AM Best has affirmed the A- (excellent) financial strength rating of the operating companies of Bermudian-based insurer Argus Group Holdings Ltd.The ratings agency said the ratings reflected Argus’s “very strong” balance sheet strength, as well as its “adequate operating performance, limited business profile and appropriate enterprise risk management”.AM Best also flagged up an impact on the company from healthcare funding reform in Bermuda and noted that Argus’ health segment contributes more than 70 per cent of the company’s net premiums.Argus underwrites about one third of the Bermudian health insurance market, Best said, adding that the healthcare reform would “significantly affect the funding dynamics” of the market.In its commentary, Best stated: “Changes in funding Bermuda’s only hospital took effect June 1, 2019 in what is deemed a first phase of the island nation’s health reform.“The current fee-for-service payment model, funded through the standard premium rate, has been replaced by a set grant paid directly by the Bermuda Government and funded in part through an increase in the Mutual Reinsurance Fund. “The change in the funding approach will reduce the premiums retained by Argus by the amount of the increase in the MRF. The corresponding claims will now be retained by the Bermuda Hospitals Board. The details and the timing of a next phase of reform is uncertain at this time.”The rating agency noted that Argus’s operating performance in the year ended March 31, 2019 improved significantly over the previous year in which the company had a large write-off of non-performing assets. It added: “The company is focused on reducing its exposure to illiquid assets and redeploying capital into high quality and marketable securities to increase liquidity and add financial flexibility. “Argus reported favourable earnings through the second quarter (September 30, 2019) in its health division, but these were offset by losses from Hurricane Humberto that affected property/casualty lines.” AM Best anticipates that “the Argus Group will continue to reduce its level of asset risk from its property holdings, and prudently manage its catastrophe risk exposure to maintain its strongest level of balance sheet strength assessment over the medium term”.AM Best affirmed the long-term issuer credit rating of “a-” of the group’s subsidiaries, Argus Insurance Company Ltd and Bermuda Life Insurance Company Ltd. Concurrently, the Long-Term ICR of Argus Group was affirmed at “bbb-”. The outlook for all these ratings is stable.