Executive Summary / Key Takeaways

• Hamilton Insurance Group (HG) is executing a strategy focused on sustainable underwriting profitability and disciplined growth in a favorable specialty insurance and reinsurance market, leveraging its diversified global platforms and strong client relationships.
• The company's unique investment partnership with Two Sigma, utilizing quantitative strategies, provides a significant, low-correlated source of investment income that complements underwriting results and enhances overall financial performance.
• Recent financial results, including strong premium growth (17% GPW increase in Q1 2025), underscore market traction, particularly benefiting from the A.M. Best upgrade to 'A' which is expected to drive approximately $160 million in total gross premium growth over 2024-2025.
• Despite absorbing significant catastrophe losses in Q1 2025 ($151M net, primarily California wildfires), the underlying attritional loss ratio improved, reflecting the health of the core book and disciplined underwriting, while favorable prior year development continued its multi-year track record.
• A robust balance sheet, ample liquidity, and a proactive capital management approach, including a $150 million share repurchase authorization, position HG to capitalize on market opportunities and enhance shareholder value, even amidst ongoing market volatility and emerging risks like social inflation.

The Hamilton Story: Building a Resilient Specialty Franchise

Founded in Bermuda in 2013, Hamilton Insurance Group set out with a clear vision: to build a global specialty insurance and reinsurance company enhanced by data and technology, focused squarely on sustainable underwriting profitability and delivering significant shareholder value. This vision has guided its journey from a Bermuda-based reinsurer to a diversified global player with underwriting operations spanning London, Dublin, Bermuda, and the United States, culminating in its initial public offering on the NYSE in November 2023. The IPO marked a pivotal moment, injecting capital that has since been strategically deployed to lean into attractive market conditions and increase risk retention on well-priced business.

Hamilton operates through two primary reporting segments: International and Bermuda. The International segment houses Hamilton Global Specialty, which includes the well-regarded Lloyd's Syndicate 4000 and the Dublin-based HIDAC, focusing on commercial specialty and casualty insurance and specialty reinsurance. It also includes Hamilton Select, a U.S. domestic Excess and Surplus (E&S) carrier targeting the hard-to-place small to mid-sized casualty market. The Bermuda segment comprises Hamilton Re (Bermuda and U.S.), primarily writing global property, casualty, and specialty reinsurance, alongside high excess Bermuda market specialty insurance. This multi-platform structure provides diverse access to risk and allows the company to respond dynamically to evolving market opportunities.

At the heart of Hamilton's operational strategy is a disciplined, data-driven underwriting culture. This is overseen by a Group Underwriting Committee that regularly reviews performance, risk appetite, and market conditions to inform decisions and portfolio construction. This rigorous approach is designed to ensure intelligent pricing and structuring of products, aiming for profitability throughout market cycles.

Complementing its underwriting prowess is a unique investment management relationship with Two Sigma, a premier investment manager specializing in quantitative analysis. The Two Sigma Hamilton Fund (TS Hamilton Fund) is a dedicated fund-of-one designed to provide low-correlated absolute returns by combining multiple hedged and leveraged systematic and non-systematic strategies across diversified liquid global markets (equities, futures, FX). This partnership provides a differentiated source of investment income, distinct from traditional fixed-income portfolios, contributing significantly to Hamilton's overall financial results.

In the competitive landscape, Hamilton operates alongside major global players like Chubb (CB), AIG (AIG), and Munich Re (MURGY), as well as numerous other specialty insurers and reinsurers. While larger competitors like Chubb and Munich Re benefit from greater scale and more extensive global networks, Hamilton positions itself by emphasizing agility, disciplined underwriting in targeted niches, and leveraging its unique investment strategy. Its access to the growing U.S. E&S market through Hamilton Select provides a distinct avenue for profitable growth, capitalizing on the flexibility non-admitted carriers have in rate and form for unique risks. The recent A.M. Best upgrade to 'A' for Hamilton Re and HIDAC is particularly significant, placing these entities on par with many larger peers and unlocking opportunities for new business and increased participation, especially in casualty reinsurance where some competitors have scaled back.

Technology as an Enabler

Hamilton views data and technology not just as support functions, but as integral components enhancing its core strategic objective of sustainable underwriting profitability. The company emphasizes "data-driven and disciplined underwriting processes," suggesting technology plays a role in risk selection, pricing, and portfolio management. While specific, quantifiable performance metrics of its proprietary technology platforms are not extensively detailed, the company notes that amortization of intangible assets, which includes internally developed software and acquired intangibles, has increased, driven by the incremental expense associated with additional technology projects. This indicates ongoing investment in its technological capabilities.

The tangible benefits of this technology, as implied by management commentary and financial results, include enabling the disciplined underwriting approach, supporting the analysis and discussion of emerging risks within the Group Underwriting Committee, and contributing to the efficiency gains reflected in the declining trend of the other underwriting expense ratio over recent years. The strategic intent behind these investments is to position the company to intelligently price and structure its products and business portfolio, ultimately contributing to its competitive moat by improving risk assessment and operational efficiency.

Beyond underwriting, the partnership with Two Sigma highlights a different facet of technological differentiation. Two Sigma's expertise lies in the "differentiated application of technology and data science" to investment management. While Hamilton does not directly control Two Sigma's algorithms or systems, its investment in the TS Hamilton Fund provides access to returns generated by these advanced quantitative strategies. This technological edge in investment management contributes to overall shareholder value by providing a potentially less correlated source of return compared to traditional investment portfolios.

For investors, the "so what" of Hamilton's technology strategy is that it underpins the core underwriting process, aiming for better risk selection and pricing, and provides access to sophisticated quantitative investment strategies. While specific metrics on underwriting technology's impact are not public, the company's consistent focus on data and technology, coupled with its track record of improving attritional loss ratios and declining expense ratios (partially due to operational leverage from technology investments), suggests these capabilities are contributing positively to performance and competitive positioning, particularly in enabling disciplined growth in complex markets.

Financial Performance: Navigating Volatility with Underlying Strength

Hamilton's financial performance in the first quarter of 2025 demonstrated both the impact of significant industry-wide events and the underlying strength of its core operations and investment strategy.

Gross premiums written (GPW) saw robust growth, increasing 17% to $843.3 million compared to $721.9 million in Q1 2024. This growth was broad-based, driven by both new and existing business across casualty, property, and specialty lines, including a contribution from reinstatement premiums related to the California wildfires. Net premiums earned (NPE) grew even faster, up 29.5% to $498.9 million, reflecting increased retention on the growing book.

However, the quarter was significantly impacted by catastrophe losses, primarily the California wildfires. Net catastrophe losses totaled $151 million, representing a 30.2% catastrophe loss ratio. This drove the consolidated combined ratio to 111.6%, an increase from 91.5% in the prior year period which had negligible cat losses.

Despite the elevated cat losses, the underlying performance of the book showed positive signs. The current year attritional loss ratio improved significantly, decreasing 5.3 percentage points to 51.9%. Management attributed this improvement primarily to the absence of large individual losses in Q1 2025, in contrast to Q1 2024 which included the Baltimore Bridge loss. Furthermore, the company continued its track record of favorable prior year reserve development, contributing 2.9 percentage points of favorable development to the attritional loss ratio, compared to 3.1 percentage points of unfavorable development in the prior year period. This favorable development was seen in both International and Bermuda specialty and property classes.

Expense ratios saw mixed movements. The acquisition cost ratio increased modestly to 23.4% (from 21.9%), driven by changes in business mix, including more proportional and property binder business, and higher profit commissions. Other underwriting expenses increased in absolute terms due to higher compensation costs and headcount supporting growth, as well as increased IT and professional costs related to growth. However, the other underwriting expense ratio decreased slightly to 9.0% (from 9.3%), reflecting improved operating leverage on the larger premium base. Corporate expenses also increased due to variable performance-based compensation.

Investment results provided a strong offset to underwriting losses. Total net realized and unrealized gains on investments and net investment income totaled $267.7 million. The TS Hamilton Fund contributed $104 million in gains (a 5.5% return for the quarter), while the fixed income and other portfolio generated $63.8 million, benefiting from higher yielding assets and positive mark-to-market returns. The average yield to maturity on the fixed income portfolio was 4.50% at quarter-end.

Overall, net income attributable to common shareholders was $80.9 million, resulting in diluted EPS of $0.77 and an annualized return on average common shareholders equity (ROACE) of 13.7%. While lower than the exceptional 29.5% ROACE in Q1 2024 (which benefited from negligible cat losses and strong investment gains), this still represents a profitable quarter despite significant cat activity, highlighting the diversification benefits and investment performance.

Liquidity, Capital, and Shareholder Returns

Hamilton maintains a strong liquidity position, supported by significant cash flows from operations and a highly liquid investment portfolio.

Unrestricted cash and cash equivalents totaled $838.5 million at March 31, 2025.

Management is confident that annual positive operating cash flows, supplemented by the liquid investment portfolio and available credit facilities, provide sufficient liquidity to meet obligations, even in the face of large claim payments. The majority of cash and liquid investments are expected to be available within one to three business days under normal market conditions, excluding restricted amounts held for regulatory or collateral purposes. The TS Hamilton Fund also offers monthly and, under limited circumstances, daily liquidity options.

Capital adequacy is closely monitored to meet rating agency and regulatory requirements. The company believes it holds sufficient capital to capitalize on market opportunities and maintain its financial strength ratings. Debt levels remain manageable, with a $150 million term loan maturing in June 2025 and various letter of credit facilities totaling over $1 billion in commitments, used to support underwriting obligations and Lloyd's capital requirements. The company was in compliance with all debt covenants at March 31, 2025.

Hamilton is actively managing its capital to enhance shareholder value. Following the IPO and a significant repurchase from a founding investor in 2024, the company has a $150 million share repurchase authorization in place. In Q1 2025, it repurchased 0.5 million shares for $10.3 million at an average price of $20.74, below book value. $111.7 million remained available under this authorization as of quarter-end. This demonstrates a commitment to returning capital when shares are trading at a discount, while still retaining ample capital for organic growth.

Outlook and Key Considerations

Management remains optimistic about the market environment and Hamilton's prospects. They see continued attractive opportunities across both insurance and reinsurance markets, intending to pursue disciplined growth.

Specific guidance and expectations include:

• A.M. Best Upgrade Impact: The upgrade to 'A' is expected to drive approximately $160 million in total gross premium growth over 2024 and 2025, unlocking new business and increased participation, particularly in casualty reinsurance.
• Segment Growth: The Bermuda segment is expected to continue strong growth, benefiting significantly from the A.M. Best upgrade. The International segment is expected to grow 15% to 20% for the full year, driven by U.S. E&S and targeted specialty lines, despite pulling back in areas like cyber where pricing is pressured.
• Expense Ratio: Management targets a continued improvement in the expense ratio each year as the company scales, leveraging operational efficiencies. Corporate expenses are targeted at $50 million to $55 million annually.
• Investment Returns: The TS Hamilton Fund has a long-term target return of 10% annually (2.5% per quarter), although actual performance can vary significantly quarter-to-quarter.
• Renewal Market: Mid-year property cat renewals are expected to see increased demand and stable supply, with pricing similar to year-to-date trends, though loss-affected accounts are anticipated to see rate increases. The casualty market is expected to remain attractive, with potential pressure on ceding commissions on certain deals.

However, the outlook is not without challenges. Macroeconomic and geopolitical uncertainties persist, including potential impacts from tariffs (primarily loss cost inflation in property lines) and the risk of recession. Inflation, particularly social inflation in casualty lines, remains a key concern. The company addresses this by embedding cautious assumptions in pricing and reserving and actively monitoring trends. Catastrophe risk is inherent, as demonstrated by the Q1 2025 results, though the company manages this through portfolio construction, reinsurance (including the Easton Re cat bond), and disciplined attachment points. Reserve adequacy, while currently believed to be strong with a history of favorable development, remains an estimate subject to future events, particularly for long-tail casualty business and complex events like the Baltimore Bridge collapse and Ukraine conflict. The LPT agreement also introduces potential volatility based on underlying reserve development.

Conclusion

Hamilton Insurance Group is executing a clear and focused strategy centered on profitable underwriting and leveraging its unique investment partnership. The first quarter of 2025, while impacted by significant catastrophe losses, demonstrated the underlying health of the business through improved attritional loss ratios and continued favorable prior year development. Robust premium growth across both segments, fueled by favorable market conditions and the strategic benefits of the A.M. Best upgrade, signals strong momentum.

The company's disciplined underwriting culture, supported by ongoing investment in technology, provides a foundation for navigating market cycles and capitalizing on targeted growth opportunities, particularly in the attractive U.S. E&S and casualty reinsurance markets. The Two Sigma partnership offers a valuable, differentiated source of returns that enhances overall profitability. With a strong balance sheet, ample liquidity, and a commitment to shareholder value through share repurchases, Hamilton appears well-positioned to continue its trajectory. While risks from catastrophes, inflation, and market competition persist, the company's strategic responses and operational discipline provide a compelling investment thesis focused on sustainable profitability and value creation in the specialty insurance and reinsurance space.