BF&M’s net profit jumped 86 percent to $32.7 million in 2011 on “excellent” investment performance and a one-time gain of $9.6 million from the company reducing its health insurance benefits for retired employees.The insurer’s CEO John Wight told The Royal Gazette yesterday that as of the end of 2011, new retirees commencing January 1, 2012 can still be in the BF&M plan but instead of paying only 50 percent of the premium, they will now have to pay all of it.He said that with the rising cost of healthcare in Bermuda, the cost to BF&M for providing healthcare benefits was increasing by “hundreds of thousands of dollars a year” and the company determined this was “unsustainable in the long-term”.“BF&M sponsors a post retirement health benefit plan for its employees,” Mr Wight told us. “Prior to January 1, 2012 the company paid 50 percent of health insurance premiums on behalf of qualifying retirees and the retiree paid 50 percent. Due to the extensive and increasing cost of providing health insurance to retirees, qualifying employees retiring after December 31, 2011 will still receive the full medical benefits of the plan but will now pay 100 percent of the premium.“The reserve that the company had set up in respect of this post-retirement benefit was released into income in 2011, resulting in a one-time gain of $9.6 million.”BF&M follows a trend by Bermuda and overseas companies of curtailing retiree benefits.Net income for the year ended December 31 was $32.7 million, resulting in a return on shareholders equity of 18 percent, BF&M said. These results exceeded shareholders’ net income of $17.5 million for 2010.Short term claims and adjustment expenses decreased 31 percent to $15.7 million, while operating expenses increased 10 percent to $49.7 million.Life and health policy benefits increased one percent to $115.4 million — only a small increase overall because the figure took into account health, as well as life and annuities pensions.Mr Wight said claims paid to KEMH had actually increased a concerning 17 percent in the year, compared to around three percent overseas.“We were satisfied with the company’s financial results,” Mr Wight said. “Normal operating results in 2011 were consistent with those in 2010, but a one-time gain in 2011 of $9.6 million relating to the restructuring of post-retirement health insurance funding was the main reason for the large increase in net income in 2011 versus 2010.“In addition, BF&M’s investment performance in 2011 was excellent, and the difference between the fair value of investments and reserves for BF&M’s life insurance companies produced a net gain of approximately $5 million.”Mr. Wight added that “the company’s balance sheet continues to be very strong. Equity attributable to shareholders at December 31, 2011 was $193 million. Assets totalled $892.3 million of which $75.4 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 June 29, 2012.”Also in 2011, AM Best reaffirmed the financial strength ratings of A (Excellent) to BF&M’s two principal operating subsidiaries, BF&M General Insurance Company Limited and BF&M Life Insurance Company Ltd.“There is no insurance company in Bermuda writing domestic insurance business with ratings this strong,” Mr Wight said.AM Best cited BF&M’s “consistent positive net income, steady premium growth, high level of capital, and strong market share”.Gross premiums written for the year ended 2011 were $234 million. Investment income increased to $42.4 million versus $19.7 million in 2010.“The company has a conservative investing philosophy which has resulted in very good performance during times of volatility and uncertainty in the bond and equity markets,” Mr Wight said. “Commission and other income decreased eight percent in 2011 versus 2010 to $24.3 million.”