AM Best Affirms Credit Ratings of Watford Re Ltd. and Its Subsidiaries
OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
“a-” of Watford Re Ltd. (Bermuda) and its subsidiaries, Watford
Insurance Company Europe Limited (Gibraltar), Watford Insurance Company
(Morristown, NJ), and Watford Specialty Insurance Company (Morristown,
NJ). In addition, AM Best has affirmed the Long-Term ICR of “bbb-” and
the Long-Term Issue Credit Rating of “bb” on the $225 million 8.5%
cumulative preference shares of Watford Holdings Ltd. (Watford)
(Bermuda), the group’s ultimate holding company. The outlook of these
Credit Ratings (ratings) is stable.
The ratings reflect Watford’s balance sheet strength, which AM Best
categorizes as strong, as well as its adequate operating performance,
neutral business profile and appropriate enterprise risk management
(ERM).
Watford’s risk-adjusted capitalization, as measured by Best’s Capital
Adequacy Ratio (BCAR), is categorized as very strong, and AM Best
expects it to remain at a similar level in prospective years. The
company maintains a good liquidity profile, with fixed-income securities
and cash covering its net loss reserves as of year-end 2018, and
efficiently deploys operating leverage to secure transactions with
counterparties. Watford implements an alternative asset strategy through
a contractual agreement with HPS Investment Partners, LLC., a New
York-based, SEC-registered investment adviser.
The company has managed to achieve a modest level of profitability over
the past five years (2014-2018), with negative underwriting results
being offset by strong investment earnings. Going forward, AM Best
expects the company’s underwriting performance to improve and be more in
line with the industry average.
Watford has developed a global reinsurance and insurance platform, with
operations in Bermuda, the United States and Europe. Business is sourced
and underwritten through a contractual relation with Arch Capital Group
Ltd., which also provides the core functions to the company’s
underwriting operations. The majority of premium is written directly on
Watford paper, and the balance through quota share reinsurance of Arch
business. The book of business is focused on lower-volatility, medium-to
long-tail lines of business, with minimum exposure to property
catastrophe risks. ERM is considered appropriate relative to the
company’s risk profile.
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and AM Best press releases, please view Guide
for Media – Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Steve Chirico
Director
+1 908 439 2200, ext.
5087
steven.chirico@ambest.com
Robert DeRose
Senior Director
+1 908 439
2200, ext. 5453
robert.derose@ambest.com
Christopher Sharkey
Manager, Public Relations
+1
908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy
Director, Public Relations
+1 908
439 2200, ext. 5644
james.peavy@ambest.com