Watford Holdings has been advised by one of its investors to sell itself.
Investment firm Capital Returns Management asked the global P&C reinsurance firm to consider selling itself and even hire an investment bank to help with the process. The suggestion comes after Watford’s stock lost over half of its value since the start of 2020, and the reinsurer has since lagged behind its competitors.
Reuters reported on the development after it saw a copy of a letter written by Capital Returns Management principal Ronald Bobman, which was addressed to Watford’s board of directors.
In the letter, Bobman said that Watford has no “inherent competitive strengths or core competencies.” The principal added that Capital Returns Management only saw “unprofitable underwriting and investment results” coming from Watford.
“The best course of action, I suspect,” Bobman said in his letter, “is for the company to be sold, possibly to a runoff specialist, or alternatively, to forgo its ratings and self administer its runoff.”
He added that Watford has “fallen horribly short of expectations” since its establishment in 2014.
According to Reuters, Watford’s portfolio has lost 13% since January; in comparison, its peers’ portfolios lost on average just 3.7%. Watford’s stock price has also dropped 53% since January, versus its peers’ average 29.1% loss.
In March, Watford Holdings announced that its CEO, John Rathgeber, would retire. Rathgeber will remain on the company’s board of directors and continue to serve as a senior advisor. He was succeeded by Jonathan Levy, then-president of Watford.
