AM Best has revised the outlooks to positive from stable and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “A-” (Excellent) of two wholly-owned subsidiaries of Bermudian-based Hamilton Insurance Group Ltd.

The agency said the credit ratings for island-based Hamilton Re Ltd and Hamilton Insurance Designated Activity Company of Ireland reflected Hamilton’s balance sheet strength, which AM Best assessed as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

"We’re proud of this accomplishment and the recognition from AM Best," said Pina Albo, CEO of Hamilton.

“Their endorsement is evidence that Hamilton is delivering on its strategy of building a global, diversified specialty insurance and reinsurance company.”

The very strong balance sheet strength assessment is supported by Hamilton’s strongest level of risk-adjusted capitalisation, as measured by Best's capital adequacy ratio.

Recent strategic shifts executed by the company, including a transition towards a more diversified underwriting portfolio, have helped moderate the performance volatility that previously weighed on Hamilton’s balance sheet strength.

However, Hamilton’s balance sheet strength assessment of very strong also reflects its relatively high-risk investment strategy on a portion of its invested assets, which is controlled by Two Sigma Investments, LP, an SEC-registered investment adviser.

The operating performance assessment of adequate is supported by Hamilton’s investment returns and a favourable trend in underwriting results more recently, although the group has not yet achieved underwriting profitability.

The agency said underwriting improvements had stemmed from the group’s diversification efforts and the favourable rate environment, as well as the re-underwriting measures taken on the casualty book of business and the completed integration of the Pembroke acquisition.

The business profile assessment of neutral is supported by Hamilton’s continued expansion of its diversified global insurance and reinsurance platform. Risk management capabilities are considered appropriate and in line with the group’s risk profile.

The positive outlooks reflect AM Best’s expectation that Hamilton will maintain its improving trend of profitability and continue generating earnings that are accretive to the group’s balance sheet strength.

Positive rating actions could result, AM Best said, if the group continues to display an improving trend of underwriting profitability, along with continued stable and accretive investment performance, thereby lessening the performance volatility that has weighed on the balance sheet strength assessment.

The ratings could be affected negatively by turmoil in the capital markets that severely impacts the group’s risk-adjusted capitalisation or investment performance, the agency said.