Hamilton Insurance (US:HG)2025-05-08 20:19Part I. Financial Information Financial Statements The company's total assets grew to $8.34 billion, while net income declined to $80.9 million in Q1 2025 due to significant catastrophe losses Consolidated Balance Sheet Highlights (Unaudited) | ($ in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Investments | $4,173,272 | $3,814,353 | | Cash and cash equivalents | $838,514 | $996,493 | | Total Assets | $8,342,831 | $7,796,033 | | Reserve for losses and loss adjustment expenses | $3,815,307 | $3,532,491 | | Total Liabilities | $5,904,338 | $5,467,196 | | Total Shareholders' Equity | $2,399,339 | $2,328,709 | Consolidated Statement of Operations Highlights (Unaudited) | ($ in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Gross premiums written | $843,306 | $721,941 | | Net premiums earned | $498,928 | $385,303 | | Total revenues | $768,781 | $658,645 | | Losses and loss adjustment expenses | $395,234 | $232,352 | | Net income (loss) | $181,266 | $277,332 | | Net income (loss) attributable to common shareholders | $80,872 | $157,174 | | Diluted income (loss) per share | $0.77 | $1.38 | Note 3. Investments Total investments increased to $4.17 billion, driven by an expanded allocation to Two Sigma Funds and a high-quality fixed income portfolio Fixed Maturity & Short-Term Investments (March 31, 2025) | ($ in thousands) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | U.S. government treasuries | $624,694 | $621,480 | | Corporate | $1,200,219 | $1,204,434 | | Mortgage-backed securities | $401,462 | $389,557 | | Total fixed maturities | $2,436,656 | $2,425,986 | | Short-term investments | $404,946 | $406,207 | - Effective January 1, 2025, the company expanded its investment in Two Sigma Funds to include allocations to ATV, HTV, NTV, and KTV, in addition to the existing STV, ESTV, and FTV funds52 Investment in Two Sigma Funds | ($ in thousands) | Fair Value (Mar 31, 2025) | Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | | Total | $1,341,079 | $939,381 | - The company incurred management fees of $12.4 million and an incentive allocation of $100.4 million related to the TS Hamilton Fund for the three months ended March 31, 20255455 Note 6. Reinsurance The company manages risk with $1.33 billion in reinsurance recoverables, primarily from highly-rated partners, and a $200 million catastrophe bond - At March 31, 2025, total reinsurance recoverables on paid and unpaid losses amounted to $1.327 billion ($91.7M paid + $1,235.0M unpaid)86 Credit Quality of Reinsurance Recoverable (March 31, 2025) | Classification | % of Total | | :--- | :--- | | Collateralized | 23.1% | | A- or better | 76.7% | | Below A- | 0.2% | - The company has a multi-year $200 million catastrophe bond via Easton Re for U.S. named storm and earthquake risks, with ceded premiums of $15.2 million in Q1 202592 Note 7. Reserve for Losses and Loss Adjustment Expenses Gross loss reserves grew to $3.82 billion, with Q1 2025 showing favorable prior year development of $23.7 million - Net favorable prior year development was $23.7 million for Q1 2025, driven by favorable development on both attritional ($14.5M) and catastrophe ($9.2M) losses94 - This compares to net unfavorable prior year development of $12.1 million in Q1 2024, primarily from attritional losses95 Net Reserves for Major Events (as of March 31, 2025) | Event | Net Recorded Reserves ($ in millions) | | :--- | :--- | | California Wildfires | $91.2 | | Baltimore Bridge Collapse | $34.9 | | Ukraine Conflict | $59.8 | Note 8. Segment Reporting The International segment remained profitable while the Bermuda segment incurred a significant underwriting loss due to catastrophe events Segment Performance - Q1 2025 vs Q1 2024 | ($ in thousands) | International (Q1 2025) | Bermuda (Q1 2025) | International (Q1 2024) | Bermuda (Q1 2024) | | :--- | :--- | :--- | :--- | :--- | | Gross premiums written | $369,959 | $473,347 | $320,841 | $401,100 | | Net premiums earned | $240,567 | $258,361 | $196,814 | $188,489 | | Underwriting income (loss) | $815 | $(59,074) | $5,315 | $27,207 | | Combined ratio | 99.7% | 122.8% | 97.2% | 85.5% | Management's Discussion and Analysis of Financial Condition and Results of Operations Gross premiums grew 16.8%, but profitability was severely impacted by $159.7 million in catastrophe losses, resulting in an underwriting loss Summary Results of Operations The company reported a consolidated underwriting loss of $58.3 million, driven by a high loss ratio from catastrophe events Consolidated Key Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Loss and loss adjustment expense ratio | 79.2% | 60.3% | | Acquisition cost ratio | 23.4% | 21.9% | | Other underwriting expense ratio | 9.0% | 9.3% | | Combined ratio | 111.6% | 91.5% | - Current year catastrophe losses from the California wildfires were $159.7 million in Q1 2025, compared to $0 in Q1 2024157159 - The current year attritional loss ratio improved to 51.9% from 57.2%, benefiting from the absence of large non-catastrophe losses like the Baltimore Bridge collapse which impacted Q1 2024157 - The TS Hamilton Fund generated income of $204.0 million before non-controlling interest, compared to $262.8 million in Q1 2024, producing a net return of 5.5% after fees and incentive allocations161163 International Segment The segment's gross premiums grew 15.3%, but underwriting income was minimal due to $29.0 million in catastrophe losses International Segment Gross Premiums Written | ($ in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Property | $54,526 | $37,704 | | Casualty | $135,563 | $121,165 | | Specialty | $179,870 | $161,972 | | Total | $369,959 | $320,841 | - The combined ratio increased to 99.7% from 97.2% in Q1 2024, with the loss ratio rising to 60.6% from 59.0%, driven by a 12.1% current year catastrophe loss ratio172176 Bermuda Segment Gross premiums grew 18.0%, but the segment suffered a $59.1 million underwriting loss due to $130.6 million in catastrophe losses Bermuda Segment Gross Premiums Written | ($ in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Property | $223,077 | $190,472 | | Casualty | $179,534 | $130,729 | | Specialty | $70,736 | $79,899 | | Total | $473,347 | $401,100 | - The combined ratio increased to 122.8% from 85.5% in Q1 2024, with the loss ratio surging to 96.6% from 61.6%, driven by a 50.6% current year catastrophe loss ratio185188 Financial Condition, Liquidity and Capital Resources The company maintains a strong financial position with $5.1 billion in cash and investments and robust liquidity - Total cash and investments increased to $5.09 billion at March 31, 2025, from $4.92 billion at December 31, 2024235 - The fixed income portfolio has an average credit quality of Aa3 and an expected average duration of 3.4 years238239 - The company has a $150 million term loan maturing in June 2025 and total available letter of credit and revolving loan facilities of $1.045 billion, of which $714.8 million was in use113272 - Under its $150 million share repurchase authorization, the company repurchased 0.5 million Class B shares for $10.3 million in Q1 2025, with $111.7 million remaining available for purchase126264 Financial Strength Ratings Key operating subsidiaries received upgraded financial strength ratings from A.M. Best to 'A' (Excellent) - On April 30, 2024, A.M. Best upgraded the Financial Strength Rating of Hamilton Re and HIDAC to 'A' (Excellent) from 'A-' (Excellent)276 - Hamilton Select's A.M. Best rating was affirmed at 'A-' (Excellent)275 - The Lloyd's syndicate benefits from the market's strong ratings, including 'A+' from A.M. Best and 'AA-' from S&P, KBRA, and Fitch278 Quantitative and Qualitative Disclosures About Market Risk The company's principal market risks remain materially unchanged from its 2024 year-end disclosures - There were no material changes to the market risks disclosed in the company's 2024 Form 10-K285 Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective - Management concluded that disclosure controls and procedures were effective as of May 8, 2025286 - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls287 Part II. Other Information Legal Proceedings Information on legal proceedings is incorporated by reference from the 2024 annual report - Details on legal proceedings are incorporated by reference from the 2024 Form 10-K288 Risk Factors Risk factors are incorporated by reference from the 2024 annual report - Risk factors are incorporated by reference from the 2024 Form 10-K289 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 843,664 common shares in Q1 2025, with $111.7 million remaining under its authorization Share Repurchases for Q1 2025 | Month (2025) | Shares Purchased (Public Program) | Shares Purchased (Other) | Total Shares Purchased | | :--- | :--- | :--- | :--- | | January | 0 | 150,623 | 150,623 | | February | 0 | 104,680 | 104,680 | | March | 495,487 | 92,874 | 588,361 | | Total | 495,487 | 348,177 | 843,664 | - As of March 31, 2025, $111.7 million remained available for repurchase under the company's $150 million authorization291 Other Information A Rule 10b5-1 trading plan for a company officer was terminated in March 2025 - On March 17, 2025, company officer Megan Graves terminated a Rule 10b5-1 trading plan that was established on December 13, 2024295