Insurer BF&M Ltd yesterday announced profits fell 21 percent to $4.5 million for the first quarter of the year on reduced investment income.Gross premiums written also fell, by four percent over 2011, while operating expenses rose nine percent to $11.8 million.The company’s first quarter net income compares to $5.7 million for the quarter ended March 31 last year and was a return on shareholders’ equity of nine percent, the company said.BF&M president and CEO John Wight said: “Financial results were down from the comparative period in 2011 due to a decrease in investment income. As BF&M has the majority of its investments in high grade corporate bonds and US Treasury securities, the increase in interest rates in Q1 resulted in the fair value of the securities decreasing in value.“International Financial Reporting Standards require these unrealised losses to be recorded in the Statement of Income. The earnings from the company’s underwriting operations were good, in the context of the challenging economy in Bermuda.”Mr Wight added that “the company’s balance sheet continues to be very strong”.He said equity attributable to shareholders at March 31 was $196 million.Assets totaled $918 million, of which $94 million was held in cash and short term deposits, he said.The board of directors maintained the dividend of 20 cents a share for shareholders of record at June 30.BF&M noted that AM Best’s financial strength ratings for BF&M’s two principal operating subsidiaries, BF&M General Insurance Company and BF&M Life Insurance Company are A (Excellent).“There is no insurance company in Bermuda writing domestic insurance business with ratings this strong,” BF&M said.AM Best cited BF&M’s “consistent positive net income, steady premium growth, high level of capital, and strong market share”.Gross premiums written for the period decreased four percent over 2011.Investment income was down due to a $5.7 million decrease in the fair value of assets, resulting from the drop in the value of US denominated bonds in the quarter. Commissions and other income increased 16 percent to $6.3 million.Short term claims and adjustment expenses increased by ten percent to $7 million and life and health policy benefits decreased to $19.1 million.