Reinsurance News

Watford’s underwriting loss narrows, as investments drive profit

10th February 2021 - Author: Matt Sheehan

Bermuda domiciled re/insurance company Watford Holdings has reported net income of $61.4 million for the fourth quarter of 2020, compared with a net loss of $16.9 million for the same period in the previous year.

watford-holdings-logoThis was despite recording an underwriting loss of $9.1 million for the period, which was nevertheless a significant improvement on an underwriting loss of $37.8 million for Q4 2019.

Accordingly, the combined ratio improved by 22.0 points from 128.3% but remained at an undesirable level of 106.3%.

Instead, results were lifted by investment income, which stood at $84.4 million over Q4, versus $34.1 million for last quarter of 2019.

The investment return was driven by net unrealized gains of $60.2 million and net realized gains of $9.8 million, as the non-investment grade credit spreads continued to tighten through the quarter.

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But net interest income decreased to $24.6 million from $29.8 million, a decrease of 17.4% compared to the prior year quarter.

Looking at the full year, Watford reported net income of $64.9 million, up slightly from $62.5 million in 2019.

The underwriting loss for the year similarly improved from $54.1 million to $34.0 million, and the combined ratio moved from 109.7% to 106.1%. However, investment income decreased modestly from $128.3 million to $114.0 million.

“Watford’s fourth quarter results continue to demonstrate the durability in our business model with another strong financial performance. Our net income for the quarter was $61.4 million, a 6.8% return on average equity for the quarter,” said Jon Levy, CEO of Watford.

“We are also pleased to report solid book value growth in 2020. Our ultimate objective is to grow book value per share over time, and despite a tumultuous and challenging environment for underwriting and investments, we have grown our book value per diluted common share by 8.3% in the year,” Levy continued.

“The quarter’s results were driven by strong investment income, which totaled $84.4 million for the last three months of the year. This was achieved while we simultaneously decreased our total invested assets in our non-investment grade portfolio, continuing our efforts to reduce our capital’s exposure to mark-to-market volatility.”

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