AM Best Affirms Credit Ratings of Hamilton Re, Ltd.

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
“a-” of Hamilton Re, Ltd. (Hamilton Re) (Bermuda). The outlook of these
Credit Ratings (ratings) is stable.

The ratings reflect Hamilton’s balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise risk
management (ERM).

Hamilton’s risk-adjusted capitalization, as measured by Best’s Capital
Adequacy Ratio (BCAR), is categorized as strongest. AM Best expects it
to remain at comparable levels in prospective years based upon:
reasonable stress testing; stability in overall reserve development; our
expectation that the company’s operating performance will benefit from
improved underwriting results; and the company’s investment performance
will remain in line with historical performance. Over the past five
years (2014-2018), capital adequacy has been bolstered by shareholders’
funds that have grown at an annual compound rate of approximately 18%.
The company’s balance sheet assessment of very strong reflects its
relatively high risk investment strategy, which is controlled by Two
Sigma Investments, LP, an SEC-registered investment adviser based in New
York, with more than USD 50 billion in assets under management as of
Dec. 31, 2018.

Hamilton’s adequate operating performance has benefitted from investment
earnings that consistently outperform peers, partially offset by
underwriting losses. The relatively small scale of the company’s
operations is a major contributor to its higher expense ratio compared
with market peers. Furthermore, Hamilton had significant exposure to the
catastrophe events in 2017 and 2018, which negatively affected its loss
ratio. AM Best notes that these losses were within the company’s risk
tolerances. AM Best expects Hamilton to achieve an underwriting
break-even point within two years, the absence of which, regardless of
investment results, could result in negative rating pressure.

Hamilton operates through global reinsurance and insurance platforms,
including the Lloyd’s syndicate 3334 and its Bermuda-based operating
company, Hamilton Re. In March 2019, the company announced that it had
signed a definitive agreement with Liberty Mutual Group, Inc. to acquire
Pembroke Managing Agency Limited (United Kingdom), which manages Lloyd’s
Syndicate 4000, Ironshore Europe Designated Activity Company (Dublin,
Ireland) and other related non-insurance entities. The transaction is
expected to close in the third quarter of 2019, pending regulatory
approvals. AM Best believes that the new business will be accretive to
Hamilton’s underwriting performance, with the company’s profile
benefiting from the additional line of business and geographic
diversification. ERM is considered appropriate relative to the company’s
risk profile and AM Best anticipates that its view of risk management
will not change after the acquisition completes.

This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

Contacts

Darian Ryan
Senior Financial Analyst
+1 908
439 2200, ext. 5449
darian.ryan@ambest.com

Steve
M. Chirico, CPA
Director
+1 908 439 2200, ext.
5087
steven.chirico@ambest.com

Christopher
Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
christopher.sharkey@ambest.com

Jim
Peavy
Director, Public Relations
+1 908 439
2200, ext. 5644
james.peavy@ambest.com