Watford Holdings has reported a net loss of $267.8 million for the first-quarter of 2020, driven by a net investment loss of $262.7 million, mostly the result of $285.5 million of unrealised mark-to-market losses in its non-investment grade fixed-income portfolio.
Watford’s substantial $267.8 million net loss for the first-quarter of 2020 compares with net income of $47.6 million a year earlier, as the firm’s investments took a hit from COVID-19-induced equity market declines and financial market volatility.
Looking at premiums, and Watford’s gross written premiums increased by almost 26% to $234.9 million, and net premiums written jumped by 28.4% to $186.7 million. Net premiums earned declined by more than 4% to $140 million in Q1 2020.
The company’s underwriting performance deteriorated further year-on-year, coming in at a loss of $6.1 million against an underwriting loss of $5.97 million in Q1 2019.
The combined ratio deteriorated slightly in the quarter to 104.4% against 104.1% a year earlier, and is comprised of a 79% loss ratio, a 20.3% acquisition expense ratio, and a 5.1% general & administrative expense ratio.
Watford explains that in the quarter, the increase in loss ratio and corresponding decrease in acquisition expense ratio were driven by losses incurred related to COVID-19 and impacted both other specialty and reinsurance business.
Discussing COVID-19, Watford says that while the pandemic is driving significant uncertainty for the property and casualty re/insurance sector, the impact on its Q1 underwriting performance was immaterial, owing to the fact its mix of business is less exposed to the classes of business likely to be the most affected by the crisis.
Jon Levy, Chief Executive Officer (CEO) of Watford, commented: “First of all, we would like to acknowledge the challenging times that the COVID-19 pandemic has created, and express how grateful we are to those on the frontlines serving their communities. Watford is also committed to supporting our customers and clients through this stressful period. I would like to thank the broader Watford team for their efforts to deliver the same level of excellence in operations under these extraordinarily difficult circumstances.
“Insurance and reinsurance market conditions continue to move in a favorable direction and we remain optimistic about our positioning in the marketplace.”
Ahead of its Q1 results announcement, Watford warned of an expected significant hit to its investment performance as a result of COVID-19. As a result of this, the company and its subsidiaries have had their ratings placed under review with negative implications by A.M. Best.
