Hamilton Insurance Group
$HG
In a recent post on X/Twitter I highlighted my favorite longs currently. The companies:
Hudson Pacific Properties HPP 0.00%↑
Hamilton Insurance Group HG 0.00%↑
Oscar Health OSCR 0.00%↑
Marex MRX 0.00%↑
The Baldwin Group BWIN 0.00%↑
The one that I have been itching to write up, but haven’t, is Hamilton Insurance Group. Part of my hesitancy had to do with me wanting to see a few quarters more of underwriting performance. Especially after the 2024 hurricane season, I felt it was necessary to see where the provisions came out. Now that 2024 is behind us and the 2024 10-K is out, I think now is a perfect time to post this. HG 0.00%↑ has been public for a little over a year and I think this is where the opportunity lies, it seems as though the market has been waiting to see (and still is) a proved out underwriting operation, I also believe given the size, it is difficult for funds of a certain aum to enter a material position (at $5b aum a 2% position would be approximately 5% of the entire company as of 3/5/2025).
Barely a SMID cap now I find this to be an insurer with strong fundamentals underwriting profitable business with a unique balance sheet that is trading below book value and has steadily grown book value per share from $16.49 in Q3 of 2023 to $22.95 in Q4 of 2025. As always, none of this is investment advice and I am not immune to making errors. I like sharing what I find interesting and hope along the way I can highlight certain companies that I think are performing well and are poised to continue performing well; Hamilton hits these marks. People will scoff at insurance companies, and many will put it in the too hard pile. However, I find insurance and insurance companies fascinating.
Overview
Founded: 2013
Public IPO Price (November 10, 2023): $15.00
Current Price: $20.94
Market Cap: $2.1 billion
Price/Book: 0.9x (not so much of a discount any longer)
“Hamilton Insurance Group, Ltd. is a Bermuda-headquartered company, whose subsidiaries and syndicates underwrite insurance and reinsurance risks on a global basis through two reporting segments: International and Bermuda.” Hamilton operates three underwriting platforms that are included in the reporting segments.
Hamilton Global Specialty – International Segment
Hamilton Select – International Segment
Hamilton Re – Bermuda Segment
International Segment:
Hamilton Global Specialty specializes in commercial specialty and casualty insurance for medium- to large-sized accounts. It also provides specialty reinsurance products through Lloyd’s Syndicate 4000, which is managed by Hamilton Managing Agency Limited and Hamilton Insurance DAC. The managing agency underwrites products through Syndicate 4000 as well as Syndicate 1947. Syndicate 1947 has fairly specific products that they offer: treaty based reinsurance for ag, engineering, property. They also underwrite personal lines and personal accident. To get a sense of the products that Hamilton Insurance DAC offers here is a link: Hamilton Insurance DAC. Some of the risks include fairly niche lines such as space (of which they recently made a new hire), Fine Art, Kidnap & Ransom, Political Risk, US War & Terrorism, etc.
Hamilton Select specializes in domestic US excess & surplus risk, writing casualty risk for middle market clients for the US E&S market. Excess and surplus is the market that higher risk, niche, and hard to place risk goes to find coverage. This market is made up of non-admitted insurers who have “power of rate and form,” which is a way to say these non-admitted insurers have the power to tailor the policy structure and charge rates they deem necessary.
A brief note regarding admitted and non-admitted carriers. Your home insurance is most likely from an admitted carrier. If you wanted liability insurance for a gambling business, you would likely tap into the non-admitted market. Non-admitted markets are still regulated and the insurers still must abide by capital requirements.
The suite of Hamilton Select products below:
Bermuda Segment:
Hamilton Re underwrites property, casualty, and specialty reinsurance globally. Hamilton Re in the US writes casualty and specialty on a global basis and Hamilton Re Bermuda grants access to the high excess Bermuda market for specialty products.
Under the Hamilton Re banner there are three reinsurance lines and three primary insurance lines.
Reinsurance Coverages:
Property Treaty Reinsurance: variety of property reinsurance products with worldwide coverage, including Excess of Loss, Proportional, Stop Loss, Aggregate, Industry Loss Warranty, Retro, and Risk Excess. The company offers capacity on a multi-year basis, with reinstatable or single-shot limits, and a maximum program line of $60 million for Catastrophe and $20 million for Risk XS.
Specialty Reinsurance: covers various niche areas, such as: Accident & Health, Aviation, Crisis Management, Financial Lines, Marine & Energy, Multiline Specialty, and Satellite reinsurance. I would implore you, if interested, to check out each of these lines further: Specialty Reinsurance
Casualty Reinsurance (Bermuda & US): offering solutions for General Liability, Umbrella & Excess Casualty, Professional Liability, Workers’ Compensation & Employer’s Liability, etc. “The casualty reinsurance is written out of Bermuda and US on a proportional and excess of loss basis covering worldwide exposure.” – excerpt from 2024 10-K.
Insurance Coverages:
Property D&F Insurance: bespoke property coverage specializing in large North American commercial. Capacity and participation are below:
Financial Lines Insurance: underwriting on a worldwide basis focusing on Directors & Officers, errors & Omissions, Employment Practices Liability, and Transactional Liability. The targeted coverage is for large US commercial companies and financial institutions on a worldwide XOL basis.
Casualty Insurance: insurance solutions with a broad appetite for complex risks, serving a diversified book of mostly Fortune 1000 business. The company provides up to $25 million in capacity. Target markets include energy, rail & transport, chemicals, hospitality, etc.
Below is a visualization of the Hamilton Insurance Group corporate structure:
Personnel
While the underwriting results are paramount, without understanding the precise lines of coverage driving the segment results you are left with little understanding of risk. Furthermore, just focusing on financial results tells you an incomplete picture about the underwriting culture of an insurer. This isn’t to negate the importance of good results as they are paramount, but in my view, insurance is a game of longevity and that is driven by decisions the management team and underwriters make on a day-to-day basis.
To that point… A couple of notable members of the risk/actuarial/underwriting team:
Wilfred Chin – Chief Actuary & Group Chief Actuary. Wilfred Chin spent 14 years at Tokio Marine Kiln, a specialist underwriting with an international presence and a very broad suite of products. He started at Tokio Marine Kiln as an actuary and proceeded to become Chief Actuary & Head of Reserving. Given the product portfolio of Tokio Marine Kiln, I personally believe the overlap makes him well versed in the types of lines that Hamilton offers. When he was hired in 2023 he was named Chief Actuary of Hamilton Global Specialty, the underwriting platform written by Syndicate 4000 and DAC, in 2024 he was promoted to Group Chief Actuary. (Tokio Marine Kiln is a part of Tokio Marine Holdings $8766.T)
Jamie Secor – Chief Underwriting Officer @ Hamilton Select. Jamie Secor joined Hamilton in 2021 after a very successful 11 year career at Kinsale Insurance Company $KNSL. When she joined Hamilton she was Head of Professional Liability business and subsequently promoted every year and a half until being named CUO of Hamilton Select.
Alex Baker – Chief Risk Officer. Alex Baker is a member of the executive team as the Chief Risk Officer, he joined Hamilton in 2016 at Hamilton International before being promoted. Prior to Hamilton he was at Chubb CB 0.00%↑, where he held the Syndicate Chief Actuary role in London.
On the whole, I find the underwriting/risk team to be staffed by competent people. I believe the culture is solid and I think the experience each of them hold compliments the current portfolio and ambitions of Hamilton at large.
Assets and Net Investment Income
First things first before diving into the FY 2024 operating results: the balance sheet. The structure of the balance sheet for Hamilton is not simply by any means, primarily due to an investment fund managed by Two Sigma.
Assets:
1) $2.38b of fixed maturity investments
2) $497.1m of short-term investments
3) $939.4m of investments in Two Sigma Hamilton Fund
4) $996.5m of cash and cash equivalents
Debt:
$149.9m term loan.
Two Sigma
Of their $4.9 billion invested assets and cash, $939.4m of that was in their Two Sigma Hamilton Fund. The TS Hamilton Fund is a “fund-of-one” managed by Two Sigma for Hamilton. During the 2024 fiscal year the TS Hamilton Fund the investments include: Two Sigma Futures Portfolio, LLC (FTV), Two Sigma Spectrum Portfolio, LLC (STV), and Two Sigma Equity Spectrum portfolio (ESTV). Hamilton had 14.3%, 17.8% and 9.8% interest in the FTV, STV, and ESTV funds respectively.
Now, the assets that are held within the TS Hamilton Fund are not just the “investments in Two Sigma Funds” line item on the balance sheet. The fund requires certain cash collateral to be within the TS Hamilton Fund to support the underlying investment strategies of the trading vehicles, of which there are three: FTV, STV, and ESTV. There is a $578.2m cash and equivalent position and a $496m short-term investment position that acts as this collateral – any capital that isn’t required to be held within a trading vehicle is swept into cash or short-term investments. These balances cannot be removed from TS Hamilton Fund for this reason.
A point I really want to drive home is that while $939.4 million is being managed in active strategies by Two Sigma, the actual amount of capital that is under the TS Hamilton Fund is larger than just the line item on the balance sheet. The actual figure under Two Sigma is the sum of the active investments of $939.4 million, cash and equivalents $578.2 million, and short-term investments of $496 million for a total of $2.0 billion.
Fund Strategies, performance, and cost:
FTV: broad macro exposure to fx, fixed income, equity and credit indices and commodities utilizing futures, spots, forwards, options swaps, cash bonds and ETPs.
STV: exposure to US listed equity securities and related instruments and derivates.
ESTV: exposure to non-US listed equity securities and related instruments and derivatives.
In 2025, the composition of investment portfolios within the TS Hamilton Fund is going to change from three funds to four and will no longer be FTV, STV, and ESTV. Below are the new funds:
Two Sigma Absolute Return Portfolio (ATV): systematic global equity market neutral strategy focusing on equity securities, equity related derivatives, foreign exchange contracts.
Two Sigma Horizon Portfolio (HTV): systematic and non-systematic discretionary strategies trading futures, futures options, fx spot, forward and option contracts, ETPs and ETP options, debt securities, and various derivatives.
Two Sigma Navigator Portfolio (NTV): non-systematic discretionary macro strategies trading globally across asset classes.
Two Sigma Kuiper Portfolio (KTV): non-systematic discretionary and quantitative strategy trading futures, futures options, fx spot, forward and option contracts, ETPs and ETP options, debt securities, and various derivatives.
As mentioned before, the actual amount of capital within the TS Hamilton Fund is $2.0 billion with $939.4 million being actively managed in the funds and the remainder being held in short-term investments and cash. Hamilton Re is required by their agreement to keep the lesser of $1.8 billion or 60% of Hamilton Insurance Group’s net tangible assets for the initial term and each commitment period thereafter. The language regarding withdrawals can be found in the 10-K, I’m not going to copy and paste the language here, but the language is good, and nothing jumps out at me as being specifically deleterious, it accommodates Hamilton in the case of depletion from day-to-day operations, if they cannot access credit, if not withdrawing would be detrimental to the business, etc. All of this can be found in the Risk Factors portion of the 10-K.
Two Sigma does not work for free and they certainly are not cheap. Personally, I find their fee to be on the higher side, but their results managing the TS Hamilton Fund speak for themselves. Two Sigma is paid a 2.5% management fee of the non-managing members’ equity (Hamilton) in the NAV of the TS Hamilton Fund per year. Two Sigma also is entitled to a 30% incentive allocation equal to 30% of the TS Hamilton Fund’s net profits. This performance fee is subject to a high watermark and accounts for withdrawals. In the event of negative performance see this excerpt directly from the 10-K:
“However, in the event there is a net loss during a quarter and a net profit during any subsequent quarter, the Managing Member is entitled to a modified incentive allocation whereby the regular incentive allocation will be reduced by 50% until subsequent cumulative net profits are credited in an amount equal to 200% of the previously allocated net losses.”
A breakdown of the total compensation paid to Two Sigma for the years 2024, 2023, and 2022:
I’m going to breakdown the operating results of the insurance business separately from the investment returns, I believe given the size of the earnings driven by their current investment portfolio, it is worthwhile to do this as it’s “balance sheet driven.”
Random note: at one point in time, the market cap for Hamilton was nearly the value of the Two Sigma Hamilton Fund.
In the years 2024, 2023, and 2022 TS Hamilton Fund returned 16.3%, 7.6% and 4.6% respectively. In 2022, if you recall, the SP500 was down 18.1% - while most certainly not the benchmark for TS Hamilton, it’s good to see, nonetheless.
The performance of their investments is most of their net earnings and to be frank, not everything about an investment or company can be positive. This is one of the negatives about this name, most of their earnings are coming off the back of their TS Hamilton Fund and while that can be a significant driver of ROE, the underwriting business is more important.
Fixed Maturity and Short-Term Investment
A more traditional investment profile for insurers is a fixed maturity book, Hamilton does a good job managing this book, in my opinion. Their fixed income portfolio performs well, and I find their capital allocation in this line item to mitigate interest rate risk.
As of December 31, 2024, their average credit quality on their fixed maturity and short-term book was Aa3, with an average yield to maturity of 4.7% and a duration of 3.4 (years). 100% of their fixed maturity and short-term investments are classified investment grade. The breakdown of their 2024 and 2023 books below:
There was approximately a $614.8 million increase in total fixed maturity and short-term investments with the overwhelming majority continuing to be invested in US government treasuries and corporate bonds. The size of this book in relation to their TS Hamilton Fund gives me some comfort, it’s almost 3x the size of their TS Hamilton Fund and is earning an average of YTM of 4.7%. While not critical, it’s good they have been able to extend the duration of their portfolio slightly while increasing the yield by 20 basis points.
2024 Repurchase Program
Further to the point regarding capital allocation, in 2024 they repurchased $109.5 million worth of Class A shares at an average price of $12.00 – a total of 9.1 million shares in the second quarter of 2024 from Blackstone. Additionally, they spent $28.1 million repurchasing 1.5 million Class B shares at an average price of $18.89. Both the Class A and Class B shares were cancelled following repurchase. The Class A common shares and Class B common shares both have voting rights, but the Class B shares are the ones that are listed on the NYSE. From the IPO prospectus:
“The rights of the holders of Class A common shares, Class B common shares and Class C common shares are identical, except with respect to voting and conversion. Subject to the voting cutback in our by-laws (the “By-laws”), each Class A common share and Class B common share is entitled to one vote per share. All Class C common shares have no voting rights, except as otherwise required by law.”
The total common shares outstanding is 101,477,997 for the full year of 2024 compared to 110,225,103 for the year ended 2023. They nailed this buyback with majority of those shares being repurchased from Blackstone at $12.00. In fact, total common shares outstanding is less than what it was in 2020 when the company was still private with a higher tangible book value per share and book value per share seen below:
Shares outstanding have gone down, but the TBVPS and BVPS has steadily increased even during years where share count increased as well. In my opinion, they have done an excellent job with their repurchase program.
Underwriting Results
Underwriting is the life blood of an insurance business. If you are bad at it, you die. As someone once asked me about them: “Is it one of those 1000 days to Thanksgiving Turkey charts?” It’s a great question, here’s the chart of a Thanksgiving Turkey:
Similarly, here’s the worst-case scenario for a really bad underwriter:
(It’s the same chart.)
This is obviously an attempt at humor, but I wanted to drive home the point as to how quickly bad underwriting can get out of hand. Hamilton Insurance Group, in my assessment, is not a bad underwriter. In fact, their underwriting has improved drastically in the last 4 years as they have scaled their strategy and expanded into different markets.
Since 2020, their premiums written has more than doubled. They’ve substantially lowered their combined ratio and have become profitable, both in their underwriting and in total company profitability. Below are a series of charts highlighting the general trends/changes in their underwriting performance & ROE:
I was debating whether to include the 2021 and 2022 data as those figures are for the 9 months ended November 30 for those years, but I decided to just to provide some type of sense for how those years went even if they are an incomplete picture. Focusing on the years that I can easily access full year results for – in 2022 net premiums written was $1.22 billion. Since then, Hamilton has increased their net premiums written to $1.92 billion, a 57% increase in premiums written. Coupling this with a reduction in combined ratios and higher return on equity, it is my belief that there has been an inflection in the underwriting operation. In fact, since 2018 they have quadrupled their premiums written from $571 million to $2.4 billion. A phenomenal result when you take into consideration the continued reduction in combined ratio.
They earned $149.4 million in underwriting income in 2024, a 15% increase from 2023 where they earned $129.8 million. The year over year increase from 2023 to 2024 is even more impressive when you recognize they were losing money on their underwriting operation in 2022, they had negative $31.7 million of underwriting income in 2022. I’ll say this again, it is my belief that their underwriting operations have reached an inflection point and barring the occasional issue, they should continue to perform well. In 2022, there was a significant catastrophe loss ratio, dragging down their combined ratio.
It is my expectation that they will continue to ramp their underwriting operation. At $149 million in underwriting income and their reserves/capital base, I believe they are poised to increase their premiums written and continue to drive meaningful ROE and net income for shareholders. Of course, this is merely an opinion based on my assessment.
2024 Segment Split
Focusing specifically on 2024, their breakdown by segment from an underwriting perspective is fairly equal. International (Hamilton Global Specialty and Hamilton Select) makes up 54%, while Bermuda (Hamilton Re) makes up 46% of their gross premiums written. The breakdown between insurance and reinsurance follows the segment breakdown as one would expect, insurance is 53% of their gross premiums written while reinsurance is 47%. From a lines classification perspective, of the $2.4 billion in gross premiums written in 2024 casualty was 45%, specialty was 30%, and property was 25%. Of the $2.4 billion in premiums written, International underwrote $1.3 billion with Bermuda underwriting the remainder of $1.1 billion.
International’s business is comprised of three lines: Specialty, Casualty, and Property of which it is made up of 43%, 42% and 15% respectively. Insurance comprises 88% of International’s $1.3 billion and reinsurance comprises 12%. International is the segment that contains Lloyd’s syndicate 4000 and Hamilton DAC. Syndicate 4000 was approved by Lloyd’s for capacity of GBP635 million in 2025, in 2024 this figure was GBP550 million – a nice bump in capacity for the syndicate.
Bermuda’s business is comprised of the same three lines as International. In the case of the Bermuda segment of the $1.1 billion in gross premiums written, casualty accounts for 47%, property for 38%, and specialty for 15%. Reinsurance is 88% of their $1.1 billion in gross premiums written with insurance being 12% - almost the exact opposite as International’s insurance/reinsurance split. They write reinsurance on an XOL or Proportional basis and are basically the same in terms of premiums written, $498 million and $486 million respectively.
Brokers
All of their International and Bermuda business is, of course, placed predominantly by brokers. Marsh, Aon, and Arthur J. Gallagher are their largest trading partners, accounting for 24%, 17%, and 13% of premiums placed respectively. All their other trading partners or direct clientele amounted to 46% of their business. Considering the consolidation and growth of the brokers this is unsurprising. The 10 largest brokers for their international segment accounted for 55% of their gross premiums written. In the reinsurance business, Marsh McLennan accounted for 41% of their gross premiums written and Aon accounted for 30% of those premiums.
Risk
The underwriting performance is great, it’s by all intents and purposes been phenomenal, but none of it matters without understanding how catastrophic events impacts their book. A big question prior to the earnings call was regarding the provision for the California Fires, the provision is $120-$150 million dollars for these fires, predominantly from their reinsurance business.
Focusing specifically on what future potential loss may look like, Hamilton conducts modeling to assess what certain events may cause in losses. HVR, known as Hamilton View of Risk, is their proprietary technology to manage natural catastrophe risk. Based on HVR:
“Our modeled 100-Year Occurrence Exceedance Probability for Atlantic Hurricanes in Florida would produce a net loss to Hamilton of $202.1 million, and our modeled 250-Year Occurrence Exceedance Probability for U.S. Mainland Earthquakes in California would produce a net loss to Hamilton of $277.8 million, or 8.7% and 11.9% of shareholders equity, respectively.”
To help manage their risk, the company purchases reinsurance and retrocession. In 2024, Hamilton ceded 26% of the premiums from the International segment and 15% from the Bermuda segment, which can be seen in the difference between Gross Premiums Written and Net Premiums Written. All of their reinsurers and retrocessionaires have at least a credit rating of A- by A.M. best or commensurate S&P Global rating.
Final Thoughts
Hamilton is barely a SMID cap. They are profitable with a unique asset being TS Hamilton Fund. They are a profitable underwriting business and grow their gross premiums written double digits each year. Since 2018, they have quadrupled the premiums they write while lowering their combined ratio to a good level. They, in my opinion, prudently manage risk and have demonstrated that there has been an inflection in the underwriting operation.
You can currently buy shares in Hamilton below book value of $22.95, trading at a market cap of $2.12 billion, growing premiums double digits (24.2% in 2024), 15% underwriting income growth, a 91.3% combined ratio, an ROE of 18.3% a $4.8 billion investment & cash asset base, minimal debt, a good underwriting/management team, and operating in an attractive segment of the insurance markets.
Through the majority of this piece, I have tried to be impartial, however, I am certainly not as I own the stock - we are all biased. Due to this I want to list a couple of negatives:
TS Hamilton Fund is BY FAR the largest contributor to net earnings – this isn’t terrible and for me it is not a deal breaker, I can see why it may for some. I believe that they will continue to underwrite effectively and get to a place where the underwriting continues to grow in proportion to the TS Hamilton Fund earnings.
Over the next few quarters this is what I really want to see and ideally by the end of 2025 have TS Hamilton fund be a lower proportion of net earnings by at least 10%.
Due to the outsized proportion of TS Hamilton Fund on net income, the $400.4 million in net income is not a stable number. Personally, I am anchoring myself to the yield in their fixed maturity and short-term investments and their underwriting income, in 2024 that income was $87.4 million and $149.4 million.
It’s my belief that other market participants are valuing the company similarly.
The California Fire provision of $120-$150 million is, without a doubt, a headwind. Although the market responded well to this news in the following days after the call. This figure will become clearer in the first quarter earnings of 2025.
I have no personal insight into this exposure, but they were bang on with their Milton provision coming in at the low end of their $30-$70 million range – it came in at $37.8 million.
I hope you all enjoyed this piece as much as I enjoyed writing it. It certainly took some time and research, and I haven’t fit nearly all of the information that I want to. In a follow up I am going to specifically focus on their catastrophe losses in previous years, prior year development, reserves as a function of premiums written by line, and the impact to their loss ratios by year. I wanted to get this piece out first to lay the groundwork for getting into what I consider to be the nitty gritty.
As always – KarstResearch on X/Twitter. My DM’s are open. Please feel free to reach out, I enjoy speaking with you all.
"Aliveness". Love the visual there.