United States securities and exchange commission logo
June 9, 2023
Pina Albo
Chief Executive Officer
Hamilton Insurance Group, Ltd.
Wellesley House North, 1st Floor
90 Pitts Bay Road
Pembroke HM 08 Bermuda
Re: Hamilton Insurance
Group, Ltd.
Draft Registration
Statement on Form S-1
Submitted May 15,
2023
CIK No. 0001593275
Dear Pina Albo:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 Submitted May 15, 2023
General
1. Please revise your
cover page, summary, and risk factors sections to disclose your
multiple class share
structure (preferred shares, Class A common shares, Class B common
shares, and Class C
common shares) and explain the nature of the disparate voting rights
and the risks the
structure presents to investors.
2. We note your statements
that you have a "robust balance sheet" on pages 3, 7, 74, 124 and
126. Please revise
these sections to balance your disclosure by also including your net
losses for the most
recent audited period, as well as your cumulative losses. In addition,
Pina Albo
Hamilton Insurance Group, Ltd.
June 9, 2023
Page 2
add appropriate risk factor disclosure.
3. We note your disclosure in several sections of the prospectus
referring to Russia's war on
Ukraine and the impact on your business, including your disclosure on
page 104 that the
"net loss for the year ended December 31, 2022 was primarily driven by
the impact of
catastrophe losses incurred on the Ukraine conflict." Typically, most
insurance policies
contain exclusions for losses related to armed conflicts. Please tell
us and, if material to
you, disclose the following:
whether you have business operations or employees in Ukraine,
Russia or Belarus;
whether your E&S policies were issued specifically to cover risks
related to conflict,
and whether you have written new or extended existing policies
since the
commencement of hostilities in 2022;
whether you have any investment assets, including financing or
reinsuring leases for
assets that currently cannot be recovered as a result of the
conflict and conflict related
sanctions; and
whether management expects to grow or decrease its exposure to
Ukraine, and
whether the company has any similar exposures to other conflict
prone areas.
4. We note that throughout the prospectus you often describe the industry
and your
performance using compound annual growth rate ("CAGR"). Because CAGR
only
represents two discrete snapshots in time, but does not show trends or
events during the
period represented, please balance your disclosure by also including
the annual rates for
the periods represented.
5. We note that you refer to "reinsurance franchise" and "underwriting
franchise" in several
sections of the prospectus. Please briefly explain what you mean by
these statements,
because it does not appear that your business operates as a franchise.
Alternatively, if your
operations are franchised, please revise your business section to
provide additional details
about your method of operations, and provide the requisite agreements.
6. Please provide us with supplemental copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
have presented or expect to present to potential investors in reliance
on Section 5(d) of the
Securities Act, whether or not you retained, or intend to retain,
copies of those
communications. Please contact Tonya K. Aldave at (202) 551-3601 to
discuss how to
submit the materials, if any, to us for our review.
Cover Page
FirstName LastNamePina Albo
7. We note your disclosure on page 115 that you currently have three
classes of common
Comapany NameHamilton
shares Insurance
outstanding. Please Group,
revise yourLtd.
cover pages to identify what
class of shares is
June 9,being
2023 registered
Page 2 in this offering. Refer to Item 501(b)(2) of Regulation
S-K.
FirstName LastName
Pina Albo
FirstName LastNamePina
Hamilton Insurance Group,Albo
Ltd.
Comapany
June 9, 2023NameHamilton Insurance Group, Ltd.
June 9,
Page 3 2023 Page 3
FirstName LastName
Summary
Our Market Opportunity, page 9
8. We note your disclosure that one of your market opportunities is
participation and
continued growth in the "non-admitted U.S. insurance market, also
known as the U.S.
E&S market." Revise your disclosure to explain why this market is
termed both "non-
admitted" and "excess and supplementary (i.e. that Hamilton is not
admitted or enrolled
with the insurance commission of the states where you do business, and
that the risks
associated with the business carry sufficient unknows that most
insurers cannot perform
the acturarial risk assessment necessary for approval by the relevant
state insurance
commission). Revise your disclosure to explain, both here and in a new
risk factor, the
risks of writing insurance in this space, including the reliance on
substantially less data to
price the premiums. In addition, please provide support for your
disclosure on page 128
that the E&S Market is "expected to produce profitable results in all
market cycles," or
state that this is management's belief.
9. Given your disclosure on page 87 that the war in Ukraine was one of
the factors that led to
the increase in your catastrophe losses for the year, please explain
your disclosure here
that you view other "global events such as natural catastrophes and
geopolitical tensions,
such as the conflict in Ukraine" as a market opportunity.
Our Business, page 10
10. We note your disclosure, both in this section, and in the risk factors
section, discussing the
impact of catastrophic weather events on your obligation to make
payments on losses both
through your insurance and reinsurance businesses. For instance, we
note that you
attribute your net losses in 2022, 2020 and 2019 to particular named
storms or other
weather events. We also note your reference to the impact of climate
change, including
the increase in the frequency and severity of weather events.
Furthermore, we note that
you attempt to limit your exposure to "100-year Atlantic Hurricanes."
Please revise your
disclosure, either here or in another appropriate section, to define a
"100-year" storm, and
the extent to which you have experienced events that meet that
definition during the last 5
years. Revise your management's discussion to address how management
adjusts for the
potential increase in frequency of these events.
11. Revise your disclosure to explain in greater detail, that the higher
premiums you can
charge in your E&S and other specialty lines of insurance are directly
related to the risks
related to the uncertainties in predicting the likelihood of an
insured loss, or the size of
any losses on the underlying policies.
Risk Factors
Unpredictable catastrophic events could adversely affect our results, page 22
12. We note that your exposure to payment obligations to insureds in the
event of catastrophic
weather events. Revise this section, or another appropriate portion of
your registration
Pina Albo
Hamilton Insurance Group, Ltd.
June 9, 2023
Page 4
statement, to identify significant accumulations of geographic risks.
Where a material
amount of risk or total insurance exposure is located in a
geographically diverse nation,
discuss any regional risks separately. For instance, for your policies
that cover property or
businesses in the United States, if a significant percentage is in
Florida, make that clear.
An investor should be able to understand not only your historical
experience, but to be
able to appreciate whether a particular event might be more likely to
impact your losses in
future periods. For instance, if you have written a significant amount
of property
insurance, reinsurance, or provided flood insurance, for costal
properties in California, or
for properties exposed to wildfire risk in the American west, so
state.
The full extent of the impacts of the ongoing Ukraine conflict on the
reinsurance, page 23
13. We note your discussion, within the general risk factor on the impact
of the Ukraine
conflict, your reference to G7 prohibitions against issuing maritime
insurance for Russian
oil transportation. Please tell us, with a view towards revised
disclosure, the extent to
which you have written any insurance to cover these shipments, or if
management has any
discussions related to providing this insurance. If your maritime book
of business has
been, or could be material, revise the risk factors to separately
address the risks related to
engaging in this or any other activity that could lead to Hamilton
running afoul of sections
imposed by the US, UK, EU or the G7.
The covenants in our debt agreements limit our financial and operational
flexibility, page 27
14. We note that you reference a "private note" in this risk factor. To
the extent that these
notes are the term loan agreement described on page 114, please
clarify. If the private
note is separate from that agreement, please revise to identify the
note holders. In addition,
if this is a separate credit facility with its own agreement (apart
form the agreements you
plan to file as Exhibits 10.13 and 10.14), describe its material terms
in the business section
and file it as an exhibit to the registration statement or advise.
We may be adversely impacted by inflation, page 33
15. Please update this risk factor to reflect how recent inflationary
pressures impacted your
operations. In this regard, identify the types of inflationary
pressures you are facing and
how your business has been affected.
Consolidated Results of Operations, page 85
16. The sum of the adjustments deducted from Net premiums earned to
calculate
FirstName LastNamePina Albo
Underwriting income (loss) do not agree to the amounts presented. Please
revise to show
Comapany NameHamilton
expenses Insurance
as a deduction and theGroup,
incomeLtd.
amounts as an addition to
arrive to your
June 9,calculation
2023 Page of
4 Underwriting income (loss).
FirstName LastName
Pina Albo
FirstName LastNamePina
Hamilton Insurance Group,Albo
Ltd.
Comapany
June 9, 2023NameHamilton Insurance Group, Ltd.
June 9,
Page 5 2023 Page 5
FirstName LastName
International Segment
Net Premiums Earned, page 92
17. We note your discussion that net premiums earned increased over the
periods presented
reflecting changes in net premiums written, including the volume, mix
and type of
business written. Please revise to provide separate discussion of
changes in net premiums
earned by Property, Casualty and Specialty during the periods
presented in the filing.
Provide similar revisions and quantitative details for your Bermuda
segment discussion
beginning on page 95.
18. In addition to the above, please revise to quantify the extent to
which such changes are
attributable to changes in price or volume by type of business.
Provide similar revisions
and quantitative details for your Bermuda segment discussion beginning
on page 95. Refer
to Item 303(b)(2)(iii) of Regulation S-K.
Third Party Fee Income, page 93
19. We note that the third party fee income decreased by 44.7% during the
year ended
December 31, 2022 primarily driven by a reduction in the number of
third party
syndicates under management. Please address the following:
revise to quantify relevant numbers of amounts associated with the
third party
syndicates under management during the periods presented;
tell us and revise your disclosure to clarify more about the
contractual terms and
management services provided to these third party syndicates; and
tell us and revise to disclose your revenue recognition policy for
this third party fee
income.
Credit Facilities, page 115
20. For each material credit facility listed in this section, please
include the interest rate
payable, the term of the facility, and other material terms. In
addition, file material credit
agreements as amendments to the registration statement or advise.
Also, since most of
these credit facilities will expire within the next year, please tell
us whether Hamilton has
begun negotiating extensions for the facilities.
Financial Strength Ratings, page 116
21. We note your disclosure here and on page 27 that on "April 22, 2022,
Hamilton Insurance
Group, Ltd. received a positive outlook from A.M. Best ... and
affirmation of its Financial
Strength Rating of "A-" (Excellent) and the Long-Term Issuer Credit
Ratings of "a-" of
Hamilton Re and Hamilton Insurance DAC." Please disclose the ratings
as of a more
recent date or advise why you are unable to do so.
Pina Albo
FirstName LastNamePina
Hamilton Insurance Group,Albo
Ltd.
Comapany
June 9, 2023NameHamilton Insurance Group, Ltd.
June 9,
Page 6 2023 Page 6
FirstName LastName
Quantiatve and Qualitative Disclosure About Market Risk
Effects of Inflation, page 120
22. You make reference to the effects of inflation, and how it could
present a risk to your
business, as well as how it has impacted results in reported periods.
Revise your
disclosure, either in this section or in the management's discussion,
to address the actual
and expected impact of continued inflationary pressure. For instance,
have your
obligations to cover losses at replacement value, compared to a fixed
loss value, impacted
results as the cost of materials has increased? If so, how has that
impacted your
significant losses in each of the reported periods? Similarly, how has
the expected cost
increases impacted your reserve calculations. Finally, is there any
significant difference
in your calculations for your reinsured portfolio, compared to
policies you directly write?
Business, page 123
23. Please revise your business section to provide a break down in your
investment portfolio
by comparison of investment grade and non-investment grade assets,
further broken down
by asset class and assigned credit rating. These figures should be
provided by dollar
amount and percentage of the portfolio.
24. Since a significant portio of your insurance is written through your
Lloyd's syndicate,
please revise this section to discuss the structure and management of
the Lloyd's market,
as well as the management of the syndicate and the percentage of the
syndicate's business
that you purchase.
Unique Investment Management Relationship with Two Sigma, page 124
25. Please refer to the last risk factor on page 37 and revise this
section to describe material
terms of the commitment agreement with Two Sigma here. Include the
compensation
structure, the historical fees paid to the investment manager, the
minimum amount of
assets required to be covered under the agreement, as well as the term
and terminational
provisions.
Investments, page 139
26. We note your disclosure here that your "fixed income investment
portfolio is managed by
two external investment managers, with approximately 50% allocated to
each." We also
note that you identify one of the investment managers as Two Sigma
Investments L.P.
Please identify the second external investment manager, describe
material terms of any
agreements signed with such investment manager, and file the
management agreement as
an exhibit to the registration statement or advise.
Certain Relationships and Related Party Transactions, page 179
27. Please identify the parties to the Shareholders Agreement described in
the first paragraph
of this section. Also, indicate the amount of your shares that the
shareholders party to this
Pina Albo
Hamilton Insurance Group, Ltd.
June 9, 2023
Page 7
agreement will control, giving effect to the capital issuances and
other distributions
contemplated as part of this initial public offering.
Description of Share Capital
Common Shares, page 181
28. Please describe each of your three classes of common stock and their
respective voting,
dividend, conversion and other important rights. In this regard we
note your disclosure on
page 115 and in the financial statements that you have Class A, Class
B and Class C
common shares. We also note your disclosure on page F-55 about your
outstanding
warrants.
Revise to discuss any limitations on the 9.5% total combined voting
power that applies
across your classes of securities. Are any shareholders or groups of
shareholders excluded
from this limitation (either currently, or as a result of future
events, including an event of
default)? Does the voting limitation apply to individuals, or also to
groups acting in
concert.
Glossary of Selected Terms, page 226
29. Please revise to include definitions for the terms Tangible book
value and Tangible
book value per common share.
Consolidated Balance Sheets, page F-6
30. We note your disclosure on page F-25 that you concluded that you are
the primary
beneficiary of TS Hamilton Fund. Please tell us how you have
considered ASC 810-10-
45-25 for your presentation on the face of the consolidated balance
sheet.
Note 1. Organization
Unconsolidated Related Parties, page F-11
31. We note your disclosure of unconsolidated related parties. Please tell
us whether these
entities are considered to be variable interest entities and explain
why or why not. To the
extent that they are variable interest entities and you are not the
primary beneficiary,
revise to disclose information required by ASC 810-10-50-4 or tell us
where this
information is already disclosed.
Note 3. Investments, page F-18
32. Please tell us why the amounts for the U.S. Treasury Securities, 3.8750%
- 4.2500%, due
FirstName LastNamePina Albo
12/31/2024 - 11/15/2052 are negative in the table, on page F-20, that
summarizes
Comapany NameHamilton
investments in whichInsurance Group,
the fair value Ltd.investment represents more
than 5% of TS
of the
June 9,Hamilton
2023 PageFund s
7 members equity.
FirstName LastName
Pina Albo
FirstName LastNamePina
Hamilton Insurance Group,Albo
Ltd.
Comapany
June 9, 2023NameHamilton Insurance Group, Ltd.
June 9,
Page 8 2023 Page 8
FirstName LastName
Note 10. Reserve for Losses and Loss Adjustment Expenses, page F-33
33. Please provide us with a reconciliation of the Net losses and loss
expenses paid in respect
of losses for the Current year of $778,936 and Prior years ($20,603)
as reflected in the
table for the year ended December 31, 2022 to the amounts reflected in
the Claims
Development tables starting on page F-36.
34. We note your disclosure that the casualty business protected by the
LPT recorded
favorable gross development which was partially offset by amortization
of the associated
deferred gain, resulting in a net positive earnings impact of $7.0
million. Please expand
your disclosure to describe the factors contributing to the favorable
development and
quantify the components of the gross favorable development and amount
of amortization
offset.
Item 15. Recent Sales of Unregistered Securities, page II-2
35. We note that you have included a placeholder in this section but have
not listed any prior
sales of unregistered securities. Please include this disclosure in
the next amendment.
Refer to Item 701 of Regulation S-K.
Exhibits
36. We note your disclosure on page 225 naming three different law firms,
but the exhibit
index only includes one legality opinion and consent. Please file the
remaining legality
opinions and consents as exhibits to your registration statement or
advise.
You may contact Sarmad Makhdoom at (202) 551-5776 or Michael Henderson
at (202)
551-3364 if you have questions regarding comments on the financial statements
and related
matters. Please contact Tonya K. Aldave at (202) 551-3601 or Chris Windsor,
Legal Branch
Chief, at (202) 551-3419 with any other questions.
Sincerely,
Division of
Corporation Finance
Office of
Finance
cc: Matthew B. Stern, Esq.