Insurer Argus Group Holdings Ltd’s profit for the first six months of its financial year fell by 77 percent to $1.6 million, chiefly as a result of unrealised losses in the value of its fixed-income investments.

Argus chief executive officer Alison Hill said in a statement today that operational results were strong and that the steep fall in net income from $7.1 million achieved in six months through the end of September last year was caused by uncertainty in fixed-income markets.

The value of US government bonds has fallen this year as their yields have risen in the expectation of an imminent tightening of monetary policy by the US Federal Reserve. The fall in value of these assets has a major impact on the net income figure.

Argus booked investment losses of $3.2 million during the six months — due mainly to unrealised losses emanating from its fixed-income portfolios.

The company said net premiums earned in the period fell by seven percent compared with the year prior reflecting the lingering recession in Bermuda as clients continue to seek ways in which to reduce costs.

There was an 18 percent decrease in net benefits and claims paid out by Argus, primarily due to lower than anticipated claims both locally and overseas, and an absence of major windstorms or other catastrophic events in the group’s property and casualty businesses.

“Although modest, this profit is supported by strong performance from our core business operations of $7.5 million as a result of achieving high client retention levels in a competitive environment and managing operating expenses,” Ms Hill said.

“The recent uncertainty in fixed income investment markets worldwide resulted in the Group incurring unrealised investment losses. The losses are regarded by management as a short-term setback to the otherwise positive development of Group Net Earnings.

“The efforts towards Balance Sheet strengthening, including investment restructuring activities, continue to focus upon the longer term by closely matching the Group’s liabilities with appropriate assets in a considered and orderly fashion.

“The leadership team is focused on delivering excellent products and services to our customers, on delivering long-term sustainable value to our shareholders and delivering on our commitment to the community.”

Total assets remained steady at $1.9 billion, while shareholders’ equity increased to $96.1 million.

Commissions, management fees and other increased in the period due to increased ceding commissions earned by the group’s property and casualty operations and improved fees arising from its investment-related businesses.

Operating expenses decreased by four percent as cost containment measures took effect.

The Board has declared a dividend of six cents per share payable on February 28, 2014 for shareholders of record on January 15, 2014. This represents a final dividend based upon the audited financial statements of the Group for the year ended March 31, 2013.