Arch Capital Group to take full ownership of Watford Holdings

Arch Capital acquisition of Watford : Arch Capital Group has signed an all-cash deal worth around $622 million to take full ownership of Watford Holdings, a Bermuda-based property and casualty (P&C) insurance and reinsurance company.

Watford Holdings has nearly $1.0 billion in capital as of 30 June 2020, comprised of $172.6 million of senior notes, $776.2 million of common shareholders’ equity, and $52.4 million of contingently redeemable preference shares. The P&C company has operations across Bermuda, the US, and Europe.

Watford Re, a reinsurance subsidiary of Watford Holdings, was launched in April 2014 with Arch Capital Group investing $100 million.

On the other hand, Arch Capital Group is a Bermuda-based company with nearly $14.7 billion in capital at 30 June 2020. Arch Capital Group is a provider of insurance, reinsurance, and mortgage insurance across the world via its wholly owned subsidiaries.

Marc Grandisson – Arch Capital Group President and CEO, commenting on Arch Capital acquisition of Watford, said: “Since we launched Watford in 2014, the company has been a valued part of the Arch story and we are pleased to deepen our existing strategic and financial investment.

“Our longstanding contractual partnership with and financial consolidation of Watford expedited the due diligence process and should give all stakeholders confidence in our ability to close this transaction quickly. Watford’s policyholders and trading partners will benefit from the continued underwriting strength and service they have come to expect from Watford and Arch.”

Arch Capital Group is acquiring the remaining 87% stake it previously did not own in Watford Holdings for $31.1 per share. The bid from Arch Capital Group is higher than the offer of $31 per share made by another Bermuda-based insurance company Enstar Group.

Upon completion of the acquisition, Watford will continue to operate as an independent business and will remain consolidated within Arch Capital Group’s financials.

Commenting on Arch Capital acquisition of Watford, Jon Levy – Watford President and CEO said: “This represents a clear path forward for Watford, while also delivering an attractive premium to shareholders in a transaction with a high degree of certainty to close.

“We believe that Watford will be better positioned as a standalone business within Arch to execute its strategic priorities and growth plans. Importantly, we expect a seamless transition for our clients, trading partners and policyholders, who we think will benefit from Watford becoming part of a larger organization with greater resources.”

Arch Capital acquisition of Watford, which is subject to regulatory and shareholder approval among other customary closing conditions, is expected to close in the first quarter of 2021.