OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has placed under review with negative implications the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Watford Re Ltd. (Watford Re) (Bermuda) and its subsidiaries, Watford Insurance Company Europe Limited (WICE) (Gibraltar), Watford Insurance Company (WIC) (New Jersey) and Watford Specialty Insurance Company (WSIC) (New Jersey). In addition, AM Best has placed under review with negative implications the Long-Term ICR of “bbb-” and the Long-Term Issue Credit Rating of “bb” on the $225 million ($52 million outstanding) 8.5% cumulative preference shares of Watford Holdings Ltd. (Watford) (Bermuda), the group’s ultimate holding company.
These rating actions follow Watford’s announcement on April 23, 2020 that its 2020 first quarter earnings will include a net investment loss of approximately $300 million due to investment market volatility following the global economic shutdown related to the COVID-19 pandemic. The net investment loss is expected to be predominantly comprised of unrealized mark-to-market losses to Watford’s non-investment grade, fixed-income portfolio.
AM Best expects to resolve the under review with negative implications status when Watford’s risk-adjusted capitalization is restored back to its prior level. AM Best will evaluate on an ongoing basis Watford’s risk-adjusted capitalization and invested asset valuations as updated information becomes available. Further rating actions could be taken if AM Best believes Watford’s financial strength has continued to decay or it has not stabilized in a reasonable amount of time. Further rating action may also be taken if AM Best believes Watford’s measured levels of balance sheet strength, operating performance, business profile, or enterprise risk management are no longer able to support its current rating level.
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