Hamilton Insurance (HG) - 2025 Q4 - Annual Report

Financial Performance - Gross premiums written increased to $2.9 billion for the year ended December 31, 2025, up from $2.0 billion in 2023, with a combined ratio of 92.9%[21] - The International segment accounted for 52% of gross premiums written, totaling $1.5 billion for 2025, with a combined ratio of 95.0%[22] - The Bermuda segment represented 48% of gross premiums written, reaching $1.4 billion for 2025, with a combined ratio of 90.9%[22] - For the year ended December 31, 2025, Hamilton recorded $2.9 billion of gross premiums written through its three principal underwriting platforms[37] - The combined ratios for Hamilton were 92.9%, 91.3%, and 90.1% for the years ended December 31, 2025, 2024, and 2023, respectively[41] - The Bermuda segment's gross premiums written reached $1,406,085 thousand in 2025, a 26.2% increase from $1,114,122 thousand in 2024[110] - Casualty business accounted for 54% of gross premiums written in the Bermuda segment for the year ended December 31, 2025[113] - The property business represented 33% of gross premiums written in the Bermuda segment for the year ended December 31, 2025[111] - The reinsurance business accounted for 91% of gross premiums written for the year ended December 31, 2025, while insurance business accounted for 9%[108] Assets and Financial Position - Total assets as of December 31, 2025, were $9.6 billion, with total cash and invested assets of $6.2 billion and shareholders' equity of $2.8 billion[31] - The company has maintained a low debt-to-capital ratio of 5.0%, providing financial flexibility for strategic execution[31] - As of December 31, 2025, Hamilton had consolidated GAAP shareholders' equity of $2.8 billion and a financial leverage ratio of 5.0%[48] Investment Management - Hamilton's investment management relationship with Two Sigma, managing approximately $77 billion in assets, supports its diversified underwriting model[32] - As of December 31, 2025, Two Sigma manages $2.2 billion, or 37%, of total invested assets through the TS Hamilton Fund, which focuses on low-correlated absolute returns[33] - The TS Hamilton Fund produced net returns of 16.0%, 16.3%, and 7.6% for the years ended December 31, 2025, 2024, and 2023, respectively[34] - The investment portfolio allocation as of December 31, 2025, is 55% in fixed income and short-term investments, 37% in the TS Hamilton Fund, and 8% in cash and cash equivalents[138] - The fixed income portfolio is structured to focus on capital preservation and liquidity to meet claims obligations, with no restrictions on liquidation if additional liquidity is required[139] - The company plans to optimize its investment portfolio through a balanced allocation of invested assets, aiming to generate strong risk-adjusted returns for shareholders[63] Underwriting Strategy - The strategic transformation initiated in 2018 has led to a significant increase in premiums written from $571 million in 2018 to $2.9 billion in 2025[23] - Hamilton expects continued growth in the U.S. E&S market, benefiting from a strong rate environment and increased submissions[59] - The company aims to prudently manage capital across different underwriting cycles to generate strong underwriting margins[53] - Hamilton's disciplined underwriting approach is supported by strong technical tools and analytics, allowing for intelligent pricing and structuring of products[56] - The company plans to pursue disciplined growth across all underwriting platforms, leveraging access to the U.S. E&S insurance business[61] Technology and Analytics - The proprietary Hamilton Analytics and Risk Platform (HARP) enhances underwriting control and decision support through advanced analytics and real-time data integration[26] - Hamilton's proprietary technology infrastructure includes HARP, a catastrophe modeling platform that enhances risk management and decision-making[43] - Hamilton's technology investments emphasize integration to support workflow efficiency across business segments, including automated data ingestion and standardized reporting[149] Regulatory Compliance - The Bermuda Operating Companies are subject to solvency and liquidity standards, as well as auditing and reporting requirements under the Insurance Act[156] - The BMA acts as the group supervisor for Hamilton Group, regulating intra-group transactions and assessing the financial situation and solvency position[160] - Bermuda's regulatory regime is recognized as achieving Solvency II Directive equivalence for its commercial insurers and insurance groups[161] - Hamilton Re is required to maintain total statutory capital and surplus of not less than $100 million to operate as a Class 4 insurer[164] - The minimum solvency margin (MSM) for Hamilton Re is the greater of $100 million, 50% of net premiums written, 15% of net aggregate loss provisions, or 25% of the enhanced capital requirement (ECR)[182] - Hamilton Re must maintain a minimum liquidity ratio of at least 75% of the value of its relevant assets against its relevant liabilities[181] - The enhanced capital requirement (ECR) is established using the Bermuda Solvency Capital Requirement (BSCR) model or an approved internal capital model[183] - Hamilton Re is required to submit annual audited financial statements within four months from the end of the financial year[174] - The BSCR model assesses capital requirements across 10 risk categories, including fixed income investment risk and operational risk[184] - A Class 4 insurer must notify the Bermuda Monetary Authority (BMA) immediately upon failing to meet its MSM or ECR requirements[186][187] - Class 4 insurers are prohibited from declaring or paying dividends if they breach their Minimum Solvency Margin (MSM) or minimum liquidity ratio[193] - The BMA requires a formal recovery plan from Class 4 insurers to recover from severe stress scenarios, which must be updated at least every three years[210] - Insurers must notify the BMA of any material changes, including acquisitions or outsourcing of significant functions, before proceeding[207] - A fine of $25,000 is imposed for failing to notify the BMA of becoming a shareholder controller within the required 45 days[204] - The BMA may object to a controller if they are deemed not fit and proper, with penalties for continued control after objection[206] - The BMA assesses compliance with the Insurance Code in relation to the nature, scale, and complexity of the insurer's business[191] - Insurers must file an affidavit with the BMA to declare dividends exceeding 25% of total statutory capital and surplus[195] Market Position and Growth - Hamilton Select is focused on expanding its product offerings in the U.S. E&S market, targeting small to medium-sized risks, which are expected to yield profitable results across market cycles[64] - The company has received an AM Best "A" rating upgrade, which is anticipated to enhance growth opportunities with key clients in the reinsurance business[62] - The 2026 syndicate business forecast approved by Lloyd's gives Syndicate 4000 a capacity of £657 million, indicating strong market positioning[74] - The company has strong market relationships with top brokers, including Marsh McLennan (25% of premiums in 2025) and Aon (18% of premiums in 2025)[128] - The International segment's 10 largest brokers accounted for approximately 54% of gross premiums written in 2025, with Marsh McLennan contributing about 10%[129] - In the Bermuda segment, Marsh McLennan represented approximately 41% of gross premiums written in 2025, while Aon accounted for around 30%[130] Specialty Lines and Coverage - The gross premiums written in the International segment included $628.3 million from casualty lines, which accounted for 41% of the segment's total[79] - Specialty lines generated 43% of gross premiums written in the International segment, totaling $651.2 million in 2025[86] - The company offers coverage for various risks including kidnap, extortion, and workplace violence, partnering with Crisis24 and Holman Fenwick Willan LLP[93] - The company specializes in upstream energy insurance, targeting a wide range of operators within the oil and gas sector globally[95] - The specialty reinsurance business accounted for 13% of gross premiums written for the year ended December 31, 2025[122] - The company provides multiline reinsurance coverage across various specialty lines, including marine and energy, aviation, and crisis management[126] - Hamilton Select offers coverage for small to mid-sized hard-to-place and distressed accounts, including healthcare facilities and social services[99]