NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns an insurance financial strength
rating (IFSR) of A to Hamilton Re, Ltd. (Hamilton Re) a Bermuda Class 4
property casualty reinsurer. KBRA also assigns an issuer rating of BBB+
to Hamilton Insurance Group, Ltd. (Hamilton Group), the Bermuda-based
holding company for Hamilton Re. The Outlook for both ratings is Stable.
The ratings for Hamilton reflect its sound financial condition,
diversified risk profile and seasoned management team. Hamilton is a
diversified global (re)insurance company that embraces data science and
technology on both the asset and liability sides of the balance sheet.
Investments are managed by Two Sigma, a technology and data company
focused on investment management and data science, via the TS Hamilton
Fund. TS Hamilton Fund is a diversified fund focused on liquid
strategies in global equity, futures and foreign exchange markets.
Liabilities emanate from the disciplined underwriting of a balanced
portfolio of property, casualty and specialty risks. Hamilton’s
internally developed, proprietary software – Hamilton Analytics and Risk
Platform (HARP) – provides a single, comprehensive view of the portfolio
across the enterprise that allows for the assumption and pricing of
underwriting risk in a measured way.
Hamilton has consistently generated net income since its inception in
2013, largely due to the strong performance of TS Hamilton Fund compared
to its benchmarks. KBRA believes Hamilton Re’s current capital position
can adequately support multiple stress scenarios on both its investments
and losses through underwriting risk tolerances that are lower than its
peers. Hamilton Re maintains low underwriting leverage as management
recognizes the need to take underwriting risk and investment risk in a
balanced and measured way. Additionally, Hamilton has excellent
financial flexibility with good interest coverage on its credit
facilities. The group has both unsecured facilities and facilities in
place supported by pledged assets. Moreover, Hamilton has access to
additional sources of capital, if needed. KBRA expects Hamilton Re to
remain prudent with premium growth relative to capital and investment
Operations are supported by a well-thought-out business plan that is
being methodically executed and a robust risk management framework with
embedded risk tolerances in HARP, which can provide management with
daily changes to its risk profile. Hamilton Re maintains a conservative
risk profile, limiting PML to 15% of shareholder’s equity in the U.S.
and 10% for the rest of the world. Operations are further supported by
strong liquidity that is able to accommodate unforeseen cash demands
without the need to liquidate invested assets.
Balancing these strengths is significant execution risk for planned
business initiatives, including further development of Hamilton’s
capital markets capabilities and the launch of Hamilton Re U.S., planned
for first quarter 2019.
In addition, Hamilton Re’s combined ratio exceeded 100% in 2016 and
2017. In 2017, Hamilton Re experienced underwriting losses in excess of
$100 million due to severe catastrophes, notably hurricanes Harvey,
Irma, and Maria. However, these underwriting losses were within their
risk tolerances and were lower than most of their peers, relative to the
100-year PML. A significant underwriting loss is expected again in 2018.
However, investment income during these periods has been sufficient to
offset underwriting losses, resulting in net income.
According to KBRA’s analysis of the TS Hamilton Fund, the underlying
investments, on a weighted average basis, are weighted towards globally
listed equity securities with the balance focused on futures, futures
options and foreign currency options. KBRA believes that funds comprised
of these asset classes tend to be vulnerable to market fluctuations.
However, KBRA’s assessment is that the overall quality of the TS
Hamilton Fund is supportive of the ratings due to its strong liquidity
profile as well as meaningful allocations to government securities, cash
and fixed income securities.
The stable outlook reflects KBRA’s expectation that Hamilton will
continue to maintain sound capitalization while prudently executing its
business plan. Additionally, KBRA expects Hamilton Re to maintain
sufficient liquidity to cover projected liability cash flows.
The ratings are based on KBRA’s Global
Insurer & Insurance Holding Company Rating Methodology
published on October 10, 2017.
A full report will soon be available on www.kbra.com.
CONNECT WITH KBRA
About KBRA and KBRA Europe
KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus, is recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.
Carol Pierce, Director
Fred DeLeon, Director
Andrew Edelsberg, Managing Director
Donna Halverstadt, Managing Director