Argus Group downgraded
Credit rating agency AM Best Co has downgraded the financial strength rating of insurer Argus Group Holdings Ltd following a “significant decline” in the company's capital position over the past two years.
Argus now has a financial strength rating of B++, downgraded from A- (excellent).
The issuer credit ratings of Argus's subsidiaries, Argus Insurance Company Ltd, Somers Isles Insurance Company Ltd, and Bermuda Life Insurance Company Ltd have been downgraded to “bbb” from “a-”.
“The rating downgrades of the Argus Group and its subsidiaries reflect the significant decline in the capital positions of Bermuda Life and Argus Group over the last two years due to asset valuation write-downs mainly on Bermuda-based equity investments, and to a lesser degree, impairments of domestic commercial mortgages,” Best said in a statement today.
“The Bermuda domestic capital market continues to be pressured and significant appreciation of the value of Bermuda Life's investment is not expected in the near term.
“Although the operating performance of Bermuda Life has improved, margins continued to be pressured due to the decline in investment income related to the low rate of return on both equity and fixed income invested assets. Additionally, Somers Isles' operating margins are being pressured due to an increase in the medical loss ratio as a result of higher utilisation and medical cost inflation.”
Best noted that Argus Insurance has recorded favourable underwriting and overall results in recent years and continues to maintain solid risk-adjusted capitalisation.
Offsetting rating factors include the Argus Group's long-standing participation in the domestic Bermuda insurance market, solid market share and improved operating results on both a consolidated and individual insurance company level.
Argus chief executive officer Alison Hill said: “Naturally we are disappointed by today's news that our ratings agency, AM Best, has downgraded its financial strength and issuer credit ratings for Argus Group Holdings Limited and its subsidiaries. We are however pleased that AM Best recognise our strong operating performance and still considers our financial strength rating to be secure, at the same time upgrading us to stable outlook.
“Argus remains financially strong with core business units that are performing well and producing steady cash flow. At September 30, 2010, the company's half-year, shareholders' equity stood in excess of $107 million, substantially over and above the statutory capital required to conduct the group's various insurance businesses.
“The Argus Group is extremely well-established in the domestic insurance and pensions markets, having celebrated its 60th year of operations in 2010, and continues to offer a diverse and robust range of high quality products and services. I remain confident that the Argus Group is well-positioned to face the challenges ahead as we continue to build on decades of experience and a healthy capital base.”