Hamilton Insurance Group Ltd
For the period ended Dec 31, 2023. Filed Mar 7, 2024.
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FY2023 · Filed Mar 7, 2024
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Cash and Investments
At December 31, 2023 and 2022, total cash and investments was $4.0 billion and $3.5 billion, respectively. However, a significant portion of the total cash and investments balances held were invested in TS Hamilton Fund as collateral for the investments held by the underlying trading vehicles, as shown in the tables under the “TS Hamilton Fund” discussion.
| As at | ||||
|---|---|---|---|---|
| ($ in thousands) · December 31, 2023 · December 31, 2022 | ||||
| Fixed maturity investments, at fair value | $1,831,268 | 46% | $1,259,476 | 36% |
| Short-term investments, at fair value | 428,878 | 11% | 286,111 | 8% |
| 2,260,146 | 57% | 1,545,587 | 44% | |
| Investments in Two Sigma Funds, at fair value | 851,470 | 21% | 740,736 | 21% |
| Total investments | 3,111,616 | 78% | 2,286,323 | 65% |
| Cash and cash equivalents | 794,509 | 20% | 1,076,420 | 31% |
| Restricted cash and cash equivalents | 106,351 | 2% | 130,783 | 4% |
| Total cash | 900,860 | 22% | 1,207,203 | 35% |
| Total cash & investments | $4,012,476 | 100% | $3,493,526 | 100% |
Total cash and investments increased from $3.5 billion at December 31, 2022 to $4.0 billion at December 31, 2023. The increase was primarily driven by increases in both the fixed maturity investments as we deployed more cash into the fixed maturity portfolio to take advantage of higher interest rates, and in the TS Hamilton Fund, primarily due to positive investment returns for the year ended December 31, 2023. The TS Hamilton Fund represents $1.8 billion of the total cash and investments at both December 31, 2023 and 2022.
Fixed Maturity and Short-term Investments - Trading
The Company’s fixed maturity portfolio and short-term investments at December 31, 2023 and 2022 are as follows:
| 2023 | ||||
|---|---|---|---|---|
| ($ in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | FairValue |
| Fixed maturities: | ||||
| U.S. government treasuries | $717,134 | $5,137 | $(14,021) | $708,250 |
| U.S. states, territories and municipalities | 4,656 | — | (286) | 4,370 |
| Non-U.S. sovereign governments and supranationals | 55,662 | 2,175 | (1,591) | 56,246 |
| Corporate | 877,493 | 8,443 | (22,060) | 863,876 |
| Residential mortgage-backed securities - Agency | 180,661 | 435 | (12,583) | 168,513 |
| Residential mortgage-backed securities - Non-agency | 5,639 | 16 | (671) | 4,984 |
| Commercial mortgage-backed securities - Non-agency | 11,473 | — | (1,050) | 10,423 |
| Other asset-backed securities | 14,781 | 20 | (195) | 14,606 |
| Total fixed maturities | 1,867,499 | 16,226 | (52,457) | 1,831,268 |
| Short-term investments | 427,437 | 1,441 | — | 428,878 |
| Total | $2,294,936 | $17,667 | $(52,457) | $2,260,146 |
| 2022 | ||||
|---|---|---|---|---|
| ($ in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | FairValue |
| Fixed maturities: | ||||
| U.S. government treasuries | $498,841 | $99 | $(27,089) | $471,851 |
| U.S. states, territories and municipalities | 4,741 | — | (434) | 4,307 |
| Non-U.S. sovereign governments and supranationals | 14,191 | 363 | (1,602) | 12,952 |
| Corporate | 690,900 | 363 | (43,786) | 647,477 |
| Residential mortgage-backed securities - Agency | 111,234 | — | (14,824) | 96,410 |
| Residential mortgage-backed securities - Non-agency | 5,147 | — | (772) | 4,375 |
| Commercial mortgage-backed securities - Agency | — | — | — | — |
| Commercial mortgage-backed securities - Non-agency | 10,283 | — | (1,064) | 9,219 |
| Other asset-backed securities | 13,347 | 1 | (463) | 12,885 |
| Total fixed maturities | 1,348,684 | 826 | (90,034) | 1,259,476 |
| Short-term investments | 285,130 | 986 | (5) | 286,111 |
| Total | $1,633,814 | $1,812 | $(90,039) | $1,545,587 |
The fair value of the Company’s fixed maturity portfolio and short-term investments increased from $1.5 billion at December 31, 2022 to $2.3 billion at December 31, 2023. The increase was driven by an increase in our fixed maturity portfolio as we continued to deploy excess cash into the fixed maturity portfolio to take advantage of higher interest rates.
$428.9 million and $264.1 million of the short-term investments balance at December 31, 2023 and 2022, respectively, is held within TS Hamilton Fund. The cash and short-term investment balances within TS Hamilton Fund are not managed by the Company, nor can they be removed from TS Hamilton Fund as they support the underlying investment strategies within the three trading vehicles. The balance may fluctuate significantly from period to period as a result of movements in the underlying funds. See discussion below for further details on assets within TS Hamilton Fund.
The fair values and weighted-average credit ratings of our fixed maturity trading portfolio and short-term investments by type at December 31, 2023 and 2022 were as follows:
| 2023 · 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in thousands) · Fair Value · % of Total · Weighted average credit rating · Fair Value · % of Total · Weighted average credit rating | ||||||||
| Fixed maturities: | ||||||||
| U.S. government treasuries | $708,250 | 31% | Aaa | $471,851 | 30% | Aaa | ||
| U.S. states, territories and municipalities | 4,370 | —% | Aa2 | 4,307 | —% | Aa2 | ||
| Non-U.S. sovereign governments and supranationals | 56,246 | 2% | Aa2 | 12,952 | 1% | Aa1 | ||
| Corporate | 863,876 | 39% | A3 | 647,477 | 42% | A2 | ||
| Residential mortgage-backed securities - Agency | 168,513 | 7% | Aaa | 96,410 | 6% | Aaa | ||
| Residential mortgage-backed securities - Non-agency | 4,984 | —% | Aaa | 4,375 | —% | Aaa | ||
| Commercial mortgage-backed securities - Non-agency | 10,423 | 1% | Aa1 | 9,219 | 1% | Aa1 | ||
| Other asset-backed securities | 14,606 | 1% | Aaa | 12,885 | 1% | Aa3 | ||
| Total fixed maturities | 1,831,268 | 81% | Aa3 | 1,259,476 | 81% | Aa3 | ||
| Short-term investments | 428,878 | 19% | Aaa | 286,111 | 19% | Aaa | ||
| Total fixed maturities and short-term investments | $2,260,146 | 100% | Aa2 | $1,545,587 | 100% | Aa2 | ||
| Fixed maturity and short-term investment credit quality summary: | ||||||||
| Investment grade | 100.0% | 100% | ||||||
| Non-investment grade | —% | —% | ||||||
| Total | 100.0% | 100% | ||||||
The average credit quality, the average yield to maturity and the expected average duration of the Company’s fixed maturities and short-term investments trading portfolio, excluding short-term investments held by the TS Hamilton Fund, at December 31, 2023 and 2022 were as follows:
| 2023 | 2022 | |
|---|---|---|
| Average credit quality | Aa3 | Aa3 |
| Average yield to maturity | 4.5% | 4.7% |
| Expected average duration (in years) | 3.3 | 3.2 |
At December 31, 2023 and 2022, approximately 100% of the Company’s fixed maturity and short-term investments trading portfolio were rated investment grade (Baa2 or higher) by third party rating services. There were no non-investment grade securities in the fixed maturity and short-term trading portfolio. The average credit quality of the Company’s fixed maturities and short-term investments trading portfolio, excluding short-term investments held by the TS Hamilton Fund, at December 31, 2023 and 2022 was Aa3.
The average yield to maturity on the Company’s fixed maturities and short-term investments trading portfolio decreased modestly to 4.5% at December 31, 2023 from 4.7% at December 31, 2022.
The expected average duration of the Company’s fixed maturities and short-term investments trading portfolio increased modestly to 3.3 years at December 31, 2023 from 3.2 years at December 31, 2022.
TS Hamilton Fund
Although Two Sigma has broad discretion to allocate invested assets to different opportunities, the current strategy is focused on highly diversified liquid positions in global equities, futures and foreign exchange markets. Through its investments in Two Sigma Futures Portfolio, LLC ("FTV"), Two Sigma Spectrum Portfolio, LLC ("STV") and Two Sigma Equity Spectrum Portfolio, LLC ("ESTV"), we seek to achieve absolute dollar denominated returns on a substantial capital base primarily by combining multiple hedged and leveraged systematic investment strategies with proprietary risk management and execution techniques. These systematic strategies include, but are not limited to, technical and statistically-based, fundamental-based, event-based, market condition-based and spread-based strategies as well as contributor-based and/or sentiment-based strategies and blended strategies. FTV primarily utilizes systematic strategies to gain broad macro exposure to FX, fixed income, equity and credit indices and commodities, predominantly by trading futures, spots, forwards, options, swaps, cash bonds and exchange traded products. STV primarily utilizes systematic strategies to trade U.S.-listed equity securities and related instruments and derivatives. ESTV primarily utilizes systematic strategies to trade non-U.S.-listed equity securities and related instruments and derivatives. At December 31, 2023, the Company owns a 21.1%, 16.2% and 8.8% interest in each of the FTV, STV and ESTV funds, respectively.
TS Hamilton Fund invests in Two Sigma Funds ("Two Sigma Funds"), which are stated at their estimated fair values, which generally represent the Company’s proportionate interest in the members’ equity of the Two Sigma Funds as reported by the respective funds based on the net asset value ("NAV") provided by the fund administrator. The Company accounts for its investment in Two Sigma Funds under the variable interest model at NAV as a practical expedient for fair value in the consolidated balance sheets.
The Company’s investments in Two Sigma Funds at December 31, 2023 and 2022 are as follows:
| 2023 | 2022 | |||||
|---|---|---|---|---|---|---|
| ($ in thousands) | Cost | Net Unrealized Gains (Losses) | FairValue | Cost | Net Unrealized Gains (Losses) | FairValue |
| Two Sigma Futures Portfolio, LLC (FTV) | $433,911 | $(38,105) | $395,806 | $438,625 | $(95,213) | $343,412 |
| Two Sigma Spectrum Portfolio, LLC (STV) | 193,299 | 88,228 | 281,527 | 171,135 | 57,982 | 229,117 |
| Two Sigma Equity Spectrum Portfolio, LLC (ESTV) | 142,981 | 31,156 | 174,137 | 121,340 | 46,867 | 168,207 |
| Total | $770,191 | $81,279 | $851,470 | $731,100 | $9,636 | $740,736 |
The increase in the total fair value of the Company’s investments in Two Sigma Funds from $740.7 million at December 31, 2022 to $851.5 million at December 31, 2023 is primarily driven by collateral management within TS Hamilton Fund, along with an overall increase in the TS Hamilton Fund market value due to positive returns. The total net assets managed in TS Hamilton Fund represent our investment in and exposure to Two Sigma Funds’ investment strategies. However, as part of Two Sigma’s collateral management processes, any capital not required to be held within one of the specific trading vehicles is held in cash or short-term investments within TS Hamilton Fund as shown in the following table. The cash and short-term investment balances are not managed by the Company, nor can they be removed from TS Hamilton Fund as they support the underlying investment strategies within the three trading vehicles.
The following table represents the total assets and total liabilities of TS Hamilton Fund at December 31, 2023 and 2022. Creditors or beneficial interest holders of TS Hamilton Fund have no recourse to the general credit of the Company as the Company’s obligation is limited to the amount of its committed investment.
| ($ in thousands) | 2023 | 2022 |
|---|---|---|
| Assets | ||
| Cash and cash equivalents | $479,255 | $800,239 |
| Short-term investments | 428,878 | 264,104 |
| Investments in Two Sigma Funds, at fair value | 851,470 | 740,736 |
| Receivables for investments sold | 41,087 | — |
| Interest and dividends receivable | 966 | 2,076 |
| Total assets | 1,801,656 | 1,807,155 |
| Liabilities | ||
| Accounts payable and accrued expenses | 191 | 291 |
| Withdrawal payable | 6,480 | 145,738 |
| Payable for investments purchased | 62,440 | 48,095 |
| Total liabilities | 69,111 | 194,124 |
| Total net assets managed by TS Hamilton Fund | $1,732,545 | $1,613,031 |
Total net assets in TS Hamilton Fund were $1.7 billion and $1.6 billion at December 31, 2023 and 2022, respectively.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.