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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Watford Holdings Ltd | NASDAQ:WTRE | NASDAQ | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 35.00 | 34.98 | 35.01 | 0 | 00:00:00 |
From Feb 2020 to Feb 2025
WATFORD HOLDINGS LTD. (“Watford” or the “Company”) (NASDAQ: WTRE) today reported net income of $78.1 million, after $1.1 million of preference dividends, for the three months ended September 30, 2020, compared to net income of $0.2 million, after payment of $2.6 million of preference dividends and $4.2 million of accelerated amortization costs related to the redemption of preference shares, for the same period in 2019. Book value per diluted common share was $43.36 at September 30, 2020, an increase of 11.7% from June 30, 2020. The quarterly results include:
There continues to be significant uncertainties surrounding the ultimate number of insurance claims and scope of damage resulting from the continuing novel coronavirus (COVID-19) pandemic. The Company’s estimates across its insurance and reinsurance lines of business are based on currently available information derived from modeling techniques, preliminary claims information obtained from the Company’s clients and brokers, a review of relevant in-force contracts with potential exposure to the pandemic and estimates of reinsurance recoverables. These estimates include losses only related to claims incurred as of September 30, 2020. Actual losses from these events may vary materially from the estimates due to several factors, including the inherent uncertainties in making such determinations and the evolving nature of this pandemic.
Commenting on the 2020 third quarter financial results, Jon Levy, CEO of Watford, said:
“We again express our gratitude to all individuals and their families who provide support to those affected by both the COVID-19 global pandemic as well as the natural catastrophe events which have occurred this year.
Watford continues to demonstrate our durability in the current economic environment, and we delivered strong financial results for the quarter. Our net income was $78.1 million, driven by net investment income of $92.8 million.
We are pleased to report that our net investment income is positive for the year, reversing the deficit driven by March’s COVID-19 market turmoil. The recovery over the last two quarters demonstrates the resilience of our strategy. This was achieved as we simultaneously upgraded the asset quality and made significant withdrawals from our non-investment grade portfolio.
Our combined ratio for the quarter was 105.6%, and 103.5% when adjusted for other underwriting income and certain corporate expenses. This was an active property catastrophe quarter for the industry, and our current year property catastrophe losses added $6.4 million or 4.4 points to our quarterly combined ratio.
Market conditions improved further in the quarter, with rates moving positively particularly in our insurance platforms.”
Underwriting
The following table summarizes the Company’s underwriting results on a consolidated basis:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
% Change
2020
2019
% Change
($ in thousands)
Gross premiums written
$
197,480
$
249,960
(21.0)
%
$
590,309
$
598,627
(1.4)
%
Net premiums written
147,316
155,752
(5.4)
%
439,872
420,509
4.6
%
Net premiums earned
146,031
125,832
16.1
%
417,605
423,244
(1.3)
%
Underwriting income (loss) (1)
(8,238)
(5,021)
(64.1)
%
(24,959)
(16,257)
(53.5)
%
% Point Change
% Point Change
Loss ratio
79.3
%
76.5
%
2.8
%
79.3
%
75.2
%
4.1
%
Acquisition expense ratio
21.3
%
21.9
%
(0.6)
%
21.3
%
22.9
%
(1.6)
%
General & administrative expense ratio
5.0
%
5.6
%
(0.6)
%
5.4
%
5.7
%
(0.3)
%
Combined ratio
105.6
%
104.0
%
1.6
%
106.0
%
103.8
%
2.2
%
Adjusted combined ratio (2)
103.5
%
101.8
%
1.7
%
103.4
%
101.3
%
2.1
%
(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.
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,
2020
2019
2020
2019
($ in thousands)
Gross premiums written:
Casualty reinsurance
$
64,860
$
145,129
$
173,803
$
253,287
Other specialty reinsurance
31,549
22,453
89,509
84,587
Property catastrophe reinsurance
4,680
3,461
25,765
15,382
Insurance programs and coinsurance
96,391
78,917
301,232
245,371
Total
$
197,480
$
249,960
$
590,309
$
598,627
Net premiums written:
Casualty reinsurance
$
63,247
$
92,084
$
171,688
$
199,226
Other specialty reinsurance
30,157
22,093
85,484
81,798
Property catastrophe reinsurance
4,680
3,040
25,018
14,643
Insurance programs and coinsurance
49,232
38,535
157,682
124,842
Total
$
147,316
$
155,752
$
439,872
$
420,509
Net premiums earned:
Casualty reinsurance
$
54,566
$
52,266
$
155,477
$
183,085
Other specialty reinsurance
32,833
31,563
98,073
118,759
Property catastrophe reinsurance
6,589
3,617
17,297
9,707
Insurance programs and coinsurance
52,043
38,386
146,758
111,693
Total
$
146,031
$
125,832
$
417,605
$
423,244
The following table shows the components of our loss and loss adjustment expenses for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
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
$
116,012
79.4
%
$
96,417
76.6
%
$
331,861
79.4
%
$
318,812
75.3
%
Prior year development (favorable)/adverse
(199)
(0.1)
%
(203)
(0.1)
%
(586)
(0.1)
%
(332)
(0.1)
%
Loss and loss adjustment expenses
$
115,813
79.3
%
$
96,214
76.5
%
$
331,275
79.3
%
$
318,480
75.2
%
Results for the three months ended September 30, 2020 versus 2019:
Gross premiums written in the 2020 third quarter were 21.0% lower than the 2019 third quarter. The decrease in gross premiums written reflected a decrease in casualty reinsurance premiums written, offset in part by an increase in insurance programs and coinsurance, and to a lesser extent, other specialty reinsurance and property catastrophe reinsurance in the 2020 third quarter.
The decrease in casualty reinsurance premiums written primarily related to an $81.1 million, three-year excess of loss contract written in the third quarter of 2019. The premium for this contract was recorded as written in the 2019 third quarter and will be earned over a three-year period. There was no comparable premium written in the 2020 third quarter.
Other specialty gross premiums were up $9.1 million, or 40.5%, to $31.5 million, over the prior year quarter. This increase was primarily attributable to an increase in the Irish motor book, as well as the fact that the prior year quarter was affected by a reduction in the estimated premium of one European motor program. Insurance programs and coinsurance line of business gross premiums written increased $17.5 million, or 22.1%, to $96.4 million. The premium growth was driven by the continued expansion of the U.S. and European insurance programs and coinsurance.
Net premiums written in the 2020 third quarter were 5.4% lower than the 2019 third quarter. The drivers of the decrease in net premiums written are the same as those impacting gross premiums written, as discussed above.
Net premiums earned in the 2020 third quarter were 16.1% higher than the 2019 third quarter. The increase in earned premiums primarily reflected increased writings in the U.S. insurance programs and coinsurance, and, to a lesser extent, greater assumed property catastrophe reinsurance.
The loss ratio was 79.3% in the 2020 third quarter compared to 76.5% in the 2019 third quarter. In the 2020 third quarter, the increase in loss ratio was primarily driven by current year natural catastrophes of $6.4 million, or 4.4 points, as compared to $2.4 million, or 1.9 points, in the 2019 third quarter. The prior year loss reserve development for both the 2020 and 2019 third quarters was essentially flat. The acquisition expense ratio was 21.3% in the 2020 third quarter, compared to 21.9% in the 2019 third quarter. These ratio movements also reflected changes in mix and the type of business.
The general and administrative expense ratio was 5.0% in the 2020 third quarter, compared to 5.6% in the 2019 third quarter. While the ratio decreased slightly, general and administrative expenses increased by $0.3 million in the 2020 third quarter compared to the 2019 third quarter. Removing certain corporate expenses, our adjusted general and administrative expense ratio was 3.3% in the 2020 third quarter, compared to 3.9% in the 2019 third quarter.
Investments
The following table summarizes the Company’s key investment returns on a consolidated basis:
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
($ in thousands)
Interest income
$
34,553
$
41,376
$
108,830
$
123,113
Investment management fees - related parties
(4,380)
(4,606)
(12,994)
(13,585)
Borrowing and miscellaneous other investment expenses
(3,657)
(7,234)
(14,089)
(23,143)
Net interest income
26,516
29,536
81,747
86,385
Realized gains (losses) on investments
13,425
645
2,378
2,716
Unrealized gains (losses) on investments
54,570
(15,291)
(52,822)
15,422
Investment performance fees - related parties
(1,758)
(850)
(1,758)
(8,342)
Net investment income (loss)
$
92,753
$
14,040
$
29,545
$
96,181
Unrealized gains on investments (balance sheet)
$
67,746
$
46,193
$
67,746
$
46,193
Unrealized losses on investments (balance sheet)
(183,642)
(140,987)
(183,642)
(140,987)
Net unrealized gains (losses) on investments (balance sheet)
$
(115,896)
$
(94,794)
$
(115,896)
$
(94,794)
Net interest income yield on average net assets (1)
1.2
%
1.4
%
4.0
%
4.1
%
Non-investment grade portfolio (1)
1.7
%
1.7
%
5.2
%
5.2
%
Investment grade portfolio (1)
0.3
%
0.6
%
1.3
%
1.8
%
Net investment income return on average net assets (1)
4.3
%
0.6
%
1.4
%
4.5
%
Non-investment grade portfolio (1)
6.3
%
0.6
%
0.9
%
5.1
%
Investment grade portfolio (1)
0.2
%
0.8
%
2.6
%
2.9
%
Net investment income return on average total investments (excluding accrued investment income) (2)
3.5
%
0.5
%
1.1
%
3.5
%
Non-investment grade portfolio (2)
4.9
%
0.5
%
0.8
%
4.3
%
Investment grade portfolio (2)
0.2
%
0.8
%
2.6
%
2.9
%
(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 periods, 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 (excluding accrued investment income) is calculated by dividing net investment income by average total investments. For the three- and nine-month periods, 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 (excluding accrued investment income).
Results for the three months ended September 30, 2020 versus 2019:
Net investment income was $92.8 million for the three months ended September 30, 2020 compared to net investment income of $14.0 million for the three months ended September 30, 2019, an increase of $78.8 million. The 2020 third quarter net investment income return on average net assets was 4.3% as compared to 0.6% for the prior year period.
The 2020 third quarter net investment income return was driven by net unrealized gains of $54.6 million as the credit markets partially recovered through the quarter. Net interest income decreased to $26.5 million from $29.5 million, a decrease of 10.2% quarter over quarter.
The 2020 third quarter non-investment grade portfolio net interest income yield on average net assets was 1.7%, consistent with the third quarter of 2019. The net realized and unrealized gains reported in the 2020 third quarter were $68.7 million, reflective of the credit market recovery discussed above.
The 2020 third quarter investment grade portfolio net interest income yield on average net assets was 0.3%, a decrease from 0.6% in the prior year period. In addition, the investment grade portfolio recognized $0.7 million of net realized and unrealized losses in the quarter as compared to net gains of $1.8 million in the third quarter of 2019.
The following tables summarize the composition of the Company's non-investment grade and investment grade portfolios by sector as of September 30, 2020 and June 30, 2020:
September 30, 2020
Total
Financials
Health Care
Technology
Consumer Services
Industrials
Consumer Goods
Oil & Gas
All Other (1)
($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments
$
893,030
$
188,791
$
155,104
$
154,834
$
136,778
$
121,996
$
27,779
$
29,779
$
77,969
Corporate bonds
456,655
44,767
50,186
32,676
95,102
41,723
66,282
36,173
89,746
Equities - sector specific
96,641
63,740
21,812
7,168
—
2,437
—
311
1,173
Short-term investments - sector specific
2,265
—
443
1,822
—
—
—
—
—
Subtotal
1,448,591
297,298
227,545
196,500
231,880
166,156
94,061
66,263
168,888
Equities - non-sector specific
17,139
Short-term investments - non-sector specific
250,636
Asset-backed securities
164,990
Mortgage-backed securities
8,600
Total Non-Investment Grade Portfolio
$
1,889,956
$
297,298
$
227,545
$
196,500
$
231,880
$
166,156
$
94,061
$
66,263
$
168,888
Investment Grade Portfolio:
Corporate bonds
$
193,357
$
52,606
$
10,390
$
18,844
$
24,440
$
14,713
$
42,506
$
15,221
$
14,637
Short-term investments
97,490
U.S. government and government agency bonds
203,452
Non-U.S. government and government agency bonds
150,782
Asset-backed securities
84,701
Mortgage-backed securities
18,115
Municipal government and government agency bonds
1,793
Total Investment Grade Portfolio
$
749,690
$
52,606
$
10,390
$
18,844
$
24,440
$
14,713
$
42,506
$
15,221
$
14,637
Total Investments
$
2,639,646
$
349,904
$
237,935
$
215,344
$
256,320
$
180,869
$
136,567
$
81,484
$
183,525
(1) Includes telecommunications, utilities and basic materials.
June 30, 2020
Total
Financials
Health Care
Technology
Consumer Services
Industrials
Consumer Goods
Oil & Gas
All Other (1)
($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments
$
875,560
$
188,970
$
170,442
$
186,367
$
113,733
$
90,250
$
36,455
$
29,573
$
59,770
Corporate bonds
378,183
44,898
26,626
16,720
105,543
33,870
68,314
29,516
52,696
Equities - sector specific
93,872
62,350
22,577
7,266
—
641
—
264
774
Short-term investments - sector specific
2,184
—
—
1,682
—
—
502
—
—
Subtotal
1,349,799
296,218
219,645
212,035
219,276
124,761
105,271
59,353
113,240
Equities - non-sector specific
27,470
Short-term investments - non-sector specific
267,904
Asset-backed securities
157,925
Other investments
34,142
Mortgage-backed securities
9,164
Total Non-Investment Grade Portfolio
$
1,846,404
$
296,218
$
219,645
$
212,035
$
219,276
$
124,761
$
105,271
$
59,353
$
113,240
Investment Grade Portfolio:
Corporate bonds
$
169,918
$
51,327
$
10,834
$
18,688
$
22,738
$
11,942
$
35,818
$
11,388
$
7,183
Short-term investments
99,978
U.S. government and government agency bonds
217,459
Non-U.S. government and government agency bonds
151,124
Asset-backed securities
130,327
Mortgage-backed securities
22,018
Municipal government and government agency bonds
2,117
Total Investment Grade Portfolio
$
792,941
$
51,327
$
10,834
$
18,688
$
22,738
$
11,942
$
35,818
$
11,388
$
7,183
Total Investments
$
2,639,345
$
347,545
$
230,479
$
230,723
$
242,014
$
136,703
$
141,089
$
70,741
$
120,423
(1) Includes telecommunications, utilities and basic materials.
The tables below summarize the credit quality of the Company's non-investment grade and investment grade portfolios as of September 30, 2020 and June 30, 2020, as rated by Standard & Poor’s Financial Services, LLC, or Standard & Poor’s, Moody’s Investors Service, or Moody’s, Fitch Ratings Inc., or Fitch, Kroll Bond Rating Agency, or KBRA, or DBRS Morningstar, or DBRS, as applicable:
Credit Rating (1)
September 30, 2020
Fair Value
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Not Rated
($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments
$
893,030
$
—
$
—
$
—
$
11,074
$
27,214
$
533,876
$
233,186
$
8,970
$
4,469
$
13,325
$
60,916
Corporate bonds
456,655
—
—
—
14,037
68,968
207,670
126,388
6,070
1,171
14,415
17,936
Asset-backed securities
164,990
—
—
5,989
88,704
28,452
9,277
8,667
842
—
—
23,059
Mortgage-backed securities
8,600
—
—
—
—
1,182
—
—
—
—
3,149
4,269
Short-term investments
252,901
54,458
132,306
63,871
—
—
—
443
—
—
—
1,823
Total fixed income instruments and short-term investments
1,776,176
54,458
132,306
69,860
113,815
125,816
750,823
368,684
15,882
5,640
30,889
108,003
Equities
113,780
Total Non-Investment Grade Portfolio
$
1,889,956
$
54,458
$
132,306
$
69,860
$
113,815
$
125,816
$
750,823
$
368,684
$
15,882
$
5,640
$
30,889
$
108,003
Investment Grade Portfolio:
Corporate bonds
$
193,357
$
—
$
20,016
$
87,672
$
80,678
$
4,991
$
—
$
—
$
—
$
—
$
—
$
—
U.S. government and government agency bonds
203,452
—
203,452
—
—
—
—
—
—
—
—
—
Asset-backed securities
84,701
—
—
16,757
63,216
4,728
—
—
—
—
—
—
Mortgage-backed securities
18,115
—
—
1,733
16,382
—
—
—
—
—
—
—
Non-U.S. government and government agency bonds
150,782
—
150,782
—
—
—
—
—
—
—
—
—
Municipal government and government agency bonds
1,793
784
595
414
—
—
—
—
—
—
—
—
Short-term investments
97,490
5,116
43,889
—
48,485
—
—
—
—
—
—
—
Total Investment Grade Portfolio
$
749,690
$
5,900
$
418,734
$
106,576
$
208,761
$
9,719
$
—
$
—
$
—
$
—
$
—
$
—
Total
$
2,639,646
$
60,358
$
551,040
$
176,436
$
322,576
$
135,535
$
750,823
$
368,684
$
15,882
$
5,640
$
30,889
$
108,003
(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.
Credit Rating (1)
June 30, 2020
Fair Value
AAA
AA
A
BBB
BB
B
CCC
CC
C
D
Not Rated
($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments
$
875,560
$
—
$
—
$
—
$
—
$
23,218
$
530,118
$
247,478
$
15,191
$
2,192
$
28,046
$
29,317
Corporate bonds
378,183
—
—
—
37,373
50,125
152,648
113,723
6,268
5,585
3,956
8,505
Asset-backed securities
157,925
—
—
3,854
98,827
23,136
8,767
1,663
—
—
—
21,678
Mortgage-backed securities
9,164
—
—
—
—
1,292
—
—
—
—
3,224
4,648
Short-term investments
270,088
34,859
172,166
60,880
—
502
—
—
—
—
—
1,681
Total fixed income instruments and short-term investments
1,690,920
34,859
172,166
64,734
136,200
98,273
691,533
362,864
21,459
7,777
35,226
65,829
Other Investments
34,142
Equities
121,342
Total Non-Investment Grade Portfolio
$
1,846,404
$
34,859
$
172,166
$
64,734
$
136,200
$
98,273
$
691,533
$
362,864
$
21,459
$
7,777
$
35,226
$
65,829
Investment Grade Portfolio:
Corporate bonds
$
169,918
$
—
$
16,032
$
90,087
$
58,858
$
4,941
$
—
$
—
$
—
$
—
$
—
$
—
U.S. government and government agency bonds
217,459
—
217,459
—
—
—
—
—
—
—
—
—
Asset-backed securities
130,327
1,377
—
19,621
108,790
539
—
—
—
—
—
—
Mortgage-backed securities
22,018
—
602
4,794
16,622
—
—
—
—
—
—
—
Non-U.S. government and government agency bonds
151,124
—
151,124
—
—
—
—
—
—
—
—
—
Municipal government and government agency bonds
2,117
1,039
586
492
—
—
—
—
—
—
—
—
Short-term investments
99,978
3,448
22,656
—
73,874
—
—
—
—
—
—
—
Total Investment Grade Portfolio
$
792,941
$
5,864
$
408,459
$
114,994
$
258,144
$
5,480
$
—
$
—
$
—
$
—
$
—
$
—
Total
$
2,639,345
$
40,723
$
580,625
$
179,728
$
394,344
$
103,753
$
691,533
$
362,864
$
21,459
$
7,777
$
35,226
$
65,829
(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.
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 $2.9 million and $2.8 million for the three months ended September 30, 2020 and 2019, respectively, in relation to the Company’s 6.5% senior notes issued on July 2, 2019. Interest is paid semi-annually in arrears on January 2 and July 2.
Preference dividends were $1.1 million and $2.6 million for the three months ended September 30, 2020 and 2019, respectively. On August 1, 2019, the Company redeemed 6,919,998 of its preference shares for an aggregate redemption price of approximately $174.4 million. The 2019 third quarter preference dividends of $2.6 million included $1.3 million of dividends paid on the shares that were redeemed. Further, 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.
There were no common share repurchases during the 2020 third quarter. As of September 30, 2020, approximately $47.1 million of share repurchases were available under the Company’s previously announced $50 million share repurchase program.
Conference Call
The Company will not hold a conference call to discuss its 2020 third quarter results due to the previously announced proposed acquisition of the Company by Arch Capital Group Ltd. (“Arch”) and the unsolicited non-binding proposal from Enstar Group Limited (“Enstar”) to acquire the Company.
About Watford Holdings Ltd.
Watford Holdings Ltd. is a global property and casualty insurance and reinsurance company with approximately $1.1 billion in capital as of September 30, 2020, comprised of: $172.6 million of senior notes, $52.4 million of contingently redeemable preference shares and $866.9 million of common shareholders’ equity, with operations in Bermuda, the United States and Europe. Its operating subsidiaries have been assigned financial strength ratings of “A-” (Excellent) from A.M. Best and “A” with an Outlook of Negative from Kroll Bond Rating Agency. On May 1, 2020, A.M. Best announced that it had placed under review with negative implications the financial strength ratings of our operating subsidiaries.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Unaudited)
September 30,
December 31,
2020
2019
Assets
($ in thousands)
Investments:
Term loans, fair value option (Amortized cost: $969,929 and $1,113,212)
$
893,030
$
1,061,934
Fixed maturities, fair value option (Amortized cost: $677,977 and $432,576)
632,664
416,594
Short-term investments, fair value option (Cost: $348,479 and $325,542)
350,391
329,303
Equity securities, fair value option
60,951
59,799
Other investments, fair value option
—
30,461
Investments, fair value option
1,937,036
1,898,091
Fixed maturities, available for sale (Amortized cost: $645,663 and $739,456)
649,781
745,708
Equity securities, fair value through net income
52,829
65,338
Total investments
2,639,646
2,709,137
Cash and cash equivalents
195,333
102,437
Accrued investment income
16,234
14,025
Premiums receivable
263,748
273,657
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses
263,293
170,974
Prepaid reinsurance premiums
131,885
132,577
Deferred acquisition costs, net
58,583
64,044
Receivable for securities sold
1,730
16,288
Intangible assets
7,650
7,650
Funds held by reinsurers
46,787
42,505
Other assets
28,331
17,562
Total assets
$
3,653,220
$
3,550,856
Liabilities
Reserve for losses and loss adjustment expenses
$
1,429,656
$
1,263,628
Unearned premiums
459,476
438,907
Losses payable
78,537
61,314
Reinsurance balances payable
68,339
77,066
Payable for securities purchased
67,602
18,180
Payable for securities sold short
24,909
66,257
Revolving credit agreement borrowings
390,195
484,287
Senior notes
172,621
172,418
Amounts due to affiliates
5,060
4,467
Investment management and performance fees payable
7,539
17,762
Other liabilities
30,012
21,912
Total liabilities
$
2,733,946
$
2,626,198
Commitments and contingencies
Contingently redeemable preference shares
52,375
52,305
Shareholders’ equity
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,804,128 and 22,692,300)
228
227
Additional paid-in capital
899,213
898,083
Retained earnings (deficit)
42,184
43,470
Accumulated other comprehensive income (loss)
3,197
5,629
Common shares held in treasury, at cost (shares: 2,917,149 and 2,789,405)
(77,923)
(75,056)
Total shareholders’ equity
866,899
872,353
Total liabilities, contingently redeemable preference shares and shareholders’ equity
$
3,653,220
$
3,550,856
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(Unaudited)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Revenues
($ in thousands except share and per share data)
Gross premiums written
$
197,480
$
249,960
$
590,309
$
598,627
Gross premiums ceded
(50,164)
(94,208)
(150,437)
(178,118)
Net premiums written
147,316
155,752
439,872
420,509
Change in unearned premiums
(1,285)
(29,920)
(22,267)
2,735
Net premiums earned
146,031
125,832
417,605
423,244
Other underwriting income (loss)
546
579
1,547
1,844
Interest income
34,553
41,376
108,830
123,113
Investment management fees - related parties
(4,380)
(4,606)
(12,994)
(13,585)
Borrowing and miscellaneous other investment expenses
(3,657)
(7,234)
(14,089)
(23,143)
Net interest income
26,516
29,536
81,747
86,385
Realized and unrealized gains (losses) on investments
67,995
(14,646)
(50,444)
18,138
Investment performance fees - related parties
(1,758)
(850)
(1,758)
(8,342)
Net investment income (loss)
92,753
14,040
29,545
96,181
Total revenues
239,330
140,451
448,697
521,269
Expenses
Loss and loss adjustment expenses
(115,813)
(96,214)
(331,275)
(318,480)
Acquisition expenses
(31,110)
(27,612)
(88,963)
(97,003)
General and administrative expenses
(7,346)
(7,027)
(22,326)
(24,018)
Interest expense
(2,912)
(2,841)
(8,735)
(2,841)
Net foreign exchange gains (losses)
(2,926)
167
4,752
(711)
Total expenses
(160,107)
(133,527)
(446,547)
(443,053)
Income (loss) before income taxes
79,223
6,924
2,150
78,216
Income tax expense
(69)
—
333
(20)
Net income (loss) before preference dividends and redemption costs
79,154
6,924
2,483
78,196
Preference dividends
(1,061)
(2,608)
(3,341)
(12,423)
Accelerated amortization of costs related to the redemption of preference shares
—
(4,164)
—
(4,164)
Net income (loss) available to common shareholders
$
78,093
$
152
$
(858)
$
61,609
Other comprehensive income (loss) net of income tax:
Available-for-sale investments:
Unrealized holding gains (losses) arising during the period
$
6,631
$
3,785
$
9,440
$
14,398
Unrealized foreign currency gains (losses) arising during the period
5,729
(3,676)
(1,691)
(4,224)
Credit loss recognized in net income (loss)
59
—
410
—
Reclassification of net realized (gains) losses, net of income taxes, included in net income (loss)
368
(1,254)
(10,368)
(3,465)
Unrealized holding gains (losses) of available for sale investments
12,787
(1,145)
(2,209)
6,709
Foreign currency translation adjustments
(411)
286
(223)
333
Other comprehensive income (loss) net of income tax
12,376
(859)
(2,432)
7,042
Comprehensive income (loss)
$
90,469
$
(707)
$
(3,290)
$
68,651
Earnings (loss) per share:
Basic
$
3.93
$
0.01
$
(0.04)
$
2.71
Diluted
$
3.92
$
0.01
$
(0.04)
$
2.71
Weighted average number of ordinary shares used in the determination of earnings (loss) per share:
Basic
19,890,784
22,765,802
19,901,921
22,729,848
Diluted
19,904,051
22,776,204
19,901,921
22,734,464
Three Months Ended September 30,
Nine Months Ended September 30,
2020
2019
2020
2019
Numerator:
($ in thousands except share and per share data)
Net income (loss) before preference dividends and redemption costs
$
79,154
$
6,924
$
2,483
$
78,196
Preference dividends
(1,061)
(2,608)
(3,341)
(12,423)
Accelerated amortization of costs related to the redemption of preference shares
—
(4,164)
—
(4,164)
Net income (loss) available to common shareholders
$
78,093
$
152
$
(858)
$
61,609
Denominator:
Weighted average common shares outstanding - basic
19,890,784
22,765,802
19,901,921
22,729,848
Effect of dilutive common share equivalents:
Weighted average non-vested restricted share units (1)
13,267
10,402
—
4,616
Weighted average common shares outstanding - diluted
19,904,051
22,776,204
19,901,921
22,734,464
Earnings (loss) per common share:
Basic
$
3.93
$
0.01
$
(0.04)
$
2.71
Diluted
$
3.92
$
0.01
$
(0.04)
$
2.71
(1) The weighted average non-vested restricted share units are excluded from the calculation of diluted weighted average common shares outstanding for the nine months ended September 30, 2020, due to a net loss reported.
September 30, 2020
June 30, 2020 (1)
March 31, 2020 (2)
December 31, 2019
September 30, 2019
Numerator:
($ in thousands except share and per share data)
Total shareholders’ equity
$
866,899
$
776,151
$
564,054
$
872,353
$
960,773
Denominator:
Common shares outstanding - basic (1)(2)
19,890,784
19,890,784
19,863,328
19,976,397
22,765,802
Effect of dilutive common share equivalents:
Non-vested restricted share units (2)
103,820
103,820
131,277
82,360
82,360
Common shares outstanding - diluted
19,994,604
19,994,604
19,994,605
20,058,757
22,848,162
Book value per common share
$43.58
$39.02
$28.40
$43.67
$42.20
Book value per diluted common share
$43.36
$38.82
$28.21
$43.49
$42.05
(1) During the second quarter of 2020, the Company issued 100,958 common shares, related to the restricted share units granted to certain employees and directors in the second quarter of 2019. Of these shares, 27,456 common shares vested in the second quarter of 2020.
(2) During the first quarter of 2020, the Company granted 63,591 restricted share units and common shares to certain employees and directors, 48,916 of which are non-vested as of September 30, 2020.
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-U.S. 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 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 certain non-recurring costs associated with the ongoing operations of the holding company, such as compensation of certain executives and costs associated with the initial setup of subsidiaries.
The presentation of underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio are non-U.S. 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 U.S. 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.
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 (excluding accrued investment income)” (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-U.S. 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 U.S. 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 (excluding accrued investment income), 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 reflects the performance of the investment portfolios that predominantly support our underwriting collateral.
The following tables present 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,
2020
2019
2020
2019
($ in thousands)
Net income (loss) available to common shareholders
$
78,093
$
152
$
(858)
$
61,609
Preference dividends
1,061
2,608
3,341
12,423
Accelerated amortization of costs related to the redemption of preference shares
—
4,164
—
4,164
Net income (loss) before preference dividends and redemption costs
79,154
6,924
2,483
78,196
Income tax expense
69
—
(333)
20
Interest expense
2,912
2,841
8,735
2,841
Net foreign exchange (gains) losses
2,926
(167)
(4,752)
711
Net investment (income) loss
(92,753)
(14,040)
(29,545)
(96,181)
Other underwriting (income) loss
(546)
(579)
(1,547)
(1,844)
Underwriting income (loss)
(8,238)
(5,021)
(24,959)
(16,257)
Certain corporate expenses
2,592
2,172
9,031
8,930
Other underwriting income (loss)
546
579
1,547
1,844
Adjusted underwriting income (loss)
$
(5,100)
$
(2,270)
$
(14,381)
$
(5,483)
The adjusted combined ratio reconciles to the combined ratio for the three and nine months ended September 30, 2020 and 2019 as follows:
Three Months Ended September 30,
2020
2019
Amount
Adjustment
As Adjusted
Amount
Adjustment
As Adjusted
($ in thousands)
Losses and loss adjustment expenses
$
115,813
$
—
$
115,813
$
96,214
$
—
$
96,214
Acquisition expenses
31,110
—
31,110
27,612
—
27,612
General & administrative expenses (1)
7,346
(2,592)
4,754
7,027
(2,172)
4,855
Net premiums earned (1)
146,031
546
146,577
125,832
579
126,411
Loss ratio
79.3
%
76.5
%
Acquisition expense ratio
21.3
%
21.9
%
General & administrative expense ratio
5.0
%
5.6
%
Combined ratio
105.6
%
104.0
%
Adjusted loss ratio
79.0
%
76.1
%
Adjusted acquisition expense ratio
21.2
%
21.8
%
Adjusted general & administrative expense ratio
3.3
%
3.9
%
Adjusted combined ratio
103.5
%
101.8
%
(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,
2020
2019
Amount
Adjustment
As Adjusted
Amount
Adjustment
As Adjusted
($ in thousands)
Losses and loss adjustment expenses
$
331,275
$
—
$
331,275
$
318,480
$
—
$
318,480
Acquisition expenses
88,963
—
88,963
97,003
—
97,003
General & administrative expenses (1)
22,326
(9,031)
13,295
24,018
(8,930)
15,088
Net premiums earned (1)
417,605
1,547
419,152
423,244
1,844
425,088
Loss ratio
79.3
%
75.2
%
Acquisition expense ratio
21.3
%
22.9
%
General & administrative expense ratio
5.4
%
5.7
%
Combined ratio
106.0
%
103.8
%
Adjusted loss ratio
79.0
%
74.9
%
Adjusted acquisition expense ratio
21.2
%
22.8
%
Adjusted general & administrative expense ratio
3.2
%
3.6
%
Adjusted combined ratio
103.4
%
101.3
%
(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.
The following tables summarize the components of our total investment return for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended September 30, 2020
Three Months Ended September 30, 2019
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
$
31,473
$
3,080
$
—
$
34,553
$
35,014
$
6,362
$
—
$
41,376
Investment management fees - related parties
(4,024)
(356)
—
(4,380)
(4,204)
(402)
—
(4,606)
Borrowing and miscellaneous other investment expenses
(2,678)
(270)
(709)
(3,657)
(3,573)
(225)
(3,436)
(7,234)
Net interest income
24,771
2,454
(709)
26,516
27,237
5,735
(3,436)
29,536
Net realized gains (losses) on investments
14,131
(706)
—
13,425
(750)
1,395
—
645
Net unrealized gains (losses) on investments (1)
54,574
(4)
—
54,570
(15,668)
377
—
(15,291)
Investment performance fees - related parties
(1,758)
—
—
(1,758)
(850)
—
—
(850)
Net investment income (loss)
$
91,718
$
1,744
$
(709)
$
92,753
$
9,969
$
7,507
$
(3,436)
$
14,040
Average total investments (2)
$
1,868,180
$
771,316
$
—
$
2,639,496
$
1,854,911
$
915,081
$
—
$
2,769,992
Average net assets (3)
$
1,463,905
$
775,848
$
(94,250)
$
2,145,503
$
1,586,134
$
915,632
$
(328,751)
$
2,173,015
Net interest income yield on average net assets (3)
1.7
%
0.3
%
1.2
%
1.7
%
0.6
%
1.4
%
Net investment income return on average total investments (excluding accrued investment income) (2)
4.9
%
0.2
%
3.5
%
0.5
%
0.8
%
0.5
%
Net investment income return on average net assets (3)
6.3
%
0.2
%
(0.8)
%
4.3
%
0.6
%
0.8
%
(1.0)
%
0.6
%
(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 (excluding accrued investment income) 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.
Nine Months Ended September 30, 2020
Nine Months Ended September 30, 2019
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
$
96,647
$
12,183
$
—
$
108,830
$
104,845
$
18,268
$
—
$
123,113
Investment management fees - related parties
(11,940)
(1,054)
—
(12,994)
(12,446)
(1,139)
—
(13,585)
Borrowing and miscellaneous other investment expenses
(8,010)
(707)
(5,372)
(14,089)
(12,240)
(667)
(10,236)
(23,143)
Net interest income
76,697
10,422
(5,372)
81,747
80,159
16,462
(10,236)
86,385
Net realized gains (losses) on investments
(8,006)
10,384
—
2,378
392
2,324
—
2,716
Net unrealized gains (losses) on investments (1)
(52,869)
47
—
(52,822)
7,446
7,976
—
15,422
Investment performance fees - related parties
(1,758)
—
—
(1,758)
(8,342)
—
—
(8,342)
Net investment income (loss)
$
14,064
$
20,853
$
(5,372)
$
29,545
$
79,655
$
26,762
$
(10,236)
$
96,181
Average total investments (2)
$1,813,645
$795,203
$
—
$2,608,848
$1,874,014
$910,784
$
—
$2,784,798
Average net assets (3)
$1,480,543
$800,695
$(223,083)
$2,058,155
$1,546,871
$909,169
$(324,452)
$2,131,588
Net interest income yield on average net assets (3)
5.2
%
1.3
%
4.0
%
5.2
%
1.8
%
4.1
%
Net investment income return on average total investments (excluding accrued investment income) (2)
0.8
%
2.6
%
1.1
%
4.3
%
2.9
%
3.5
%
Net investment income return on average net assets (3)
0.9
%
2.6
%
(2.4)
%
1.4
%
5.1
%
2.9
%
(3.2)
%
4.5
%
(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 (excluding accrued investment income) 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.
As of September 30, 2020
As of September 30, 2019
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
$
1,868,180
$
771,316
$
—
$
2,639,496
$
1,854,911
$
915,081
$
—
$
2,769,992
Average total investments - YTD
1,813,645
795,203
—
2,608,848
1,874,014
910,784
—
2,784,798
Average net assets - QTD
1,463,905
775,848
(94,250)
2,145,503
1,586,134
915,632
(328,751)
2,173,015
Average net assets - YTD
1,480,543
800,695
(223,083)
2,058,155
1,546,871
909,169
(324,452)
2,131,588
Total investments
$
1,889,956
$
749,690
$
—
$
2,639,646
$
1,876,346
$
893,532
$
—
$
2,769,878
Accrued investment income
13,745
2,489
—
16,234
13,805
4,472
—
18,277
Receivable for securities sold
1,681
49
—
1,730
25,274
9
—
25,283
Less: Payable for securities purchased
67,602
—
—
67,602
36,870
3,716
—
40,586
Less: Payable for securities sold short
24,909
—
—
24,909
65,736
—
—
65,736
Less: Revolving credit agreement borrowings
365,445
—
24,750
390,195
190,447
—
328,750
519,197
Net assets
$
1,447,426
$
752,228
$
(24,750)
$
2,174,904
$
1,622,372
$
894,297
$
(328,750)
$
2,187,919
Non-investment grade borrowing ratio (1)
25.2
%
11.7
%
Unrealized gains on investments
$
52,176
$
15,570
$
—
$
67,746
$
34,794
$
11,399
$
—
$
46,193
Unrealized losses on investments
(172,198)
(11,444)
—
(183,642)
(131,453)
(9,534)
—
(140,987)
Net unrealized gains (losses) on investments
$
(120,022)
$
4,126
$
—
$
(115,896)
$
(96,659)
$
1,865
$
—
$
(94,794)
(1) The non-investment grade borrowing ratio is calculated as revolving credit agreement borrowings divided by net assets.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology. These forward-looking statements include statements regarding the Company’s return on equity potential and prospects for further book value growth.
Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:
All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006282/en/
Robert L. Hawley: (441) 278-3456 rhawley@watfordre.com
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