BF&M said yesterday it made a $21.5 million profit in 2012, but has put aside $5 million for bad mortgages.In stating that 2012 was a good year for BF&M, president and CEO, John Wight added: “We were disappointed however that the prolonged and severe economic climate and depressed real estate market in Bermuda resulted in certain mortgagees potentially unable to fulfil their contractual obligations to the company.“This resulted in the requirement to record an impairment provision of approximately $5 million in the consolidated statement of income for 2012.“This compared with an impairment provision for mortgages of approximately $500,000 in 2011.”Mr Wight told The Royal Gazette: “BF&M is a small player in the mortgage market and we don’t advertise however we do have both commercial, but mostly residential, mortgages.”The insurance company said its $21.5 million full-year profit — a return on shareholders’ equity of 10.7% — compared to net income of $32.7 million in 2011.Operating expenses increased 28% to $63.1 million as BF&M acquired Cayman-based Island Heritage last March, and thus nine months of operating expenses from this company that was not included in the 2011 figures.BF&M stated that the challenging economic environments in the other islands where the BF&M Group operate mirrored those of Bermuda.“2013 looks very much like a continuation of the 2012 economic climate and it may take several years before we see significant improvement in these regions. In the meantime our businesses continue to perform well against their peers,” the company said.Mr Wight added: “We were pleased with the fundamental operating performance of the companies in the BF&M Group against the backdrop of continuing recessionary pressures on our customers in Bermuda and the Caribbean where BF&M operates its businesses.“In comparing the financial results of 2012 against 2011 it is important to recall that 2011 had a one-time gain of $9.6 million related to the future funding of the Company’s retiree health plan. This gain was fully recognised in the 2011 financial statement year, and thus did not reoccur in 2012.”The financial results for 2012 include those of Island Heritage Holdings Ltd, a Cayman-based company that writes principally property and casualty insurance in certain Caribbean islands through one of its subsidiary companies, for the period from 30th March 2012, the effective date of the acquisition of that company. This acquisition of Island Heritage further strengthened BF&M’s position as a strong regional insurer in the Caribbean, operating in fourteen countries.AM Best maintained their Financial Strength Ratings for BF&M’s four principal operating companies, based in Bermuda, Barbados, and Cayman. AM Best’s rating system is designed to provide an opinion of an insurer’s financial strength and ability to meet ongoing obligations to policyholders.Mr Wight added that “the Company’s balance sheet continues to be very strong. Equity attributable to shareholders at 31st December, 2012 was $208.4 million. Assets, including segregated funds, totalled $1.5 billion of which $87.9 million was held in cash and short term deposits. Based on the company’s strong balance sheet, the Board of Directors maintained the dividend of 20 cents per share for shareholders of record at 28th March, 2013.”Year-on-year comparisons of figures are influenced by the operating results of Island Heritage since being consolidated into BF&M at the start of the second quarter.Gross premiums Written for the year increased 37% over 2011 to $319.7 million.Investment income decreased 41% over 2011 to $17.2 million as a result of a decline in the change in fair value of investments held.Commission and other income increased 94% to $47.1 million.Short term claim and adjustment expenses increased 16% to $18.2 million and life and health policy benefits decreased 9% to $105.2 million.