Insurer and investment company BF&M Ltd. reported profits of $7.93 million for the first six months of this year — a fall of almost 40 percent compared to last year.

The company said in its earnings statement yesterday that earnings had been hit by a fall in the value of investments and a rise in health insurance claims.

Accounting rules adopted by the company in 2007 require that the $7.26 million fall in the fair value of investments flows through the net earnings column.

Policy benefits, which include health insurance claims, shot up by $11.4 million, or 34 percent, compared to last year.

Half-year net income broke down to 95 cents per share, compared to $13.18 million, or $1.62 per share, in the same period last year. The profit represented a nine percent annualised return on shareholders' equity.

BF&M chief executive officer John Wight said yesterday: "As with all financial services companies, our results have been negatively impacted by the economic climate, globally and specifically in Bermuda and Barbados, where we conduct the majority of our business."

"Our results were also impacted by the investment markets.

"Despite the decrease in value, the company continues to hold a high quality portfolio of investments on behalf of our policyholders and shareholders. At June 30, 2009 BF&M had bond investments totalling $334 million.

"One hundred percent of these investments were rated investment grade. The company has no direct exposure to sub-prime mortgages."

One the rise in health claims, Mr. Wight said: "In our 2008 Annual Report we reported that during 2009 several health care reforms were anticipated which we expected would increase domestic claim costs beyond which we felt were reasonable for local residents to bear through future rate increases.

"Health claims for the months of April, May, and June were higher than the corresponding period in 2008 and negatively impacted our operating results."

BF&M's total assets at June 30 were $725.43 million. Shareholders equity was $161.1 million, up 5.6 percent from 12 months earlier.

Gross premiums written increased nine percent for the half-year period compared to 2008 to $117.96 million. Investment income increased four percent to $8.93 million.

Commissions and other income decreased 13 percent to $9.73 million, as the assets under management on investments that the company advises on and administers decreased, due to declining investment balances as compared to the corresponding period in 2008.

The BF&M board maintained the quarterly dividend of 20 cents per share for shareholders of record at September 30, 2009.

Ratings agency AM Best affirmed the ratings of the group's two principal operating subsidiaries BF&M General and BF&M Life.

"These A (Excellent) ratings are the strongest of any insurer in the Bermuda domestic insurance market and reflect the strong performance and capitalisation of these companies," Mr. Wight said.