Watford Holdings Ltd (NASDAQ:WTRE) Q2 2020 Earnings Conference Call - Final Transcript

Jul 30, 2020 • 01:00 pm ET


Watford Holdings Ltd (NASDAQ:WTRE) Q2 2020 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and welcome to the Watford Holdings Second Quarter Earnings Conference Call. As a reminder, this conference call is being recorded. Before the company gets started with its update, management wants to first remind everyone that certain statements discussed on this call may constitute forward-looking statements under the federal securities law. These statements are based upon management's current assessments and assumptions that are subject to a number of risks and uncertainties.

Consequently, actual results may differ materially from those expressed or implied. For more information on the risks and factors that may affect future performance, investors should review periodic reports and other filings that are filed by the company with the SEC from time to time. Additionally, certain statements contained in the call that are not based on historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The company intends the forward-looking statements in this call to be subject to the safe harbor created thereby. Management also will make reference to some non-GAAP measures of financial performance, the reconciliation to GAAP, the definition of underwriting income, adjusted underwriting income and adjusted combined ratio and descriptions of noninvestment-grade portfolio and investment-grade portfolio components of the company's investment returns can be found in the company's current report on Form 8-K, furnished to the SEC yesterday, which contains the company's earnings press release and is available on the company's website.

I would now like to introduce your host for today's conference, Mr. Jon Levy, CEO of Watford Holdings. You may now begin.

Jon Levy

Thank you, Dylan, and good afternoon, everyone. Thank you for joining the Watford Second Quarter 2020 Earnings Call. We hope that you are safe and well and appreciate you making time to listen. Joining me today on the call is Rob Hawley, our Chief Financial Officer. I will first give an overview of the quarter, including commentary on our underwriting and investment results. Rob will then follow with a more detailed review of our financials. Next, I will give an update on our status with the rating agencies and our Axeria acquisition.

Then after some concluding remarks, we will answer questions from the equity analysts. If there are any individual investors with questions that aren't addressed today, we'd be happy to arrange a follow-up call with each of you. Despite the continued backdrop of significant economic and health care-related turmoil, Watford showed its resilience and delivered a strong financial performance. For the second quarter of 2020, we recorded net income of $188.8 million. Our GAAP results benefited significantly from the recovery in the credit investment markets and the resulting improved in valuation in our asset portfolio.

After including other comprehensive income of $23 million related to improvements in our investment-grade portfolio, our book value grew by 38% or $10.61 per diluted share, largely recovering the mark-to-market induced decline we booked in the first quarter. Starting with our underwriting results. Our adjusted combined ratio, which removes certain corporate and nonrecurring expenses