Bermuda-based specialty re/insurer Watford Holdings has estimated that its first quarter 2020 earnings will include a net investment loss of approximately $265 million due to investment market volatility caused by the economic shutdown mandated by governments due to the COVID-19 pandemic.
The net investment loss predominantly consists of unrealised mark-to-market losses to the company's non-investment grade fixed-income portfolio.
The impact of unrealised mark-to-market losses on net income is estimated to be approximately $290 million. Realised losses in the quarter are estimated to be approximately $6 million.
In addition, the company expects that its book value will be impacted by unrealised mark-to-market losses to its investment grade portfolio of approximately $38 million. These losses are mainly driven by mark-to-market price movements on investment grade asset-backed securities.
Watford said the impact of COVID-19 on the company’s 2020 first quarter underwriting results is not expected to be material, due to the mix of business underwritten.