Bermuda insurance group BF&M Limited announced half year profits of $4.4 million dollars yesterday, a reduction of 12 percent over the same period last year.

Chief executive officer Glen Titterton said yesterday: "We are pleased to announce that net earnings for the six months to June 30, 2001 amounted to $4,398,965. The 12 percent reduction from the first half of 2000 was largely anticipated and is the result of budgeted increases in expenses, as well as increased claims."

John Wight, executive vice president of finance added: "Gross premiums earned of $35.4 million was consistent with the previous year and total income increased by two percent to $34.8 million. Investment income increased by seven percent but this was partly the result of a loss in the preceding year.

"True investment performance was satisfactory, being consistent with the comparable period in 2000 despite falling interest rates and a general softening of the investment climate."

Mr. Wight also said that at June 30, total assets stood at $163 million with shareholders equity at $48 million.

Mr. Titterton added: "Loss experience was generally considered to be good with some improvement in health claims. However, property/casualty claims in the comparable year of 2000 were exceptionally low, whereas in 2001 they increased to anticipated levels.

"We still consider this to be a good result but when compared to the unusually good results for the same period in the previous year, net property/casualty claims increased by 76 percent or $650,000 with the resulting effect on net earnings."

Mr. Titterton said that, in addition to the claims developments, the company had projected a substantial increase in expenses due to the many changes being initiated.

He said that in the comparable period of 2000, the company had an unusually large number of staff vacancies due partly to the refocusing of the organisation, creating new positions and the raising of performance standards.

Most of theses positions and others subsequently created were successfully filled and there has also been substantial investment in information systems, including replacing the pensions administration system and further enhancements to BF&M's market leading e-commerce capabilities.

Mr. Titterton said: "Our investment in systems technology and in building our human resource capabilities will continue and is critical to the future success of the group.

"In the short term, this will depress net earnings but these developments are necessary for the company's future competitiveness and success."

Mr. Titterton also pointed to BF&M's strong lead in e-commerce capabilities and the resulting re-engineering of other systems, the introduction of the Global Health Series of policies, and the formation of Barr's Bay Properties Limited to develop a new five storey office building adjoining BF&M's Insurance Building on Pitts Bay Road as three of the highlights of the first half of 2001.

"Our business remains strong and profitable and we are focused on developing the capabilities that we will need to win in the business environment of tomorrow," said Mr. Titterton.

Mr. Titterton says the company has rebounded from the prolonged and highly publicised legal proceedings surrounding the formation of BF&M Limited in 1991 and its acquisition of the domestic business.

BF&M contributed $35 million to an out-of-court settlement in 1999 as well as paying $6.6 million in legal fees, leaving that year's earnings floundering in the red.

However, the year after the legal wrangling was finally over, the company produced net earnings of $10.8 million

Mr. Titterton said yesterday that the legal issues were " ancient history" and added: "The settlement affects profits only to the extent that we had at the beginning in 2000, a reduction in investments and a bank loan. One reduces income and one increases costs."

But Mr. Titterton said these issues had been covered in annual reports and extensively in the local media and had been relegated to the history books long ago.