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Argus Group Announces Half-Year Results to September 2002
ARGUS earnings decreased significantly from the corresponding period last year. Whilst health insurance underwriting results returned to an acceptable level the poor performance of equity investments has reduced earnings in two areas of our business, one being the investment income earned by the Group's capital and free reserves and the other our life insurance and annuity business.
The decline in total premium income is as a result of the inclusion of a large non-recurring annuity premium in the prior year figure. Otherwise, both motor and health insurance premiums rose significantly in this half-year as premium rates were adjusted to reflect high claims levels. Premiums also increased as a result of a change in the reinsurance structure of our accident portfolio. Only catastrophe and aggregation risks are now reinsured and our retained premium income has thus increased. Income from commissions and management fees provided an improved contribution to the Group's earnings.
As a result of increased premiums, the performance of the health insurance portfolio returned to an acceptable level but the high incidence and ever-increasing cost of large individual claims continue to be of concern.
Mr. Simons stated that "earnings in our pensions and life insurance operations have also been adversely affected by the poor performance of equity markets. Income on the pension portfolio is essentially asset based and, as a result of poor investment results experienced in the last few years, income has declined rather than increased. Interest rates earned on the fixed interest investments supporting our annuity liabilities have remained at very low levels and, whilst this means that carrying values are enhanced, there is no contribution to earnings".
Operating expenses have escalated considerably during the recent few years of intense internal change as we replaced computer hardware and systems and introduced new products. This escalation has been much reduced during the six-month period under review in which expenses rose by only 4.7%.
"Given the uncertainty of investment markets it would be unwise to predict the Group's earnings for the second six months of the financial year but, if the Group's investments hold their current values and no adverse claims fluctuations occur, we expect earnings in the second six months to be at least at the same level as those in the first half of the year," Mr. Simons said