|[December 23, 2013]
A.M. Best Removes Ratings of Hamilton Re, Ltd. From Under Review
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has removed from under review with negative
implications and affirmed the financial strength rating of A-
(Excellent) and issuer credit rating of "a-" of Hamilton Re, Ltd. (Hamilton
Re) (Hamilton, Bermuda), formerly S.A.C. Re, Ltd. (SAC Re) (Hamilton,
Bermuda). The outlook assigned to both ratings is stable.
The ratings of Hamilton Re are based on its excellent risk-adjusted
capitalization, knowledgeable management team and prudent business plan.
Partially offsetting these positive rating factors are the start-up
nature of the company, the greater investment risk associated with an
alternative investment strategy, as well as the increased competition in
the reinsurance marketplace that may challenge some of the company's
A.M. Best is concerned there is a possibility that Hamilton could be
exposed to a convergence of events due to the adjoining of underwriting
risk and the present risk in an alternative investment strategy. Also of
concern is the relatively high gross investment leverage used by Two
Sigma Investments (TSI (News - Alert)) which is higher than other alternative
investment strategies. These risks could have an adverse effect on the
company's risk-adjusted capital. However, these risks are mitigated by
Hamilton's low underwritingleverage and experienced underwriting team.
The investment leverage concerns are mitigated by the partially hedged
nature of the portfolio, the large number of diversified liquid
investments, and the investment manager's lengthy investment track
The assets of Hamilton will be managed by TSI, a global firm based in
New York, NY, which was founded in July of 2001 by John Overdeck and
David Siegel. Hamilton's assets will be invested in a dedicated "fund of
one" which allocates capital to two different trading entities.. These
entities apply various strategies to invest in liquid investments in the
global equity, futures, FX and derivatives markets.
In addition, A.M. Best anticipates that Hamilton's management will be
challenged by competition from established reinsurers as well as other
start-up entities. The addition of more capacity to an already
overcapitalized reinsurance marketplace could pressure underwriting
Key rating triggers that could result in positive rating actions would
be steady growth of surplus through investments and underwriting, and
meeting and/or exceeding the business plan over the long term.
Key rating triggers that could result in negative rating actions would
be not executing the business plan over the long term, and/or having
large losses that would reduce risk adjusted capital.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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