Hello, 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 Levenson, Group Treasurer and Head of Investor Relations. Please go ahead.

Thank you, Operator, and welcome all to the Hamilton Insurance Group First 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. Management may also refer to certain non-GAAP financial measures. These items are reconciled on our earnings release and financial supplement. With that, I turn the call over to Pina Albo, Hamilton CEO.

Thank you, John, and hello everyone. Welcome to the First Quarter 2024 Conference Call for Hamilton Insurance Group Limited. Following our strong year end results in 2023, Hamilton kicked off 2024 with another great quarter, making these six quarters in a row of underwriting profitability. We had a combined ratio of 91.5%, net income of $157 million, an annualized ROE of 29.5%, book value growth of 7% from year end 2023, an AM Best ratings upgrade to A for our operating subsidiaries, Hamilton Re and Hamilton Insurance Designated Activity Company, and an agreed targeted share buyback. Let me start with our strong underwriting result, a result which was achieved against the backdrop of an active loss quarter for the industry, including natural catastrophes and what is being described as potentially one of the largest losses ever to hit the marine market, the collapse of the Francis Scott Key Baltimore Bridge in Baltimore. I will come back to this point later, but for now, suffice it to say that we booked a conservative provision for this loss. We are exceptionally proud of the growth the team has accomplished in this favorable market environment across property, casualty, and specialty classes, and we look ahead, we are excited about the additional opportunities we expect to see with the benefit of our AM Best rating upgrade to A. Both of our segments and all three of our underwriting platforms, Hamilton Re, Hamilton Global Specialty, and Hamilton Select contributed to a notable increase in our top line this quarter. Our Bermuda segment, which houses Hamilton Re and Hamilton Re US, and its predominantly reinsurance business, grew top line by 38% for the quarter, with property as the largest contributor. We leaned into this market, growing existing lines, and securing new business with existing clients, as…

Thank you, Pina, and hello, everyone. Hamilton had an excellent start to the year, reporting strong investment returns, solid underwriting income, and record gross premiums written. For the first quarter of 2024, as Pina mentioned, Hamilton reported net income of $157 million, equal to $1.38 per diluted share, producing an annualized return on average equity of 29.5%. This compares to net income of $51 million, or $0.49 per share, and an annualized return on average equity of 12.2% in the first quarter of 2023. With those numbers as highlights, let me provide additional details around our underwriting and investment income components for the quarter, starting with underwriting results. Hamilton continues to grow in an impressive double-digit rate for the first quarter of 2024, gross premiums written increased to $722 million compared to $538 million this time last year, an increase of 34%. This was a record revenue result for the group. Each of our three operating platforms, Hamilton Global Specialty, Hamilton Select, and Hamilton Re leaned into this favorable market to hit this record premium level. Please note this was achieved without the benefit of our recent AM Best rating upgrade to A, which will increase our business opportunities even further going forward. Underwriting income for the group was $33 million in the first quarter compared to underwriting income of $34 million in the first quarter last year. The group combined ratio was 91.5% compared to 87.9% in the first quarter of 2023. The increase was driven by a higher attrition loss ratio partially offset by a lower expense ratio. The current attritional loss ratio increased 8.1 points to compared to 49.1% in the prior period. The increase was primarily driven by the Baltimore Bridge collapse, which contributed 9.8 points or $38 million to the current attritional loss ratio. Given…

[Operator Instructions] Our first question comes from the line of Elyse Greenspan.

Hi, thanks. Good morning. Maybe starting on the growth side of things. I think both of you guys in your prepared remarks just touched on the potential implications of the S&P upgrade and it sounds like you were really kind of flagging casualty reinsurance as some potential opportunities. Could you just give us a sense of just magnitude of additional premiums and how you're thinking of these opportunities in terms of timeline potentially coming on to the platform?

Sure, Elyse. I'll take that, and thanks for the question. We are incredibly pleased with the growth that we achieved this quarter following last year's double-digit growth. Just at the outset we saw growth across all three platforms and also across property casualty and specialty. In Q1, property led the way followed by specialty and casualty was third. You specifically asked about the rating upgrade and how we perceive that. I don't want to put a number on that at this stage but what I can say is that we see great opportunity for us that have particularly at Hamilton Re on the reinsurance size and our ability to keep growing by leveraging the smaller line sizes that we have with clients that we've been building relationships with over several years. Also by offering new products. This AM Best upgrade to A is going to open up a number of new classes of business for us and also allow us again to take those smaller line sizes that we have on casualty but also on some of the other classes to leverage those up but at the same time we are always going to be selective about the clients that we support and continue our culture of strong underwriting discipline. Does that answer your question?

Yes, that's helpful and then my follow-up was just on some of the repurchase commentary, right. So I think you guys said, right, Craig, buying back at these levels is an attractive use of capital. So how do we think about potential open market repurchases and then also perhaps if there's other shareholders, right, that might come forward and also want to monetize their stake. I'm just trying to understand, right, how you guys are going to use the fact that you have excess capital, you're willing to buy back stock and kind of could you just help me bring it all together?

Elyse, this is Craig. At the moment, the board authorized just this targeted share repurchase at the moment. So this was, again, a good opportunity for us to have a large investment exited in full from an initial shareholder that we had in the organization. We took that opportunity to be able to buy these shares back at a discount. This will be accretive to all Hamilton shareholders as it reduces our outstanding shares. It will improve our book value per share, our earnings per share, and our ROE. And you'll see that in our financials going forward next quarter, starting next quarter.

The only thing I would add, Elyse, is we're trying to use any of the capital or excess capital that we have really to continue to grow into what's a very favorable market environment. Of course, we will also continue to look at how we will be proper stewards of capital. And if we were to determine that we wish to purchase because we thought our shares are not valued, that is something that we would return to at a later date.

Our next question comes from the line of Tommy McJoynt.

Hey, good morning, guys. Thanks for taking my questions. I wanted to ask about the expense ratio. It certainly saw some nice improvement year-over-year. Wanted to get a sense if there was any sort of implications of the higher loss ratio that fed into the lower expense ratio, perhaps via profit ceding commissions or anything of that sort. Just want to get a sense of kind of what we can think about for the expense ratio going forward.

Tommy, that's a good question. So actually, no direct implication on the expense ratio. We saw some items that I had mentioned earlier in my script that were consequently happened during this quarter. For example, bonuses that were not paid, they were accrued at the end of last year, not paid in the first quarter of this year. So those reversals come through in the first quarter. We also saw some performance-based fee income that came in from our ILS platform that comes in, and we utilized that to offset expenses in the quarter. We don't really plan for that performance-based income, fee income because it's on a contingent basis. What we do plan for is the fee income on that IOS platform that's based on assets under management. We have about $1 million of fee income that comes in each year.

Okay, got it, that's helpful. And then switching over, the retention ratios, kind of the net to gross at both the International and Bermuda segments increased decently year-over-year. What do you anticipate for that net to gross ratio on written premium to be for each segment in 2024, if not on an absolute basis, perhaps just relative to last year at least?

Yes, so what I would say to you is we expect to retain more of that business. As you know, we took in primary proceeds from the IPO. Last year, one way to utilize that was to grow our premium base. The other way to do that was to retain more of that business. So we do expect to retain more business this year than we have in the past. But at this point, I don't want to put out a forecast other than that.

Our next question comes from the line of Matt Carletti.

Yes. Thanks. Good morning. I just had a question on the accident year loss ratios. If we kind of attritional, if we take the bridge loss out, yes, they're vary in line with Q1 last year, which was the low point of last year, and a few points below kind of where the year settled. How should we think about that? Is that -- are there other moving pieces in there? Was it a late large loss quarter otherwise, or is that a pretty clean number or way to think about it as we think forward through this year?

So what I would say to you, Matt, is certainly as we pick our normal loss picks for the year, we expect a certain level of losses in those picks. There are -- this bridge loss certainly is a headline event, and as we see that loss come in as a separate loss, we certainly have to take a look and adjust that headline loss in those other loss selections. So as part of that loss, it gets absorbed into our attritional loss ratio. Otherwise, we'd be double counting the loss. What I would say to you from an overall basis, I would encourage you to look at the full year loss ratios. For example, at the end of 2023, that would be a normalized basis for our attritional loss ratio.

Our next question comes from the line of Bob Huang.

Thank you. The first question regarding the Baltimore Bridge incident. I think the last major event that I can recall for Hamilton would have been the Ukraine conflict, which was noted in S-1. Comparing that to the Baltimore Bridge incident, can you talk about how we should think about the losses? Are there parallels? Are there differences when we think about any potential lingering effect or how any potential future unresolved losses that we could think about?

Thanks, Bob. I'll kick off on that. I think you touched on a good point there, and I think what it allows me to do is just to speak generally about our reserve philosophy, which is to post conservative lost reserves at the outset. As I said in the prepared remarks, we decided to take our medicine early. We did the same thing in the case of the Ukraine, where we put up a loss provision that still remains intact has not been increased over the course of the last couple of years and still remains predominantly IB&R. So in this case, similar to what we did there, as we looked at the magnitude of this loss and just all of the potential items that are involved, whether it's removal of wreck, loss of lives, et cetera, and we decided to peg our loss estimate in this case to the higher end of those published ranges. Again, I think Craig made the point, we are a specialty insurance company. This is exactly the kind of business that we write and know how to write. We have very well-defined risk tolerances and we monitor our aggregates on a regular basis. The loss estimate, even at this prudent level that we reserved it, is completely in line with our expectations.

Okay, thank you. That's very helpful. Maybe a follow-up on just on the reserving side of things a little bit. The two satellite losses that cost the PYD this quarter, is it fair to assume that was the same event that happened in 3Q ‘23 where you booked an attritional loss? And if that's the case, can you talk about the reserving philosophy there in terms of, it sounds like you booked a loss and then additional information came up and then you had to true up. I'm just trying to figure out, was there something that was unexpected that resulted in the PYD?

Actually, Bob, this is Craig. These are completely separate losses. There have been a number of satellite losses over the last 18 months to two years with respect to satellites. This is not what I would traditionally call prior year development. These losses from the satellites were failures. The satellites launched in the years 2022 and 2023. And then subsequently, they failed from an operational standpoint. So we took a strict view on this and reported it as a prior period loss, because the loss was actually reported in the first quarter. You may recall earlier this year, there was a large headline where $0.5 billion of satellite losses were going to be coming into the industry. These were new losses, not the same as the old losses. So this is not a reoccurrence of those old losses.

Okay, thank you very much for clearing that up. Really appreciate it. Although skies are falling, but we'll talk about that later, so.

Our next question comes from the line of Michael Zaremski.

Hi, this is Dan on for Mike. Good morning. Just quick one on the E&S business, Hamilton Select. How have submission flows been for Hamilton that are given the noise we've seen with growth in the staffing data from the major states?

I'm very happy to take that one. We are seeing some really robust growth in E&S in generally across our three platforms, but in particular for Hamilton Select. We had record submission flow in the first quarter. And I think that April has been our strongest months to date. So we are really happy about the momentum that we have in E&S across the three platforms, but particularly our opportunities with Hamilton Select.

Great, thanks. And then one follow-up, maybe on the corporate expense guide, I believe there is a guide of about $50 million for the year. I think this quarter probably pacing a little bit below that. If you could just remind us if there's any seasonality, we should be expecting with the corporate expenses there.

A little bit of seasonality. One thing, as I mentioned, were bonus accruals from last year that did not get paid out in the first quarter. They reverse in the first quarter, so that's number one. And then number two, things like professional fees. You don't have a lot of fees being paid. The guidance that I had given for the $50 million is still the target for the year.

Our next question comes from the line of Mike Ward.

Hey guys, thank you, good morning. I was wondering if you could sort of give us some color, maybe year-to-date just on if or how your risk appetite has sort of shifted across product lines. And then is there any sort of view you could give us on the lost trend across casualty and specialty?

I start with the latter first. We're seeing in terms of a trend, and this is across property casualty specialty, we're seeing trend in the mid to high single digit range in the business that we write. But as we look at it, look at how we're pricing and rating this business. Rates are either keeping up or in some cases, outpacing that trend. I mean, just take a look at satellites. And we're looking at rate increases in the mid double digit range for that area of our business. Your first question talks about our appetite. We have appetite across property, casualty, and specialty business, we write. The next opportunity for us to deploy this appetite will be at the upcoming 6-1 and 7-1 renewals. Those are largely property-based renewals, and they include Florida. We have defined tolerances for PMLs, but we will look at where to best deploy our PMLs in this market. Also looking at what other business that we can secure with the clients that we transact with.

Great, thanks. And then is there anything maybe quantitative or incremental you can share in terms of how the spring and summer renewals are shaping up?

So we are looking at these renewals and what we're seeing is we're definitely going to see increased demand on the property side for more limit in the market. There may be some, as we've seen in previous quarters, some additional capital at the top end of the programs, but we think given the increased demand that we're going to see, and even with this additional capital, we think that there's going to be -- a discipline will remain in the market in terms of rating going into this renewal. And importantly, we all talk about rate, but very importantly is the structural changes that we've been able to secure in this market starting in 2023, whether that's terms and conditions or importantly, attachment points, we see their very strong resolve on the part of the market to keep those intact.

And it looks like we have one additional question from Mike Ward.

Thanks guys, long time no speak. I just wanted to follow up and I joined late. The buyback, I thought that was really interesting and the structure of it. Is there, are there more opportunities for that type of activity or indications from shareholders or anything like that could keep happening or more of that?

Mike, this is Craig. So first of all, this was a one-off targeted repurchase transaction for an initial investor of the organization.

Thank you. That will conclude our question and answer session for today. I'll hand the floor over to management for closing remarks.

Thank you. As always, I do want to thank you all for joining us today on our call. I remain very optimistic for the future of Hamilton, and we all look forward to speaking to you again in a couple of months. Thanks again.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.