Argus Group Holdings Ltd. today announced a net full-year loss of $18.4 million - due mainly to the plunge in value of its stake in Butterfield Bank <> after what chief executive officer Gerald Simons described as a “challenging year”.

The insurer, pension provider and investment company said its operating earnings had been strong for the year through March 31, 2010, and its board has maintained its quarterly dividend to shareholders at 10 cents per share.

The losses came on the investment side and were dominated by a $29 million fall in Argus’s stake in fellow Bermuda Stock Exchange-listed company Butterfield Bank during the second half of the fiscal year.

According to Bloomberg data, the Argus Group owns about 9.8 million shares in the Butterfield. During Argus’s fiscal year, the value of those Butterfield shares fell from $3.90 to $1.45 - a decline of more than 60 percent.

Butterfield’s share price fall was also a major factor in Argus last year announcing its first-ever annual loss of $115.7 million.

However, an injection of $550 million in fresh equity capital in March from a group of mainly overseas investors appears to have helped the bank to stabilise. On Friday, Butterfield was trading at $1.40.

Another significant item mentioned in the Argus results was the provision of $10 million against “potentially uncollectable commercial loans”. The company declined to give any further details on the nature of the loans in question, which were Bermuda loans.

Mr. Simons said that without the two major investment loss items, the group’s core operations would have produced net income of around $20 million for the year.

“As we celebrate our 60th year of operations, we are confident that the Argus Group is well positioned for the future with core business units that are strong and producing steady cash flow,” Mr. Simons said.

Gross premiums written increased by 5.6 percent arising from new business and increases in premiums “to achieve acceptable underwriting ratios”. Overall, claims, policy and actuarial benefits rose by 7.7 percent over the prior year, reflecting the trend of increasing health care costs offset by lower claims than expected in the property and casualty businesses.

In its annual report, Argus commented on the escalating costs of health care.

”We recognise that the escalating costs of health care and the resulting higher premiums have been difficult for many employers and employees to bear,” the report stated. “In 2009 and again in 2010 we have attempted to hold premium increases to a minimum.

”However, claims increases were higher than expected. Group health claims increased 12.4 percent during this past year which also saw higher incidences of very expensive cases, primarily due to treatments related to heart disease and cancer.

”Clearly, this is a situation that cannot continue forever. The Argus Group is working with other health care stakeholders to find a solution in order to preserve the system of health care that has served Bermuda so well for over three decades.”

Commissions, management fees and other income fell by 8.3 percent as fees from Argus’s investment-related operations declined with the value of assets under management, especially in the international life and annuity portfolios. This was partially offset by enhanced ceding and profit commissions earned by the group’s property and casualty operations.

Argus said the containment of operating expenses was “a key strategic objective for management” and the increase for the year was held below inflation at one percent.

Argus’s shareholders’ equity at March 31 was $97.5 million <> well in excess of regulatory requirements for insurers.

Total General Fund Assets of the Argus Group fell by $10 million to $519 million.