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Arch Capital eyeing $500m acquisition of Watford Holdings: reports

9th September 2020 - Author: Charlie Wood

A consortium led by Bermuda-based re/insurer Arch Capital Group has put forward a $500 million offer to buy Watford Holdings, according to reports from Reuters.

ArchAfter pre-warning of sizeable investment losses as a result of COVID-19-induced financial market volatility, Watford this year announced a first quarter loss of almost $267 million.

As well as the investment hit, the Bermuda-domiciled reinsurer also suffered another underwriting loss, with performance on this side of the balance sheet deteriorating year-on-year.

Calls for Watford to be sold soon followed, with a letter from the principal of investment firm Capital Returns Management, Ronald Bobman, stating that the reinsurer had “fallen horribly short of expectations” since its establishment in 2014.

With a 12.6% stake, Arch Capital is Watford’s largest shareholder and has reportedly partnered with private equity firms to offer around $26 a share for Watford. Its shares ended trading in New York on Tuesday at $17.87.

Reuters notes that Watford has turned to Morgan Stanley to review the offer and decide on its course of action.

Concurrently, sources have stressed that no deal is certain and asked not to be identified due to the matter’s confidential nature.

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