Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hamilton Insurance Group Ltd (HG, Financial) reported a net income of $78 million for the third quarter of 2024, despite significant catastrophe losses.
- The company achieved a group combined ratio of 93.6%, demonstrating strong underwriting performance.
- Hamilton's Bermuda segment posted a commendable combined ratio of 89.4%, reflecting effective risk management.
- The company experienced a 17% year-over-year growth in gross premiums written, driven by strong performance in the Bermuda segment.
- Hamilton's investment income for the third quarter was $83 million, a significant increase from $46 million in the same period last year.
Negative Points
- Hamilton faced $38 million in net losses from Hurricane Helene and other large loss events, impacting overall profitability.
- The International segment's combined ratio was 97.6%, indicating higher loss ratios due to business mix and social inflation assumptions.
- Increased competition in the London market, particularly in cyber and financial lines, has pressured pricing and growth in the International segment.
- The company anticipates losses from Hurricane Milton to be between $30 million to $70 million, adding uncertainty to future financial results.
- Corporate expenses are trending higher, primarily due to increased variable expenses associated with long-term incentive compensation plans.
Q & A Highlights
Q: Can you discuss the unfavorable casualty reserve development mentioned in the release and whether it was driven by one large claim?
A: The group had favorable prior period development of about $3 million for the quarter, but that's a net number. The favorable part was property and specialty classes. The unfavorable part was one large loss on the casualty side, which occurred in the International segment this quarter. The loss originally occurred in the fourth quarter of 2023, and we received additional claims information this quarter, prompting the adjustment. - Craig Howie, CFO
Q: The quarter saw higher retention on gross premiums. Can you explain the drivers and whether the rating upgrade impacted retention?
A: The additional retention of business in both international and Bermuda was a stated goal. We raised primary capital at the beginning of the year when we went public, and we deployed that capital by retaining more well-priced business. The rating upgrade primarily benefited our reinsurance operations, leading to new business opportunities and increased line sizes. We expect a 15% to 20% premium uplift for our business on a run rate basis starting in 2024. - Pina Albo, CEO
Q: Is the international underlying loss ratio of 55% in the quarter a good run rate going forward?
A: I would encourage looking at the full-year results for a better gauge. The 2023 full year was about 53%, and on a year-to-date basis, the attritional loss ratio is about 54.6%, with 1.9 points related to the Baltimore bridge from the first quarter. The full year at about 53% is consistent with where this book has been running. - Craig Howie, CFO
Q: Can you elaborate on the increased competition in the London market and which areas are affected?
A: We are seeing increased competition in cyber, financial lines like D&O, and large global property placements. Despite some pricing pressure, the property insurance class has seen quarterly rate increases since 2017, and we are targeting the most profitable business. - Pina Albo, CEO
Q: Will reinsurers be able to push down ceding commission ratios in the coming year?
A: We expect continued concerns around inflation to keep insurance pricing attractive, which may put pressure on ceding commissions for certain deals. We have increased our writing in the casualty reinsurance space, taking advantage of opportunities as larger competitors scale back. - Pina Albo, CEO
Q: Is there a terminal level for the expense ratio, or do you see further opportunities for operating leverage?
A: We expect to continue producing a better expense ratio each year as we scale. We have achieved this target every year since 2019. - Craig Howie, CFO
Q: Does the holding company need to upstream capital from insurance companies to deploy capital into buybacks?
A: We have flexibility to use the buyback as needed, with some capital at the holding company and the ability to utilize dividends from the operating company. We have $140 million left on the authorization from the Board. - Craig Howie, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
