(Hamilton, Bermuda, December 7, 2020) - Against a backdrop of economic and operational upheaval due to COVID-19 and ongoing changes in the regulatory environment, Argus Group Holdings Limited (the “Group” or the “Argus Group”) is today reporting a $0.7 million net loss attributable to shareholders for the six months to September 30, 2020. However shareholders’ equity increased 18% over the same period, from $122.1 million as at March 31, 2020 to $144.6 million as at September 30, 2020.
Alison Hill, Chief Executive Officer of the Group states: “When we look at the underlying earnings it is evident that the Argus Group has had a strong six months of financial performance. The modest net loss – driven by short-term market factors that impact reported net income under current accounting rules – only tells part of the story. Once the corresponding investment gains – reported within equity – are factored in, our overall book value has grown by $22.5 million over the past six months."
“The growth in value of our business has been achieved through solid operational earnings, strategic acquisitions and revenue diversification whilst maintaining a high client retention rate and continued commitment to careful and diligent custodianship of policyholder and shareholder assets.”
The Argus Group reports the following:
- A dividend of 9 cents per share for shareholders of record as of December 31, 2020 payable on January 28, 2021 has been declared
- 18% growth in shareholders’ equity supports ongoing investment in strategic expansion and diversification
- Accounting and valuation-driven movements in the reported results of our annuity business overshadows strong underlying earnings in the core business operations of $12.0 million, resulting in a modest reported net loss of $0.7 million
- Strong client retention across all businesses driven by innovative COVID-19 financial relief measures and humanitarian support
- $31.3 million total return from investment portfolio, $7.4 million reported through the income statement and $23.9 million of unrealised gains reported as other comprehensive income on the balance sheet
- AM Best Financial Strength Rating of A- (Excellent)
COVID-19 has materially affected the businesses and individuals we serve and challenged the Argus team to find new products and innovative ways to deliver our services. Bermuda experienced a busy hurricane season and ongoing uncertainty in the regulatory landscape in key lines of business. In Europe, Brexit has become a reality and our businesses have had to navigate the long and complex process in order to be able to continue to operate on both sides of the Brexit divide with Malta within the European Union and Gibraltar remaining part of the UK.
Our acquisition of two Bermuda-based medical practices in July, along with OTH, our Canadian-based care and network management business, allows us to create a unique healthcare ecosystem. Our goal is to create a Better Health Partnership focused on delivering quality integrated healthcare solutions that incentivise healthy outcomes whilst managing down health cost inflation and over-utilization. In this partnership, our aims and our focus are all aligned. By joining insurance and health-care together, we aim to make quality care more affordable for more people.
The Argus Group’s core business operations, excluding annuities and disposal group operations, has demonstrated incredible resilience and generated net income for the six months of $12.0 million. The Bermuda Health Financing Reform, which took effect in June 2019, and a reduction in the insured population are the primary drivers for the decline in net insurance premiums during the period. Core business claims for the six months declined $12.3 million or approximately 29.4% compared to the prior year.
We have a deliberate strategy to improve the resilience and diversification of our business by increasing the sources of fee-based income. We are therefore pleased that our recent acquisitions have helped increase our fee income for the six months by $4.8 million or approximately 49.4% compared to the prior year.
Our recent acquisitions have added to the overall operating cost base of our core business by $7 million when compared to prior year. Elsewhere in our operations we have taken meaningful steps to reduce the ongoing cost of doing business. We remain committed to careful and judicious management of operating expenditure.
Our annuity business reported a net loss of $11.5 million during the six months. The year-on-year volatility in the reported net earnings is not indicative of a change in the underlying profitability, but rather a result of accounting and valuation rules which we currently must follow. The decline in market yields during the period drove an increase in the annuity liability (reported within net income) and a well matched increase in the value of the investments that back the annuity liability (reported as ‘Other Comprehensive Income’ on the balance sheet).
Since March 2018, our shareholders’ equity has increased from $105.9 million to $144.6 million as of September 30, 2020. Our track record for increasing the shareholders’ equity has been solid against a backdrop of challenging times. Our statutory capital remains well in excess of the capital required by regulators.
Alison Hill concludes: “Our strong operations allowed us to support the communities where we operate with donations and in-kind support for many individuals and organisations. Together we strive to operate a responsible and sustainable business, working with local market partners to promote social and economic development for tomorrow’s society and environment.”
“We remain committed to reinvesting in the business – balancing profitability, risk, growth and strategic investments for the long-term benefit of our customers, our shareholders, our colleagues and our community.”