By Paul Mayo Cerqueiro and David French
LONDON/NEW YORK (Reuters) – Hamilton Insurance Group is considering strategic options amid growing momentum in deals with insurance and reinsurance companies, people familiar with the matter told Reuters.
The Bermuda-based group has been discussing options with potential advisers, including an initial public offering (IPO) and a private sale, the people, who spoke on condition of anonymity, said.
One respondent said a transaction could value Hamilton in excess of $2 billion. The group reported a book value of nearly $1.7 billion at the end of December. Listed competitors trade at a premium to book value.
The deliberations are preliminary and a transaction may not materialize, the people said. One person suggested that an agreement would be more likely after the hurricane season ended in November due to the company’s underwriting exposure to natural disasters.
A spokesman for Hamilton declined to comment.
The timing of the strategic discussions benefits from a number of tailwinds from the industry.
Investors have shown interest in the sector, and shares of Skyward Specialty have rallied since their New York debut in January. Reinsurer Everest Re successfully raised around $1.5 billion last month to fund its growth. Bermuda-based Fidelis Insurance announced in April that it was seeking a US IPO.
Private sales have also returned, most notably AIG’s nearly $3 billion sale of reinsurance unit Validus Re to RenaissanceRe last month.
Insurers have been increasing the premiums for insuring commercial risks for some time, thereby strengthening their finances. According to a market index by broker Marsh McLennan, global commercial insurance prices rose 4% in the first quarter of 2023 after 21 consecutive quarters of price increases.
Hamilton, a property-casualty insurer and reinsurer, was founded in 2013 and was led by industry veteran Brian Duperreault until he left the company in 2017 to become CEO of American International Group (AIG).
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Since then, the company has been run by Pina Albo, with Hamilton deriving the majority of its revenue from operations in the United States, followed by the United Kingdom, where the company is active in the Lloyd’s of London insurance market.
Hamilton has a partnership with Two Sigma, with assets generated by Hamilton being managed by the US hedge fund. Such asset management agreements have prevailed in the insurance industry in recent years.
However, a sale could be complicated by Hamilton’s complicated management structure, another person added. According to the 2022 Financial Review, no Hamilton shareholder owns more than 11% of the group, while voting rights for all investors are capped at 9.5%.
On the other hand, underwriting losses from natural catastrophes and losses in investment portfolios amid rising interest rates weighed on insurance industry profits.
But insurers have taken steps to diversify their insurance risks, while losses in investment portfolios are expected to ease from this year, one of the respondents added.
(Reporting by Pablo Mayo Cerqueiro in London and David French in New York; Editing by Elisa Martinuzzi)