Global financial services ratings agency A.M. Best has placed the credit ratings of Watford Re Ltd. and its subsidiaries under review with negative implications, after the company announced that its Q1 2020 results will include a net investment loss of $300 million as a result of COVID-19 impacts on financial markets.
Specifically, A.M. Best has placed under review with negative implications the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Watford Re (Bermuda) and its subsidiaries, Watford Insurance Company Europe Limited (Gibraltar), Watford Insurance Company (New Jersey), and Watford Specialty Insurance Company (New Jersey).
Additionally, the ratings agency has placed under review with negative implications the Long-Term ICR of “bbb-” and the Long-Term Issue Credit Rating of “bb” on the $225 million ($52 million outstanding) 8.5% cumulative preference shares of Watford Holdings Ltd., the group’s ultimate holding company.
Watford Holdings announced recently that its first-quarter 2020 results would include a large investment loss as a result of the financial market turmoil being caused by the ongoing COVID-19 pandemic.
A.M. Best says that this is the reason for its recent rating actions, adding that it expects to resolve the under review with negative implications status once the company’s risk-adjusted capitalisation is restored back to its prior level.
“AM Best will evaluate on an ongoing basis Watford’s risk-adjusted capitalization and invested asset valuations as updated information becomes available,” says the ratings agency.
In addition, A.M. Best wars that further rating action could be taken if it’s perceived that Watford’s financial strength has deteriorated further, or it has not stabilised in a reasonable amount of time.