Bermuda domiciled insurance and reinsurance company, Watford Holdings Ltd. has announced net income of $0.2 million and a combined ratio of 104% for the third-quarter of 2019.
The re/insurer’s Q3 result was adversely impacted by charges totalling $5.5 million for accelerated amortization and other one-time payments related to the redemption of preference shares. The impact contributed to a decline in net income from $18.8 million in Q3 2018 to $0.2 million this year.
The 104% combined ratio weakened from the 100.7% recorded in the prior year quarter, and in Q3 2019 included a 76.5% loss ratio, a 21.9% acquisition expense ratio, and a 5.6% general and administrative expense ratio.
Watford states that it’s pleased with its underwriting performance in the quarter in light of the impacts of catastrophe events in the period, most notably Hurricane Dorian and Typhoon Faxai. The firm has recorded an underwriting loss of $5 million in Q3 2019 and $16.3 million for the first nine months of the year.
Commenting on the firm’s third-quarter results, Chief Executive Officer (CEO), John Rathgeber said: “Our results for the 2019 third quarter, while essentially break even from a net income standpoint, contained many positives and are stronger than a cursory reading of our financials might first reveal.
“Due to the refinancing of a sizable portion of our preference shares, this quarter’s results were impacted by charges totaling $5.5 million for accelerated amortization and other one-time payments related to the redemption.
“The third quarter results were also impacted by approximately $15 million of net unrealized investment losses in the quarter, which was largely in line with the slight spread widening experienced by the high yield market overall…
“Insurance and reinsurance market conditions in most lines of business continue to trend more favorably than we have seen in several years, which we believe should translate into even stronger underwriting results in future quarters.
“We were also pleased to implement, in connection with our previously announced share repurchase program, a Rule 10b5-1 share repurchase plan, which took effect on September 30, 2019. As the plan incepted at the end of the third quarter, and there is a short settlement lag following trades, the reduction in share count will not be reflected in our financial results until the fourth quarter.
“Through nine months, our total book value has increased 8.0% from year-end 2018 and we remain optimistic about continued strong book value growth.”
In the quarter, Watford recorded an increase in gross written premiums of 35.1% and also a 2.7% rise in net premiums written. However, net premiums earned declined in the quarter by 7.2% year-on-year, to $125.8 million.
Net investment income also declined in the third-quarter of 2019 when compared with the previous year, from $21.4 million to $14 million.
