EX-99.(C)(7) 7 nc10018386x1_exc7.htm EXHIBIT (C)(7)

Exhibit (c)(7)

 Board of Directors Follow-Up  Project William  September 4, 2020 

 Summary of Revised Verbal Offer and Key Points Raised    Subsequent to receiving Watford’s letter and feedback from Morgan Stanley, Goldman Sachs met with the consortium, including Arch’s board of directors    2  Revised Offer  Alternatives  Investment Portfolio  Business Plan / Ratings  Provided revised verbal offer of $27 per share in cashNoted it represents an 8% improvement vs. original $25 offer60% premium to current, represents 0.69x P/BV at 6/30/2020Decided to provide improved, non-public offer in hopes of completing transactionSuggested private equity investors argued to make $25 offer public  Challenged Watford’s practical ability to pursue alternativesDid not raise run-off  Investment portfolio raised as a key source of concernAcknowledged improvement in value since March, but see potential for further volatilityChallenged value attributed to post-6/30 book value improvement, as would want to diligence the marks and understand risks  Believe business plan is highly uncertain if company’s ratings remain on watch or are downgradedCounterparties may be wary of placing of business or demand collateralNoted that if this transaction is not successful, may pursue sidecar strategy, which could constrain the amount of business offered to Watford beyond the requirements of the service agreement  Rollover  Reiterated prior rejection of ability of current Watford holders to participate / roll  Arch Relationship  Took umbrage regarding reference to fees paid to Arch as believe were for services renderedHowever, did not attempt to dispute high combined ratio 

 Watford Re Stock Price Analysis    Stock Price Performance since Watford Re ListingStock Price ($), Volume (Shares, MM)    Source: Capital IQ, SNL Financial (09/03/2020)  Notes:1. Period ending 02/19/2020    3  10/29/2019: All-Time High of $28.90  5/14/2020: All-Time Low of $10.86  $16.87  ~140k sharesPre-COVID Average Daily Volume  ~70k sharesPost-COVID Average Daily Volume  $25.76Listing-to-COVID VWAP  2/19/2020 (COVID): $24.42 

 Watford Re Trading Multiple Performance        Source: Capital IQ, SNL Financial (09/03/2020)  Notes:Traditional (Re)insurance Peers include ACGL, AXS, RE, RNR and Y    4  01/01/2015 – 09/03/2020 (x)  Price / Book Value  (1)  0.43x  0.62x  0.60x  0.94x 

 Precedent Reinsurance Transactions    Source: Capital IQ, SNL Financial, Company Filings and MaterialsNotes:Book value and tangible book value reflect 2Q20 figures as referenced in Third Point investor presentation, which preceded Sirius earnings announcementPartnerRe 6/30/2015 book value adjusted for $315MM breakup fee payable to AXIS    5  (1)  (2)  (1)  (2) 

 Standalone Alternatives: Sensitivity Analysis  Base Case vs. De-Risked Investment Portfolio Scenario    6  De-Risk Investment Portfolio  Description  Transfer $500MM from HPS to investment grade strategy  Baseline assumptions includingHardening marketAchievement of 10%+ ROE at 99% combined ratio  Base Case  Sensitivity:Cost of Equity / Terminal Multiple  Sensitivity:Combined Ratio / Terminal Multiple  Does not include investment gains of $3.17/share from June 30 to August 12 

 Run-Off Analysis: Sensitivities     Projections based on Company Run-Off ModelAssumes business is sold after 5 years of run-offAssumes 100% asset reallocation to investment grade assets upon run-offOutcome of run-off scenario dependent on existing reserves and the actual payout of lossesTo assess impact of adverse or favorable development, showing a range of +/- 10% reserve chargeAssumes reserve charge is taken in Q3 2020 and run-off with existing reserves    7  Run-Off Reserve Development Sensitivity  Cost of Equity Sensitivity  Does not include investment gains of $3.17/share from June 30 to August 12 

 Appendix  Supporting Materials    8 

 Base Case - Dividend Discount Model Summary    Discount rate of 10% based on Watford’s cost of equityExit multiple of 0.43x BVPS based on Watford’s current trading multiple(1)  Notes:As of 09/03/2020Includes loss reserve equity, senior notes, contingent redeemable preferred shares less intangible assets  Supporting Materials  9  (2)  Does not include investment gains of $3.17/share from June 30 to August 12 

 Run-Off Analysis - Dividend Discount Model Summary    Discount rate of 10% based on Watford’s cost of equityExit multiple of 0.80x BVPS based on precedent run-off dealsPresent discounted value of Arch run-off fees over 5 years: $43.5MM or $2.17/share  Notes:Based on 50% of net reserves  Supporting Materials  10  (1)  Does not include investment gains of $3.17/share from June 30 to August 12 

   11  Cost of Equity Analysis  Watford Cost of Equity Analysis  Supporting Materials  Source: Capital IQ, SNL Financial (09/03/2020)   

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