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Argus Group Announces Year End Earnings

31 May 2001

Hamilton, Bermuda: 31 May 2001 - Today, Gerald Simons, President and Chief Executive Officer of the Argus Group announced earnings for the year ended March 31, 2001 of $14.22 million, slightly down on the previous year's record earnings of $14.69 million. However, from a shareholder's point of view the year could well be considered the best ever, as the value of the Group's investment in local equities rose to record levels led by an impressive increase in the value of bank shares following the relaxation of Bermuda's 60/40 ownership rules. Under applicable Canadian accounting rules such unrealised gains may only be recognised in earnings at the rate of 15% per annum and the unrecognised portion of such gains are excluded from the balance sheet. At March 31, 2001 these unrecognised gains totalled $20.06 million and at the time of this press release a further $10.53 million of unrealised gains had accrued. Whilst these gains will be reflected in the earnings of future years at the rate of 15% per annum they currently represent just over $5.00 per share of shareholder value which is not reflected in shareholders' equity.

Overall, the Group's underwriting results were in line with last year with both Net Premiums and Claims and Benefits rising by 8.7%. The increase in investment income of 3.5%, in a year in which overseas markets lost value and interest rates on fixed income securities remained low, was mainly attributable to the recognition, at the permitted 15% level, of unrealised gains on Bermuda equities. Commissions, fees and other income rose by 4.4% to $8.18 million reflecting, through increased commissions earned by our CGU agency, the increased property and casualty rates of the hardening market.

Operating expenses, as forecast last year, increased considerably as new computer systems came on line and a new health insurance product was implemented. We also retained all the staff hired to administer the new business generated by last year's pension legislation in order to cope with the voluminous reporting requirements it has imposed. We continue to believe that our new products and administration systems will result in improved earnings in the years ahead. At 21.0% of total income, operating expenses and commissions are higher than historical levels and steps are now being taken to reduce them.

General account assets of the Group now total $232 million and separate account assets under the Group's control are $300 million. Shareholders' equity at March 31, 2001 stands at $96 million.

The Argus Group is a multi-line insurance organization and the leading provider of employee benefits in Bermuda. Argus is the first and only Bermudian owned insurance company to be rated "A" (Excellent) by A.M. Best the international insurance rating agency.