Insurance company Argus Group suffered a $18.6 million loss for the year, impacted by a large number of major medical claims, and a decision to exit a variety of illiquid investments.

There was $19.5 million of writedowns associated with disposing of illiquid, noncore assets as the group restructured its balance sheet.

Argus’s results were also impacted by claims in its health business that were $10.4 million higher year-on-year. Among the major medical claims was an unusually high number of difficult pregnancies and premature babies.

Elsewhere, the group’s general portfolio of investments generated positive results; 84 per cent of its investments are fixed income bonds, of which 98 per cent are investment grade.

Alison Hill, chief executive officer of Argus, said: “At the core of the group’s investment philosophy is our commitment to careful and diligent custodianship of policyholder and shareholder assets. The group’s investment portfolio is designed to ensure funds are readily available to satisfy our obligation to policyholders and to enhance shareholder value by generating appropriate long-term risk-adjusted yields.”

Regarding the move out of the noncore asset positions that resulted in the significant writedowns, Ms Hill said: “Exiting these assets frees up resources and creates additional liquidity that can be used to drive further diversification and growth. These decisions have not been made lightly; after an exhaustive process to explore and evaluate the various options, it’s clear that now is the time to implement our strategy.”

Peter Dunkerley, chief financial officer, added: “We have a conviction that taking the short-term loss is going to generate the best long-term value for our shareholders and all our stakeholders.”

The group’s financial strength rating was upgraded to A- (excellent) by AM Best in December.

Ms Hill said: “We have continued our balance sheet optimisation strategy during the year with the sole focus of putting our capital to its best use while ensuring long term sustainable value.

“We are pleased that our diligent capital planning means that, despite our reported loss for the current year, the group remains in a healthy capital position and we are able to sustain our dividend to shareholders at 9 cents per share.”

Argus Group’s three core divisions remained positive, with wealth management operating results improving from $0.1 million to $0.4 million, global property & casualty rising to $7.5 million from $4.7 million. However, the operating earnings from employee benefits in Bermuda dropped from $13 million to $0.2 million — this division includes health insurance.

During 2015 and 2016, Argus saw a plateauing trend in health claims inflation and passed on premium savings to customers. In hindsight, the group believes that it made that move too quickly, which contributed to the loss in the health business this year.

Looking ahead, Argus has signed an agreement to sell its private placement life business, a noncore business segment that is described as a drag on the group’s resources.

Ms Hill said: “The terms of the deal will mean a gain of up to $6 million will be reported over the next three years, based on the persistency of the business.”