.

Best analysed Argus’s operating companies, Bermuda Life and Argus Insurance.

It noted the improvements in Bermuda Life’s investment portfolio, through writedowns and the sale of shares of island-based companies.

“The company has reduced its exposure to Bermuda equities from approximately 50 per cent prior to 2013 to less than 3 per cent in the second half of 2016,” Best stated.

However, Best still saw risks in the investment portfolio, relating to “residential and commercial mortgages, where approximately half of the mortgages are held in a single parcel of commercial mortgage property”.

Operating results had also improved, Best noted.

“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,” Best commented.

“Furthermore, net income was enhanced further by Bermuda Life’s favourable performance of its life, annuity and pension operations.”

Best added that stronger financial results and lack of significant impairments had led to capital growth and improved risk-adjusted capitalisation.

The rating agency flagged up a lack of growth opportunities and diversification as offsetting the company’s strengths.

“More than 80 per cent 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,” Best said.

It added that Argus Group’s senior leadership team “placed heavy emphasis on risk management of current and emerging risk exposures of internal and external sources” — something Best viewed as supportive of its credit ratings.

Best added that the ratings of Argus Insurance were based on its “supportive balance sheet strength, excellent operating performance and strong market profile in Bermuda as one of the top property and auto writers”.