Argus Group Holdings Ltd CEO Alison Hill expressed disappointment after AM Best issued a negative rating outlook for the company’s insurance subsidiaries.The ratings agency, which also affirmed the Bermuda-based group’s financial strength rating at B++, said the negative outlook reflected “the decline in liquidity and financial flexibility of the Argus Group”.In a statement issued on Friday, AM Best said Argus had recorded a net loss in each of the past three years and had seen its capital decline, mostly as a result of writedowns of its investments.AM Best affirmed the issuer credit ratings of “bbb” of Argus Insurance Company Ltd, Somers Isles Insurance Company Ltd and Bermuda Life Insurance Company Ltd.“We are pleased that AM Best has recognised the success of our operating units and confirmed our financial strength of B++ (Good) and issuer credit ratings (ICR) of bbb,” Ms Hill told The Royal Gazette.“Naturally we are disappointed that they have revised the outlook to negative, however, we continue our progress to transition the invested assets portfolio to more liquid and higher quality investments.“As previously stated in the 2011 half-year results, this is a turning point for the Argus Group and we are confident of a return to more normal times.”AM Best noted that Argus was recording positive underwriting results in its property/casualty and life operations. It added that Somers Isles, the group’s domestic health insurer, had reported stabilisation in its loss ratio as a result of product design, rate actions and medical management programmes undertaken by the company.Best added that Argus was maintaining “more than adequate risk-adjusted capitalisation”.However, the rating agency said it was “concerned with potential liquidity issues if a catastrophe loss or multiple catastrophe losses occur”.A year ago, AM Best downgraded Argus’s financial strength rating to B++ from A-.Argus was heavily impacted by the collapse in the value of Butterfield Bank shares. It owned more than seven percent of the bank, before Butterfield’s shares plunged more than 90 percent between 2008 and 2011.Under Best’s ratings regime, a negative outlook indicates that a company is experiencing unfavourable financial and market trends, relative to its current rating level. If these trends continue, the company has a good possibility of having its rating downgraded.In its commentary, Argus stated: “Argus Group’s outlook could be revised to stable if there is a successful transition of the invested assets portfolio to more liquid and higher quality investments that better match the liabilities of each insurance entity; or there is increased liquidity at the holding company.“Key rating factors that could result in negative rating actions include unfavourable earnings from operations, additional losses due to asset valuation or any further decline in capital levels on a consolidated basis or at the insurance subsidiary level.”Over the past three years, Argus has posted losses totalling $144 million. Most of the losses have been a result of the fall in the value of its investments, rather than the performance of its operating units.