Bermuda domiciled re/insurance company Watford Holdings has posted a net income of $188.8 million for the second quarter of 2020, compared with just $13.8 million for the same period last year.
The improvement owes mostly to the company’s net investment income, which rose to $199.5 million, up from $23.8 million in Q2 2019, despite market disruption due to the COVID-19 pandemic.
In contrast, Watford’s combined ratio deteriorated to 108.0%, comprised of a 79.7% loss ratio, a 22.4% acquisition expense ratio and a 5.9% general and administrative expense ratio.
This compares with a combined ratio of 103.5% for the prior year second quarter, comprised of a 73.6% loss ratio, a 23.4% acquisition expense ratio and a 6.5% general and administrative expense ratio.
The increase in loss ratio was primarily driven by COVID-19 related losses of $5.2 million, or 4.0 points, which mainly impacted property catastrophe reinsurance business
Watford noted that at this time there continues to be significant uncertainties surrounding the ultimate number of insurance claims and scope of damage resulting from the pandemic.
“The COVID-19 global pandemic has created significant uncertainty for the property and casualty industry, though we believe our mix of business is less exposed to classes likely to be materially affected,” said Jon Levy, CEO of Watford.
“Despite the backdrop of significant turmoil created by the pandemic, Watford demonstrated its resilience and delivered a strong financial performance,” he added.
Watford recognized a COVID-19 loss provision of $5.2 million, or 4.0 loss ratio points, for the second quarter, almost exclusively arising from business interruption coverage in our property catastrophe reinsurance line of business.
Gross and net premiums written in the 2020 second quarter were 2.5% and 11.3% lower, respectively, than the 2019 second quarter.
This reflected a decrease in casualty reinsurance and other specialty reinsurance premiums written, offset in part by an increase in insurance programs and coinsurance and property catastrophe reinsurance in the 2020 second quarter.
In addition, a higher portion of insurance programs and coinsurance premiums written were ceded in the 2020 second quarter compared to the 2019 second quarter.