Bermuda domiciled re/insurance company Watford Holdings has posted a net income of $78.1 million for the third quarter of Q3, as strong investment returns offset an underwriting loss.
Watford’s net investment income for Q3 2020 was $92.8 million, a significant improvement on the $14.0 million that it posted for the same period last year.
This more than made up for an overall underwriting loss of $8.2 million across the company, following on from an underwriting loss of $5.0 million last year.
The weak underwriting performance was reflected in a combined ratio of 105.6%, comprised of a 79.3% loss ratio, a 21.3% acquisition expense ratio and a 5.0% general and administrative expense ratio.
Last year, Watford recorded a combined ratio of 104.0%, made up of a 76.5% loss ratio, a 21.9% acquisition expense ratio and a 5.6% general and administrative expense ratio.
Watford has been making headlines recently after insurers Enstar and Arch have been competing to acquire the company.
In recent developments, Enstar upped its bid to $686 million and threatened legal action against Arch, in what could be considered a “Superior Proposal” under Watford’s agreement.
Watford recorded a slight decrease in net premiums written over Q3, which totaled $147.3 million this year, down from $155.8 previously.
Line by line, Watford saw casualty reinsurance premiums decrease from $92.1 million to $63.2 million, while other specialty reinsurance premiums increased from $22.1 million to $30.2 million.
Likewise, property catastrophe reinsurance premiums rose from $3.0 million to $4.7 million and insurance programs and coinsurance premiums moved from $38.5 million to $49.2 million.
“Watford continues to demonstrate our durability in the current economic environment, and we delivered strong financial results for the quarter,” said Watford CEO Jon Levy.
“We are pleased to report that our net investment income is positive for the year, reversing the deficit driven by March’s COVID-19 market turmoil. The recovery over the last two quarters demonstrates the resilience of our strategy. This was achieved as we simultaneously upgraded the asset quality and made significant withdrawals from our non-investment grade portfolio.”
Levy continued: “Our combined ratio for the quarter was 105.6%, and 103.5% when adjusted for other underwriting income and certain corporate expenses. This was an active property catastrophe quarter for the industry, and our current year property catastrophe losses added $6.4 million or 4.4 points to our quarterly combined ratio.”
“Market conditions improved further in the quarter, with rates moving positively particularly in our insurance platforms.”
