Hamilton Insurance Group’s third-quarter underwriting profit fell sharply after it strengthened reserves for losses linked to the war in Ukraine. Strong premium growth and a large investment gain kept overall earnings high.
The Bermuda-based specialty insurer and reinsurer, which trades on the New York Stock Exchange, reported underwriting income of $15.5 million, down from $64.1 million a year earlier. Its combined ratio rose nearly 10 points to 97.3% from 87.8%. Gross premiums written grew 17.3% to $819.7 million.
Investment returns made up the difference. Hamilton reported operating income of $179.9 million, an annualized operating return on equity of 24.9%, helped by $144.7 million from the Two Sigma Hamilton Fund. Net income fell to $81.5 million from $136.2 million.
Almost all of Hamilton’s $53.9 million of net catastrophe losses in the quarter came from conflict. They included $47.1 million of adverse prior-year development relating to the Ukraine conflict and $6.8 million from the Middle East conflict.
Most of the Ukraine-related losses fell in Hamilton’s Bermuda segment, which took $42.6 million of the adverse development. That segment’s combined ratio jumped to 97.7% from 80.7%. Hamilton didn’t say which classes were affected.
Outside the war losses, reserves remained favorable. Hamilton released $27.2 million from prior years, mostly in specialty classes. It also reported one large loss in its specialty and property reinsurance classes.
Hamilton’s business mix is shifting toward casualty reinsurance, much of which reflects exposure to the US liability market. The company said its current-year attritional loss ratio rose 2.1 points to 57.5%, mainly because of more casualty reinsurance and the large loss. The extra casualty business also raised its acquisition cost ratio by 1.5 points.
The Bermuda segment grew premiums 13.9% to $363.4 million, mainly from casualty and specialty reinsurance. The International segment, which includes Hamilton’s Lloyd’s operations, grew 20.1% to $456.3 million, with growth in specialty and casualty insurance and specialty reinsurance. That segment’s combined ratio was 97.1%.
Chief executive Pina Albo said Hamilton had delivered consistent performance despite a transitioning market and continuing geopolitical tensions.
For the first nine months, Hamilton’s combined ratio was 94.1%, and underwriting income was $102.2 million.
Hamilton’s move into casualty reinsurance reflects a wider trend. As property catastrophe reinsurance pricing softens, reinsurers looking for growth are turning to casualty. That is good news for US primary carriers and MGAs that rely on reinsurance to support their liability programs, since more capacity can help keep casualty reinsurance terms stable.
The risks are clear, though. US casualty lines remain under pressure from social inflation, nuclear verdicts and litigation funding. The Insurance Information Institute and Milliman forecast that general liability and commercial auto will remain unprofitable this year, and several carriers have reported adverse liability development in the third quarter. Reinsurers growing in casualty now are taking on long-tail risk that may take years to show its true cost.
The Ukraine charge is also a reminder that war and political risk losses can keep developing long after the events that caused them, as coverage disputes and court cases play out. For brokers placing specialty, political risk and reinsurance business, Hamilton’s double-digit growth shows it remains an active market. Brokers should still expect underwriters across the market to look closely at conflict exclusions and aggregation in those classes.
