OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Ratings of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Hamilton Re, Ltd. (Hamilton Re) (Pembroke, Bermuda) and Hamilton Insurance Designated Activity Company (Dublin, Ireland), each a wholly owned subsidiary of Hamilton Insurance Group, Ltd. (Pembroke, Bermuda) (collectively referred to as Hamilton). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Hamilton’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Hamilton’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the strongest level. AM Best expects the group’s risk-adjusted capital to remain at a supportive level in prospective years based on the current stress testing for COVID-19 estimated losses; expected stability in overall loss reserve development; improved underwriting results following the integration of recently acquired companies (including Hamilton Managing Agency Limited and Hamilton Insurance Designated Activity Company); and AM Best’s expectation that the group’s investment performance will revert to historical levels following the current global economic downturn. Hamilton’s balance sheet strength assessment of very strong reflects its relatively high-risk investment strategy, which is controlled by Two Sigma Investments, LP, an SEC-registered investment adviser, as well as the significant operational and managerial changes over the past several years, which encompass the execution risk of integrating the newly acquired companies.
Hamilton’s adequate operating performance has benefited from investment earnings that have outperformed peers on a historical basis, which is partially offset by underwriting losses. Management has indicated that the substantial growth of gross premium from the acquisitions will act to absorb overhead expenses and generate a substantial improvement in Hamilton’s reported combined ratio. Hamilton has experienced material adverse loss reserve development in its casualty lines of business over the past five years, a portion of which has recently been protected by an adverse loss reserve development contract and management’s non-renewal of underperforming accounts. Over the past three years, the group was negatively affected by large loss events, prompting re-underwriting of the related lines of business with tighter terms and conditions at increased rates. The group has been challenged by its relatively small size; however, AM Best expects the group’s underwriting results to improve significantly in 2020 following the 2019 expansion of its global reinsurance and insurance platforms via the aforementioned acquisitions, which have had historically better underwriting performance.
AM Best expects that the business written by the newly acquired platforms, in addition to the existing business written by Hamilton Re, will benefit the group’s business profile by increasing line of business and geographic diversification. The company’s ERM practices are considered appropriate relative to the company’s risk profile.
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