Press Release - MAY 31, 2019
AM Best Affirms Credit Ratings of Hamilton Re, Ltd.
FOR IMMEDIATE RELEASE
OLDWICK - MAY 31, 2019
The ratings reflect Hamilton’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Hamilton’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorized as strongest. AM Best expects it to remain at comparable levels in prospective years based upon: reasonable stress testing; stability in overall reserve development; our expectation that the company’s operating performance will benefit from improved underwriting results; and the company’s investment performance will remain in line with historical performance. Over the past five years (2014-2018), capital adequacy has been bolstered by shareholders’ funds that have grown at an annual compound rate of approximately 18%. The company’s balance sheet assessment of very strong reflects its relatively high risk investment strategy, which is controlled by Two Sigma Investments, LP, an SEC-registered investment adviser based in New York, with more than USD 50 billion in assets under management as of Dec. 31, 2018.
Hamilton’s adequate operating performance has benefitted from investment earnings that consistently outperform peers, partially offset by underwriting losses. The relatively small scale of the company’s operations is a major contributor to its higher expense ratio compared with market peers. Furthermore, Hamilton had significant exposure to the catastrophe events in 2017 and 2018, which negatively affected its loss ratio. AM Best notes that these losses were within the company’s risk tolerances. AM Best expects Hamilton to achieve an underwriting break-even point within two years, the absence of which, regardless of investment results, could result in negative rating pressure.
Hamilton operates through global reinsurance and insurance platforms, including the Lloyd’s syndicate 3334 and its Bermuda-based operating company, Hamilton Re. In March 2019, the company announced that it had signed a definitive agreement with Liberty Mutual Group, Inc. to acquire Pembroke Managing Agency Limited (United Kingdom), which manages Lloyd’s Syndicate 4000, Ironshore Europe Designated Activity Company (Dublin, Ireland) and other related non-insurance entities. The transaction is expected to close in the third quarter of 2019, pending regulatory approvals. AM Best believes that the new business will be accretive to Hamilton’s underwriting performance, with the company’s profile benefiting from the additional line of business and geographic diversification. ERM is considered appropriate relative to the company’s risk profile and AM Best anticipates that its view of risk management will not change after the acquisition completes.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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