Watford Re Complete $1.13 Billion Capital Raise
Watford Holdings Ltd. and its wholly owned subsidiary Watford Re Ltd., a newly formed, Bermuda-based multi-line reinsurer has completed a $1.13 billion capital raise.
The initial capitalization comprises $907 million in common equity, including a $100 million investment by a subsidiary of Arch Capital Group Ltd., and $226 million in preference shares. Watford is a Class 4 insurer licensed by the Bermuda Monetary Authority and has received a financial strength rating of A- from A.M. Best Company.
Watford intends to combine a diversified reinsurance business with a disciplined investment strategy comprised primarily of non-investment grade credit assets, which it believes will generate attractive risk-adjusted returns for its shareholders over the long term. The Company’s reinsurance business will be managed by Arch Underwriters Ltd. , a newly formed subsidiary of Arch, and its assets will be managed by Highbridge Principal Strategies, LLC, a subsidiary of J.P. Morgan Asset Management.
John Rathgeber, a 30-year reinsurance industry veteran who was most recently the Vice Chairman of Arch Worldwide Reinsurance Group, will serve as Chief Executive Officer of Watford. Jon Levy will serve as Chief Risk Officer and Roderick Romeo will serve as Chief Financial Officer.
Watford’s Board of Directors comprises experienced insurance and finance executives and will be led by Walter Harris, who will serve as Chairman of the Board. Mr. Harris, who has more than 30 years of experience in the insurance industry, currently serves as the Senior Advisor and Vice Chairman Emeritus of Alliant Insurance Services and is a Director on the Board of Loews Corporation.
“We believe our unique strategy will enable us to address an unmet need in the reinsurance marketplace today,” said Mr. Rathgeber. “We are thrilled to partner with Arch and Highbridge, two leading institutions within their respective fields. Our management team is focused on providing our clients a high level of service, creative reinsurance solutions and prompt claims payment.”
Arch Underwriters will manage Watford’s reinsurance portfolio under a long-term services agreement. Arch Underwriters is a subsidiary of Arch, a publicly traded company and a leading insurance and reinsurance company with $6.55 billion in capital as of December 31, 2013. Marc Grandisson, Chairman and CEO of Arch Worldwide Reinsurance and Mortgage Groups, and Nicolas Papadopoulo, Chairman and CEO of Arch Reinsurance Ltd., have joined Watford’s Board of Directors.
“Our partnership with Watford is driven by the opportunity we see to underwrite attractive medium- to long-tail, multi-line business,” said Mr. Grandisson. “We look forward to working with Watford to serve the reinsurance needs of its clients and build long-term value for its shareholders.”
HPS will manage Watford’s investment portfolio through a long-term investment management agreement. Founded in 2007 by CEO Scott Kapnick, HPS has approximately $19 billion in assets under management as of March 2014, predominantly in non-investment grade corporate credit.
Purnima Puri, Managing Director of HPS, said, “We believe that non-investment grade credit complements Watford’s reinsurance strategy and we are proud to partner with Arch and Watford.”
