Hamilton Insurance Group stock target raised to $27 at JMP

On Friday, JMP Securities analyst Matthew Carletti increased the price target on Hamilton Insurance Group (NYSE:HG) shares to $27.00, up from the previous $25.00, while retaining a Market Outperform rating on the company. According to InvestingPro data, the stock is currently trading at an attractive P/E ratio of 5x, with analysts’ targets ranging from $20 to $27, suggesting potential upside. The company’s shares have shown strong momentum, gaining 8.6% in the past week. The revision follows Hamilton’s earnings report, which revealed an operating EPS of $0.26, falling short of JMP’s $0.62 estimate and the consensus of $0.56. The earnings miss was mainly attributed to several factors, including higher non-controlling interest expenses of $40 million compared to the expected nil, an expense ratio of 35% versus the estimated 33%, and corporate expenses reaching $19 million against the $15 million forecast.

Despite these setbacks, there were some positive aspects in the report. The ex-catastrophe accident year loss ratio was better than anticipated at 51%, compared to the 52% estimate. InvestingPro analysis reveals the company maintains excellent financial health with a "GREAT" overall score, supported by strong profitability metrics and a solid current ratio of 2.36x, indicating robust liquidity management. Get access to 6 more exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report. The company also reported favorable prior period development (PPD (NASDAQ:PPD)) of $6.2 million, against no expectation, and slightly lower catastrophe losses of $49 million, compared to the estimated $51 million. Net investment income (NII) matched expectations, but its composition was affected by a strong performance from Two Sigma and weaker fixed income (FI) results due to negative mark-to-market adjustments from rising interest rates. After accounting for all fees, the Two Sigma Fund delivered a robust 16% return for the fiscal year 2024.

Moreover, Hamilton’s gross written premiums saw a significant increase of 25% for the quarter, surpassing JMP’s forecast of 19%. This growth contributes to the company’s impressive 47.9% year-over-year revenue growth, as reported in InvestingPro’s latest financial metrics. Based on InvestingPro’s Fair Value analysis, the stock is currently trading near its fair value, suggesting balanced market pricing. The growth was particularly strong in the International segment, which grew by 28% versus the 15% anticipated, and the Bermuda/Reinsurance segment continued its robust performance with a 21% increase. The company’s book value was reported at $22.95 as of December 31, closely aligning with JMP’s estimate of $23.02 and marking a 1% sequential increase from September 30.

During the earnings call held on Friday morning, Hamilton’s management provided an initial estimate for the first-quarter losses due to the LA wildfires, projecting a net impact of $120 million to $150 million. JMP Securities views this estimation as a very favorable outcome for the insurer.

In other recent news, Hamilton Insurance Group reported its Q4 2024 earnings, revealing a notable shortfall in expected earnings per share (EPS) with an actual EPS of $0.32, significantly missing the forecasted $0.71. Despite this, the company’s revenue reached $543.94 million, far exceeding the forecast of $25.1 million, and full-year net income rose by 55% year-over-year. The company also achieved record underwriting income of $149 million and a return on average equity of 18.3%, up from 13.9% in 2023. Hamilton Insurance’s gross premiums written increased by 24% year-over-year to $2.4 billion, demonstrating robust growth in its insurance and reinsurance segments. The company continues to focus on expanding its specialty insurance lines and expects stable mid-year renewals. Analysts inquired about the company’s exposure to California wildfire losses, estimated at $120-150 million, which could impact future earnings. Hamilton confirmed comfortable reserve levels and highlighted favorable reserve development. Additionally, Hamilton Insurance has $122 million allocated for further share repurchases, reflecting its strategic capital management initiatives.

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