Health insurance payouts by Argus Insurance have spiralled so high that the company may be forced to limit benefits, the company said in its annual report.

Argus reported earnings of $12.47 million for the year ended March 31, 12.26 percent lower than figures reported the year before. The company general and health insurance claims rose an "alarming" 30 percent for the year to nearly $51 million, the biggest single factor affecting earnings.

"Reinsurance has been retained for such risks for the coming year but there is a very real concern that reinsurers will limit coverage in future years and thus force us to impose benefit restrictions," the report stated.

The report said claims for overseas treatment and prescription drugs showed particularly large increases, in part because of the inflationary cost of medical care in the United States. It also said that with improved technology, procedures that were once rare, such as heart by-pass operations, are now routine, and that claims for those types of operations had risen. The report also noted that number of claims costing more than $25,000 increased by 50 percent during the year.

Argus has already increased health coverage premiums to make up for the year's poor performance.

The company's motor portfolio also suffered losses, although premiums were increased to counter the rising cost of claims. Argus said its pensions line of business struggles because of the high costs of administering a large number of small plans, but said results would improve as funds under administration grow.

Operating expenses rose $2.17 million to $17.48 million, which the company attributed to changes of products, computer hardware and operating system. The company said those expenses had now peaked.

Investment income, normally secondary for the insurance company, was the most significant contributor to Argus' earnings. The company earned $19.1 million from its investments during the year, of which $8.9 million was contributed by local equities. Last year, investment income was $14.26 million.