Net Income of $43.6 million and Gross
Premiums Written Growth of 18.3%
Hamilton Insurance Group, Ltd. (NYSE: HG; “Hamilton” or “The
Company”) today announced financial results for the third quarter
ended September 30, 2023.
Commenting on the third quarter 2023 financial results, Pina
Albo, CEO of Hamilton, said:
“It has been a momentous few weeks for Hamilton having closed
our initial public offering on November 14th, and we are pleased to
be reporting our first quarterly results as a public company.
For the quarter ended September 30, 2023, Hamilton recorded net
income of $44 million and a combined ratio of 92.6%. For the nine
months year to date, net income was $132 million and the combined
ratio was 90.2%.
These results reflect the remarkable transformation of our
business over the past few years, notably our commitment to
underwriting profitability. I am incredibly proud of the Hamilton
team and what we have achieved together.
Hamilton will continue to lean into the current market with the
benefit of newly raised capital. Our underwriting platforms in
Bermuda, at Lloyd’s and in the US are focused on specialty
insurance and reinsurance, and we see tremendous opportunity to
expand our business and relationships with key customers and
intermediaries.”
Consolidated Highlights – Third Quarter
- Net income of $43.6 million;
- Annualized return on average equity of 9.8%;
- Gross premiums written of $474.1 million, with year over year
growth of 18.3%;
- Overall combined ratio of 92.6%, with strong performance across
both reporting segments; International combined ratio of 97.7% and
Bermuda combined ratio of 86.9%;
- Underwriting income of $24.9 million;
- Catastrophe losses of $7.2 million; and
- Net investment income of $46.3 million; Two Sigma Hamilton Fund
return of $51.3 million, or 3.1%, fixed income portfolio loss of
$7.8 million, or -0.5% and other investment income of $2.8
million.
For the Three Months
Ended
($ in thousands, except for per share
amounts and percentages)
September 30, 2023
September 30, 2022
Change
Gross premiums written
$
474,123
$
400,811
$
73,312
Net premiums written
383,566
300,811
82,755
Net premiums earned
337,036
294,943
42,093
Underwriting income (loss)
$
24,866
$
(66,075
)
$
90,941
Combined ratio
92.6
%
122.5
%
(29.9
%)
Net income (loss) attributable to common
shareholders
$
43,583
$
(136,117
)
$
179,700
Income (loss) per share attributable to
common shareholders - diluted
$
0.41
$
(1.32
)
Book value per common share
$
17.35
$
16.71
Change in book value per share
2.7
%
(7.1
%)
Return on average common equity -
annualized
9.8
%
(30.4
%)
For the Three Months
Ended
Key Ratios
September 30, 2023
September 30, 2022
Change
Attritional loss ratio - current year
54.8
%
49.6
%
5.2
%
Attritional loss ratio - prior year
(0.1
%)
10.2
%
(10.3
%)
Catastrophe loss ratio - current year
3.9
%
28.3
%
(24.4
%)
Catastrophe loss ratio - prior year
(1.8
%)
(0.6
%)
(1.2
%)
Loss and loss adjustment expense ratio
56.8
%
87.5
%
(30.7
%)
Acquisition cost ratio
23.3
%
22.3
%
1.0
%
Other underwriting expense ratio
12.5
%
12.7
%
(0.2
%)
Combined ratio
92.6
%
122.5
%
(29.9
%)
- Gross premiums written increased by $73.3 million, or 18.3%, to
$474.1 million with an increase of $37.9 million, or 14.1% in the
International Segment, and $35.4 million, or 26.9% in the Bermuda
Segment.
- Net premiums written increased by $82.8 million, or 27.5%, to
$383.6 million with an increase of $50.3 million, or 27.3% in the
International Segment, and $32.5 million, or 27.9% in the Bermuda
Segment.
- Net premiums earned increased by $42.1 million, or 14.3%, to
$337.0 million with an increase of $22.3 million, or 14.3% in the
International Segment, and $19.8 million, or 14.3% in the Bermuda
Segment.
- Catastrophe losses (current and prior year), net of
reinsurance, were $7.2 million, or 2.1 points, driven by the Hawaii
wildfires, Hurricane Idalia, Vermont Floods and certain smaller
wind events, partially offset by favorable development on
convective storms from earlier this year and favorable prior year
development.
- Net favorable attritional prior year reserve development was
$0.4 million.
Segment Underwriting Results – Third Quarter
International Segment
For the Three Months
Ended
($ in thousands, except for
percentages)
September 30, 2023
September 30, 2022
Change
Gross premiums written
$
307,140
$
269,228
$
37,912
Net premiums written
234,621
184,319
50,302
Net premiums earned
178,632
156,307
22,325
Underwriting income (loss)
$
4,057
$
(1,363
)
$
5,420
Key ratios:
Attritional loss ratio - current year
54.6
%
46.7
%
7.9
%
Attritional loss ratio - prior year
(5.3
%)
(0.1
%)
(5.2
%)
Catastrophe loss ratio - current year
5.1
%
11.9
%
(6.8
%)
Catastrophe loss ratio - prior year
0.4
%
0.4
%
0.0
%
Loss and loss adjustment expense ratio
54.8
%
58.9
%
(4.1
%)
Acquisition cost ratio
26.4
%
26.8
%
(0.4
%)
Other underwriting expense ratio
16.5
%
15.2
%
1.3
%
Combined ratio
97.7
%
100.9
%
(3.2
%)
- Gross premiums written increased by $37.9 million, or 14.1%,
primarily driven by growth in specialty insurance and reinsurance
classes and hardening rates on property insurance classes,
partially offset by a modest decrease in casualty insurance.
- Catastrophe losses (current and prior year), net of
reinsurance, were $9.8 million driven by the Vermont floods,
Hurricane Idalia and the Hawaii wildfires.
- Net favorable attritional prior year reserve development was
$9.5 million or 5.3 points driven by reserve releases on our
specialty and property classes of business.
- The acquisition cost ratio decreased by 0.4 points in the third
quarter, compared to the same period in 2022 primarily driven by a
change in business mix.
- The other underwriting expense ratio increased by 1.3 points in
the third quarter, compared to the same period in 2022 driven by
increased headcount as we built out underwriting teams supporting
the corresponding increase in premium volume.
Bermuda Segment
For the Three Months
Ended
($ in thousands, except for
percentages)
September 30, 2023
September 30, 2022
Change
Gross premiums written
$
166,983
$
131,583
$
35,400
Net premiums written
148,945
116,492
32,453
Net premiums earned
158,404
138,636
19,768
Underwriting income (loss)
$
20,809
$
(64,712
)
$
85,521
Key ratios:
Attritional loss ratio - current year
55.1
%
53.0
%
2.1
%
Attritional loss ratio - prior year
5.7
%
21.7
%
(16.0
%)
Catastrophe loss ratio - current year
2.6
%
46.8
%
(44.2
%)
Catastrophe loss ratio - prior year
(4.2
%)
(1.8
%)
(2.4
%)
Loss and loss adjustment expense ratio
59.2
%
119.7
%
(60.5
%)
Acquisition cost ratio
19.8
%
17.2
%
2.6
%
Other underwriting expense ratio
7.9
%
9.8
%
(1.9
%)
Combined ratio
86.9
%
146.7
%
(59.8
%)
- Gross premiums written increased by $35.4 million, or 26.9%,
primarily attributable to increases related to expanded
participation and improved pricing on the renewed casualty
reinsurance and property insurance lines and new business.
- Catastrophe losses (current and prior year), net of
reinsurance, were $2.5 million favorable, driven by favorable
development on convective storms from earlier this year and
favorable prior year development, partially offset by the Hawaii
wildfires and Hurricane Idalia.
- Net unfavorable attritional prior year reserve development was
$9.1 million or 5.7 points due to unfavorable development primarily
on discontinued property reinsurance business.
- The acquisition cost ratio increased by 2.6 points in the third
quarter, compared to the same period in 2022 driven by a change in
mix of business and the impact of profit commissions.
- The other underwriting expense ratio decreased by 1.9 points in
the third quarter, compared to the same period in 2022 driven by a
growth in premium base and our continued focus on expense
management.
Investments and Shareholders’ Equity as of September 30,
2023
- Total invested assets and cash of $3.8 billion versus $3.4
billion at December 31, 2022.
- Total shareholders’ equity of $1.8 billion compared to $1.7
billion at December 31, 2022.
- Book value per share of $17.35 versus $16.14 at December 31,
2022, an increase of 7.5%.
Conference Call Details and Additional Information
Conference Call Information
Hamilton will host a conference call to discuss its financial
results on Wednesday, December 6, 2023, at 10:00 a.m. ET. The
conference call can be accessed by dialing 1-888-350-3870 (US toll
free), or 1-646-960-0308, and entering the conference ID
6439207.
A live, audio webcast of the conference call will also be
available through the Investors portal of the Company’s website at
investors.hamiltongroup.com.
A replay of the audio conference call will be available at
investors.hamiltongroup.com or by dialing 1-800-770-2030
(U.S. toll free), or 1-647-362-9199, and entering the conference ID
6439207.
About Hamilton Insurance Group, Ltd.
Hamilton Insurance Group, Ltd. is a Bermuda-headquartered
company that underwrites specialty insurance and reinsurance risks
on a global basis through its wholly owned subsidiaries.
For more information about Hamilton Insurance Group, visit our
website at www.hamiltongroup.com or on LinkedIn at
Hamilton.
Consolidated Balance Sheet
($ in thousands)
September 30,
2023
December 31,
2022
Assets
Fixed maturity investments, at fair
value
$
1,631,471
$
1,259,476
(amortized cost 2023: $1,730,262; 2022:
$1,348,684)
Short-term investments, at fair value
(amortized cost 2023: $347,623; 2022: $285,130)
348,968
286,111
Investments in Two Sigma Funds, at fair
value (cost 2023: $891,791; 2022: $731,100)
979,986
740,736
Total investments
2,960,425
2,286,323
Cash and cash equivalents
804,548
1,076,420
Restricted cash and cash equivalents
98,979
130,783
Premiums receivable
689,042
522,670
Paid losses recoverable
138,314
90,655
Deferred acquisition costs
151,314
115,147
Unpaid losses and loss adjustment expenses
recoverable
1,157,123
1,177,863
Receivables for investments sold
19,044
371
Prepaid reinsurance
232,211
164,313
Goodwill and intangible assets
89,589
86,958
Other assets
164,015
167,462
Total assets
$
6,504,604
$
5,818,965
Liabilities, non-controlling interest,
and shareholders' equity
Liabilities
Reserve for losses and loss adjustment
expenses
$
2,948,822
$
2,856,275
Unearned premiums
951,596
718,188
Reinsurance balances payable
367,954
244,320
Payables for investments purchased
117,836
48,095
Term loan, net of issuance costs
149,801
149,715
Accounts payable and accrued expenses
159,681
138,050
Payables to related parties
9,060
20
Total liabilities
4,704,750
4,154,663
Non-controlling interest – TS Hamilton
Fund
129
119
Shareholders’ equity
Common shares:
Class A, authorized (2023 and 2022:
53,993,690), par value $0.01;
305
305
issued and outstanding (2023 and 2022:
30,520,078)
Class B, authorized (2023: 65,480,684 and
2022: 50,480,684 ), par value $0.01;
427
420
issued and outstanding (2023: 42,658,302
and 2022: 42,042,155)
Class C, authorized (2023 and 2022:
30,525,626), par value $0.01;
305
305
issued and outstanding (2023 and 2022:
30,525,626)
Additional paid-in capital
1,128,553
1,120,242
Accumulated other comprehensive loss
(4,441
)
(4,441
)
Retained earnings
674,576
547,352
Total shareholders' equity
1,799,725
1,664,183
Total liabilities, non-controlling
interest, and shareholders' equity
$
6,504,604
$
5,818,965
Consolidated Statement of Operations
Three months ended
September 30,
Nine months ended
September 30,
($ in thousands, except per share
information)
2023
2022
2023
2022
Revenues
Gross premiums written
$
474,123
$
400,811
$
1,517,247
$
1,305,421
Reinsurance premiums ceded
(90,557
)
(100,000
)
(400,475
)
(366,933
)
Net premiums written
383,566
300,811
1,116,772
938,488
Net change in unearned premiums
(46,530
)
(5,868
)
(164,374
)
(107,021
)
Net premiums earned
337,036
294,943
952,398
831,467
Net realized and unrealized gains (losses)
on investments
47,343
(67,380
)
101,881
146,640
Net investment income (loss)
8,069
(5,255
)
17,719
(22,185
)
Total realized and unrealized gains
(losses) on investments and net investment income (loss)
55,412
(72,635
)
119,600
124,455
Other income (loss)
2,386
2,727
7,838
9,117
Net foreign exchange gains (losses)
1,432
1,906
(3,953
)
15,382
Total revenues
396,266
226,941
1,075,883
980,421
Expenses
Losses and loss adjustment expenses
191,577
257,963
519,554
597,014
Acquisition costs
78,537
65,735
220,532
194,795
General and administrative expenses
63,035
46,344
158,075
135,290
Amortization of intangible assets
2,794
3,178
7,869
9,874
Interest expense
5,288
4,102
16,007
11,255
Total expenses
341,231
377,322
922,037
948,228
Income (loss) before income tax
55,035
(150,381
)
153,846
32,193
Income tax expense
2,387
1,054
6,908
3,103
Net income (loss)
52,648
(151,435
)
146,938
29,090
Net income (loss) attributable to
non-controlling interest
9,065
(15,318
)
15,076
68,069
Net income (loss) and other
comprehensive income (loss) attributable to common
shareholders
$
43,583
$
(136,117
)
$
131,862
$
(38,979
)
Per share data
Basic income (loss) per share attributable
to common shareholders
$
0.42
$
(1.32
)
$
1.27
$
(0.38
)
Diluted income (loss) per share
attributable to common shareholders
$
0.41
$
(1.32
)
$
1.26
$
(0.38
)
Non-GAAP Financial Measures Reconciliation
We present our results of operations in a way that we believe
will be the most meaningful and useful to investors, analysts,
rating agencies and others who use our financial information to
evaluate its performance. Some of the measurements are considered
non-GAAP financial measures under SEC rules and regulations. In
this press release, we present underwriting income (loss), a
non-GAAP financial measure as defined in Item 10(e) of SEC
Regulation S-K. We believe that non-GAAP financial measures, which
may be defined and calculated differently by other companies, help
explain and enhance the understanding of our results of operations.
However, these measures should not be viewed as a substitute for
those determined in accordance with U.S. GAAP. Where appropriate,
reconciliations of our non-GAAP measures to the most comparable
GAAP figures are included below.
Underwriting Income (Loss)
We calculate underwriting income (loss) on a pre-tax basis as
net premiums earned less losses and loss adjustment expenses,
acquisition costs and other underwriting expenses (net of third
party fee income). We believe that this measure of our performance
focuses on the core fundamental performance of the Company’s
reportable segments in any given period and is not distorted by
investment market conditions, corporate expense allocations or
income tax effects.
The table below reconciles underwriting income (loss) to net
income (loss), the most comparable GAAP financial measure:
For the Three Months
Ended
($ in thousands)
September 30, 2023
September 30, 2022
Underwriting income (loss)
$
24,866
$
(66,075
)
Total realized and unrealized gains
(losses) on investments and net investment income (loss)
55,412
(72,635
)
Other income (loss), excluding third party
fee income
85
(517
)
Net foreign exchange gains (losses)
1,432
1,906
Corporate expenses
(18,678
)
(5,780
)
Amortization of intangible assets
(2,794
)
(3,178
)
Interest expense
(5,288
)
(4,102
)
Income tax expenses
(2,387
)
(1,054
)
Net income (loss), prior to
non-controlling interest
$
52,648
$
(151,435
)
Third Party Fee Income
Third party fee income includes income that is incremental
and/or directly attributable to our underwriting operations. It is
primarily comprised of fees earned by the International segment for
management services provided to third party syndicates and
consortia. We believe that this measure is a relevant component of
our underwriting income (loss).
The table below reconciles third party fee income to other
income, the most comparable GAAP financial measure:
For the Three Months
Ended
($ in thousands)
September 30, 2023
September 30, 2022
Third party fee income
$
2,301
$
3,244
Other income (loss), excluding third party
fee income
85
(517
)
Other income (loss)
$
2,386
$
2,727
Other Underwriting Expenses
Other underwriting expenses include those general and
administrative expenses that are incremental and/or directly
attributable to our underwriting operations. While this measure is
presented in Note 9, Segment Reporting in the unaudited condensed
consolidated financial statements, it is considered a non-GAAP
financial measure when presented elsewhere.
Corporate expenses include holding company costs necessary to
support our reportable segments. As these costs are not incremental
and/or directly attributable to our underwriting operations, these
costs are excluded from other underwriting expenses, and therefore,
underwriting income (loss). General and administrative expenses,
the most comparable GAAP financial measure to other underwriting
expenses, also includes corporate expenses.
The table below reconciles other underwriting expenses to
general and administrative expenses, the most comparable GAAP
financial measure:
For the Three Months
Ended
($ in thousands)
September 30, 2023
September 30, 2022
Other underwriting expenses
$
44,357
$
40,564
Corporate expenses
18,678
5,780
General and administrative expenses
$
63,035
$
46,344
Special Note Regarding Forward-Looking Statements
This information may contain forward-looking statements which
reflect the Company's current views with respect to future events
and financial performance and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are made based on management's current
expectations and beliefs concerning future developments and their
potential effects upon Hamilton. There can be no assurance that
future developments affecting Hamilton will be those anticipated by
management. Forward-looking statements include, without limitation,
all matters that are not historical facts. These forward-looking
statements are not a guarantee of future performance and involve
risk and uncertainties, and there are certain important factors
that could cause actual results to differ, possibly materially,
from expectations or estimates reflected in such forward-looking
statements, including the following:
- our results of operations and financial condition could be
adversely affected by unpredictable catastrophic events, global
climate change or emerging claim and coverage issues;
- our business could be materially adversely affected if we do
not accurately assess our underwriting risk, our reserves are
inadequate to cover our actual losses, our models or assessments
and pricing of risks are incorrect or we lose important broker
relationships;
- the insurance and reinsurance business is historically cyclical
and the pricing and terms for our products may decline, which would
affect our profitability and ability to maintain or grow
premiums;
- we have significant foreign operations that expose us to
certain additional risks, including foreign currency risks and
political risk;
- we do not control the allocations to and/or the performance of
the Two Sigma Hamilton Fund’s investment portfolio, and its
performance depends on the ability of its investment manager, Two
Sigma, to select and manage appropriate investments and we have a
limited ability to withdraw our capital accounts;
- Two Sigma Principals, LLC, the managing member of Two Sigma
Hamilton Fund, Two Sigma and their respective affiliates have
potential conflicts of interest that could adversely affect
us;
- the historical performance of Two Sigma is not necessarily
indicative of the future results of the Two Sigma Hamilton Fund’s
investment portfolio or of our future results;
- our ability to manage risks associated with macroeconomic
conditions resulting from the global COVID-19 pandemic or any other
public health crisis, current or anticipated military conflict,
including the ongoing Ukraine conflict, terrorism, sanctions,
rising energy prices, inflation and interest rates and other
geopolitical events globally;
- our ability to compete successfully with more established
competitors and risks relating to consolidation in the reinsurance
and insurance industries;
- downgrades, potential downgrades or other negative actions by
rating agencies;
- our dependence on key executives, including the potential loss
of Bermudian personnel as a result of Bermuda employment
restrictions, and inability to attract qualified personnel, in
particular in very competitive hiring conditions;
- our dependence on letter of credit facilities that may not be
available on commercially acceptable terms;
- our potential need for additional capital in the future and the
potential unavailability of such capital to us on favorable terms
or at all;
- the suspension or revocation of our subsidiaries’ insurance
licenses;
- the potential characterization of us and/or any of our
subsidiaries as a passive foreign investment company, or PFIC;
- risks associated with our investment strategy being greater
than those faced by competitors;
- changes in the regulatory environment and the potential for
greater regulatory scrutiny of the Group going forward as a result
of the outsourcing arrangements;
- a cyclical downturn of the reinsurance industry;
- operational failures, failure of information systems or failure
to protect the confidentiality of customer information, including
by service providers, or losses due to defaults, errors or
omissions by third parties and affiliates;
- we are a holding company with no direct operations, and our
insurance and reinsurance subsidiaries’ ability to pay dividends
and other distributions to us is restricted by law;
- risks relating to our ability to identify and execute
opportunities for growth or our ability to complete transactions as
planned or realize the anticipated benefits of our acquisitions or
other investments;
- our potentially becoming subject to U.S. federal income
taxation;
- our potentially becoming subject to U.S. withholding and
information reporting requirements under the U.S. Foreign Account
Tax Compliance Act, or FATCA, provisions;
- our costs will increase as a result of operating as a public
company, and our management will be required to devote substantial
time to complying with public company regulations;
- if we were to identify a material weakness and were unable to
remediate this material weakness, or fail to achieve and maintain
effective internal controls, our operating results and financial
condition could be impacted and the market price of our Class B
common shares may be negatively affected;
- the lack of a prior public market for our Class B common
shares, our share price may be volatile and anti-takeover
provisions contained in our organizational documents could delay
management changes;
- the potential that the market price of our Class B common
shares could decline due to future sales of shares by our existing
shareholders;
- applicable insurance laws, which could make it difficult to
effect a change of control of our company;
- investors may have difficulties in serving process or enforcing
judgments against us in the United States;
- and other factors affecting future results disclosed in the
Company’s filing with the SEC, including the Prospectus and
Quarterly Report on Form 10-Q.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231205056162/en/
Investor contacts: Jon Levenson & Darian Niforatos
Investor.Relations@hamiltongroup.com
Media contact: Kelly Ferris
kelly.ferris@hamiltongroup.com
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