Hamilton Insurance (HG) - 2025 Q2 - Quarterly Report

Part I. Financial Information Financial Statements This section presents Hamilton Insurance Group's unaudited consolidated financial statements and notes for Q2 and H1 2025 Note 1. Organization Hamilton Insurance Group, a Bermuda-incorporated holding company, operates globally through subsidiaries like Hamilton Re, Lloyd's Syndicate 4000, and has a strategic investment with Two Sigma - The company's Bermuda operations are led by Hamilton Re, Ltd., a Class 4 insurer writing property, casualty, and specialty insurance and reinsurance globally[28] - London operations are conducted through Hamilton Managing Agency Limited (HMA), which manages the wholly aligned Syndicate 4000 in the Lloyd's market[31] - The company has a strategic investment commitment in the Two Sigma Hamilton Fund (TS Hamilton Fund) for up to the lesser of $1.8 billion or 60% of the Group's net tangible assets[35] Note 3. Investments This note details the company's investment portfolio, including fixed maturities, short-term investments, and Two Sigma Funds, along with associated fee structures Investment Portfolio Composition (June 30, 2025) | Investment Type | Fair Value ($ thousands) | | :--- | :--- | | Total Fixed Maturities | 2,698,470 | | Short-term Investments | 307,129 | | Investments in Two Sigma Funds | 1,453,781 | | Total Investments | 4,459,380 | - 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 funds[50] Fees Paid to Two Sigma | Fee Type | Q2 2025 ($ millions) | H1 2025 ($ millions) | | :--- | :--- | :--- | | Management Fee | 13.1 | 25.5 | | Incentive Allocation | 80.4 | 180.7 | Note 6. Reinsurance This note details the company's reinsurance strategy, including recoverables, collateralization, and catastrophe bond arrangements for risk management - As of June 30, 2025, 99.9% of the company's reinsurance recoverables were either collateralized or with reinsurers rated 'A-' or better[85] - The company's catastrophe bond through Easton Re provides $200 million in multi-year risk transfer capacity against U.S. named storm and U.S./Canada earthquake risks for the period January 1, 2024, to December 31, 2026[88] Note 7. Reserve for Losses and Loss Adjustment Expenses This note details the company's loss reserves, including favorable prior year development and specific net reserves for major events - For the six months ended June 30, 2025, the company experienced net favorable prior year development of $34.7 million, driven by favorable development on property contracts ($35.6 million) and specialty contracts ($18.3 million), partially offset by unfavorable development on casualty contracts ($20.4 million)[90][91] Net Reserves for Major Events (as of June 30, 2025) | Event | Net Reserves ($ millions) | | :--- | :--- | | California Wildfires | 73.2 | | Baltimore Bridge Collapse | 20.5 | | Ukraine Conflict | 59.3 | Note 8. Segment Reporting This note details the performance of the International and Bermuda segments, including underwriting income and combined ratios Segment Performance - Six Months Ended June 30, 2025 | Segment | Gross Premiums Written ($ thousands) | Underwriting Income (Loss) ($ thousands) | Combined Ratio (%) | | :--- | :--- | :--- | :--- | | International | 714,757 | 27,931 | 94.4 | | Bermuda | 840,575 | (18,732) | 103.6 | | Total | 1,555,332 | 9,199 | 99.1 | Segment Performance - Three Months Ended June 30, 2025 | Segment | Gross Premiums Written ($ thousands) | Underwriting Income (Loss) ($ thousands) | Combined Ratio (%) | | :--- | :--- | :--- | :--- | | International | 344,799 | 27,118 | 89.3 | | Bermuda | 367,227 | 40,341 | 84.3 | | Total | 712,026 | 67,459 | 86.8 | Note 9. Debt and Credit Facilities This note outlines the company's debt and credit facilities, including a new $150 million term loan and available liquidity - The company refinanced its debt with a new $150 million term loan facility on June 10, 2025, maturing in June 2028[114] - As of June 30, 2025, the company had $1.08 billion in available letter of credit and revolving loan facilities, with $699.5 million utilized[123] Note 10. Share Capital This note details the company's share capital structure, including share repurchase activity and Class C to Class B share conversions - During the six months ended June 30, 2025, the company repurchased 2.1 million Class B common shares at an aggregate cost of $45.3 million[127] - As of June 30, 2025, $76.6 million remained available for share repurchases under the board's $150 million authorization[127] Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | Total Investments | 4,459,380 | 3,814,353 | | Total Assets | 8,913,050 | 7,796,033 | | Total Liabilities | 6,285,167 | 5,467,196 | | Total Shareholders' Equity | 2,558,591 | 2,328,709 | Consolidated Statement of Operations Highlights | Metric | Three Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | | :--- | :--- | :--- | | Gross Premiums Written | 712,026 | 1,555,332 | | Net Premiums Earned | 511,163 | 1,010,091 | | Total Revenues | 740,765 | 1,509,550 | | Net Income | 267,786 | 449,053 | | Net Income Attributable to Common Shareholders | 187,415 | 268,288 | Earnings Per Share (EPS) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Basic EPS | $1.85 | $2.64 | | Diluted EPS | $1.79 | $2.56 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic priorities, and market conditions, highlighting premium growth, investment returns, and capital position - The company operates through two reporting segments: International (including Hamilton Global Specialty and Hamilton Select) and Bermuda (Hamilton Re)[142][145] - A key strategic priority is sustainable underwriting profitability, complemented by a unique investment management relationship with Two Sigma[141][143] - The company expects to be exempt from the new 15% Bermuda corporate income tax until January 1, 2030, and has recorded a deferred tax asset of $35.4 million related to the economic transition adjustment (ETA)[152] Summary Results of Operations This section analyzes consolidated and segment-level results, highlighting premium growth, net income, combined ratios, and investment returns for Q2 and H1 2025 Q2 2025 vs Q2 2024 Consolidated Results | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross Premiums Written | $712.0M | $603.3M | | Net Income Attributable to Common Shareholders | $187.4M | $131.1M | | Diluted EPS | $1.79 | $1.20 | | Combined Ratio | 86.8% | 84.4% | H1 2025 vs H1 2024 Consolidated Results | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Gross Premiums Written | $1,555.3M | $1,325.2M | | Net Income Attributable to Common Shareholders | $268.3M | $288.3M | | Diluted EPS | $2.56 | $2.57 | | Combined Ratio | 99.1% | 87.9% | - Catastrophe losses for H1 2025 were $152.0 million, primarily driven by California wildfires ($159.7 million gross), which significantly increased the combined ratio[221] Key Operating and Financial Metrics This section highlights key operating metrics, including book value per common share and return on average common shareholders' equity (ROACE) Book Value Per Share Growth | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Book Value per Common Share | $25.55 | $22.95 | +11.3% | | Tangible Book Value per Common Share | $24.65 | $22.03 | +11.9% | Return on Average Common Shareholders' Equity (ROACE) | Period | ROACE | | :--- | :--- | | Three Months Ended June 30, 2025 | 7.6% | | Six Months Ended June 30, 2025 | 11.0% | Financial Condition, Liquidity and Capital Resources This section assesses the company's financial condition, liquidity, and capital resources, highlighting cash, investments, and shareholders' equity - Total cash and investments increased to $5.5 billion as of June 30, 2025, up from $4.9 billion at December 31, 2024, driven by positive investment returns and deployment of cash[286] - Consolidated shareholders' equity increased by 9.9% to $2.6 billion in the first six months of 2025, primarily due to net income of $268.3 million, partially offset by share repurchases[311] - The company has access to monthly and daily liquidity options from its TS Hamilton Fund investment, subject to its minimum investment commitment[308] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its principal market risks, including interest rate, credit spread, equity price, and foreign currency risks - There were no material changes to the company's market risk exposures during the quarter[336] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[337] - No material changes to internal control over financial reporting were identified during the quarter[338] Part II. Other Information Legal Proceedings Information regarding legal proceedings is incorporated by reference from the company's 2024 Form 10-K - Information regarding legal proceedings is referenced from the company's 2024 Annual Report on Form 10-K[339] Risk Factors Readers are directed to the comprehensive risk factors discussed in the company's 2024 Form 10-K - Investors are advised to consider the risk factors detailed in the company's 2024 Annual Report on Form 10-K[340] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity during Q2 2025 under its $150 million authorization Share Repurchases (Q2 2025) | Month | Shares Repurchased | Average Price per Share | | :--- | :--- | :--- | | April 2025 | 0 | N/A | | May 2025 | 550,654 | $21.07 | | June 2025 | 1,102,291 | $21.26 | | Total Q2 | 1,652,945 | N/A | - As of June 30, 2025, the maximum amount still available for repurchase under the program was $76.6 million[342] Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreements, employment agreements, and certifications