Argus Group Holdings Ltd. is working with fund managers and lawyers to explore whether it will be possible to recover any of the money at risk in some of its pension and investment fundsaffected by exposure to the alleged Bernard Madoff fraud.

In a letter sent out to shareholders yesterday, Argus also said it was working with its lawyers in Bermuda and the US to gather information and examine the route taken by other Madoff-related lawsuits as it considers the best course of action.

Argus revealed on December 15 — four days after New York-based financier Mr. Madoff was arrested on suspicion of running a $50 billion Ponzi scheme — that its Argus Select Funds' Moderate Fund, used by pension and some investment clients, had a 2.1 percent exposure to Madoff.

In effect, that meant that an Argus pension holder with a $50,000 fund would stand to lose between zero and $1,050, depending on the pension option selected.

Additionally clients who invested in the AFL Portfolios administered by Argus Financial Ltd. (AFL), also had exposures ranging between 1.3 percent and 1.8 percent.

Yesterday Argus revealed that its Argus International Life Bermuda Ltd. (AILBL) unit had also been affected, in particular with regard to some of the investments which supported its life insurance and annuity products for international clients.

Argus chief financial officer David Pugh said it would not be appropriate at this time to put a dollar amount on the Group's exposure, while legal avenues were being explored.

Argus' share price fell 45 cents yesterday to close Bermuda Stock Exchange trading on $9.30 — its lowest level in nearly three years.

Argus chief executive officer Gerald Simons told The Royal Gazette yesterday: "The Argus Group remains very strong from a balance sheet perspective. Our half-year figures showed we have shareholders' equity of nearly $203 million at September 30, 2008." The statutory capital and surplus of the Group's insurance subsidiaries was $227 million at the end of March last year, he added — more than 11 times the minimum amount the companies were required to maintain by law.

Mr. Simons said the Madoff scandal would have an impact beyond the losses it has inflicted on financial institutions and individuals across the world.

"In addition to those personal losses, I think the wider community has lost a degree of faith in financial institutions," he said. "The concern is: Who can you trust?"

Advice from a fund management firm of high repute had led to Argus's own exposure to Madoff, he added. "The overwhelming majority of banks and investment advisers are honest," Mr. Simons said. "We expect them to be and most, I believe, are."

The Argus Group has no direct investments with Mr. Madoff's investment companies, but does have indirect exposure through other money managers. Yesterday's letter said AFL had an investment in the Momentum AllWeather Fund, a Bermuda-based fund of hedge funds, which is exposed to Madoff through the Kingate Global Fund.

"AFL has built a strong business based on rigorous investment standards and we are disappointed to be the victim of an alleged fraud," Mr. Simons wrote in the letter. "We are working with Pioneer Alternative Investments, managers of Momentum AllWeather Fund, to determine if it is possible to recover any funds."

Mr. Simons also said the decline in value of the underlying assets of AILBL policies would "affect the level of future policy fees".

"As a consequence, the goodwill, which Argus currently shows in its financial statements in respect of the acquisition of this business, may now have to be written down," Mr. Simons added.

Goodwill is an accounting term used to reflect the portion of the book value of a business not directly attributable to its assets and liabilities — its intangible assets.

AILBL was previously the Bermuda-based unit of Tremont International Insurance, acquired by Argus in 2007. Argus' acquisition of MassMutual Bermuda last year added to AILBL's international reach.

The Group is also moving forward on legal fronts with its response to the Madoff alleged fraud. "Argus is now working diligently with Appleby, our lawyers in Bermuda, and with our counsel in New York City, Morrison & Foerster LLP, to gather all the facts and determine the best way to proceed in order to protect the interests of Argus and its shareholders," Mr. Simons wrote.

"We are, among other things, in the process of reviewing related lawsuits that have already been filed in the United States. Obviously the process is at an early stage; we continue to investigate the facts surrounding this alleged fraud and what possible claims can be pursued."