Hamilton Insurance Group Ltd. Q3 FY2026 earnings call

• Financial Performance: The company delivered net income of $81 million and operating income of $180 million. Annualized return on average equity was 11%, while operating annualized return on average equity reached 25%. Book value per share grew 83% since IPO.
• Underwriting Discipline: Management prioritized underwriting profitability over top-line growth, pulling back in areas where pricing and terms did not meet hurdles (e.g., large account property DNS). They focused on smaller property risks and attractive casualty pockets.
• Geopolitical Impact: Catastrophe losses related to conflicts in Ukraine and the Middle East increased the loss ratio by 9.1 points (8.0 points from Ukraine, 1.1 from Middle East). However, rates in war risk, marine hull, and cargo lines saw healthy uplifts.
• Segment Specifics:
  • Hamilton Global Specialty: Growth driven by accident and health, professional lines, and marine hull (benefiting from war risk rating increases).
  • Hamilton Select: Grew 22% due to new property offerings, excess casualty, and small business lines. Benefited from an AMBest rating upgrade to A, aiding hard-to-place business and expansion into lower middle-market risks.
  • Bermuda Reinsurance: Growth in casualty and specialty reinsurance, driven by financial risks, aviation, and key client retention. Pullback in large account property insurance.
• Technology and Distribution: Hamilton Select invested in proprietary technology, including AI-assisted intake and smart queue systems, to enhance responsiveness and ease of doing business for wholesale brokers.
• Investment Portfolio: The fixed-income portfolio generated a loss of $56 million due to interest rate impacts, contrasting with a gain of $43 million in the prior year. The Two Sigma Hamilton Fund returned 6.1% for the quarter and 16.3% year-to-date.

The International segment, encompassing Hamilton Global Specialty and Hamilton Select, reported gross premiums written of $456 million for the quarter, representing a 20% increase from the prior period. This segment contributed approximately 55.7% to the total gross premiums written ($819 million combined with Bermuda). For the first nine months of 2026, International premiums grew 21% to $1.3 billion. Underwriting income was $9 million with a combined ratio of 97.1%, impacted by catastrophe losses from Ukraine and Middle East conflicts.

The Bermuda segment, housing Hamilton Re and Hamilton Re US, reported gross premiums written of $363 million, a 14% increase year-over-year. This segment contributed approximately 44.3% to total gross premiums. For the first nine months of 2026, Bermuda premiums grew 10% to $1.3 billion. Underwriting results were negatively impacted by a large loss in the Ras Laffin energy market event and attritional loss ratio increases, though favorable prior year development on specialty lines provided some offset.

• Underlying Loss Ratio: No change to guidance; management maintains expectations of a mid-50s underlying loss ratio for the group (specifically 55% for the group, 54.5% for International, and 56% for Bermuda).
• Premium Growth: Expects low double-digit premium growth for the full year 2026, consistent with their track record since 2017.
• January 1 Renewals: Does not expect price reductions at January 1, 2027, to match the declines seen at January 1, 2026. Rates are expected to remain adequate with terms and conditions largely intact, particularly in property.
• Capital Returns: Continued commitment to active capital management via share repurchases and potential special dividends, subject to prudent positioning during win season and overall capital evaluation.

• Catastrophe Losses: Significant exposure to geopolitical conflicts, specifically Ukraine and the Middle East, which drove substantial prior year and current year loss ratio increases.
• Aviation Reserve Uncertainty: The Ukraine conflict's impact on aviation reinsurance and retrocession remains uncertain due to long reporting lags and legal clarifications regarding liability on war risk vs. all-risk policies. Management adjusted reserves based on new information but noted that a significant portion of the estimate is still IBNR.
• Market Cycle Volatility: Property catastrophe rates are under pressure, and casualty rates are not uniformly keeping pace with loss cost trends, requiring disciplined risk selection.
• Fixed Income Volatility: The trading classification of the fixed-income portfolio exposes net income to unrealized gains/losses driven by interest rate fluctuations.

Q: Analyst asked about the magnitude of the large loss in Bermuda and whether the underlying loss ratio guidance changed. / A: CFO identified the loss as the Ras Laffin energy event, attributing $13 million of the $17 million group loss to Bermuda. Excluding this one-off, the Bermuda attritional loss ratio reverted to the guided 56%, confirming no change to underlying guidance.

Q: Analyst questioned if the mid-50s underlying loss ratio remains appropriate given recent volatility. / A: CFO confirmed 'Always,' reiterating that the mid-50s run-rate expectation stands firm despite the temporary impact of catastrophe events and reserve adjustments.

Q: Analyst asked about competitive dynamics in the US E&S space for Hamilton Select and future growth drivers. / A: CEO stated that while competition exists, Hamilton Select’s strong underwriting bench, new distribution head, and tech-enabled ease of doing business position them well. Submission intake is rising, supporting continued targeted growth in profitable lines.

Q: Analyst inquired about the shift in business mix toward specialty/casualty and its impact on asset duration and ROE. / A: CFO confirmed a deliberate shift away from property toward specialty and casualty, which has lengthened liability duration and necessitated an increase in asset duration to 3.8 years. He noted that higher yields on longer-duration assets help maintain accretive ROE despite potential shifts in loss ratios.

Q: Analyst sought clarity on the drivers behind the optimism for January 1 renewals compared to last year. / A: CEO explained that while pricing may soften slightly due to a light cat year, traditional markets are acting disciplinarily. Terms, conditions, and attachment points are expected to hold, preventing severe margin erosion and allowing profitable opportunities to persist.