Hamilton Insurance Group Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 7 speakers on the call.

Operator

welcome to the Hamilton Insurance Group Earnings Conference Call. As a reminder, this call is being webcast and will also be available for replay with links on the Hamilton Investor Relations website. I'd now like to turn the call over to John Levinson, Group Treasurer and Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and welcome all to the Hamilton Insurance Group Third Quarter 2024 Earnings Conference Call. The Hamilton executives leading today's call are Pina Albo, Group Chief Executive Officer and Craig Howie, Group Chief Financial Officer. We are also joined by other members of the Hamilton management team. Before we begin, please note that Hamilton financial disclosures, including our earnings release, include important disclosures regarding forward looking statements. Management comments regarding potential future developments are subject to the risks and uncertainties as noted in these disclosures.

Speaker 1

Management may also refer to certain non GAAP financial measures. These items are reconciled in our earnings release and financial supplement. With that, I turn the call over to Pina Albo, Hamilton's CEO.

Speaker 2

Thank you, John, and hello, everyone. Let me start by extending my warm welcome to all of you joining us for Hamilton's Q3 2024 conference call. Before we discuss our results for the quarter, as you know, there have been a series of natural catastrophes these past 3 months that have impacted the lives and livelihoods of many people. We want to address all of those who suffered these catastrophes. Our heartfelt thoughts go out to you.

Speaker 2

As I reflect on these tragic events, I have to say that I'm proud to be part of an industry that helps individuals and communities rebuild when such devastation takes place. Moving forward with today's call, almost a year ago today, we launched the initial public offering for Hamilton, which marked our transition from a private company to the New York Stock Exchange listed firm we are today. In addition to raising capital, which we successfully and quickly deployed into our underwriting operations, the IPO also afforded us the opportunity to refine and share with you a detailed set of objectives to guide our business into the future. The most important of those objectives was and remains producing sustainable underwriting profitability. By this, we mean achieving underwriting profit throughout market cycles.

Speaker 2

We strive to reach this goal by focusing relentlessly on underwriting discipline and by having a shared accountability for results across our organization. The Q3 of 2024 was a real world test of our commitment to this objective, not to mention the resilience of our balance sheet. I am happy to report that we passed with flying colors. We had net income of $78,000,000 despite $38,000,000 of net losses from Hurricane Helene and other large loss events around the world. And turning to underwriting results, Hamilton had $29,000,000 of underwriting income and a group combined ratio of 93.6%.

Speaker 2

In other words, we were comfortably able to absorb the significant losses of the quarter and still produce a very solid underwriting result. Our International segment posted a combined ratio of 97.6% and our Bermuda segment posted a combined ratio of 89.4 percent, commendable results given the loss activity in the quarter. On a year to date basis, our combined ratio is 89.9% and our annualized ROE is 22.4 percent, points of pride as we celebrate 1 year as a public company. These results are a testament to the quality of our team, our portfolio construction and our disciplined underwriting approach. On this latter note, our underwriting results this quarter reflect our underwriting philosophy and the intentional actions we have taken and continue to take in our business.

Speaker 2

I've mentioned our Group Underwriting Committee or our GUC in the past. This committee meets regularly for in-depth discussion of our business performance by underwriting platform and by line. We discuss emerging risks, our risk appetite, our view of the market conditions, when to lean in and out of certain classes or geographies. Our analyses and discussions are robust and inform underwriting decisions and portfolio construction and also ensure we maintain our high underwriting standards. The GUC is representative of the discussions that take place regularly at Hamilton also between meetings amongst members of our executive team and frontline underwriters.

Speaker 2

I see engaging with and in some cases challenging our team as one of my main responsibilities as CEO. What are they seeing in pricing and rate adequacy? How is the market moving? What opportunities are we pursuing? And what risks are on our radar?

Speaker 2

I credit this regular dialogue and our underwriting culture for our vastly improved book of business and our strong underwriting results. Turning now to the overall market environment. The Q3 also marks an important time in both insurance and reinsurance renewals. It's when our industry begins discussions with clients and brokers regarding a number of items, including demand, appetite, opportunities, pricing and terms and conditions. Hamilton participated in a number of these events, starting with the annual reinsurance rendezvous in early September, moving to the Wholesale and Specialty Insurance Association meeting or WICIA, continuing through the Council of Insurance Agents and Brokers Meeting, Baden Baden and the Professional Liability Underwriting Society Conferences in October November.

Speaker 2

Hamilton Re, Hamilton Global Specialty and Hamilton Select were well represented at these events. The benefit of our active participation at these conferences is the opportunity to meet face to face with our customers and brokers to better understand their needs and goals for the upcoming renewals and to discuss how we can partner with them to meet these needs. Let me share a few takeaways from those meetings. First, Hamilton is seen as a valuable and reliable partner, not only for our capacity and responsiveness, but also for our creativity and ability to provide solutions. This has proven particularly valuable when other markets make broad brush decisions, for example, to back down or exit completely from a certain line of business.

Speaker 2

Our ability to step up and provide solutions matters a great deal to our customers, helps us win business and develop broad, long standing relationships, some of which are now over 10 years old. The second key takeaway is that market discipline continues to remain strong. The underpinnings of the market reset that took place in 2023 are intact as we continue to grapple with the realities of climate change, geopolitical turmoil and inflation. The catastrophe events of the past few months only serve to uphold attractive market conditions. A third observation is that the concerns over economic and social inflation are real, affecting many lines of business, but particularly casualty classes.

Speaker 2

We have been wary of this development for several years now, building what we believe to be cautious assumptions into our pricing and reserving and reviewing development regularly, a topic which Craig will provide more detail on in a few minutes. Many of our peers who leaned into casualty during the softer market years continue to pull back. The fact that we were until very recently underrepresented in this class, coupled with our recent rating upgrade has created opportunities for Hamilton, which we are selectively pursuing. A couple of comments related to the growth in our business before I hand over to Craig. The punch line is that growth has remained strong in the quarter, up 17% year over year.

Speaker 2

Bermuda had a particularly strong quarter, in part driven by the A. M. Best upgrade to A, which has led to meaningful amounts of new business as well as the ability to increase our line size on targeted accounts. International growth also continues apace, albeit at a more measured clip, but within our expectations and reflecting our focus on maintaining pricing and underwriting discipline. As a reminder, international includes both Hamilton Select, our domestic U.

Speaker 2

S. E and S operation and Hamilton Global Specialty, which houses our Lloyd's syndicate and our Irish carrier. While we continue to see very strong double digit growth in Hamilton Select, As you will have heard from others, the level of competition in the London market has been heating up for certain classes of business. Cyber is a perfect example, where we at Hamilton have stood firm both on coverage terms and price, which has consequently led to a reduction in premium written in this line. Having said this, given that we write specialty insurance across all three of our underwriting platforms and that we have a very diversified book, we continue to expect double digit growth in Specialty Insurance, including in the International segment.

Speaker 2

In closing, I'd like to say a word about how proud I am of our results this quarter, particularly in the face of meaningful catastrophe losses. As we noted when we went public, we have built Hamilton for the long term. We aim to be a resilient and reliable partner, providing valuable solutions and meaningful capacity. This will ultimately benefit all of our stakeholders, namely our clients, our brokers, our shareholders, as well as the individuals and communities we serve. Craig, now over to you.

Speaker 1

Thank you, Pina, and hello, everyone. Hamilton had a very strong Q3 and 1st 9 months of financial results with excellent investment returns, solid underwriting income and record gross premiums written. For the Q3 of 2024, as Pina mentioned, Hamilton reported net income of $78,000,000 equal to $0.74 per diluted share, producing an annualized return on average equity of 13.8%. This compares to net income of $44,000,000 or $0.41 per diluted share and an annualized return on average equity of 9.8 percent in the Q3 of 2023. With those figures as highlights, let me provide some additional detail around our underwriting and investment income components for the quarter and for the 1st 9 months.

Speaker 1

Starting with underwriting results. Hamilton continues to grow its top line at an impressive double digit rate. For the 1st 9 months of 2024, gross premiums written increased to a record $1,900,000,000 compared to $1,500,000,000 this time last year, an increase of 24%. All three of our operating platforms, Hamilton Global Specialty, Hamilton Select and Hamilton Re continue to take advantage of favorable market conditions, all of which contributed to our profitable growth. Underwriting income for the group was $29,000,000 for the 3rd quarter compared to underwriting income of $25,000,000 in the Q3 last year.

Speaker 1

The group combined ratio was 93.6% compared to 92.6% in the Q3 of 2023 despite an active catastrophe season. In terms of the combined ratio components, the loss ratio increased due to catastrophe losses in the quarter offset by a decrease in the expense ratio. The loss ratio increased 4.2 points to 61.0 percent compared to 56.8 percent in the prior period. The increase was primarily driven by $38,000,000 or 8.5 points of current and prior year catastrophe losses, which consisted of Hurricane Helene for $34,000,000 the Calgary hailstorms for $12,000,000 and Hurricane Debbie for $6,000,000 This was partially offset by favorable prior period catastrophe development of $13,000,000 This compares to $7,000,000 or 2.1 points of catastrophe losses reported in the Q3 last year. The current year attritional loss ratio was 53.2%, a decrease of 1.6 points compared to the same period in 2023.

Speaker 1

This was primarily driven by the absence of large losses in the current quarter. We also saw about $3,000,000 of attritional favorable development driven by specialty and property lines. This compares to less than $1,000,000 of favorable development in the Q3 last year. Turning to our expense ratio. This decreased by 3.2 points to 32.6% compared to 35.8% in the Q3 last year.

Speaker 1

Year to date, the expense ratio decreased 3.2 points to 32.4% compared to 35.6% in the 1st 9 months last year. The decrease in the expense ratio was mainly driven by improved operating leverage due to the growth in our earned premium base as well as third party fee income, which is offset against expenses. As for corporate expenses, they are trending higher, but this is primarily due to an increase in the variable expenses associated with our long term incentive compensation plan, which is based on performance over a 3 year period. I'll discuss the expense ratio on a year to date basis in more detail in the segment results section, which I'll turn to now. Let's start with the International segment, which includes our specialty insurance businesses, Hamilton Global Specialty and Hamilton Select.

Speaker 1

For the 1st 9 months, international gross premiums written grew to $958,000,000 from $832,000,000 an increase of 15%. This was primarily driven by growth, improved pricing and new business in casualty and property insurance classes and specialty reinsurance and insurance classes. For the Q3, international had underwriting income of $5,000,000 and a combined ratio of 97.6%, compared to underwriting income of $4,000,000 and a combined ratio of 97.7% in the Q3 last year. The international current year attritional loss ratio increased by 0.7 points to 55.3% in the 3rd quarter compared to 54.6% in the prior quarter. The increase was primarily driven by business mix and a modest increase in the casualty insurance class as a result of a more conservative assumption regarding social inflation of about $2,000,000 Moving back to some year to date figures.

Speaker 1

For the 1st 9 months, the international acquisition expense ratio decreased 0.9 points to 25.2% compared to 26.1% in the 1st 9 months last year. The decrease was primarily related to lower acquisition costs in casualty insurance in 2024 compared to 2023. The other underwriting expense ratio decreased 2.5 points to 13.8 percent compared to 16.3% in the 1st 9 months last year as a result of the growth in the premium base. I will now turn to the Bermuda segment, which houses Hamilton Re and Hamilton Re U. S, the entities that predominantly write reinsurance business.

Speaker 1

For the 1st 9 months, Bermuda gross premiums written grew to $921,000,000 from $685,000,000 an increase of 34%. The increase was primarily driven by new business, expanded participations and rate increases in the property and casualty reinsurance classes. Specifically for the Q3, we generated a considerable amount of new business as a result of our A. M. Best rating upgrade.

Speaker 1

For the Q3, Bermuda had underwriting income of $24,000,000 and a combined ratio of 89.4 percent compared to underwriting income of $21,000,000 and an 86.9% combined ratio in the Q3 last year. The increase in the combined ratio was primarily related to catastrophe losses in the quarter. Bermuda had $29,000,000 of net catastrophe losses in the Q3 of 2024 compared to favorable $3,000,000 of net catastrophe losses in the Q3 of last year. The Bermuda current year attritional loss ratio decreased 4.1 points to 51.0 percent compared to 55.1% in the prior quarter. The decrease was primarily driven by the absence of large losses in the current quarter.

Speaker 1

This was partially offset by a modest increase in the casualty class as a result of a more conservative assumption regarding social inflation of about $4,000,000 Moving back to some year to date figures. For the 1st 9 months, the Bermuda acquisition expense ratio increased 0.1 points to 19.9 percent compared to 19.8% in the prior period. The other underwriting expense ratio decreased 2.5 points to 5.6 percent compared to 8.1% in the 1st 9 months of last year as a result of the growth in our premium base and the performance based fee income from our iOS platform, which offsets expenses. I encourage you to look at our full year 2023 results as a gauge for many of our underwriting ratios. Now turning to investment income.

Speaker 1

Total net investment income for the Q3 was $83,000,000 compared to investment income of $46,000,000 in the Q3 of 2023. The fixed income portfolio, short term investments and cash produced a gain of $94,000,000 in the quarter compared to a loss of $5,000,000 in the Q3 of 2023. This includes the realized and unrealized gains and losses that Hamilton reports through net income as part of our trading investment portfolio. The fixed income portfolio had a return of 4.1 percent or $90,000,000 and a new money yield of 4.3% on investments purchased this quarter. The duration of the portfolio decreased slightly to 3.1 years.

Speaker 1

The average yield to maturity on this portfolio was 4.2% compared to 4.5% at year end 2023. The average credit quality of the portfolio remains strong at AA3. The 2 Sigma Hamilton Fund produced an $11,000,000 loss or minus 0.6 percent for the Q3 of 2024. The fund had a net return of 12.2% for the 1st 9 months. The latest estimate we have for the 2 Sigma Hamilton Fund year to date performance is 13.3% through October 31, 2024.

Speaker 1

The 2 Sigma Hamilton Fund made up about 39% of our total investments, including cash investments at September 30, 2024 compared to 43% at December 31, 2023. Last quarter, we announced a $150,000,000 share repurchase authorization by the Hamilton Board of Directors. During the quarter, we used $10,000,000 of that authorization to repurchase 530,000 shares at an average price of $18.87 per share. Based on our book value per common share of $22.82 at September 30, the shares were repurchased at a 17% discount to book value. Next, I have some comments on the strength of our balance sheet.

Speaker 1

Total assets were $7,800,000,000 at September 30, 2024, up 17% from $6,700,000,000 at year end 2023. Total investments in cash were $4,600,000,000 at September 30, an increase of 16% from $4,000,000,000 at year end 2023. Shareholders' equity for the group was $2,300,000,000 at the end of the third quarter, which was a 13% increase from year end 2023. Our book value per share was $22.82 at September 30, 2024, up 23% from year end 2023. In terms of our reserve position, we completed our mid year external actuarial review, which allows us to continue to say that we are comfortable with the strength of our reserves.

Speaker 1

I'd like to conclude my remarks with some comments on the recent hurricane activity. Shortly after Hurricane Helene hit Florida in late September, Hurricane Milton also made landfall on the Gulf Coast of Florida in early October. The company estimates that losses from Hurricane Milton will be in the range of $30,000,000 to $70,000,000 net of reinsurance. It remains early for both of these events in terms of the information flow on the claims side. Consequently, loss estimates from both events are subject to uncertainty.

Speaker 1

The estimated losses from Hurricane Milton will be reported in the company's Q4 2024 financial results. Thank you. And with that, we'll open up the call for your questions.

Speaker 3

Thank

Operator

you. Our first question comes from the line of Alex Scott from Barclays. Please go ahead.

Speaker 3

Good morning, everyone. This is Justin on for Alex. My first question was related to sort of the favorable reserve development. I was wondering if you could discuss the unfavorable casualty reserve development that you mentioned in the release and to what degree it was just driven by one large claim that you had called out? Thank you.

Speaker 1

Justin, this is Craig. Thanks for the question. The group had favorable prior period development of about $3,000,000 for the quarter, but that's a net number. The favorable part was property and specialty classes. The unfavorable part, as you mentioned, was one large loss in the casualty side.

Speaker 1

That loss occurred in the international segment this quarter. The loss occurred originally in the Q4 of 2023. We just received additional claims information this quarter and we're reacting to that new information. That's the reason for the adjustment this quarter.

Speaker 3

Great. Thank you. And just a quick follow-up on retention. It looked like this quarter saw higher retention on gross premiums. I was wondering if you could help sort of like unpack the drivers of this and what we should expect going forward and if sort of the upgrade on the rating had any impact on the retentions?

Speaker 3

Thank you.

Speaker 2

All right. So there's a couple of questions there. I'll take that. This is Pina. Thank you.

Speaker 2

In terms of the additional retention of business both in international and Bermuda, that was a stated goal. As you might recall, we raised some primary capital at the beginning of the year when we went public. And we partly deployed that capital by keeping more of the well priced business that we have on our books. So that goes to that. In terms of the rating upgrade and the impact that the rating upgrade has had for us, the most of the benefit of that rating upgrade was for our reinsurance operations.

Speaker 2

Our Lloyd's syndicate already benefits from an A rating being part of Lloyd's. So it was expected to impact mostly the reinsurance side of our business. To be really honest, we started fielding calls on new business and ability to increase line sizes basically the minute the release was made. And we then had opportunities for brand new deals with existing clients, the opportunity to access new clients and also the ability as I said to increase our line size and we did that selectively during this quarter. If I look out, I can tell you 2 things.

Speaker 2

On a year to date basis, and I'm not going to give you a precise number, we do track this. On a year to date basis, I can tell you we had a high double digit 1,000,000 in terms of additional premium. And if I I know you're probably going to ask me what else I expect because we did say that this impact would affect not only this year, but we also believe it will affect our business opportunities going into 2025. So if I look at it on a run rate basis starting 2024 over a year, we're probably expecting about a 10% to 15% premium uplift for our business. I hope that answers your question.

Speaker 3

Yes. Thank you for the color.

Operator

Our next question comes from the line of Elyse Greenspan from Wells Fargo. Please go ahead.

Speaker 4

Hi. Thanks. Good morning. My first question was on the international underlying loss ratio that 55% and change in the quarter. Do you guys think that reflects kind of a run rate for the segment?

Speaker 4

I know you pointed out business mix and just more conservative assumptions around social inflation. It's kind of driving the uplift in the quarter. But is that a good run rate to think about going forward?

Speaker 1

Elyse, this is Craig. What I would say to you is, again, I would encourage you to look at the full year results as a better gauge for some of these underlying ratios. As you know or just to give you an idea, 2023 full year was about 53% on a year to date basis for international, that attritional loss ratio right now is at about 54.6%, but about 1.9 points of that is related to the Baltimore Bridge from the Q1. So on an overall basis, obviously, it does depend on business mix. But if you look at the full year at about a 53%, that's about where this book has been running pretty consistently.

Speaker 4

And then from a premium growth perspective commentary, right, you guys had pointed to like $15,000,000 to $20,000,000 for the year in international last quarter. It sounds like you might be perhaps running a bit like there just because of the underwriting discipline and pulling back in cyber, but maybe growth is running better in Bermuda. Am I thinking about the components kind of correctly? And how would you think I guess international and maybe overall growth to trend for the full year this year?

Speaker 2

Thanks Elyse. It's Tina here. I'll take that. Craig, I'm sure we'll fill in any blanks. You're right to point out and we encourage people to look at our year to date figures, which showed gross premium written for international segment, up 15%.

Speaker 2

You're right to point out it was lower in the quarter and also right to point out this is reflective of the discipline that we are deploying in light of the business that we're seeing. And I signaled cyber out on the prepared remarks because there we're seeing pressure on premium and where we're trying to uphold both pricing and coverage terms. At the end of the day, we will never sacrifice we will never prioritize top line for bottom line and that is what you're seeing this quarter, but we're not changing our guidance. You'll also know that Select is part of our international segment and there we're continuing to see the benefit of very strong E and S market in general, but also a strong reception to our product offerings in Hamilton Select with very strong premium flow to the operation. So that is part of the international segment as well.

Speaker 1

Yes. Pina, the only thing I would add is, Elyse also asked about Bermuda. We still expect Bermuda to continue to grow for all the reasons you just mentioned, including the A. M. Best upgrade.

Speaker 4

Thank you.

Operator

Our next question comes from the line of Michael Zareminski from BMO. Please go ahead.

Speaker 5

Hey, good morning. I think you partially touched on this, but the increased competition coming from the London market, is that more isolated to cyber or is it just kind of property 2 or maybe you can kind of dimension more, because I don't think we can see that you're a national segment. We can see the historical mix of property versus casualty versus specialty. So I'm just going to wanted to help to mention kind of what pockets of your business are seeing those increased competitive pressures?

Speaker 2

Sure. Happy to take that. So yes, I mentioned cyber as an area where we're seeing increased competition in the London market. Another area is an area that you've heard from other people on the some of the financial lines, D and O class of business where we're still seeing pressure on pricing. And then I guess the third thing I would mention is on the large global property placements on our direct and facultative book, we're also seeing some pressure on pricing there.

Speaker 2

Having said that, with respect to that class, the property insurance class, let's not forget that even with a little bit of pressure on pricing, this class has been seeing quarterly rate increases since 2017. So it's still adequate, but we are picking our spots on that class and making sure we target the most profitable business. Does that help?

Speaker 5

Yes, yes, yes, that helps. I understood that the absolute returns are probably still excellent. Switching gears to maybe more so the Bermuda segment, but curious if you think the reinsurers will be able to push down ceding acquisition cost ratios, ceding commission ratios in the coming year or so. I think we all see this morning that Swiss Re, for example, took a pretty big liability reserve addition. Berkshire did as well.

Speaker 5

So it feels like we're finally getting more action on insurers truing up their liability reserves. I'm curious if that can kind of play into the benefit of reinsurers in the coming year.

Speaker 2

Sure. I mean, I'll answer that specifically to casualty, but why don't I give you a little bit more flavor overall in terms of what we're seeing or what we expect in terms of market conditions going forward. And I'm going to start with on a very general umbrella level overarching everything, I'm going to start with market discipline. And this is probably as persistent as I have seen market discipline last in my 25 years plus in this business. So with terms, commission terms and conditions, attachment points, limit management, tower management, all staying very intact in this marketplace.

Speaker 2

And I think that is something that sometimes gets underestimated because those things are particularly important. When it comes to pricing, I'll start with casualty and but I'll also touch on property and specialty. On the casualty side, no question. The continued concerns around inflation, be it economic, but also social, we believe that's going to continue to keep insurance pricing attractive. So we're going to see that uptick on pricing on the insurance side.

Speaker 2

And then specific to what you were asking, we also think that's going to push some pressure on ceding commissions, not every deal, but on certain deals, we certainly expect to see pressure on ceding commissions. Just in this context, I also want to mention, we did take the opportunity in the last particularly since our A. M. Best upgrade to tick up our writing in the casualty reinsurance space because we were until very, very recently underrepresented in this class. And some of the actions of our larger competitors who have been involved in this class for during the softer market years and you're seeing their reaction now and either scaling back, that's created an opportunity for us quite frankly to get in on select deals that we want to get into and we are taking advantage of that.

Speaker 2

Just moving quickly to property, I think if I look at cat reinsurance, whatever sentiment was circulating about modest price pricing decreases going into oneone, those sentiments were circulating as we went into conference season this year, dissipated as the storm activity increased. So we're expecting pricing on the cat side to remain firm and attractive going into oneone. And then finally, if I just on specialty classes, there too, we've had geopolitical tensions are not abating. We've had a slew of space losses in the recent past. We also had the Baltimore Bridge loss at the beginning of this year.

Speaker 2

So we think that's going to keep pricing

Speaker 5

Hamilton has a bit underway or underway, U. S. Casualty, especially the older vintages, would are pricing at levels that you could potentially play offense? Just trying to better understand kind of, if there was a read through from your commentary just a moment ago about the casualty?

Speaker 2

So yes, thank you for that question. Not only can we play offense, but we have been playing offense. You're right to point out, we completely re underwrote our casualty reinsurance book of business starting from 2018 to 2020. We only started to selectively grow our book in 2021 when conditions started improving. This A rating has really turbocharged our ability and it comes at a time quite frankly where we have larger peers or some players in the market who perhaps have seen some adverse development or have found themselves overexposed.

Speaker 2

This A rating comes at a time where those players are pulling back, opening up the opportunity for us to selectively write the deals quite frankly that we have been targeting and isolating over the course of the last year and a half. So we are playing offense, but again here too, we are playing offense with clients that we've targeted who have that same discipline mindset that we have on this class.

Speaker 5

Thank you.

Operator

Our next question comes from the line of Tommy McJoynt from KBW. Please go ahead.

Speaker 6

Hey, good morning guys. Thanks for taking my questions. On the expense ratio, we've continued to see that ratio come down for really kind of 5 years in a row now, starting to realize some solid efficiencies around that. Is there some terminal level that we think that we should be getting close to at this point? Or do you still see opportunity for operating leverage to drive that expense ratio down further?

Speaker 1

Yes, Tommy, thanks for the question and thanks for noticing that the expense ratios come down every year since 2019. But as you say, as we continue to scale, we still expect to be able to produce a better expense ratio each and every year. And that's our target. So we've been able to achieve that target again every year since 2019.

Speaker 6

Okay, got it. And then on the capital front, for the holding company to deploy capital into buybacks, does it need to upstream some capital from the insurance companies? Or is there already kind of capital at the holding company, so you guys have flexibility to utilize the buyback when you want?

Speaker 1

Yes. We do have flexibility to use the buyback as we need to. There is some capital at the holding company, but predominantly it would come from dividends up from the operating company as well. But we have flexibility to be able to utilize that full authorization. You may recall, we had $150,000,000 authorization last quarter.

Speaker 1

We used $10,000,000 this quarter during wind season, and we still have $140,000,000 left on that authorization from the Board.

Speaker 5

Great. Thank you.

Operator

And those are all the questions we do have in the queue. So I'd now like to turn the call back over to Jon Levenson and the team.

Speaker 2

Thank you. Thanks everybody who joined us on this call today. We really appreciate your questions and the opportunity to answer them. We look forward to sharing our year end results with you shortly. So on that, thanks again.

Operator

That does conclude today's call. Have a pleasant day.

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Key Takeaways

  • Net income of $78 million in Q3 with a 93.6% combined ratio, delivering a 22.4% annualized ROE year-to-date despite $38 million of catastrophe losses.
  • Record gross premiums written of $1.9 billion in the first nine months (+24% YoY), including 17% growth in Q3 and segment gains of 34% in Bermuda and 15% internationally.
  • Expense ratio improved to 32.6%, down 3.2 points YoY, driven by strong operating leverage and third-party fee income offsets.
  • A.M. Best upgrade to A-rating accelerated new business and increased line sizes, with an estimated 10–15% premium uplift run-rate expected into 2025.
  • Estimated net losses from Hurricane Milton of $30–70 million will be reported in Q4, underscoring ongoing catastrophe exposure.
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Earnings Conference Call
Hamilton Insurance Group Q3 2024
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