AM Best Affirms Credit Ratings Of Hamilton Re

June 2, 2019

AM Best has affirmed the Financial Strength Rating of A- [Excellent] and the Long-Term Issuer Credit Rating [Long-Term ICR] of “a-” of Hamilton Re, Ltd. [Hamilton Re] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.

The ratings agency said, “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.”

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