Excellent Hamilton Re credit ratings affirmed
AM Best has affirmed the financial strength ratings of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of Bermudian-based Hamilton Re Ltd and Hamilton Insurance Designated Activity Company of Ireland, each a wholly owned subsidiary of Hamilton Insurance Group Ltd of Bermuda.
The outlook of these credit ratings is positive.
The ratings reflect Hamilton’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The very strong balance sheet strength assessment is supported by Hamilton’s strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio.
AM Best said recent strategic shifts that have been executed by the company, including a transition towards a more diversified underwriting portfolio, had helped moderate the underwriting performance volatility, which previously weighed on Hamilton’s balance sheet strength.
Hamilton’s balance sheet strength assessment of very strong also reflects its relatively high-risk investment strategy on the portion of invested assets managed by Two Sigma Investments LP, an SEC-registered investment adviser.
The operating performance assessment of adequate is supported by Hamilton’s historical investment returns and underwriting results, which have trended favourably over the past five years, although the group has not yet achieved underwriting profitability.
Underwriting improvements have stemmed from the group’s diversification efforts and the favourable rate environment, as well as the re-underwriting measures across the business and the recent integration of the Pembroke Managing Agency platform at Lloyd’s acquired in 2019.
Year-end 2022 performance was hindered by unrealised losses in the group’s fixed-income portfolio, although it is AM Best’s expectation that these unrealised losses will not be realised, and the securities will be held to maturity.
The business profile assessment of neutral is supported by Hamilton’s continued expansion of its diversified global insurance and reinsurance platform. Risk management capabilities are considered appropriate and in line with the group’s risk profile.
The positive outlooks reflect AM Best’s expectation that Hamilton will maintain its improving trend of profitability and continue generating earnings that are accretive to the group’s balance sheet strength.
Positive rating actions could result if Hamilton continues to display an improving trend of underwriting profitability, along with continued accretive investment performance, thereby lessening the performance volatility that has weighed on its balance sheet strength assessment.
The ratings could be affected negatively if turmoil in the capital markets severely impacts the group’s risk-adjusted capitalisation and/or investment performance.