Argus Group Holdings Ltd. yesterday announced a $42 million loss for the six months ended September 30 — the first loss in the group's 26-year history.

The company said last night the results came about as a result of the current, difficult market conditions leading to unrealised losses of $56 million reflecting a decline in the market value in assets such as equities.

These unrealised losses appeared in the earnings statement under new accounting rules introduced in April last year.

Argus chief executive officer Gerald Simons told The Royal Gazette he was satisfied with operating performance, with net premiums written up 5.7 percent and investment income also rising compared to the same period last year.

And he stressed the company had no liquidity problems, meaning that the unrealised losses will not affect the company's ability to meet its obligations as an insurer, pension provider and employer. Argus also announced an unchanged quarterly dividend of 16 cents per share.

"The company is well capitalised and has the financial strength to deal with present financial conditions," Mr. Simons said.

One of the assets that declined during the period was Argus's seven-percent shareholding in Butterfield Bank.

"What appears to have happened is that shares in banks are not in favour right now, in spite of strong earnings and diversification," Mr. Simons said.

The CEO also suggested that Argus might have been a victim of its own past success, when it comes to reporting results under the new accounting rules. "The reason the loss is as great as it is, is because of the long history of solid earnings and the huge amount of shareholders' equity built up over time," Mr. Simons said. He explained that money backing the Group's insurance exposure and pension obligations was mainly invested very conservatively, in bonds and fixed-income securities. It was the surplus capital that was invested on the more volatile stock markets, largely via an array of mutual funds.

On April 1, 2007 accounting rules were changed to a "fair value basis" and at that time the company was required to increase shareholders equity by $81 million to account for the change in the rules, but was not allowed to reflect that gain in earnings.

Mr. Simons said volatility in the company's earnings would inevitably increase over time, as the accounting rules required Argus to report the unrealised losses and gains in its "held for trading" investments.

"Volatility will increase and there's nothing much we can do about it," Mr. Simons said. This did not affect the company's ability to pay claims and pensions, or salaries to staff and dividends to shareholders, he said.

The company said the increase in premiums earned, net of reinsurance, reflected efforts to achieve acceptable underwriting ratios by appropriate adjustments to premiums and had been boosted by the lack of catastrophes.

Operating expenses have increased by eight percent as a result of continuing investment in information systems and additional costs associated with the expansion of the company's international life and annuity division.

General account assets of the Argus Group at September 30, 2008, totalled $592 million and segregated funds assets under its control stand at $1.3 billion. In total, the Group now has assets of $1.9 billion under its administration. Shareholder's equity at September 30, 2008, stood at $203 million.