Shares of Hamilton Insurance Group have gained more than 40 per cent over the last year, and an investment adviser who downgraded the stock to “hold” in September, is having second thoughts.

The Seeking Alpha analyst concedes: “In hindsight, I should have simply maintained them as a buy with the stock adding another 12 per cent, though shares did reach my $23.25 buy target before rallying strongly.

“With updated financials and shares above my price target, now is a good time to revisit HG.”

Hamilton is a diversified niche insurance company with a fairly even mix of business between reinsurance and insurance exposure, with about half occurring in Bermuda and half overseas.

The report, Hamilton Insurance Group: Positive Momentum Continues, observes: “The company has been aggressively growing and adding scale, with premiums growing about 20 per cent annually over the past five years.”

A “Hold” rating is maintained, with an explanation of limited near-term upside and moderating industry pricing.

“HG reported robust Q3 results with improved combined ratios, but margin gains were mainly due to unusually low catastrophe losses, not underlying underwriting improvement.

“The company’s unique Two Sigma hedge fund investment continues to outperform, while share buybacks and book value growth support capital strength.”

In the third quarter, the group earned $1.32 on a (generally accepted accounting principle) basis and $1.20 on a run-rate basis. Net premiums were up over 16 per cent from last year to $523 million.

The report concluded: “I see no rush to sell Hamilton, given its excellent operating results. I do not see enough upside to buy here, but I continue to see HG as a suitable hold, and on pullbacks below $26.25, I would add more shares in this quality insurance company.”

In recent third quarter reporting, Hamilton demonstrated that its Bermuda segment generated $52 million of underwriting income with a combined ratio of 80.7 per cent.

This was dramatically better than the 89.3 per cent last year, given a 13.2 per cent improvement in cat losses.

Reinsurance rates are expected to face further pressure at January 1 renewals, although Hamilton itself had no catastrophic losses in the third quarter.

Hamilton Insurance Group (NYSE: HG) closed Friday at $26.50.