Argus Group Holdings Ltd made a loss of $2.3 million for its most recent six-month accounting period as health insurance claims rose.

Alison Hill, Argus’s chief executive officer, said the insurer was concerned about the “unsustainable” cost of the Bermuda healthcare system.

The insurer also announced that AM Best had upgraded its financial strength rating to A- (excellent) from B++ (good).

The loss in the half-year period ending September 30 compared to net earnings of $8.2 million in the corresponding six months last year.

Argus said the cost of net benefits and claims increased by $6.7 million with the main driver being the health division.

The company added: “The utilisation of medical services increased due to both the high incidence of chronic disease, and an ageing population who require a greater number of medical services.”

Ms Hill said: “Argus continues to be deeply concerned about the unsustainable cost of the healthcare system in Bermuda.

“We continue to invest in our population health management initiatives such as partnering with the Premier Health and Wellness Centre for the Diabetes Reversal Programme, which is free to eligible Argus members.

“While the group was spared from one of the most devastating hurricane seasons of recent times, it was hit with non-storm related large claims within its property and casualty division.

“However, our risk mitigation programme and comprehensive reinsurance arrangements have significantly reduced the financial impact of these losses.”

The group’s combined operating ratio was 93.6 per cent for the current period, up from 85.4 per cent last year.

AM Best upgraded Argus’s long-term issuer credit rating to “a-” from “bbb+”, as well as raising the financial strength rating to A-.

Ms Hill said: “Despite the short-term decline in earnings for the period to September 30, 2017, this rating reflects the strength of our balance sheet, our enterprise risk management programme and our consistent favourable operating performance.

“Argus always seeks to generate attractive long-term returns while managing short-term volatility.”

Argus generated investment income of $7.7 million in the six-month period. And the group’s investment portfolio reported a positive total return, including capital appreciation, of $14.3 million as credit spreads tightened, and global equities rallied.

Combined fee income, which represents fees generated by Argus’s employee benefits, wealth management and insurance brokerage businesses of $10.5 million, increased 17 per cent over the prior year.

Client retention, new business and investment growth resulted in an increase in assets under management, a key driver for the increase in the combined fee income.

Alison Hill continues: “Our investment portfolio is designed to ensure funds are readily available to satisfy our promises to policyholders and to enhance shareholder value by generating appropriate long-term risk-adjusted yields.

“In the prior year, we did the right thing for our pension members by reducing fees to enhance their savings and are now seeing this translate into real long-term value.”

On the balance sheet, total assets including segregated fund assets stand at $2.3 billion.

Shareholders’ equity attributable to shareholders of the company has increased to $134 million, in excess of the statutory capital required by regulators.

The Argus board declared a dividend of nine cents per share payable on January 12, 2018 for shareholders of record on December 27, 2017. This represents a total dividend of 18 cents per share based upon the audited financial statements of the Group for the year ended March 31, 2017 and an annualised dividend yield of 4.3 per cent.