An improved investment performance helped BF&M Ltd. post a massive increase in profit for the first quarter of this year.

The insurer and investment company yesterday announced a profit of $5.92 million for the first three months of the year, compared to $0.89 million in the same period last year.

Investment income increased nine percent to $4.37 million.

But BF&M chief executive officer John Wight noted that sales of some sorts of insurance had fallen, as a result of organisations cutting staff during the economic downturn.

Overall, gross premiums written for the period increased nine percent over 2009 to $59.18 million.

The health insurance segment recorded a loss as claims soared. Policy benefits, most of which relate to health insurance policies, saw the company pay out $97.97 million — an increase of 54 percent.

The $5.9 million of earnings gave shareholders an annualised return on equity of 14 percent, the company said. BF&M's board of directors decided to maintain its quarterly dividend at 20 cents per share for shareholders of record at June 30, 2010.

"We were overall satisfied with the company's financial results, although the improvement was largely as a result of the company's improved investment performance," Mr. Wight said.

"The company's earnings from underwriting activities were negatively impacted by higher health claims which resulted in a rare loss for this major line of business.

"All other lines of insurance business performed more or less the same as that of the corresponding prior period, and in line with expectations.

"Several group customers have reduced their staffing levels due to the challenging economic conditions in Bermuda and this resulted in less premium income from, in particular, health and life insurance."

BF&M said the fair value of assets classified as held for trading decreased earnings by $313,720 principally due to the drop in the value of local Bermuda equities held by the company.

This, however, compared very favourably to a drop in value of $10.67 million for the the corresponding period in 2009, when the investment portfolio was adversely affected by an overweighting of US Treasury securities.

Shareholders' equity at March 31, 2010 was $173.78 million. Assets totalled $745.68 million, of which $54.32 million was held in cash and short-term deposits.

Commissions and other income increased nine percent to $5.32 million. Claims and adjustment expenses increased by 20 percent to $5.59 million. Operating expenses increased nine percent to almost $10 million.