Leading local insurer The Argus Group said yesterday that its half-year results fell 21.9 percent after being battered by poor equity investment performances.

Argus president and chief executive officer Gerald Simons said net income fell from $6.44 million in the six months to September 30, 2001 to $5.02 million in the same period this year.

"Argus earnings decreased significantly from the corresponding period last year," he said. "Whilst health insurance underwriting results returned to an acceptable level, the poor performance of equity investments has reduced earnings in two areas of our business, one being the investment income earned by the Group's capital and free reserves and the other our life insurance and annuity business."

Mr. Simons said total premium income declined by an unspecified amount "as a result of the inclusion of a large non-recurring annuity premium in the prior year figure".

He said motor and health insurance premiums rose as premium rates were adjusted to reflect high claims levels and due to a change in the reinsurance structure of the company's accident portfolio in which only catastrophe and aggregation risks are now reinsured. Mr. Simons said that despite the increase in premiums, "the high incidence and ever-increasing cost of large individual claims continue to be of concern".

"Earnings in our pensions and life insurance operations have also been adversely affected by the poor performance of equity markets," Mr. Simons said.

"Income on the pension portfolio is essentially asset based and, as a result of poor investment results experienced in the last few years, income has declined rather than increased. "Interest rates earned on the fixed interest investments supporting our annuity liabilities have remained at very low levels and, whilst this means that carrying values are enhanced, there is no contribution to earnings."

Mr. Simons also said that operating expenses rose by 4.7 percent in the period, a lower figure than in "recent years" when expenses rose due to "intense internal change as we replaced computer hardware and systems and introduced new products".

"Given the uncertainty of investment markets it would be unwise to predict the Group's earnings for the second six months of the financial year but, if the Group's investments hold their current values and no adverse claims fluctuations occur, we expect earnings in the second six months to be at least at the same level as those in the first half of the year," Mr. Simons said.