Hamilton Insurance Group Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 7, 2024

Key Takeaways

  • Underwriting Profitability: Hamilton delivered a Q4 combined ratio of 90.2% and a full‐year combined ratio of 90.1%, generating record 2023 underwriting income of $130 million despite significant natural catastrophe losses.
  • Premium Growth: Gross premiums written reached nearly $2 billion in 2023, up 18.5% year‐over‐year, with Q4 growth of 27% driven by balanced increases across both International and Bermuda segments.
  • Return on Equity: Net income for Q4 was $127 million, producing a 26.4% annualized ROE (including a 7.1% tax benefit), while full‐year ROE was 14%, reversing a 2022 loss.
  • Elevated Corporate Expenses: Q4 saw higher corporate costs from the IPO‐triggered value appreciation pool and performance‐based compensation, and management now expects annual corporate expenses around $50 million over the next few years.
  • Strong Investment Returns: Q4 net investment income was $114 million versus a loss of $60 million in Q4 2022, with the fixed income portfolio yielding 4.5% and the 2 Sigma Hamilton Fund delivering 7.6% for the full year.
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Earnings Conference Call
Hamilton Insurance Group Q4 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good day, and 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, SVP of Finance and Investor Relations. Please go ahead.

Speaker 1

Thank you, operator, and welcome all to the Hamilton Insurance Group 4th quarter and full year 2023 earnings conference call. The Hamilton executives leading today's call are Pina Alboe, 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. Welcome to our inaugural Q4 year end earnings conference call. I'd like to start by saying how proud I am of Hamilton's results for both the Q4 and the full year 2023. These results exemplify the transformation of our business and our unwavering focus on our 4 business imperatives. 1st, sustainable underwriting profitability 2nd, strategic growth 3rd, technology enablement and 4th, being a magnet for talent.

Speaker 2

Starting with the first imperative, our 4th quarter combined ratio of 90.2% and our full year results of 90.1% demonstrate our ability to deliver strong underwriting returns. In our combined ratio since we started our strategic transformation in 2018. Put more clearly, our 2023 combined ratio was 35 combined ratio points better than 2018 and nearly 13 combined ratio points better than last year. Both of our reporting segments, International and Bermuda, contributed to our record underwriting results of $130,000,000 for the year, a result that was achieved despite another year of significant natural catastrophe losses for the insurance industry. Our strong underwriting results, combined with solid investment returns resulted in a 26% annualized return on equity for the quarter and 14% for the year.

Speaker 2

Regarding our second business imperative, strategic growth, I'm happy to report yet another year of double digit growth for Hamilton in this continued favorable market environment. Our 2023 gross premiums written were nearly $2,000,000,000 an increase of 18.5% over 2022. I'm especially pleased by the well balanced nature of this growth with both of our segments, Bermuda, which is predominantly reinsurance and international, which is predominantly specialty insurance, increasing premiums by the same percentage. As I said before, our business is global, nimble and scalable and 2023 demonstrated just that as we capitalized on continued strong market conditions by leaning in to the best price classes of business across the geographies we service. In this context, we took advantage of the primary capital we raised last year to capture more of the market and put more well priced, well structured business on our books.

Speaker 2

Underlying these strong results are continuous improvement in our processes and technology consistent with our 3rd business imperative of investing in business enabling technology. In addition to strengthening our core platforms, we've begun to embrace and reap the benefits of artificial intelligence to improve efficiency. 2023 demonstrated that Hamilton not only has the platforms and systems to grow our business, but also and most importantly a talented team that knows when and how to put their foot on the gas pedal while maintaining rigorous underwriting and risk management standards. Our team and our culture enable us to be a magnet for talent, our 4th business imperative. Our team is entrepreneurial and collaborative, a group that created an environment that allows us to attract and retain top talent professionals who want to be part of what we're building.

Speaker 2

On this note and before handing over to Craig for a detailed walk through of the numbers, I want to extend my gratitude to the entire Hamilton family for their outstanding performance during 2023. As I said earlier, it was truly a year that exemplified the transformation of our business, our ability to deliver strong results and to grow at the right time and in the right lines. Our 5.50 plus employees across the world work tirelessly and collaboratively to expand and strengthen our client and broker relationships, an achievement that has served us well and will continue to do so well into the future. Craig, now over to you.

Speaker 3

Thank you, Pena, and hello, everyone. Hamilton had another strong quarter of premium growth, underwriting income and investment returns to close out a very good 2023 full year result. For the Q4 of 2023, Hamilton reported net income of $127,000,000 producing an annualized return on average equity of 26.4%, which includes an income tax benefit of 7.1 percent of annualized return on equity. This compares to a net loss of $59,000,000 in the Q4 of 2022, largely resulting from unrealized losses in our investment portfolio last year, which Hamilton reports through its consolidated net income. For the full year ended 2023, net income was $259,000,000 compared to a net loss of $98,000,000 in 20.22.

Speaker 3

The 2022 results were heavily impacted by loss estimates for both the Ukraine conflict and Hurricane Ian,

Speaker 4

as well

Speaker 3

as the investment losses I just mentioned. If you haven't seen it already, I want to note that in addition to our earnings release, Hamilton published a financial supplement and an investor presentation, which are available on our Investor Relations website. With those numbers as our highlights, let me provide additional details around our income components for the quarter. Starting with underwriting results, as you heard from Pina, Hamilton continues to grow premium at a double digit rate while improving our bottom line performance. For the Q4 of 2023, gross premiums written increased $434,000,000 from $341,000,000 a year ago, an increase of 27%.

Speaker 3

As Pina mentioned, the full year 2023, the company grew top line premium to almost $2,000,000,000 up $304,000,000 or 18.5 percent from 2022. I will note that the 4th quarter premium growth was particularly strong given the success of our targeted approach to business opportunities in this favorable market environment, namely new business that was written in our Bermuda segment. As always, I would encourage you to look at the full year results across all our metrics. The overall underwriting gain for the group was $36,000,000 for the Q4 compared to an underwriting gain of $39,000,000 in the Q4 last year. For the Q4 of 2023, the group combined ratio was 90.2% compared to 87.6% in the Q4 of 2022.

Speaker 3

The primary driver was catastrophe loss estimates for the Q4 that impacted the loss ratio by 1.8 points compared to favorable catastrophe loss development a year ago of 1.5 points. In the prior period, which was impacted by some large loss activity. We had favorable attritional prior year development of 1.7 points in the current quarter compared to 4.7 points of favorable development in the Q4 last year. So we continue our track record of favorable loss reserve development each year since the inception of the company. The quarterly combined ratio was also impacted by an increase in our other underwriting expenses compared to the Q4 of 2022, reflecting higher performance based compensation accruals in 2023.

Speaker 3

Our overall expense ratio for the full year 2023 continued to improve by 0.6 points compared to 2022. Our expense ratio has improved to each year since 2019. Corporate expenses were elevated in the 4th quarter, primarily driven by share based compensation related to the value appreciation pool that was triggered by the IPO. According to this plan, essentially all employees at the time of the IPO will eventually own shares of the company, ensuring full alignment with our shareholders. We noted last quarter that this plan would be a 4th quarter expense item and to a lesser extent in 2024 2025 as the awards are fully vested into shares.

Speaker 3

The remainder of the increase in corporate expenses was mostly related to variable performance based compensation costs. We also completed a re budgeting exercise for our corporate expenses now that we have greater visibility into these costs as a public company. As a result, we expect corporate expenses to run-in the range of $50,000,000 a year for the next few years. This number includes the value appreciation pool expenses I just mentioned. Before I move on to the segment results, Hamilton also booked a $35,100,000 net deferred tax benefit in the quarter as a result of Bermuda enacting a 15% corporate income tax in December of 2023.

Speaker 3

This economic transition adjustment was required to be recognized in 2023 under U. S. GAAP, even though Hamilton expects to meet the requirements to be exempt from the Bermuda corporate income tax and the global minimum tax until January 1, 2030. Next, let's look at the results by segment. As Pina noted, Hamilton reports its underwriting results through 2 reporting business segments, the International segment and the Bermuda segment.

Speaker 3

Let's start with the International segment, which includes Hamilton Global Specialty and Hamilton Select. International had an underwriting gain of $2,000,000 and a combined ratio of 99.1 percent for the Q4 compared to a combined ratio of 90.9% in the Q4 last year. The main drivers of the increase in the combined ratio were less favorable prior period development and catastrophe losses compared to the prior year, partially offset by a 5 point decrease in the current year attritional loss ratio due to less large loss activity in the quarter compared to the Q4 last year. International had favorable prior year reserve development of $2,700,000 or 1.4 points for the quarter, primarily driven by the casualty and property classes. There were also catastrophe losses of $800,000 or 0.4 points compared to favorable catastrophe loss development in the Q4 of 2022.

Speaker 3

Turning to the Bermuda segment, which houses Hamilton Re. Bermuda had an underwriting gain of $34,000,000 and a combined ratio of 79.6 percent for the 4th quarter, a record result compared to 83 point 6% combined ratio in the Q4 last year. The Bermuda attritional loss ratio for the current quarter improved 3.3 points to 51.8% compared to 55.1% in the prior year. This decrease is primarily related to West's large loss activity in the quarter compared to 2022. Bermuda had favorable prior period reserve development of $3,700,000 or 2.2 points, primarily driven by the property and specialty reinsurance classes.

Speaker 3

There were also catastrophe losses of $5,700,000 related to events from earlier this year. Now turning to investment income. Total net investment income for the Q4 was $114,000,000 compared to an investment loss of $60,000,000 in the Q4 of 2022. The fixed income portfolio, short term investments and cash produced a gain of $77,000,000 for the quarter, compared to a gain of $21,000,000 in the Q4 of 2022. This includes the realized and unrealized gains and losses that Hamilton reports through net income as part of our trading investment portfolio.

Speaker 3

Fixed income portfolio had a return of 4.3% or $74,000,000 and a new money rate of 4.9% on investments purchased in this quarter. The duration of the portfolio was 3.3 years at December 31, 2023 compared to 3.2 years at the end of 2022. The average yield to maturity on this portfolio was 4.5% compared to 4.7% at year end 2022. The average credit quality of the portfolio remains strong at AA3. The 2 Sigma Hamilton Fund produced a gain of $37,000,000 and had a net return of 2.2% in the 4th quarter.

Speaker 3

The fund had a net return of 7.6% for the full year 2023. The latest estimate we have for the 2 Sigma Hamilton Fund year to date performance is 5.7% through February 29, 2024. The 2 Sigma Hamilton Fund made up about 43% of our total investments, including cash investments at year end compared to 49% at year end 2022. As you know, there's been a lot of discussion lately about loss reserves, particularly as they relate to casualty business for accident years 2019 and prior. It's important to note that Hamilton has limited exposure to legacy liabilities for four main reasons.

Speaker 3

1, the company is only 10 years old. 2, when we purchased Pembroke Managing Agency in 2019, we did not assume the historical reserve liabilities, which were retained by the seller of the business. 3, at the same time, we purchased an unlimited loss portfolio transfer on certain casualty classes for years 2016 to 2018 written by our Lord's syndicate. And 4, we performed a deep dive of our remaining casualty reserves in Bermuda in 2022 and booked a reserve charge at that time. For these reasons and the fact that we engage in external actuary to review our reserves twice a year, while no one can make guarantees when it comes to reserves, I feel comfortable with our overall reserve position at year end.

Speaker 3

So to conclude my remarks with some comments on our strong balance sheet metrics. Total assets were $6,700,000,000 at year end 2023, up 15% from $5,800,000,000 at year end 2022. Total investments in cash were $4,000,000,000 at December 31, an increase of 15% from $3,500,000,000 at year end 2022. Shareholders' equity for the group was over $2,000,000,000 at the end of the 4th quarter, which was a 23% increase from year end 2022. As a reminder, a portion of this equity increase includes $81,000,000 of net primary proceeds raised in our IPO, which closed in November 2023, all of which has been deployed, which Pina will detail in a moment.

Speaker 3

Our net book value per share was $18.58 at December 31, 2023, up 15% compared to year end 2022. Thank you. And now I'll turn it back over to Peanut.

Speaker 2

Thanks, Craig. I'll now provide some additional commentary on our business. Let me start with our growth during 2023 as well as our growth prospects going forward. As I touched on in my opening remarks, Hamilton's growth during 2023 continues the pattern of the past 5 years of being both double digit and well balanced. By well balanced, I mean across both insurance and reinsurance and diversified by class of business.

Speaker 2

We ended the year with an enviable mix of business, 57% in our International segment, which again is primarily specialty insurance and 43% in our Bermuda segment, which is mostly reinsurance. In terms of lines of business, 77% of our business is specialty and casualty and 23% is property. This mix was achieved in large part due to our flexible and scalable platform with 3 distinct underwriting engines, 2 of which Hamilton Global Specialty and Hamilton Select, focused predominantly on casualty and specialty insurance business. The hybrid nature of our business model allows each of our underwriting platforms to focus on their particular markets and distribution partners and facilitates our ability to lean in and out of various classes and products consistent with market cycles and where we see the most opportunity. Hamilton Global Specialty is our largest underwriting platform and is centered around Lloyd's Syndicate 4,000 and our Dublin underwriting entity, Hamilton Insurance DAC.

Speaker 2

Hamilton Global Specialty wrote over $1,000,000,000 of gross premium for the first time in 2023 compared to just under $900,000,000 for the full year 2022. Casualty is the largest class at Hamilton Global Specialty followed by Specialty and then Property. By the way, some of our casualty classes, for example, cyber or energy or what others might define as specialty insurance business. The business is predominantly focused on medium to large size commercial accounts in the U. S.

Speaker 2

Excess and Surplus Lines market, a market which continues to experience significant growth and favorable pricing. Some of our larger classes such as financial institutions, political violence and fine art and specie are those where both the Lloyd's market and particularly our team have a rich history of expertise, access and business flow. This allows us to form consortia or arrangements where we write on behalf of other parties and derive fee income. Hamilton Select, the newest addition to our underwriting family is a specialized writer of U. S.

Speaker 2

E and S Business focused exclusively on the small to midsized commercial risk segment. It finished 2023 with $78,000,000 of gross premiums written, nearly double the $40,000,000 it wrote in 2022 and right on plan. As a start up, Hamilton Select has a higher growth trajectory versus our larger, more established platforms, and I'm pleased to report that we are attracting the talent necessary to support the strong momentum we are experiencing in our targeted niche, namely the hard to place casualty and specialty commercial E and S segment. Amazon Select's growth comes together with a laser focus on underwriting profitability and outcome, which is supported by the fact that it can strictly tailor coverage to the risks it writes. Hamilton Re is our Bermuda based underwriting platform which focuses predominantly on reinsurance.

Speaker 2

Hamilton Re wrote nearly $850,000,000 in gross premiums during 2023 as compared to $713,000,000 during 2022. Hamilton Re's largest class of business is now casualty at 47%, followed by property at approximately 38% with the remainder being specialty classes. With respect to Cat exposed property business, the class experiencing very favorable market conditions and increased demand, we are fortunate that Hamilton Re is a well recognized and respected writer of this class. With the benefit of increased capital, our talented underwriters took the opportunity to provide additional capacity to key clients and to develop new relationships complementing our property cat XOL reinsurance capacity with property quota share and per risk offerings. Clients and brokers not only appreciated our expanded product offerings, but also the clarity of appetite and responsiveness we have shown them over the years.

Speaker 2

As a result, in many cases, we received our full signings or increased line sizes consistent with our stated ambitions. As mentioned at the outset, Hamilton is highly focused on sustainable underwriting profitability across all of our platforms, all classes of business and all market cycles. Ensuring rate adequacy and resilient reserves is key in this regard. With respect to rate adequacy, we calibrate our pricing to reflect capital allocations to ensure we are achieving our required return on equity. And our pricing assessments reflect the risk environment as we see it, including what we believe to be cautious loss trend assumptions.

Speaker 2

All of our segments are meeting or beating pricing targets, so we feel good about the profitability of the business we are putting on the books today. With respect to reserves, we strive to set them prudently at the outset and then perform regular internal and external reviews, as Craig mentioned, to ensure they remain strong. In this context, we have been acutely aware of inflation, particularly social inflation for several years and have performed deep dives into our book and have increased inflation assumptions for several years also with the benefit of third party input. On this note, the most recent external actuarial review affirmed the robustness of our reserves as at December 31, 2023, and we remain proud of the fact that we have had favorable reserve development for 10 consecutive years. Turning to the January 1 reinsurance renewals.

Speaker 2

As I alluded to at the outset, we had great success across the board at Hamilton Re. Starting with CatExpo's property business, both excess of loss and our new quota share offering, we secured excellent signings and grew in the areas we had been targeting. This was also the case for our casualty reinsurance business where we wrote a select number of new casualty quota share treaties, getting the benefit of continued strong primary pricing and in some cases improving commission terms. We took advantage of dislocation in the market to broaden our relationships with select clients at the right rates, terms and conditions. We also wrote a number of new specialty reinsurance deals where pricing, terms and conditions remain attractive.

Speaker 2

Client response to and take up of our offerings validated Hamilton's position as an important growing and reliable business partner. It also allowed us to strategically deploy the additional capital we raised at the end of last year into an attractive market with increased buyer demand. Our ability to expand line sizes on targeted accounts shows that clients and brokers are rewarding Hamilton for our responsiveness and consistency over the years. We were also rewarded by being offered new reinsurance opportunities notably with reputable global, national and super regional insurance companies. This allowed us to quickly deploy the primary proceeds raised in our recent IPO into this attractive market, done through a combination of additional inwards business as well as by retaining more risks on our balance sheet.

Speaker 2

We expect favorable market conditions and increased demand to continue as the year progresses and we intend to continue to selectively grow our book during the remainder of the year, both in reinsurance and in specialty insurance. The good news is we have the balance sheet to do it. Turning to insurance, we expect the strong business flow and pricing in the U. S. E and S market to continue.

Speaker 2

Again, given its well established specialist underwriting capabilities, Hamilton Global Specialty is well positioned to capture more of this market, while Hamilton Select will continue to benefit from demand in the hard to place E and S sub segment it specializes in. To end my prepared remarks, following our success in 2023, I am very optimistic for the future of Hamilton. Our strategy, our service and the promise we make to everyone we interact with via our corporate tagline, in good company is clearly resonating. Delivering on this promise starts with our amazing team and our inclusive entrepreneurial and collaborative culture. It continues with our ability to focus on our 4 clear business imperatives.

Speaker 2

We then add the strategic advantages of having 3 nimble scalable underwriting platforms with broad product offerings across both insurance and reinsurance and talent that knows how to address client needs and manage market cycles. We are therefore confident in our abilities to find profitable growth opportunities as the year progresses and also in the years to come. With that, we will open the call for your questions.

Operator

Your first question comes from the line of Mike Zaremski with BMO. Please go ahead.

Speaker 4

Hey, great. Good morning. Obviously, a great return on equity level, but I wanted to dig into the expense ratio and including the corporate expense. I know, Craig, you gave a lot of color, so I might have missed some. But I heard a guidance of $50,000,000 on the corporate piece of the equation, I think, for the next couple of years.

Speaker 4

And the consensus is you've been thinking $36,000,000 You gave some color around why it's going to be higher. So is there like a cliff where once we get past this and outer years it goes it loses the corporate will lose some a material amount or is this kind of the $50,000,000 plus the new run rate and any other color you want to give on the expense ratio of puts and takes to not to steal other people's questions, but in the overall segments?

Speaker 3

Thanks, Mike. Yes, I can answer that question for you. What I would say to you is what we wanted to do is give a little bit of guidance for the next few years of that $50,000,000 That does include the expenses for the value appreciation pool. And what it did was we also did a re budgeting effort or reallocation effort for people that are essentially working on corporate level items now for the organization that we didn't have in the past. For example, SEC reporting or compensation discussion and analysis.

Speaker 3

So in other words, now we'll have legal and compliance allocations to corporate as well as HR allocations to corporate as well as increased D and O and E and O insurance coverages and things like that. But that's the reason we wanted to put that in my prepared remarks. I would say to you over time, I would expect that to come down from certainly from a percentage of overall indications. And the reason I say that is, the value appreciation pool will only be for continue for 2024 and 2025 as those shares vest.

Speaker 2

Mike, let me just add just from just on the VAP, just as a reminder, we put that plan in place to secure this talented team that executed this transformation. And this is a way of tying the team in and aligning them, sorry, aligning them the remaining shareholders in this company.

Speaker 4

Okay. Understood. I'll just I'll pivot to a lot of other people probably ask about the underlying loss ratios. I'll pivot to growth. You gave some color on the call and in the press release, but you don't offer kind of most companies offer kind of the business mix quarterly, so we can kind of see more granularly what lines and what specifically is growing and shrinking.

Speaker 4

So, clearly sounds like your growth was robust. Sounds like you're excited about continuing to see opportunities in 2024. Can you give us any context or a flavor around pricing power? Like what's causing you to be much more bullish on growth? Is pricing power?

Speaker 4

I know you have obviously operating in lots of different classes. Is it accelerating? Or is it just staying at great levels? And what's changed so much from last time we spoke?

Speaker 2

So I'm going to start on a high level to say that I think it's fair to say that this is one of the most sustained favorable market environments that anybody who's been in industry for a while has seen for some time. And we're seeing that across both insurance and reinsurance. And as a reminder, we have 3 platforms, all 3 platforms, right specialty insurance business predominantly in the U. S. E and S market, where we're continuing that trend of flow into the U.

Speaker 2

S. E and S market at favorable terms and conditions. And also on the reinsurance side, it's predominantly Bermuda. We have seen year over year rate increases in commercial business and that's where we concentrate our writings for several years now. As we sit here today and we include prudent assumptions in our trends, pricing is meeting or exceeding our hurdle rates and that is why we feel comfortable leaning into this market.

Speaker 2

That's on a high level. If I look at Q4, we concentrated our growth both in casualty and property and here quite frankly to take advantage of dislocation that we saw. You'll recall there was dislocation in the property market about a year ago as many players were pulling out. Well, that's when we started leaning in more on the property reinsurance excess of loss offerings, complementing those offerings this year with quota share capacity, which was very well received. This year, as the year progressed and I think you know the reasons why, we started to see some dislocation in the casualty space, and particularly in casualty quota share business.

Speaker 2

And that's where we saw an opportunity where primary rates are increasing, commission terms are favorable. That's where we saw an opportunity to lean in and either increase some of our line sizes. By the way, you'll recall they start from a small level, so increase some of our line sizes from the small base we had, but also to bring on some new clients. And these are clients these are A list clients that we've been supporting with our casual with our property insurance offerings for several years now. So that I hope gives you the explanation for our growth and the reasons why we feel comfortable growing.

Speaker 4

Okay. That's helpful. Thank you.

Operator

Your next question comes from Tommy McJoynt with KBW. Please go ahead.

Speaker 5

Hey, good morning guys. Thanks for taking our questions. Is there anything granular that you can share on the either accident years or lines of business of the favorable prior year development that you booked in the Q4?

Speaker 3

Yes. So, Tommy, this is Craig. What I would say to you is, we continue to see favorable development in the specialty lines. That's been consistent for many years now. We overall, across the group, I would say, we took unfavorable development on the property side as well as the casualty side, but much smaller.

Speaker 3

But essentially that would partially offset the favorable development that we saw in the specialty side.

Speaker 5

Okay, got it. And then just my other question about the loss ratio. It looks like the kind of attritional current year loss ratio came in a bit higher than we were expecting, but obviously the cats became came in lower pretty benign quarter. Was there any evidence that you saw of any sort of weather creep just from more SCS, potential smaller storms that may have previously been part of cats that ended up in the attritional loss ratio in this quarter, any evidence of that?

Speaker 3

Yes. So first of all, I agree with you. Certainly, we see some of that because our cat threshold is $5,000,000 So anything less than that $5,000,000 threshold shows up in attritional losses. But the one thing I would say, Tommy, is I would encourage you and others to look at the full year metrics to get a better indicator, a long term indicator of how these ratios and how you would expect them to look going forward and kind of remove some of the noise, quarterly noise that you might see on a quarterly basis.

Speaker 5

Okay. Makes sense. Thanks.

Operator

Your next question comes from Elyse Greenspan with Wells Fargo. Please go ahead.

Speaker 6

Hi, thanks. My first question, wanted to go back to the pricing discussion and I guess within both insurance and reinsurance. So you guys are referencing right rate increases. Can you put a magnitude on the increases you saw to start the year? And then just give us a sense, I know you said they're above loss trend, but how do you think rate increases should materialize as we move through the balance of 2024?

Speaker 2

So, hey, thanks Elyse for that question. If I look at 1one, this past oneone, we are still seeing favorable increases and this is coming off of increases over the last couple of years. So that's a nice place to be. But we like to focus on rate adequacy. And if the rates are exceeding our assumption of loss trend and that's important.

Speaker 2

I think one thing that people seem to relegate to the backbenches, but is equally important, if not more important, are the terms and conditions. And you'll recall there was a step change in terms and conditions and attachment points at last year's renewal and those held up. If I flash forward a little bit, we think that the underlying reasons for these rates remaining favorable and terms and conditions remaining intact are still there. Geopolitical tensions are still all around us. We still talk about inflation and social inflation.

Speaker 2

And that those two latter factors, quite frankly, we think will have a play a role, particularly on casualty business as we go forward, where we think that will sustain a favorable market. Does that help?

Speaker 6

That does. And then I guess, my follow-up, if you guys talking about rate adequacy, right, and prices exceeding loss trend, would your assumption then be that the underlying loss ratios within both of your segments should improve in 2024 relative to the full year 2023 levels?

Speaker 3

Elyse, what I would say to you is, I'm not sure that I want to bring that through in my loss ratio at this point. We expect to be to increase or exceed that loss trend, but I'm not necessarily ready to recognize that yet.

Speaker 2

Thank you.

Operator

Your next question comes from Matt Carletti with Citizens JMP. Please go ahead.

Speaker 4

Thanks. Good morning. I guess a follow-up on Tommy's question. When I

Speaker 7

look at the international segment, the attritional current year loss ratio, it definitely just ran a little bit higher in the back half of the year versus the front half of the year. Is that some of that kind of small cat activity or is there anything else going on there in terms of mix of business or otherwise that we should be picking up?

Speaker 3

Thanks, Matt. Appreciate the question. And it always is related to business mix as well. But again, what I would do is encourage you to look at the full year numbers. I don't think that the back half of the year, you may have seen that specifically in the international segment, it went down 5.5 points compared to the prior year Q4.

Speaker 3

And that was really due to fewer large loss events that happened in the Q4 of 2023 compared to Q4 last year. And as Tommy said, some of those small weather events that don't show up as a catastrophe loss, international had zero catastrophe losses in the Q4. Those show up in attritional. We still have to put those losses through, but if they don't meet our threshold of $5,000,000 they go through the attritional line.

Speaker 7

Okay, perfect. Very helpful. And then one other if I could, just on

Speaker 4

the 2 Sigma fund, looking at

Speaker 7

the presentation, past 10 years kind of average return a little over 12%. As you think forward long term, is that a reasonable hurdle? Or do you guys think about it differently that your expected return over the long run at that level better, worse?

Speaker 3

That is a number that we use. We continue to use the 10% and that gets recalibrated each year. But as you heard me say in my prepared remarks, through the end of February, they're at 5.7% for the year so far. So there is some volatility in the fund and we know that it goes up, it goes down. But overall, couple of things.

Speaker 3

One is, we've never had a calendar year loss out of the fund. And number 2 is, we've always been able to beat the bond returns out of the fund as well. Great. Thank you for the answers. Appreciate it.

Operator

Your next question comes as a follow-up from Mike Zaremski with BMO. Please go ahead.

Speaker 4

Hey, great. I might have missed it, but any commentary on given the high pace of growth on how to think about operating leverage or debt leverage and whether it makes you'll want to issue debt or anything there on that front?

Speaker 3

Mike, not at this point. I think that's a lever for us still to pull in the future. Right now, it's dry powder for me to be able to do that. I have capital that we can still continue to use for profitable growth, organic growth in the organization, but it still sits out there as a lever for us to pull.

Speaker 4

Okay, got it. And lastly, so I think you said the new money rates just below 5%. Would you happen to know kind of the on the maturities expiring in 2024, what the yield is approximately on those maturities, so we can get better in our model at the investment income math?

Speaker 3

I do not. Just for the year 2024 overall, I gave you the yield to maturity, which is about 4.6% on the remaining portfolio. Okay. Thank you. Majority.

Operator

Your next question comes from Mike Ward with Citi. Please go ahead.

Speaker 3

Thanks, guys. I was wondering if you could maybe talk through any upcoming renewals that we should be mindful of them first moving through this first half of the year, seasonal concentrations?

Speaker 2

Yes. Sure, Mike. Happy to do that. Yes, we've got 41s, 61s, 71s coming up. Again, in terms of what we are expecting, we are expecting some increased demand as we saw some of that at the oneone renewal on the property side.

Speaker 2

We expect that to continue as the year progresses and we will see that for these upcoming renewals. And again, we are of the view that the terms and conditions that we've seen to date and the structures with 3 insurers attaching higher will remain intact. Those are very important factors. And we also see the market environment continuing to favor these strong returns and always ahead of a loss trend assumptions.

Speaker 3

Thanks, Tina. And then maybe like specifically the growth outlook or appetite in Hamilton Select for 2024 in a specific line?

Speaker 2

Yes. Happy to talk about that. Start off by saying, and as I said it in my prepared remarks, we're really, really happy about how Hamilton Select is progressing. They are right on plan in terms of underwriting. And the but importantly, the momentum that those underwriters and the team there is seeing, We saw 40,000 submissions in our 1st year.

Speaker 2

We more than doubled that submission count in our 2nd year. But the focus at that platform is going to be really ensuring we put the right business on the books. So where we're seeing the most favorable terms, conditions and rating is in the general casualty, excess casualty and allied med. And where we've seen things not reach our hurdles, we're backing off a little bit and that's in the D and O side. So we're really excited about their prospects and really happy with what they've done to date.

Speaker 3

Great. Thanks. And if there's time for one more, just any update on the progress in terms of rating agency upgrades?

Speaker 2

So Craig, do you want to take that?

Speaker 3

Yes, sure. So Mike, our meetings with the rating agencies are going to take place this month in March. You may recall that we have positive outlooks from both the rating agencies right now. So we would expect to hear back from them on a normal basis, which would be by midyear after we hold the meetings this month. Awesome.

Speaker 3

Thanks, Craig. Thank you.

Operator

There are no further questions at this time. I would now like to turn the call back to management for any closing remarks.

Speaker 2

Thank you. As you've heard during this call, we are very proud of the results we've achieved in our 1st year as a public company. And given the strength of our team, I am very optimistic about our future. We appreciate your interest in Hamilton and look forward to speaking to you all in the coming months. Thank you.

Operator

This concludes today's conference call. You may now disconnect.

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