Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 29, 2019
 
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Watford Holdings Ltd.
(Exact Name of Registrant as Specified in its Charter)
Bermuda
(State or other jurisdiction
of incorporation or organization)
001-38788
(Commission File No.)
98-1155442
(I.R.S. Employer Identification Number)
Waterloo House, 1st Floor
100 Pitts Bay Road, Pembroke HM 08, Bermuda
(Address of principal executive offices)

(441) 278-3455
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-(4)(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Shares
 
WTRE
 
Nasdaq Global Select Market
8½% Cumulative Redeemable Preference Shares
 
WTREP
 
Nasdaq Global Select Market















Item 2.02        Results of Operations and Financial Condition

On October 29, 2019, Watford Holdings Ltd. issued a press release reporting its earnings for the quarter ended September 30, 2019. The press release is attached hereto as Exhibit 99.1.

The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01        Financial Statements and Exhibits

(d): The following exhibit is being filed herewith.

99.1        Press release dated October 29, 2019

Exhibit
Number
 
Description of Document
99.1
 

2




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 29, 2019

 
WATFORD HOLDINGS LTD.
 
 
By:
/s/ Robert L. Hawley
 
Robert L. Hawley, Chief Financial Officer


3
Exhibit


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WATFORD REPORTS 2019 THIRD QUARTER RESULTS
PEMBROKE, Bermuda, October 29, 2019 -- (GLOBE NEWSWIRE)-- WATFORD HOLDINGS LTD. (“Watford” or the “Company”) (NASDAQ: WTRE) today reported net income of $0.2 million, after $2.6 million of preference dividends and $4.2 million of accelerated amortization costs related to the redemption of preference shares, for the three months ended September 30, 2019, compared to net income of $18.8 million, after payment of $4.9 million of preference dividends, in the same period in 2018. The results included:
Net income available to common shareholders of $0.2 million, or $0.01 per diluted common share, compared to net income of $18.8 million, or $0.83 per diluted common share for the 2018 third quarter;
Book value per diluted common share of $42.05 at September 30, 2019;
Combined ratio of 104.0%, comprised of a 76.5% loss ratio, a 21.9% acquisition expense ratio and a 5.6% general and administrative expense ratio, compared to a combined ratio of 100.7% for the prior year third quarter, comprised of a 71.5% loss ratio, a 24.9% acquisition expense ratio and a 4.3% general and administrative expense ratio;
Net interest income of $29.5 million, a 1.4% yield on average net assets for the 2019 third quarter, compared to net interest income of $27.4 million and a 1.3% yield on average net assets for the 2018 third quarter;
Net investment income of $14.0 million, a 0.6% return on average net assets for the 2019 third quarter, compared to net investment income of $21.4 million and a 1.1% return on average net assets for the 2018 third quarter.
On July 2, 2019, the Company completed an offering of $175.0 million of 6.5% senior notes, with a maturity date of July 2, 2029. The net proceeds from the offering were used to redeem 76.34% of the Company’s 8½% cumulative redeemable preference shares. In addition to the accelerated amortization noted above, the redeemed preference shares were paid dividends totaling $1.3 million.
Commenting on the 2019 third quarter financial results, John Rathgeber, CEO of Watford, 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.

Net interest income, at $29.5 million, was up approximately 8% from the 2018 third quarter despite the more recent declining interest rate environment.


Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-1-



The combined ratio was 104.0% and, when adjusted for certain corporate expenses and other underwriting income, the adjusted combined ratio was 101.8%. Given our mix of business and the sizable industry catastrophe events during the quarter, most notably Hurricane Dorian and Typhoon Faxai, we are pleased with the third quarter underwriting results. Our loss reserves for prior accident years continued to hold up well, with slight net favorable development in the quarter.

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.”

Underwriting
The following table summarizes the Company’s underwriting results on a consolidated basis:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
($ in thousands)
Gross premiums written
$
249,960

 
$
185,033

 
35.1
 %
 
$
598,627

 
$
574,078

 
4.3
 %
Net premiums written
155,752

 
151,677

 
2.7
 %
 
420,509

 
471,815

 
(10.9
)%
Net premiums earned
125,832

 
135,624

 
(7.2
)%
 
423,244

 
431,889

 
(2.0
)%
Underwriting income (loss) (1)
(5,021
)
 
(912
)
 
(450.5
)%
 
(16,257
)
 
(3,180
)
 
(411.2
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
% Point Change
 
 
 
 
 
% Point Change
Loss ratio
76.5
%
 
71.5
%
 
5.0
 %
 
75.2
%
 
72.3
%
 
2.9
 %
Acquisition expense ratio
21.9
%
 
24.9
%
 
(3.0
)%
 
22.9
%
 
24.7
%
 
(1.8
)%
General & administrative expense ratio
5.6
%
 
4.3
%
 
1.3
 %
 
5.7
%
 
3.8
%
 
1.9
 %
Combined ratio
104.0
%
 
100.7
%
 
3.3
 %
 
103.8
%
 
100.8
%
 
3.0
 %
Adjusted combined ratio (2)
101.8
%
 
99.5
%
 
2.3
 %
 
101.3
%
 
99.5
%
 
1.8
 %
(1) Underwriting income (loss) is a non-U.S. GAAP financial measure and is calculated as net premiums earned, less loss and loss adjustment expenses, acquisition expenses and general and administrative expenses. See “Comments on Regulation G” for further discussion, including a reconciliation of underwriting income (loss) to net income (loss) available to common shareholders.
(2) Adjusted combined ratio is a non-U.S. GAAP financial measure and is calculated by dividing the sum of loss and loss adjustment expenses, acquisition expenses and general and administrative expenses, less certain corporate expenses, by the sum of net premiums earned and other underwriting income (loss). See “Comments on Regulation G” for further discussion, including a reconciliation of our adjusted combined ratio to our combined ratio.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-2-



The following table shows the components of our loss and loss adjustment expenses for the three and nine months ended September 30, 2019 and 2018:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
Loss and Loss Adjustment Expenses
 
% of Earned Premiums
 
Loss and Loss Adjustment Expenses
 
% of Earned Premiums
 
Loss and Loss Adjustment Expenses
 
% of Earned Premiums
 
Loss and Loss Adjustment Expenses
 
% of Earned Premiums
 
($ in thousands)
Current year
$
96,417

 
76.6
 %
 
$
99,215

 
73.2
 %
 
$
318,812

 
75.3
 %
 
$
314,381

 
72.8
 %
Prior year development (favorable)/adverse
(203
)
 
(0.1
)%
 
(2,258
)
 
(1.7
)%
 
(332
)
 
(0.1
)%
 
(2,294
)
 
(0.5
)%
Loss and loss adjustment expenses
$
96,214

 
76.5
 %
 
$
96,957

 
71.5
 %
 
$
318,480

 
75.2
 %
 
$
312,087

 
72.3
 %
The following table provides summary information regarding premiums written and earned by line of business:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
($ in thousands)
Gross premiums written:
 
 
 
 
 
 
 
Casualty reinsurance
$
145,129

 
$
80,274

 
$
253,287

 
$
222,636

Other specialty reinsurance
22,453

 
37,434

 
84,587

 
151,083

Property catastrophe reinsurance
3,461

 
1,353

 
15,382

 
8,740

Insurance programs and coinsurance
78,917

 
65,972

 
245,371

 
191,619

Total
$
249,960

 
$
185,033

 
$
598,627

 
$
574,078

 
 
 
 
 
 
 
 
Net premiums written:
 
 
 
 
 
 
 
Casualty reinsurance
$
92,084

 
$
80,149

 
$
199,226

 
$
221,669

Other specialty reinsurance
22,093

 
35,466

 
81,798

 
138,259

Property catastrophe reinsurance
3,040

 
1,342

 
14,643

 
8,515

Insurance programs and coinsurance
38,535

 
34,720

 
124,842

 
103,372

Total
$
155,752

 
$
151,677

 
$
420,509

 
$
471,815

 
 
 
 
 
 
 
 
Net premiums earned:
 
 
 
 
 
 
 
Casualty reinsurance
$
52,266

 
$
63,292

 
$
183,085

 
$
206,532

Other specialty reinsurance
31,563

 
36,987

 
118,759

 
125,271

Property catastrophe reinsurance
3,617

 
2,481

 
9,707

 
7,443

Insurance programs and coinsurance
38,386

 
32,864

 
111,693

 
92,643

Total
$
125,832

 
$
135,624

 
$
423,244

 
$
431,889

Results for the three months ended September 30, 2019 versus 2018:
Gross and net premiums written in the 2019 third quarter were 35.1% and 2.7% higher, respectively, than the 2018 third quarter. The increase in premiums reflected a higher level of new and renewal business bound in casualty reinsurance and insurance programs and coinsurance. This increase was offset in part by a reduction in other specialty reinsurance premiums in the 2019 third quarter.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-3-



Net premiums earned in the 2019 third quarter were 7.2% lower than the 2018 third quarter. The decrease in premiums reflected prior period reduced participations in casualty reinsurance and other specialty reinsurance, offset in part by increased writings in insurance programs and coinsurance.
The loss ratio was 76.5% in the 2019 third quarter compared to 71.5% in the 2018 third quarter. The increase in the loss ratio largely reflects changes in the mix and type of business. In addition, the prior period loss ratio benefited from 1.7 points of net favorable loss reserve development while loss reserve development this quarter was essentially flat.
The acquisition expense ratio was 21.9% in the 2019 third quarter, compared to 24.9% in the 2018 third quarter, reflecting changes in the mix and type of business.
The general and administrative expense ratio was 5.6% in the 2019 third quarter, compared to 6.5% in the 2019 second quarter and 4.3% in the 2018 third quarter. The 0.9 point decrease this quarter versus the 2019 second quarter reflected the timing of certain long-term incentive compensation expenses, including a one-time accelerated expense equating to approximately 1.0% of earned premium in the 2019 second quarter. The 1.3 point increase versus the prior year third quarter was attributable to ongoing public company expenses. Removing certain corporate expenses, our adjusted general and administrative expense ratio was 3.9% in the 2019 third quarter compared to 3.3% in the 2019 second quarter.




















Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-4-



Investments
The following table summarizes the Company’s key investment returns on a consolidated basis:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
($ in thousands)
Interest income
$
41,376

 
$
38,704

 
$
123,113

 
$
109,830

Investment management fees - related parties
(4,606
)
 
(4,314
)
 
(13,585
)
 
(12,616
)
Borrowing and miscellaneous other investment expenses
(7,234
)
 
(6,993
)
 
(23,143
)
 
(19,636
)
Net interest income
29,536

 
27,397

 
86,385

 
77,578

Realized gains (losses) on investments
645

 
4,004

 
2,716

 
(9,387
)
Unrealized gains (losses) on investments
(15,291
)
 
(7,621
)
 
15,422

 
(6,850
)
Investment performance fees - related parties
(850
)
 
(2,407
)
 
(8,342
)
 
(6,606
)
Net investment income (loss)
$
14,040

 
$
21,373

 
$
96,181

 
$
54,735

 
 
 
 
 
 
 
 
Unrealized gains on investments (balance sheet)
$
46,193

 
$
49,325

 
$
46,193

 
$
49,325

Unrealized losses on investments (balance sheet)
(140,987
)
 
(64,841
)
 
(140,987
)
 
(64,841
)
Net unrealized gains (losses) on investments (balance sheet)
$
(94,794
)
 
$
(15,516
)
 
$
(94,794
)
 
$
(15,516
)
 
 
 
 
 
 
 
 
Net interest income yield on average net assets (1)
1.4
%
 
1.3
%
 
4.1
%
 
3.9
%
Non-investment grade portfolio (1)
1.7
%
 
1.7
%
 
5.2
%
 
5.1
%
Investment grade portfolio (1)
0.6
%
 
0.5
%
 
1.8
%
 
1.4
%
Net investment income return on average net assets (1)
0.6
%
 
1.1
%
 
4.5
%
 
2.8
%
Non-investment grade portfolio (1)
0.6
%
 
1.4
%
 
5.1
%
 
4.2
%
Investment grade portfolio (1)
0.8
%
 
0.4
%
 
2.9
%
 
0.1
%
 
 
 
 
 
 
 
 
Net investment income return on average total investments (2)
0.5
%
 
0.8
%
 
3.5
%
 
2.1
%
Non-investment grade portfolio (2)
0.5
%
 
1.1
%
 
4.3
%
 
3.4
%
Investment grade portfolio (2)
0.8
%
 
0.4
%
 
2.9
%
 
0.1
%
(1) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. Net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. For the three- and nine-month period, average net assets is calculated using the averages of each quarterly period. However, for the investment grade portfolio component of these returns, revolving credit agreement borrowings are not subtracted from the net assets calculation. The separate components of these returns (non-investment grade portfolio and investment grade portfolio) are non-U.S. GAAP financial measures. See “Comments on Regulation G” for further discussion, including a reconciliation of these components of our net interest income yield on average net assets and net investment income return on average net assets.
(2) Net investment income return on average total investments is calculated by dividing net investment income by average total investments. For the three- and nine-month period, average total investments is calculated using the averages of each quarterly period. The separate components of these returns (non-investment grade portfolio and investment grade portfolio) are non-U.S. GAAP financial measures. See “Comments on Regulation G” for further discussion, including a reconciliation of these components of our net investment income return on average total investments.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-5-



The following chart shows the composition of our non-investment grade and investment grade portfolios as of September 30, 2019:
 
As of September 30, 2019
 
Non-Investment Grade
 
($ in millions)
Total non-investment grade investments
$
1,876.3

 
 
Portfolio allocation by asset class:
 
Term loans
55.4
%
Corporate bonds
14.8
%
Asset-backed securities
10.4
%
Short-term investments
11.9
%
Equities
5.4
%
Other investments
1.6
%
Mortgage-backed securities
0.5
%
Total
100.0
%
 
As of September 30, 2019
 
Investment Grade
 
($ in millions)
Total investment grade investments
$
893.5

 
 
Portfolio allocation by asset class:
 
U.S. government and government agency bonds
33.5
%
Corporate bonds
17.4
%
Asset-backed securities
16.1
%
Non-U.S. government and government agency bonds
15.2
%
Short-term investments
15.1
%
Mortgage-backed securities
2.5
%
Municipal government and government agency bonds
0.2
%
Total
100.0
%










Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-6-



Corporate Function
The Company has a corporate function that includes general and administrative expenses related to corporate activities, interest expense, net foreign exchange gains (losses), income tax expense and items related to the Company’s contingently redeemable preference shares.
The Company incurred an interest expense of $2.8 million for the three and nine months ended September 30, 2019, in relation to the 6.5% senior notes issued on July 2, 2019. Interest will be paid semi-annually in arrears on January 2 and July 2, commencing January 2, 2020.
There were net foreign exchange gains for the 2019 third quarter of $0.2 million, compared to net foreign exchange gains for the 2018 third quarter of $2.6 million. There were net foreign exchange losses for the nine months ended September 30, 2019 of $0.7 million, compared to a net foreign exchange gains for the nine months ended September 30, 2018 of $1.8 million.
Preference dividends for the 2019 third quarter were $2.6 million, inclusive of the final $1.3 million paid on the shares that were redeemed, compared to $4.9 million for the 2018 third quarter. Preference dividends for the nine months ended September 30, 2019 were $12.4 million, compared to $14.7 million for the nine months ended September 30, 2018.
During the 2019 third quarter, the Company incurred an expense of $4.2 million related to the accelerated amortization of issuance and discount costs on the preference shares redeemed on August 1, 2019.
The dividend rate on the remaining 2,145,202 preference shares will be adjusted quarterly to a rate equal to the 3-month USD LIBOR on the first calendar day of the quarter (or the next business day, if such first day is not a business day) plus a margin of 6.678%.
Conference Call
The Company will hold a conference call on Wednesday, October 30, 2019 at 1:00 p.m. Eastern time to discuss its 2019 third quarter results. A live webcast of this call will be available via the Investors section of the Company’s website at http://investors.watfordre.com. A replay of the conference call will also be available via the Investors section of the Company’s website beginning on November 1st.
About Watford Holdings Ltd.
Watford Holdings Ltd. is a global property and casualty insurance and reinsurance company with approximately $1.2 billion in capital as of September 30, 2019, comprised of: $172.4 million of senior notes, $52.3 million of contingently redeemable preference shares and $960.8 million of common shareholders’ equity, with operations in Bermuda, the United States and Europe. Its operating subsidiaries have been assigned financial strength ratings of “A-” (Excellent) from A.M. Best and “A” from Kroll Bond Rating Agency.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-7-



CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(Unaudited)
 
 
 
September 30,
 
December 31,
 
2019
 
2018
Assets
($ in thousands)
Investments:
 
 
 
Term loans, fair value option (Amortized cost: $1,109,393 and $1,055,664)
$
1,040,983

 
$
1,000,652

Fixed maturities, fair value option (Amortized cost: $583,530 and $972,653)
563,214

 
922,819

Short-term investments, fair value option (Cost: $359,837 and $281,959)
357,611

 
282,132

Equity securities, fair value option
56,905

 
56,638

Other investments, fair value option
29,583

 
49,762

Investments, fair value option
2,048,296

 
2,312,003

Fixed maturities, available for sale (Amortized cost: $675,542 and $397,509)
678,094

 
393,351

Equity securities, fair value through net income
43,488

 
33,013

Total investments
2,769,878

 
2,738,367

Cash and cash equivalents
80,390

 
63,529

Accrued investment income
18,277

 
19,461

Premiums receivable
302,265

 
227,301

Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
144,437

 
86,445

Prepaid reinsurance premiums
129,909

 
61,587

Deferred acquisition costs, net
67,241

 
80,858

Receivable for securities sold
25,283

 
24,507

Intangible assets
7,650

 
7,650

Funds held by reinsurers
51,134

 
44,830

Other assets
15,031

 
18,321

Total assets
$
3,611,495

 
$
3,372,856

Liabilities
 
 
 
Reserve for losses and loss adjustment expenses
$
1,164,945

 
$
1,032,760

Unearned premiums
454,148

 
390,114

Losses payable
63,731

 
24,750

Reinsurance balances payable
79,264

 
21,034

Payable for securities purchased
40,586

 
60,142

Payable for securities sold short
65,736

 
8,928

Revolving credit agreement borrowings
519,197

 
693,917

Senior notes
172,350

 

Amounts due to affiliates
4,700

 
5,888

Investment management and performance fees payable
13,647

 
3,807

Other liabilities
20,137

 
20,916

Total liabilities
$
2,598,441

 
$
2,262,256

Commitments and contingencies
 
 
 
Contingently redeemable preference shares
52,281

 
220,992

Shareholders’ equity

 
 
Common shares ($0.01 par; shares authorized: 120 million; shares issued and outstanding: 22,692,300 and 22,682,875)
227

 
227

Additional paid-in capital
897,900

 
895,386

Retained earnings (deficit)
60,334

 
(1,275
)
Accumulated other comprehensive income (loss)
2,312

 
(4,730
)
Total shareholders’ equity
960,773

 
889,608

Total liabilities, contingently redeemable preference shares and shareholders’ equity
$
3,611,495

 
$
3,372,856




Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-8-



CONSOLIDATED STATEMENT OF INCOME (LOSS) (UNAUDITED)
 
(Unaudited)
 
(Unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
Change QTR %
 
2019
 
2018
 
Change YTD %
Revenues
($ in thousands except share and per share data)
Gross premiums written
$
249,960

 
$
185,033

 
35
 %
 
$
598,627

 
$
574,078

 
4
 %
Gross premiums ceded
(94,208
)
 
(33,356
)
 
182
 %
 
(178,118
)
 
(102,263
)
 
74
 %
Net premiums written
155,752

 
151,677

 
3
 %
 
420,509

 
471,815

 
(11
)%
Change in unearned premiums
(29,920
)
 
(16,053
)
 
86
 %
 
2,735

 
(39,926
)
 
(107
)%
Net premiums earned
125,832

 
135,624

 
(7
)%
 
423,244

 
431,889

 
(2
)%
Other underwriting income (loss)
579

 
703

 
(18
)%
 
1,844

 
2,092

 
(12
)%
Interest income
41,376

 
38,704

 
7
 %
 
123,113

 
109,830

 
12
 %
Investment management fees - related parties
(4,606
)
 
(4,314
)
 
7
 %
 
(13,585
)
 
(12,616
)
 
8
 %
Borrowing and miscellaneous other investment expenses
(7,234
)
 
(6,993
)
 
3
 %
 
(23,143
)
 
(19,636
)
 
18
 %
Net interest income
29,536

 
27,397

 
8
 %
 
86,385

 
77,578

 
11
 %
Realized and unrealized gains (losses) on investments
(14,646
)
 
(3,617
)
 
305
 %
 
18,138

 
(16,237
)
 
(212
)%
Investment performance fees - related parties
(850
)
 
(2,407
)
 
(65
)%
 
(8,342
)
 
(6,606
)
 
26
 %
Net investment income (loss)
14,040

 
21,373

 
(34
)%
 
96,181

 
54,735

 
76
 %
Total revenues
140,451

 
157,700

 
(11
)%
 
521,269

 
488,716

 
7
 %
Expenses
 
 
 
 

 
 
 
 
 

Loss and loss adjustment expenses
(96,214
)
 
(96,957
)
 
(1
)%
 
(318,480
)
 
(312,087
)
 
2
 %
Acquisition expenses
(27,612
)
 
(33,778
)
 
(18
)%
 
(97,003
)
 
(106,708
)
 
(9
)%
General and administrative expenses
(7,027
)
 
(5,801
)
 
21
 %
 
(24,018
)
 
(16,274
)
 
48
 %
Interest expense
(2,841
)
 

 
100
 %
 
(2,841
)
 

 
100
 %
Net foreign exchange gains (losses)
167

 
2,582

 
(94
)%
 
(711
)
 
1,847

 
(138
)%
Total expenses
(133,527
)
 
(133,954
)
 
 %
 
(443,053
)
 
(433,222
)
 
2
 %
Income (loss) before income taxes
6,924

 
23,746

 
(71
)%
 
78,216

 
55,494

 
41
 %
Income tax expense

 

 
 %
 
(20
)
 
(27
)
 
(26
)%
Net income (loss) before preference dividends
6,924

 
23,746

 
(71
)%
 
78,196

 
55,467

 
41
 %
Preference dividends
(2,608
)
 
(4,909
)
 
(47
)%
 
(12,423
)
 
(14,724
)
 
(16
)%
Accelerated amortization of costs related to the redemption of preference shares
(4,164
)
 

 
100
 %
 
(4,164
)
 

 
100
 %
Net income (loss) available to common shareholders
$
152

 
$
18,837

 
(99
)%
 
$
61,609

 
$
40,743

 
51
 %
Earnings (loss) per share:
 
 
 
 

 
 
 
 
 

Basic
$
0.01

 
$
0.83

 
(99
)%
 
$
2.71

 
$
1.80

 
51
 %
Diluted
$
0.01

 
$
0.83

 
(99
)%
 
$
2.71

 
$
1.80

 
51
 %
Weighted average number of ordinary shares used in the determination of earnings (loss) per share:
 
 
 
 

 
 
 
 
 

Basic
22,765,802

 
22,682,875

 
 %
 
22,729,848

 
22,682,875

 
 %
Diluted
22,776,204

 
22,682,875

 
 %
 
22,734,464

 
22,682,875

 
 %


Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-9-



 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Numerator:
($ in thousands except share and per share data)
Net income (loss) before preference dividends
$
6,924

 
$
23,746

 
$
78,196

 
$
55,467

Preference dividends
(2,608
)
 
(4,909
)
 
(12,423
)
 
(14,724
)
Accelerated amortization of costs related to the redemption of preference shares
(4,164
)
 

 
(4,164
)
 

Net income (loss) available to common shareholders
$
152

 
$
18,837

 
$
61,609

 
$
40,743

Denominator:

 
 
 

 
 
Weighted average common shares outstanding - basic
22,765,802

 
22,682,875

 
22,729,848

 
22,682,875

Effect of dilutive common share equivalents:
 
 
 
 
 
 
 
Weighted average non-vested restricted share units (1)
10,402

 

 
4,616

 

Weighted average common shares outstanding - diluted
22,776,204

 
22,682,875

 
22,734,464

 
22,682,875

Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic
$0.01
 
$0.83
 
$2.71
 
$1.80
Diluted
$0.01
 
$0.83
 
$2.71
 
$1.80
(1) During the second quarter of 2019, the Company granted 165,287 restricted share units and common shares to certain employees and directors, 82,360 of which are non-vested as of September 30, 2019.
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
2019
 
2019
 
2019
 
2018
Numerator:
($ in thousands except share and per share data)
Total shareholders’ equity
$
960,773

 
$
961,296

 
$
941,891

 
$
889,608

Denominator:
 
 

 
 
 
 
Common shares outstanding - basic
22,765,802

 
22,765,802

 
22,682,875

 
22,682,875

Effect of dilutive common share equivalents:
 
 
 
 
 
 
 
Non-vested restricted share units (1)
82,360

 
82,360

 

 

Common shares outstanding - diluted
22,848,162

 
22,848,162

 
22,682,875

 
22,682,875

 
 
 
 
 
 
 
 
Book value per common share
$42.20
 
$42.23
 
$41.52
 
$39.22
Book value per diluted common share
$42.05
 
$42.07
 
$41.52
 
$39.22
(1) During the second quarter of 2019, the Company granted 165,287 restricted share units and common shares to certain employees and directors, 82,360 of which are non-vested as of September 30, 2019.
Comments on Regulation G
Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-GAAP financial measures in assessing the Company’s overall financial performance.
This presentation includes the use of “underwriting income (loss)” (which is defined as net premiums earned less loss and loss adjustment expenses, acquisition expenses and general and administrative expenses), “adjusted underwriting income (loss)” (which is defined as underwriting

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-10-



income (loss) plus other underwriting income (loss) less certain corporate expenses), and “adjusted combined ratio” (which is calculated by dividing the sum of loss and loss adjustment expenses, acquisition expenses and general and administrative expenses, less certain corporate expenses, by the sum of net premiums earned and other underwriting income (loss)). Certain corporate expenses are generally comprised of non-recurring costs of the holding company, such as costs associated with the initial setup of subsidiaries, as well as costs associated with the ongoing operations of the holding company such as compensation of certain executives.
The presentation of underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income (loss) available to common shareholders (the most directly comparable GAAP financial measure) in accordance with Regulation G is included on the following pages of this release.
Underwriting income (loss) is useful in evaluating our underwriting performance, without regard to other underwriting income (losses), net investment income (losses), net foreign exchange gains (losses), interest expense, income tax expenses and preference dividends, and adjusted underwriting income (loss) is useful in evaluating our underwriting performance, without regard to net investment income (losses), net foreign exchange gains (losses), interest expense, income tax expenses, preference dividends and certain corporate expenses, and the adjusted combined ratio is a key indicator of our profitability, without regard to certain corporate expenses.  The Company believes that preference dividends, income tax expense, foreign exchange gains (losses), interest expense, net investment income (loss), other underwriting income (loss) and certain corporate expenses in any particular period are not indicative of the performance of, or trends in, the Company’s underwriting performance. Although preference dividends, income tax expense, foreign exchange gains (losses), interest expense, net investment income (loss) and other underwriting income (loss) are an integral part of the Company’s operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, and the recognition of foreign exchange gains or losses are independent of the underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. The Company believes that certain corporate expenses, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance. Due to these reasons, the Company excludes preference dividends, income tax expense, foreign exchange gains (losses), interest expense, net investment income (loss), other underwriting income (loss) from the calculation of underwriting income (loss), and excludes preference dividends, income tax expense, foreign exchange gains (losses), interest expense, net investment income (loss) and certain corporate expenses from the calculation of adjusted underwriting income (loss) and the adjusted combined ratio.
The Company believes that showing underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio exclusive of the items referred to above reflects the underlying fundamentals of the Company’s business since the Company evaluates the performance of its business using underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio. The Company believes that this presentation enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Company’s financial information to compare the Company’s performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies, which follow the Company and the insurance industry as a whole generally exclude these items from their analysis for the same reasons.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-11-



This presentation also includes the non-investment grade portfolio and investment grade portfolio components of our investment returns: “net interest income yield on average net assets” (calculated as net interest income divided by average net assets), “net investment income return on average total investments” (calculated as net investment income divided by average total investments), and “net investment income return on average net assets” (calculated as net investment income divided by average net assets). Net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less revolving credit agreement borrowings, payable for securities purchased and payables for securities sold short. For the three and nine-month periods, average net assets is calculated using the averages of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss) or the net assets calculation.
The presentation of the separate components of our investment returns (non-investment grade portfolio and investment grade portfolio) are non-GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net interest income and net investment income (loss), the most directly comparable GAAP financial measures, in accordance with Regulation G is included on the following pages of this release.
The non-investment grade portfolio and investment grade portfolio components of our investment returns (net interest income yield on average net assets, net investment income return on average net assets and on average total investments, respectively) are useful in evaluating our investment performance. The non-investment grade portfolio components of these investment returns reflect the performance of our investment strategy under HPS Investment Partners, LLC (“HPS”), which includes the use of leverage. The investment grade portfolio component of these returns reflect the performance of the investment portfolios that predominantly support our underwriting collateral.
The following tables presents a reconciliation of underwriting income (loss) to net income (loss) available to common shareholders, and a reconciliation of adjusted underwriting income (loss) to underwriting income (loss):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
($ in thousands)
Net income (loss) available to common shareholders
$
152

 
$
18,837

 
$
61,609

 
$
40,743

Preference dividends
2,608

 
4,909

 
12,423

 
14,724

Accelerated amortization of costs related to the redemption of preference shares
4,164

 

 
4,164

 

Net income (loss) before dividends
6,924

 
23,746

 
78,196

 
55,467

Income tax expense

 

 
20

 
27

Interest expense
2,841

 

 
2,841

 

Net foreign exchange (gains) losses
(167
)
 
(2,582
)
 
711

 
(1,847
)
Net investment (income) loss
(14,040
)
 
(21,373
)
 
(96,181
)
 
(54,735
)
Other underwriting (income) loss
(579
)
 
(703
)
 
(1,844
)
 
(2,092
)
Underwriting income (loss)
(5,021
)
 
(912
)
 
(16,257
)
 
(3,180
)
Certain corporate expenses
2,172

 
947

 
8,930

 
3,100

Other underwriting income (loss)
579

 
703

 
1,844

 
2,092

Adjusted underwriting income (loss)
$
(2,270
)
 
$
738

 
$
(5,483
)
 
$
2,012


Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-12-



The adjusted combined ratio reconciles to the combined ratio for the three and nine months ended September 30, 2019 and 2018 as follows:
 
Three Months Ended September 30,
 
2019
 
2018
 
Amount
 
Adjustment
 
As Adjusted
 
Amount
 
Adjustment
 
As Adjusted
 
($ in thousands)
Losses and loss adjustment expenses
$
96,214

 
$

 
$
96,214

 
$
96,957

 
$

 
$
96,957

Acquisition expenses
27,612

 

 
27,612

 
33,778

 

 
33,778

General & administrative expenses (1)
7,027

 
(2,172
)
 
4,855

 
5,801

 
(947
)
 
4,854

Net premiums earned (1)
125,832

 
579

 
126,411

 
135,624

 
703

 
136,327

 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
76.5
%
 


 
 
 
71.5
%
 


 
 
Acquisition expense ratio
21.9
%
 


 
 
 
24.9
%
 


 
 
General & administrative expense ratio (1)
5.6
%
 


 
 
 
4.3
%
 


 
 
Combined ratio
104.0
%
 


 


 
100.7
%
 





Adjusted loss ratio
 
 
 
 
76.1
%
 
 
 
 
 
71.1
%
Adjusted acquisition expense ratio
 
 
 
 
21.8
%
 
 
 
 
 
24.8
%
Adjusted general & administrative expense ratio
 
 
 
 
3.9
%
 
 
 
 
 
3.6
%
Adjusted combined ratio
 
 
 
 
101.8
%
 
 
 
 
 
99.5
%
(1) Adjustments include certain corporate expenses, which are deducted from general and administrative expenses, and other underwriting income (loss), which is added to net premiums earned.
 
Nine Months Ended September 30,
 
2019
 
2018
 
Amount
 
Adjustment
 
As Adjusted
 
Amount
 
Adjustment
 
As Adjusted
 
($ in thousands)
Losses and loss adjustment expenses
$
318,480

 
$

 
$
318,480

 
$
312,087

 
$

 
$
312,087

Acquisition expenses
97,003

 

 
97,003

 
106,708

 

 
106,708

General & administrative expenses (1)
24,018

 
(8,930
)
 
15,088

 
16,274

 
(3,100
)
 
13,174

Net premiums earned (1)
423,244

 
1,844

 
425,088

 
431,889

 
2,092

 
433,981

 
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
75.2
%
 


 
 
 
72.3
%
 


 
 
Acquisition expense ratio
22.9
%
 


 
 
 
24.7
%
 


 
 
General & administrative expense ratio (1)
5.7
%
 


 
 
 
3.8
%
 


 
 
Combined ratio
103.8
%
 


 
 
 
100.8
%
 


 
 
Adjusted loss ratio
 
 
 
 
74.9
%
 
 
 
 
 
71.9
%
Adjusted acquisition expense ratio
 
 
 
 
22.8
%
 
 
 
 
 
24.6
%
Adjusted general & administrative expense ratio
 
 
 
 
3.6
%
 
 
 
 
 
3.0
%
Adjusted combined ratio
 
 
 
 
101.3
%
 
 
 
 
 
99.5
%
(1) Adjustments include certain corporate expenses, which are deducted from general and administrative expenses, and other underwriting income (loss), which is added to net premiums earned.



Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-13-



The following tables summarize the components of our total investment return for the three and nine months ended September 30, 2019 and 2018:
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
Non-Investment Grade
 
Investment Grade
 
Cost of
U/W Collateral (4)
 
Total
 
Non-Investment Grade
 
Investment Grade
 
Cost of
U/W Collateral (4)
 
Total
 
($ in thousands)
Interest income
$
35,014

 
$
6,362

 
$

 
$
41,376

 
$
34,338

 
$
4,366

 
$

 
$
38,704

Investment management fees - related parties
(4,204
)
 
(402
)
 

 
(4,606
)
 
(4,008
)
 
(306
)
 

 
(4,314
)
Borrowing and miscellaneous other investment expenses
(3,573
)
 
(225
)
 
(3,436
)
 
(7,234
)
 
(4,050
)
 
(80
)
 
(2,863
)
 
(6,993
)
Net interest income
27,237

 
5,735

 
(3,436
)
 
29,536

 
26,280

 
3,980

 
(2,863
)
 
27,397

Net realized gains (losses) on investments
(750
)
 
1,395

 

 
645

 
4,095

 
(91
)
 

 
4,004

Net unrealized gains (losses) on investments (1)
(15,668
)
 
377

 

 
(15,291
)
 
(7,129
)
 
(492
)
 

 
(7,621
)
Investment performance fees - related parties
(850
)
 

 

 
(850
)
 
(2,407
)
 

 

 
(2,407
)
Net investment income (loss)
$
9,969

 
$
7,507

 
$
(3,436
)
 
$
14,040

 
$
20,839

 
$
3,397

 
$
(2,863
)
 
$
21,373

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average total investments (2)
$
1,854,911

 
$
915,081

 
$

 
$
2,769,992

 
$
1,924,657

 
$
827,085

 
$

 
$
2,751,742

Average net assets (3)
$
1,586,134

 
$
915,632

 
$
(328,751
)
 
$
2,173,015

 
$
1,501,942

 
$
827,058

 
$
(295,647
)
 
$
2,033,353

 
 
 
 
 
 
 
 
 
 
 


 


 
 
Net interest income yield on average net assets (3)
1.7
%
 
0.6
%
 
 
 
1.4
%
 
1.7
%
 
0.5
%
 
 
 
1.3
%
Net investment income return on average total investments (2)
0.5
%
 
0.8
%
 
 
 
0.5
%
 
1.1
%
 
0.4
%
 
 
 
0.8
%
Net investment income return on average net assets (3)
0.6
%
 
0.8
%
 
(1.0
)%
 
0.6
%
 
1.4
%
 
0.4
%
 
(1.0
)%
 
1.1
%
(1) Net unrealized gains (losses) on investments excludes unrealized gains and losses from the available for sale portfolios, which are recorded in other comprehensive income.
(2) Net investment income return on average total investments is calculated by dividing net investment income by average total investments. For the three-month period, average total investments is calculated using the average of the beginning and ending balance of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of revolving credit agreement borrowings is not subtracted from net investment income.
(3) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. For the non-investment grade component of investment returns and total investment returns, net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less total revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss), or the net assets calculation.
(4) The cost of underwriting collateral is calculated as the revolving credit agreement expenses for the investment grade portfolios divided by the average total revolving credit agreement borrowings for the investment grade portfolios during the period.

Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-14-



 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
 
Non-Investment Grade
 
Investment Grade
 
Cost of
 U/W Collateral (4)
 
Total
 
Non-Investment Grade
 
Investment Grade
 
Cost of
 U/W Collateral (4)
 
Total
 
($ in thousands)
Interest income
$
104,845

 
$
18,268

 
$

 
$
123,113

 
$
97,594

 
$
12,236

 
$

 
$
109,830

Investment management fees - related parties
(12,446
)
 
(1,139
)
 

 
(13,585
)
 
(11,728
)
 
(888
)
 

 
(12,616
)
Borrowing and miscellaneous other investment expenses
(12,240
)
 
(667
)
 
(10,236
)
 
(23,143
)
 
(11,575
)
 
(274
)
 
(7,787
)
 
(19,636
)
Net interest income
80,159

 
16,462

 
(10,236
)
 
86,385

 
74,291

 
11,074

 
(7,787
)
 
77,578

Net realized gains (losses) on investments
392

 
2,324

 

 
2,716

 
(5,198
)
 
(4,189
)
 

 
(9,387
)
Net unrealized gains (losses) on investments (1)
7,446

 
7,976

 

 
15,422

 
(560
)
 
(6,290
)
 

 
(6,850
)
Investment performance fees - related parties
(8,342
)
 

 

 
(8,342
)
 
(6,606
)
 

 

 
(6,606
)
Net investment income (loss)
$
79,655

 
$
26,762

 
$
(10,236
)
 
$
96,181

 
$
61,927

 
$
595

 
$
(7,787
)
 
$
54,735

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average total investments (2)
$1,874,014
 
$910,784
 
$

 
$2,784,798
 
$1,833,711
 
$799,012
 
$

 
$2,632,723
Average net assets (3)
$1,546,871
 
$909,169
 
$(324,452)
 
$2,131,588
 
$1,465,589
 
$801,481
 
$(282,191)
 
$1,984,879
 
 
 
 
 


 
 
 

 

 


 


Net interest income yield on average net assets (3)
5.2
%
 
1.8
%
 
 
 
4.1
%
 
5.1
%
 
1.4
%
 
 
 
3.9
%
Net investment income return on average total investments (2)
4.3
%
 
2.9
%
 
 
 
3.5
%
 
3.4
%
 
0.1
%
 
 
 
2.1
%
Net investment income return on average net assets (3)
5.1
%
 
2.9
%
 
(3.2
)%
 
4.5
%
 
4.2
%
 
0.1
%
 
(2.8
)%
 
2.8
%
(1) Net unrealized gains (losses) on investments excludes unrealized gains and losses from the available for sale portfolios, which are recorded in other comprehensive income.
(2) Net investment income return on average total investments is calculated by dividing net investment income by average total investments. For the nine-month period, average total investments is calculated using the average of the beginning and ending balance of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of revolving credit agreement borrowings is not subtracted from net investment income.
(3) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. For the non-investment grade component of investment returns and total investment returns, net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less total revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss), or the net assets calculation.
(4) The cost of underwriting collateral is calculated as the revolving credit agreement expenses for the investment grade portfolios divided by the average total revolving credit agreement borrowings for the investment grade portfolios during the period.


Watford Holdings Ltd.
100 Pitts Bay Road, Pembroke HM08 Bermuda
Tel: 441-278-3454 www.watfordre.com
-15-



 
As of September 30, 2019
 
As of September 30, 2018
 
Non-Investment Grade
 
Investment Grade
 
Borrowings for U/W Collateral
 
Total
 
Non-Investment Grade
 
Investment Grade
 
Borrowings for U/W Collateral
 
Total
 
($ in thousands)
Average total investments - QTD
$
1,854,911

 
$
915,081

 
$

 
$
2,769,992

 
$
1,924,657

 
$
827,085

 
$

 
$
2,751,742

Average total investments - YTD
1,874,014

 
910,784

 

 
2,784,798

 
1,833,711

 
799,012

 

 
2,632,723

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average net assets - QTD
1,586,134

 
915,632

 
(328,751
)
 
2,173,015

 
1,501,942

 
827,058

 
(295,647
)
 
2,033,353

Average net assets - YTD
1,546,871

 
909,169

 
(324,452
)
 
2,131,588

 
1,465,589

 
801,481

 
(282,191
)
 
1,984,879

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total investments
$
1,876,346

 
$
893,532

 
$

 
$
2,769,878

 
$
1,928,336

 
$
847,644

 
$

 
$
2,775,980

Accrued Investment Income
13,805

 
4,472

 

 
18,277

 
14,082