BF&M Insurance Group yesterday cited escalating health care costs for an adverse effect on the group?s performance during the first six months of the year.

In his report for the half year to June 30, 2004, CEO & president Glenn Titterton said that the company?s strong sales and business retention resulted in a substantial improvement in income. Gross Premiums Written increased by 17 percent to $ 55,862,134 from $47,735,363 in 2003. Net Premiums Earned increased by 18 percent while investment income increased 13 percent. Total Income, net of reinsurance costs, increased by 15 percent. However, Mr. Titterton said that because of poor experience in the company?s Health and Life business, total expenses including claims increased by 27%. As a result, Net Earnings decreased by 48 percent to $ 3,324,673 (2003 - $6,373,265). For the first six months of the year, Total Assets stood at $256 million with Shareholders Equity at $69 million.

Chief financial officer John Wight said that claims and policy benefits increased by 35 per cent during the period. He said: ?Health insurance is our largest line of business by premium volume and therefore a 14 percent increase in our group health loss ratio caused considerable concern. A comprehensive review is being undertaken which will provide us with actuarial and underwriting information needed to develop the necessary solutions.?

Mr. Titterton said. ?We marvel at the many wonders of modern medicine that help us to detect and save patients with heart disease or cancer for example, claims for both of which are rising rapidly; but we must also accept that there is a huge price to be paid for these advances. An example would be our ability today to save the lives of children born many months prematurely. We had two claims for such pre-mature births within the period and another subsequently, which is an unexpectedly high number for one insurer in such a short time frame. It may surprise many that the overall cost of each such pre-mature birth is generally between $0.5 million and $1 million.?

Mr. Titterton said that while reinsurance protection reduces the financial impact to BF&M, rising healthcare costs still have a material adverse affect on the Group?s results.

?Several claims of this magnitude quickly extinguish any hope of a health insurer covering its costs and making any profit on the business. We have also been adversely impacted by an unusual number of large death claims.?

?While similar problems are occurring in other countries, Mr. Titterton used his report to call on Government, employers and employees to help curb the rapid escalation in health care costs or risk further large increases in health insurance premiums. He said: ?We have been very concerned that the escalating cost of health care has been difficult for employers and their employees to bear. These costs drive insurance premiums ever upwards. For the 2004/2005 year we attempted to hold premium increases to a minimum. We might have succeeded temporarily, however claims increased considerably faster and greater than anticipated. Unfortunately the result was that we lost a substantial amount of money providing health insurance coverage during the first six months of the year.?

The company also reported expenses continue to reflect a substantial investment in staff development and information systems as well as a portion of the direct and indirect expenses associated with the $5 million project to extensively renovate and refurbish the Insurance Building. Mr. Titterton said that BF&M?s determined action to bring its Motor Account back to a more viable position after many consecutive years of losses, is beginning to show results while the company?s pension assets under administration grew 22 percent in the period.