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Argus: local insurer with European interests

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Fluctuations: how Argus shares have traded on the BSX during this decade (Graphic by Byron Muhammad)

The Bermuda Stock Exchange last month launched its “Own Your Share of Bermuda” campaign to raise awareness of opportunities to invest in the island’s public companies. The Royal Gazette is supporting the effort by publishing weekly features on each of the 13 domestic companies listed on the BSX. In the first of the series, Scott Neil looks at Argus Group Holdings Ltd.

Investors looking for a long-established Bermudian business will find one in the Argus Group.

It has been around for more than 60 years, and its products and services range from health and life insurance to pensions, property insurance, financial planning and wealth management.

The company has a market capitalisation of about $96 million, and $2.2 billion of assets under its control.

Outside Bermuda, it predominantly operates in Gibraltar and Malta. One of the group’s 17 subsidiaries is Argus Financial Ltd, or AFL, a joint venture with Barbados-based Cidel Bank & Trust, focused on asset management and individual wealth management.

During the past four years Argus’s twice-a-year share dividend has risen in yearly increments of one cent. The most recent dividend, paid in January, was nine cents, lifting the 2016-17 annualised dividend yield to 4.9 per cent, compared with 4.2 per cent the previous year.

Between 2012 and late 2016, Argus’s average share price has fluctuated within a 63-cent range, with an average low of $3.53 in 2013, and an average high of $4.17 in 2015.

This week, the stock has been trading around $4.50 on the Bermuda Stock Exchange.

In its most recent interim financial report, released in December, Argus stated its purpose as “delivering long-term sustainable returns to our shareholders through exceptional customer service, delivered by engaging and motivating our staff”.

The company’s products and services are split into three distinct areas; employee benefits, global property and casualty, and wealth management.

The employee benefits segment includes health, life insurance, disability income, retirement income and pensions.

In the global P&C segment are commercial property and liability, home, motor, marine and travel, while the wealth management division covers investment and asset management, financial planning and private placement life insurance.

Argus states it places equal focus on its customer value and shareholder value. To customers it is “delivering market-leading flexible solutions and high-quality service of excellent value”, while for shareholders it seeks to generate “long-term returns on shareholders’ capital whilst managing short-term volatility”.

In its report, Argus said it looks to deliver earnings from operational and investment performance. It has been broadening its business mix both geographically and by products, while working on reducing the volatility in its investment portfolio.

When it comes to its strategy for capital, the company said that meant balancing mandatory regulatory capital requirements in each of the territories it operates with the need to invest to support innovation, overseas expansion and rewarding shareholder with dividends.

In the financial report, reflecting the period from March to September last year, Argus reported it had reduced its holdings in Bermuda equities by 35 per cent, which brought a one-off positive impact of $3.1 million for the six-month financial results.

The company is following a strategy of reducing concentration of risk. This contrasts to a decade ago when almost two-thirds of its yearly investment income was derived from its portfolio of Bermuda equities.

When the island’s economic boom years abruptly ended as the global financial crisis took hold in the late 2000s, the souring of various investments took its toll on Argus Group, which lost about $144 million between 2009 and 2012.

Argus’s shares went as high as $17.75 in March 2008. But three years later they had fallen to $4.75, and in April 2011 the company paid its last dividend ahead of a two-and-a-half year hiatus.

In its 2011 financial statement, Argus reported it was making “continued and significant efforts to place our house in order following the effects of the traumatic financial meltdown in world investment markets and the lingering recession experienced over the last three years”.

The company recommenced dividend payments in 2013.

In its most recent full-year financial report, for the year ending March 31, 2016, Argus’s stated net income was $7.3 million, down from $16 million, while its adjusted net income before unrealised investment gains and losses was $15.3 million, almost identical to the 2015 figure.

Its return on average equity was 6 per cent, down from 14.3 per cent, and its combined operating ratio was 89.5 per cent.

Alison Hill, Argus Group CEO, in the interim half-year report released in December, said: “The Argus Group’s brand promise of ‘Our Interest Is You’ underpins how we do business.

“Our culture is to do the right thing on behalf of our people, customers and shareholders.

“We believe by doing this, we can create long-term sustainable value for all. This philosophy has resulted in a positive impact on our earnings.”

The group’s half-year net income, as of September 30, was $8.2 million, up from $3 million for the corresponding period in 2015.

Argus Group trades on the Bermuda Stock Exchange using the ticker AGH.BH.

Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Past performance is no guarantee of future results.

Argus Group CEO Alison Hill