BF&M said its half-year profit fell 16 percent to $10.2 million as the company saw more impaired mortgages.But gross premiums written for the six months ended June 30 were $184.1 million, an increase of 16 percent over 2012.“BF&M’s further impairment on mortgages was a combination of commercial and residential, due to the ongoing challenges facing certain businesses and individuals,” BF&M president & CEO, John Wight said yesterday.“The company still lends funds to qualified buyers on a very selective basis in the current economic environment.”Investment income for the second quarter reflected a $17.3 million decrease in the value of investments for the period as the marginal increase in interest rates decreased the fair value of the company’s extensive fixed income portfolio, the company said.Offsetting this was a $17.2 million decrease in the value of policyholder benefits as a result of the company’s “disciplined asset liability matching policy which limits volatility of reported earnings as a result of interest rate swings in either direction”.Short term claims and adjustment expenses increased by 26.7 percent to $13.4 million and life and health policy benefits fell by 36 percent to $32.5 million.Mr Wight told The Gazette: “Life insurance liabilities are valued at fair market value on the company’s balance sheet. As interest rates increased in Q2, the value of both fixed income investments and policyholder liabilities that they support, decreased in value. Thus the effect of interest rate changes in Q2 did not materially affect BF&M’s net earnings because of the asset liability matching policy that the company utilises.”In a statement accompanying the results, Mr Wight commented: “Financial results for the first six months of 2013 were down from the corresponding period in 2012, principally as a result of further impairments on Bermuda based properties where BF&M holds a first mortgage, and the rise in interest rates in the second quarter that decreased the value of BF&M’s bond portfolio.”He continued: “The Company’s core operations relating to insurance and investment advisory and administration services continued to perform well, despite the ongoing challenges that impact our individual, commercial, and group customers in Bermuda, Barbados, and Cayman, where the majority of the business is operated from.”Mr. Wight added that “the Company’s balance sheet continues to be very strong. Equity attributable to shareholders at 30 June 2013 was $213.4 million. General fund assets totalled $1.1 billion of which $94.5 million was held in cash and short term deposits. Based on the Company’s strong balance sheet, the Board of Directors maintained the dividend of 20c per share for shareholders of record at 30 September 2013.”BF&M was very pleased to have AM Best reaffirm last week the A (Excellent) financial strength ratings of its two principle Bermuda based subsidiaries, BF&M General Insurance Company Limited and BF&M Life Insurance Company Limited.“There is no insurance company in Bermuda writing domestic insurance business with ratings this strong,” BF&M said.BF&M noted that when comparing the results of 2013 with 2012, it is important to note that BF&M Limited acquired Island Heritage Holdings, a leading Caribbean company with extensive insurance operations, on 30 March 2012, and thus the 2012 Q2 consolidated BF&M earnings do not include the 2012 Q1 results of this company.Short term claims and adjustment expenses increased by 26.7 percent to $13.4 million and life and health policy benefits decreased by 36 percent to $32.5 million.Operating expenses increased 10 percent to $33.0 million.