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Investments | 9 Months Ended
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Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments Fixed Maturity and Short-Term Investments - Trading The Company’s fixed maturity and short-term investments at September 30, 2023 and December 31, 2022 are as follows:
| 2023
(Expressed in thousands of U.S. Dollars) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Fixed maturities: |  |  |  |  |  |  |
U.S. government treasuries | $ | 651,446 |  |  | $ | 21 |  |  | $ | (32,381) |  |  | $ | 619,086 |
U.S. states, territories and municipalities | 4,729 |  |  | — |  |  | (375) |  |  | 4,354 |
Non-U.S. sovereign governments and supranationals | 44,759 |  |  | 413 |  |  | (1,840) |  |  | 43,332 |
Corporate | 853,433 |  |  | 81 |  |  | (42,177) |  |  | 811,337 |
Residential mortgage-backed securities - Agency | 148,097 |  |  | — |  |  | (20,117) |  |  | 127,980 |
Residential mortgage-backed securities - Non-agency | 4,763 |  |  | 2 |  |  | (821) |  |  | 3,944 |
Commercial mortgage-backed securities - Non-agency | 10,188 |  |  | — |  |  | (1,295) |  |  | 8,893 |
Other asset-backed securities | 12,847 |  |  | 15 |  |  | (317) |  |  | 12,545 |
Total fixed maturities | 1,730,262 |  |  | 532 |  |  | (99,323) |  |  | 1,631,471 |
Short-term investments | 347,623 |  |  | 1,345 |  |  | — |  |  | 348,968 |
Total | $ | 2,077,885 |  |  | $ | 1,877 |  |  | $ | (99,323) |  |  | $ | 1,980,439 |
| 2022
(Expressed in thousands of U.S. Dollars) | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
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 - 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 |
Contractual Maturities Summary The following table presents contractual maturities of fixed maturity securities at September 30, 2023. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
| 2023
(Expressed in thousands of U.S. Dollars) | Amortized Cost |  | Fair Value
Due less than one year | $ | 139,886 |  |  | $ | 135,950 |
Due after one through five years | 1,164,512 |  |  | 1,107,734 |
Due after five through ten years | 245,255 |  |  | 230,867 |
Due after ten years | 4,714 |  |  | 3,558 |
Mortgage-backed | 163,048 |  |  | 140,817 |
Asset-backed | 12,847 |  |  | 12,545 |
Total | $ | 1,730,262 |  |  | $ | 1,631,471 |
Investments in Two Sigma Funds The Company’s investments in Two Sigma Funds at September 30, 2023 and December 31, 2022 are as follows:
| 2023 |  | 2022
(Expressed in thousands of U.S. Dollars) | Cost |  | Net Unrealized Gains (Losses) |  | Fair Value |  | Cost |  | Net Unrealized Gains (Losses) |  | Fair Value
Two Sigma Futures Portfolio, LLC (FTV) | $ | 469,379 |  |  | $ | (7,212) |  |  | $ | 462,167 |  |  | $ | 438,625 |  |  | $ | (95,213) |  |  | $ | 343,412 |
Two Sigma Spectrum Portfolio, LLC (STV) | 239,819 |  |  | 54,115 |  |  | 293,934 |  |  | 171,135 |  |  | 57,982 |  |  | 229,117 |
Two Sigma Equity Spectrum Portfolio, LLC (ESTV) | 182,593 |  |  | 41,292 |  |  | 223,885 |  |  | 121,340 |  |  | 46,867 |  |  | 168,207 |
Total | $ | 891,791 |  |  | $ | 88,195 |  |  | $ | 979,986 |  |  | $ | 731,100 |  |  | $ | 9,636 |  |  | $ | 740,736 |
The Company, through its investments in FTV, STV and ESTV, seeks 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 September 30, 2023, the Company owns a 20.1%, 16.1% and 8.6% interest in each of the FTV, STV and ESTV funds, respectively. The following table summarizes certain investments of FTV, STV and ESTV where TS Hamilton Fund’s proportionate share of the fair value of the investment represents more than 5% of TS Hamilton Fund’s members’ equity at September 30, 2023:
| 2023
(Expressed in thousands of U.S. Dollars) | Principal / Shares (1) |  | Fair Value (1) |  | % of Members' Equity
State Street Treasury Obligations Money Market Fund | 126,802 |  |  | $ | 126,802 |  |  | 7.5 | %
U.S. Treasury Securities, 0.0000% - 4.6250%, due 10/5/2023 - 8/15/2043 | 710,830 |  |  | $ | 704,227 |  |  | 41.5 | %
U.K. Gilt Securities, 1.6250%, due 10/22/2028 | 604 |  |  | $ | 650 |  |  | — | %
U.K. Gilt Securities, 3.2500% - 3.7500%, due 1/31/2033 - 10/22/2053 | (82,909) |  |  | $ | (89,773) |  |  | (5.3) | %
U.S. Treasury Securities, 3.8750% - 5.0000%, due 9/30/2025 - 8/15/2023 | (240,013) |  |  | $ | (236,195) |  |  | (13.9) | %
(1) Values represent TS Hamilton Fund’s proportionate share of the aggregate of FTV, STV and ESTV total holdings. Two Sigma and the Managing Member are related parties to the Company as described further in Note 1, Organization. Effective July 1, 2023, a revised investment management agreement with Two Sigma requires TS Hamilton Fund to incur a management fee of 2.5% of the non-managing members' equity in the net asset value of the TS Hamilton Fund per annum (previously 3%). The management fee for the three months ended September 30, 2023 and 2022 was $10.4 million and $14.0 million, respectively, and the management fee for the nine months ended September 30, 2023 and 2022 was $34.4 million and $39.5 million, respectively. Under the terms of the revised limited liability company agreement between Hamilton Re and the Managing Member, the Managing Member remains entitled to an incentive allocation equal to 30% of TS Hamilton Fund’s net profits, subject to high watermark provisions, and adjusted for withdrawals and any incentive allocation to the Managing Member. In the event there is a net loss during a quarter and a net profit during any subsequent quarter, the Managing Member is entitled to a modified incentive allocation whereby the regular incentive allocation will be reduced by 50% until subsequent cumulative net profits are credited in an amount equal to 200% of the previously allocated net losses. The Managing Member is also entitled to receive a revised additional incentive allocation as of the end of each fiscal year (or on any date Hamilton Re withdraws all or a portion of its capital), in an amount equal to 25% of the Excess Profits (previously 20%). “Excess Profits” for any given fiscal year (or other such accounting period) means the net profits over 10% for such fiscal year (previously 15%), net of management fees and expenses and gross of incentive allocations, but only after recouping previously unrecouped net losses. To the extent Hamilton Re contributes capital other than at the beginning of a fiscal year or withdraws capital other than at the end of a fiscal year, the additional incentive allocation hurdle with respect to such capital is prorated. The aggregate incentive allocation (inclusive of the additional incentive allocation) for the three months ended September 30, 2023 and 2022 was $9.1 million and $(15.3) million, respectively, and the aggregate incentive allocation (inclusive of the additional incentive allocation) for the nine months ended September 30, 2023 and 2022 was $15.1 million and $68.0 million, respectively. Hamilton Re has a commitment with TS Hamilton Fund to maintain an amount up to the lesser of (i) $1.8 billion or (ii) 60% of Hamilton Insurance Group’s net tangible assets in TS Hamilton Fund, such lesser amount, the “Minimum Commitment Amount”, for a three-year period (the "Initial Term") and for rolling three-year periods thereafter (each such three-year period the "Commitment Period"), subject to certain circumstances and the liquidity options described below, with the Commitment Period ending on December 31, 2025. The Commitment Period consists of a 3-year rolling term that automatically renews on an annual basis unless Hamilton Re or the Managing Member provide advance notice of non-renewal. The TS Hamilton Fund generally has two liquidity options, subject to Hamilton Re’s minimum investment commitment, which are as follows: •Monthly liquidity - Subject to certain conditions, Hamilton Re may request a whole or partial withdrawal of its capital account, no later than fifteen days prior to the end of a calendar month, effective as of the last day of such calendar month. •Daily liquidity - Subject to certain limited circumstances, including the need to meet obligations pursuant to Hamilton Re’s underwriting operations, Hamilton Re may request a withdrawal of all or a portion of its capital account upon at least one business day’s written notice of such withdrawal request date to the Managing Member. At its discretion, the Managing Member may permit or require Hamilton Re to withdraw all or any portion of its respective capital account at other times, or waive or reduce certain notice periods, or allow a notice to be revoked. The Managing Member may withdraw all or any portion of its capital account at any time. Total Realized and Unrealized Gains (Losses) on Investments and Net Investment Income (Loss) The components of total realized and unrealized gains (losses) on investments and net investment income (loss) for the three and nine months ended September 30, 2023 and 2022 are as follows:
|  |  |  | Three Months Ended |  | Nine Months Ended |  |  |  |  |  |
|  |  |  | September 30, |  | September 30, |  |  |  |  |  |
(Expressed in thousands of U.S. Dollars) |  |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |
Net realized and unrealized gains (losses) on investments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net realized gains (losses) on investments |  |  |  | $ | 42,403 |  |  | $ | 115,129 |  |  | $ | 32,363 |  |  | $ | 267,140 |  |  |  |  |  |  |
Change in net unrealized gains (losses) on investments |  |  |  | 4,940 |  |  | (182,509) |  |  | 69,518 |  |  | (120,500) |  |  |  |  |  |  |
Net realized and unrealized gains (losses) on investments |  |  |  | 47,343 |  |  | (67,380) |  |  | 101,881 |  |  | 146,640 |  |  |  |  |  |  |
Net investment income (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturities |  |  |  | 12,208 |  |  | 5,880 |  |  | 31,178 |  |  | 14,343 |  |  |  |  |  |  |
Short-term investments |  |  |  | 38 |  |  | 334 |  |  | 287 |  |  | 737 |  |  |  |  |  |  |
TS Hamilton Fund |  |  |  | 3,121 |  |  | 3,095 |  |  | 13,033 |  |  | 4,603 |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  | 4,029 |  |  | 544 |  |  | 8,752 |  |  | 696 |  |  |  |  |  |  |
Other |  |  |  | (104) |  |  | (431) |  |  | 1,015 |  |  | (1,230) |  |  |  |  |  |  |
Interest and other |  |  |  | 19,292 |  |  | 9,422 |  |  | 54,265 |  |  | 19,149 |  |  |  |  |  |  |
Management fees |  |  |  | (10,958) |  |  | (14,420) |  |  | (35,806) |  |  | (40,601) |  |  |  |  |  |  |
Other expenses |  |  |  | (265) |  |  | (257) |  |  | (740) |  |  | (733) |  |  |  |  |  |  |
Net investment income (loss) |  |  |  | 8,069 |  |  | (5,255) |  |  | 17,719 |  |  | (22,185) |  |  |  |  |  |  |
Total realized and unrealized gains (losses) on investments and net investment income (loss) |  |  |  | $ | 55,412 |  |  | $ | (72,635) |  |  | $ | 119,600 |  |  | $ | 124,455 |  |  |  |  |  |  |
` Net Realized Gains (Losses) on Investments The components of net realized gains (losses) on investments for the three and nine months ended September 30, 2023 and 2022 are as follows:
| Three Months Ended |  | Nine Months Ended |  |  |  |  |  |  |
| September 30, |  | September 30, |  |  |  |  |  |  |
(Expressed in thousands of U.S. Dollars) | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |  |
Fixed maturities and short-term investments | $ | (7,688) |  |  | $ | (3,313) |  |  | $ | (10,796) |  |  | $ | (13,684) |  |  |  |  |  |  |  |
TS Hamilton Fund | 50,091 |  |  | 118,442 |  |  | 42,948 |  |  | 279,977 |  |  |  |  |  |  |  |
Other | — |  |  | — |  |  | 211 |  |  | 847 |  |  |  |  |  |  |  |
Net realized gains (losses) on investments | $ | 42,403 |  |  | $ | 115,129 |  |  | $ | 32,363 |  |  | $ | 267,140 |  |  |  |  |  |  |  |
Net Unrealized Gains (Losses) on Investments The components of net unrealized gains (losses) on investments for the three and nine months ended September 30, 2023 and 2022 are as follows:
| Three Months Ended |  | Nine Months Ended |  |  |  |  |  |  |
| September 30, |  | September 30, |  |  |  |  |  |  |
(Expressed in thousands of U.S. Dollars) | 2023 |  | 2022 |  | 2023 |  | 2022 |  |  |  |  |  |  |
Fixed maturities and short-term investments | $ | (12,818) |  |  | $ | (38,556) |  |  | $ | (9,800) |  |  | $ | (101,760) |  |  |  |  |  |  |  |
TS Hamilton Fund | 17,758 |  |  | (143,953) |  |  | 79,318 |  |  | (18,740) |  |  |  |  |  |  |  |
Net realized gains (losses) on investments | $ | 4,940 |  |  | $ | (182,509) |  |  | $ | 69,518 |  |  | $ | (120,500) |  |  |  |  |  |  |  |
Pledged Assets At September 30, 2023 and December 31, 2022, pledged investments at fair value were comprised of $226.9 million and $274.0 million, respectively, securing a portion of the capital requirements for business written at Lloyd's, $54.1 million and $39.0 million, respectively, held in trust accounts for the benefit of U.S. state regulatory authorities and $34.9 million and $Nil, respectively, securing other underwriting obligations. In addition, certain investments were pledged as security for letter of credit facilities as described further in Note 10, Debt and Credit Facilities. At September 30, 2023 and December 31, 2022, restricted cash and cash equivalents balances were comprised of $95.5 million and $126.8 million, respectively, securing other underwriting obligations, $1.8 million and $2.1 million, respectively, securing a portion of the capital requirements for business written at Lloyd's, $1.4 million and $1.3 million, respectively, in trust accounts for the benefit of regulatory authorities, and $0.3 million and $0.6 million, respectively, of escrow funds. Total cash and cash equivalents and restricted cash and cash equivalents of $903.5 million presented in the statement of cash flows at September 30, 2023 was comprised of cash and cash equivalents of $804.5 million and restricted cash and cash equivalents of $99.0 million on the balance sheet. Total cash and cash equivalents and restricted cash and cash equivalents of $1.2 billion presented in the statement of cash flows at December 31, 2022 was comprised of cash and cash equivalents of $1.1 billion and restricted cash and cash equivalents of $130.8 million on the balance sheet.

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- Definition The entire disclosure for investment. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 320 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//320/tableOfContent Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Name Accounting Standards Codification -Topic 321 -Publisher FASB -URI https://asc.fasb.org//321/tableOfContent Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef -Name Accounting Standards Codification -Topic 325 -Publisher FASB -URI https://asc.fasb.org//325/tableOfContent + Details
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