2020-2021 has been another strong year of financial performance and growth in shareholders’ equity for the Argus Group.

Our operating earnings – which is our key measure of the profitability of the Group – is $21.1 million for the fiscal year ended March 31, 2021 compared to $19.1 million in the prior year.

Since March 2018, our shareholders’ equity has increased from $105.9 million to $149.7 million as of March 31, 2021. During this time, we have returned $15.3 million to shareholders through dividends.

The growth in our shareholders’ equity has been achieved through solid operating earnings, strategic acquisitions and revenue diversification, achieved while maintaining a high client retention rate and continued commitment to careful and diligent custodianship of policyholder and shareholder assets.

Our track record for increasing the shareholders’ equity has been solid against a backdrop of unusually challenging times. However, a strong balance sheet and careful capital management have allowed us to invest in our strategy to create long-term sustainable value and growth. In addition, our statutory capital remains well in excess of the capital required by regulators.

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Key Performance Metrics

Our reported net earnings for the year to March 2021 is $10.1 million and total comprehensive income is $30.7 million. This includes the growth in the value of the Argus Group’s assets. However, the headline net earnings for the year only tells part of the story. To understand the financial results for the year, we must separate out the long-term annuity business. This aspect of our operations generates attractive long-term profits and returns on capital deployed, but the accounting and valuation rules we currently must follow introduce a lot of volatility in the reported net income figure, especially over shorter periods.

The key performance metrics for the Argus Group for the year have remained strong despite the economic and operational challenges that exist across the world today. The strength in our insurance operations is reflected in the combined operating ratio, which is a metric to track the overall performance of our underwriting operations by comparing premium income to the cost of claims and operating expenses.

For the year to March 31, 2021, the combined operating ratio for the insurance businesses within the Group was a healthy 70.4 percent compared with 80.8 percent for the year ended March 2020. Diligent treasury management has ensured operating cash flows during the period have remained strong with a net operating cash inflow of $28.2 million compared to net inflow of $30.3 million over the previous year.

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Core Business Performance

Our core business, which consists of all lines of business except Annuity business and private placement life business which is held-for-sale, has demonstrated incredible resilience during a period of extreme economic and operational upheaval, delivering net earnings for the year of $20.9 million (2020 – $12.7 million) and total comprehensive income of $27.8 million (2020 – $4.5 million).

COVID-19 has materially affected many of the businesses and individuals we serve, and the Argus team has worked tirelessly to retain and acquire new clients through excellent client management and bespoke solutions for clients and industries hardest hit by the pandemic.

Brexit became a reality and our businesses in Europe have had to navigate the long and complex process of operating on both sides of the Brexit divide, with Malta in the EU and Gibraltar in the UK.

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Core Revenue

Revenue in the fiscal year ending March 31, 2021, from net insurance premiums in our core health, domestic life and property and casualty (P&C) insurance business declined $10.1 million or approximately 9 percent compared to the prior year. Our special premium rebate programmes, the June 2019 Bermuda hospital financial reform, and a reduction in the insured health population were the primary drivers for the decline in net insurance premiums during the period.

Commission and fee income generated by our core business, as shown in the adjacent chart, has increased by $16.9 million or approximately 53 percent compared to the prior year. We have a deliberate strategy to improve the resilience and diversification of our business by increasing the sources of fee-based income. We are pleased with the strong growth in this type of income during the year.

Significantly contributing to the growth in fee income are the acquisitions of the medical practices in Bermuda in June 2020 and the acquisition of an additional insurance brokerage business in Malta in September 2019.

Income from our European insurance brokerage operations has remained robust and income from our asset management and pension administration businesses have benefited from the investment market growth we’ve seen this year.

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Core Claims

We continued to deliver on our commitment to put our customers at the heart of everything we do. This philosophy drove many of our decisions to support our personal lines customers through an exceptionally difficult year.

For example, reduced traffic on roads due to COVID-19-related lockdowns resulted in a decrease in claims incurred in our motor insurance business. We passed some of these savings back to our clients in the form of rebates offered to car, motorcycle and small business customers on their motor insurance policy premiums.

In March 2021, we launched a $5 million premium rebate scheme for our qualifying health insurance policyholders in recognition of the impact COVID-19-related restrictions have had to health care access.

Insurance claims within our core business for the year were notably lower than normal, primarily due to lower economic activity caused by the COVID-19-related lockdowns and travel restrictions. Core business claims for the year declined $19.5 million or approximately 25 percent compared to the prior year.

Limitations to health care access during the first wave of COVID-19 (notably, elective overseas medical procedures) and cost-containment measures undertaken following the acquisition of One Team Health, contributed to the decrease in the insurance claims during the period.

It is anticipated that underutilisation during periods of shelter-in-place or travel restriction will cause an uptick in claims over the coming years, as many procedures have been deferred rather than cancelled.

We are analysing emerging health data to understand the potential for an increase in the frequency or severity of future health claims as a consequence of the lower utilisation of standard and preventative benefits during the past year.

As far as property insurance is concerned, Bermuda experienced a busy 2020 hurricane season. Hurricane losses incurred during the year from Hurricanes Paulette and Teddy were mitigated by our robust reinsurance programme.

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We will continue to work closely with our clients to ensure plan benefits fit their evolving needs so they can continue to focus on what matters most.

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Operating Expenses

We remain committed to the careful and judicious management of operating expenditure. Our recent acquisitions have added to the overall operating cost base of our core business by $14.0 million when compared to the prior year. Elsewhere in our operations, we have taken meaningful steps to reduce the ongoing cost of doing business. These steps include investments in technology that enable the ongoing digitisation of product and service delivery.

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Elsewhere in our operations, we have taken meaningful steps to reduce the ongoing cost of doing business.

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Annuity Business

As noted earlier, our annuity business generates attractive long-term profits and returns on capital deployed, but current accounting and valuation rules introduce a lot of volatility in the reported net income figure, especially over shorter periods.

The annuity business remains well managed and governed, supported by best-in-class investment managers and a team of professional actuaries. The Argus Group’s high-quality fixed income portfolio remains aligned to the interest rate sensitivity of our longer-term annuity liabilities.

Our annuity business reported a net loss for the year of $9.7 million and total comprehensive income of $2.1 million. The net loss contributed by our annuity business – driven by short-term market factors that impact reported net income under current accounting rules – only tells part of the story.

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A more representative view of the economics and underlying profitability of the annuity business is shown in the Annuities: Total Comprehensive Income chart, which brings together the impact of the increase in the annuity liability and the investment portfolio gains that are reported through ‘other comprehensive income’. The chart shows the meaningful contribution of the annuity business to Group net earnings and total comprehensive income over many years. The year-on-year volatility in the reported net earnings is not indicative of a change in the underlying profitability; rather, it’s the result of accounting and valuation rules which we currently must follow.

This means that, for at least another two years before the new international accounting standards IFRS 17 and IFRS 9 are introduced, users of financial statements are required to pull together the pieces to see that the annuity business has good fundamental economics, contributing positive long-term profits and returns on capital deployed.

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As David Brown notes in his Letter to Shareholders, the Argus Group has made some difficult decisions to put the Company on the path to sustainable, profitable growth. One of these decisions was to dispose of businesses that weren’t a good strategic fit for Argus.

We’re pleased to announce that, subsequent to the year end, the Group entered into an agreement to dispose of our private placement life business.

The sale was completed on July 1, 2021. The total consideration for the sale is equal to the audited book value at March 31, 2021 plus a premium of $2.0 million.

For the year ended March 31, 2021, the private placement life business contributed a net loss of $1.0 million and total comprehensive income of $0.9 million.



Our commitment to careful and diligent custodianship of policyholder and shareholder assets is central to the Argus Group’s investment philosophy.

Our investment portfolio is designed to ensure funds are readily available to satisfy our obligations to policyholders and to enhance shareholder value by generating appropriate long-term, risk-adjusted yields. We have a clear objective to maximise returns without taking inappropriate levels of risk.

During the year we have taken further steps to realise value from our remaining less liquid legacy assets and reinvested the proceeds in global securities in line with our Group investment policy statement.

COVID-19 has profoundly affected global markets. During the last quarter of fiscal year 2020, we saw markets in turmoil as the impacts of the virus unfolded globally. However, the current fiscal year saw a rapid recovery in equity and credit markets as lockdown measures eased, and there were signs of economic recovery.

Against this backdrop, the Group’s portfolio generated positive returns. Combined investments generated a total return of $31.9 million – $13.1 million reported through the income statement, and $18.8 million of unrealised gains reported as other comprehensive income on the balance sheet.

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The Argus Group continues to hold a high quality, diversified, global investment portfolio. 89 percent of the Group’s investments are in fixed income bonds, of which 98 percent are classified as investment grade.

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The Board has declared a dividend of ten cents per share payable on August 27, 2021 for shareholders of record on July 28, 2021.

This results in a 6 percent increase in the dividends declared for the 2020-21 fiscal year compared to the prior fiscal year.

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