Hamilton’s third-party capital platform Ada Capital generating performance fees

Hamilton, the Bermuda based insurance and reinsurance holding company, has been generating a helpful addition to its earnings from performance fees earned by its Ada Capital Management third-party capital platform and its Ada Re collateralized reinsurance and retrocession underwriting vehicle, in recent quarters.

Hamilton launched Ada Capital Management Limited in 2020 as a largely retro focused collateralized underwriting agent and manager.

Ada Re Ltd., a registered Bermuda special purpose insurer (SPI), is the underwriting vehicle used.

The Ada Capital platform is the key third-party capital management and ILS franchise play for Hamilton, as it works with institutional investors to share in the performance of some of the business the group underwrites.

The Ada Capital platform has been steadily building over recent years, we understand and as of the reporting of its last annual results, Hamilton Group started to disclose some of the inputs to its earning from the Ada third-party capital management business.

For full-year 2023, Hamilton reported that its third party fee income within its Bermuda business segment grew to almost $8.55 million for the period, up from just $0.2 million in 2022.

Hamilton attributed this increase as “primarily driven by certain performance based management fees recognized by Ada Capital Management Limited for services provided to Ada Re, Ltd.”

In 2024, the increased run-rate of performance fees from the Ada Capital and Ada Re platform appears to have continued.

For Q1 2024, Hamilton’s Bermuda unit reported nearly $3.9 million in third-party fee income, again primarily driven by Ada Capital performance fee income and up from just $0.1 million a year earlier.

In Q2 2024, the latest quarter reported for, Hamilton said the Bermuda unit third party fee income reached $2.2 million, up from less than $0.1 million in the prior year period.

Again, the performance based fee income earned by Ada Capital from Ada Re is the attributed reason for the increase.

The performance management fees earned by Ada Capital are also cited as one of the drivers of an improvement to Hamilton’s other underwriting expense ratio, which has fallen year-on-year.

For H1 2024, Hamilton reports that its other underwriting expense ratio fell to 5.3% from 8.2%, which it says was “as a result of the growth in premium base and certain performance based management fees recognized by Ada Capital Management Limited in the current period for services provided to Ada Re, Ltd.”

As Hamilton reported relatively low fee income from its Bermuda unit up to the final quarter of 2023, it seems the performance fees from Ada Capital may have begun to flow then.

That flow has continued into 2024 and while still relatively small so far, it’s a strong signal for the fact the Ada Capital strategy has been performing well and that should help Hamilton in attracting more investor capital to grow this over time.