KBRA Affirms Ratings for Hamilton Re, Ltd. and Hamilton Insurance Group, Ltd., Revises Outlooks to Stable

KBRA affirms the A insurance financial strength rating of Hamilton Re, Ltd. (Hamilton Re). Hamilton Re is the lead operating company for Hamilton Insurance Group, Ltd. (Hamilton Group) and writes property, casualty and specialty insurance and reinsurance on a global basis. KBRA also affirms the BBB+ issuer rating of Hamilton Group, a Bermuda domiciled holding company. The companies are collectively referred to as Hamilton. The Outlooks have been revised to Stable from Positive for both ratings, reflecting attritional loss and combined ratios which continue to be supportive of the current rating level. The Stable Outlooks reflect KBRA’s expectation that Hamilton Insurance Group will maintain adequate risk-adjusted capitalization and conservative leverage metrics while prudently executing its business plan.

Key Credit Considerations

The ratings reflect the group’s seasoned management team, comprehensive enterprise risk management program, very strong liquidity, conservative financial leverage, adequate risk-based capitalization, strong financial flexibility and decreasing investment risk. KBRA believes that Hamilton Group and Hamilton Re’s BSCR coverage ratios of 196% (2022: 224%) and 218% (2022: 247%), respectively, are adequate for the group’s risk profile. KBRA views Hamilton Group’s financial leverage of 6.8% (2022: 8.3%) as conservative with interest expense solidly covered by dividend capacity at Hamilton Re. At end-2023, 55% (2022: 60%) of Hamilton Re’s cash and invested assets consisted of high credit quality fixed income securities with an average credit quality of AA- and an average duration of 3.3 years. While KBRA views favorably the reduction of the TS Hamilton Fund as a percentage of cash and invested assets, KBRA believes that the trading vehicles in the fund present high investment risk. In addition to an unsecured term loan, Hamilton Group has access to a revolver facility and now has access to the public equity and debt markets following Hamilton Insurance Group’s Initial Public Offering in November 2023. The group sources cost-effective third-party capital to support its outward property catastrophe reinsurance program. Hamilton Re holds significant amounts of unrestricted cash and cash equivalents. KBRA believes that the probability of the company needing to sell investments to pay an influx of claims following a natural catastrophe is low. Hamilton Group has experienced, proven leaders across the organization with growing bench strength for key positions. Hamilton Group has a strong, integrated risk management framework across the organization. The group’s proprietary models evaluate underwriting, market, and operational risk holistically against embedded risk tolerances and guidelines.

Balancing these strengths are unfavorable underwriting results and exposure to event risk. While Hamilton Re has reported net income of $484 million from 2019 through 2023, the company has only reported a combined ratio below 100% in two of the past five years. In addition, the attritional loss ratio increased to 57% in 2023, which is above KBRA’s expectations for a catastrophe exposed reinsurer. Hamilton Re is exposed to both natural catastrophe and market event risk. Natural catastrophe event risk exposes Hamilton Re's reported underwriting results to year over year volatility. Market risk is presented by both the trading vehicles in the TS Hamilton Fund and the fixed income portfolio. While exposure to event risk is viewed unfavorably, KBRA believes that the company appropriately manages the risk within stated risk tolerances by using the group’s proprietary models.

Rating Sensitivities

Sustained attritional loss ratios in the low to mid-50% range, combined ratios under 100% over the medium term and a sustained increase in risk-adjusted capitalization could result in a positive rating action.

An elevated attritional loss ratio, material decline in risk-based capitalization, unfavorable change in risk profile, or loss of a key member of the management team without a suitable replacement could result in a negative rating action.

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