WATFORD REPORTS 2020 FOURTH QUARTER RESULTS

PEMBROKE, Bermuda, February 9, 2021 -- (BUSINESS WIRE)-- WATFORD HOLDINGS LTD. (“Watford” or the “Company”) (NASDAQ: WTRE) today reported net income of $61.4 million, after $1.1 million of preference dividends, for the three months ended December 31, 2020, compared to net loss of $16.9 million, after $1.2 million of preference dividends for the same period in 2019. Book value per diluted common share was $47.08 at December 31, 2020, an increase of 8.3% from December 31, 2019. The quarterly results include:

•The 2020 fourth quarter net income available to common shareholders was $61.4 million, or $3.08 per diluted common share, a 6.8% return on average equity, compared to net loss of $16.9 million, or $(0.79) per diluted common share, for the 2019 fourth quarter;

•The 2020 full year net income available to common shareholders was $60.5 million, or $3.04 per diluted common share, a 7.8% return on average equity, compared to net income of $44.7 million, or $2.00 per diluted common share, a 4.8% return on average equity, for the 2019 full year;

•Combined ratio of 106.3%, comprised of a 76.5% loss ratio, a 25.6% acquisition expense ratio and a 4.2% general and administrative expense ratio for the 2020 fourth quarter, compared to a combined ratio of 128.3%, comprised of a 100.9% loss ratio, a 22.3% acquisition expense ratio and a 5.1% general and administrative expense ratio for the 2019 fourth quarter;

•Net interest income of $24.6 million, a 1.1% yield on average net assets for the 2020 fourth quarter, compared to net interest income of $29.8 million and a 1.4% yield on average net assets for the 2019 fourth quarter; and

•Net investment income of $84.4 million, a 3.8% return on average net assets for the 2020 fourth quarter, compared to net investment income of $32.1 million and a 1.5% return on average net assets for the 2019 fourth quarter.

Commenting on the 2020 fourth quarter financial results, Jon Levy, CEO of Watford, said:

“Watford's fourth quarter results continue to demonstrate the durability in our business model with another strong financial performance. Our net income for the quarter was $61.4 million, a 6.8% return on average equity for the quarter.

We are also pleased to report solid book value growth in 2020. Our ultimate objective is to grow book value per share over time, and despite a tumultuous and challenging environment for underwriting and investments, we have grown our book value per diluted common share by 8.3% in the year.

The quarter's results were driven by strong investment income, which totaled $84.4 million for the last three months of the year. This was achieved while we simultaneously decreased our total invested assets in our non-investment grade portfolio, continuing our efforts to reduce our capital's exposure to mark-to-market volatility.

Our combined ratio for the quarter was 106.3%, and 104.5% when adjusted for other underwriting income and certain corporate expenses.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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Market conditions improved further in the quarter, with rates moving positively particularly in our insurance platforms.”

Underwriting

The following table summarizes the Company’s underwriting results on a consolidated basis:

	Three Months Ended December 31,								Year Ended December 31,
	2020			2019			% Change		2020			2019			% Change
	($ in thousands)
Gross premiums written	$	138,237		$	156,254		(11.5)	%	$	728,546		$	754,881		(3.5)	%
Net premiums written	97,717			112,353			(13.0)	%	537,589			532,862			0.9	%
Net premiums earned	142,746			133,446			7.0	%	560,351			556,690			0.7	%
Underwriting income (loss) (1)	(9,054)			(37,819)			76.1	%	(34,013)			(54,076)			37.1	%
							% Point Change								% Point Change
Loss ratio	76.5		%	100.9		%	(24.4)	%	78.6		%	81.4		%	(2.8)	%
Acquisition expense ratio	25.6		%	22.3		%	3.3	%	22.4		%	22.8		%	(0.4)	%
General & administrative expense ratio	4.2		%	5.1		%	(0.9)	%	5.1		%	5.5		%	(0.4)	%
Combined ratio	106.3		%	128.3		%	(22.0)	%	106.1		%	109.7		%	(3.6)	%
Adjusted combined ratio (2)	104.5		%	126.4		%	(21.9)	%	103.7		%	107.3		%	(3.6)	%

(1) Underwriting income (loss) is a non-U.S. GAAP financial measure and is calculated as net premiums earned, less loss and loss adjustment expenses, acquisition expenses and general and administrative expenses. See “Comments on Regulation G” for further discussion, including a reconciliation of underwriting income (loss) to net income (loss) available to common shareholders.

(2) Adjusted combined ratio is a non-U.S. GAAP financial measure and is calculated by dividing the sum of loss and loss adjustment expenses, acquisition expenses and general and administrative expenses, less certain corporate expenses, by the sum of net premiums earned and other underwriting income (loss). See “Comments on Regulation G” for further discussion, including a reconciliation of our adjusted combined ratio to our combined ratio.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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The following table provides summary information regarding premiums written and earned by line of business:

	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
	($ in thousands)
Gross premiums written:
Casualty reinsurance	$	14,239	$	26,680	$	188,042	$	279,967
Other specialty reinsurance	27,668		34,931		117,177		119,518
Property catastrophe reinsurance	1,569		844		27,334		16,226
Insurance programs and coinsurance	94,761		93,799		395,993		339,170
Total	$	138,237	$	156,254	$	728,546	$	754,881
Net premiums written:
Casualty reinsurance	$	14,280	$	26,532	$	185,968	$	225,758
Other specialty reinsurance	26,091		33,078		111,575		114,876
Property catastrophe reinsurance	1,569		874		26,587		15,517
Insurance programs and coinsurance	55,777		51,869		213,459		176,711
Total	$	97,717	$	112,353	$	537,589	$	532,862
Net premiums earned:
Casualty reinsurance	$	49,715	$	55,352	$	205,192	$	238,437
Other specialty reinsurance	33,800		30,929		131,873		149,688
Property catastrophe reinsurance	5,740		3,692		23,037		13,399
Insurance programs and coinsurance	53,491		43,473		200,249		155,166
Total	$	142,746	$	133,446	$	560,351	$	556,690

The following table shows the components of our loss and loss adjustment expenses for the three months and years ended December 31, 2020 and 2019:

	Three Months Ended December 31,								Year Ended December 31,
	2020				2019				2020				2019
	Loss and Loss Adjustment Expenses		% of Earned Premiums		Loss and Loss Adjustment Expenses		% of Earned Premiums		Loss and Loss Adjustment Expenses		% of Earned Premiums		Loss and Loss Adjustment Expenses		% of Earned Premiums
	($ in thousands)
Current year	$	109,314	76.6	%	$	110,510	82.8	%	$	441,175	78.7	%	$	429,322	77.1	%
Prior year development (favorable)/adverse	(107)		(0.1)	%	24,145		18.1	%	(693)		(0.1)	%	23,813		4.3	%
Loss and loss adjustment expenses	$	109,207	76.5	%	$	134,655	100.9	%	$	440,482	78.6	%	$	453,135	81.4	%

Results for the three months ended December 31, 2020versus 2019:

Gross premiums written in the 2020 fourth quarter were 11.5% lower than the 2019 fourth quarter. The decrease in gross premiums written reflected a decrease in casualty reinsurance and other specialty reinsurance premiums written, offset in part by an increase in insurance programs and coinsurance and property catastrophe reinsurance in the 2020 fourth quarter.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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Casualty reinsurance gross premiums decreased $12.4 million, or 46.6%, to $14.2 million, over the prior year quarter. The decrease was driven by non-renewals of certain professional liability, workers' compensation and medical malpractice treaties.

Other specialty gross premiums decreased $7.3 million, or 20.8%, to $27.7 million, over the prior year quarter. The decrease was driven by a reduction in mortgage premiums as well as reduced writings in certain motor reinsurance cessions.

Net premiums written in the 2020 fourth quarter decreased $14.6 million, or 13.0%, to $97.7 million, over the prior year quarter. The drivers of the decrease in net premiums written for casualty and other specialty reinsurance were the same as those impacting gross premiums written, as discussed above. The insurance programs and coinsurance net premiums written increased $3.9 million as a result of an increased net retention on our U.K. motor insurance portfolio.

Net premiums earned in the 2020 fourth quarter increased $9.3 million, or 7.0%, to $142.7 million, over the prior year quarter. The increase in earned premiums primarily reflected increased writings in the U.S. insurance programs and coinsurance, increased European motor writings within other specialty reinsurance and, to a lesser extent, greater assumed property catastrophe reinsurance. This increase was offset in part by decreases in casualty reinsurance driven by reduced professional liability premium, as described above.

The loss ratio was 76.5% in the 2020 fourth quarter compared to 100.9% in the 2019 fourth quarter. In the 2020 fourth quarter, we had losses totaling $1.3 million, or 0.9 points for catastrophe events which occurred during the quarter. The 2019 fourth quarter loss ratio included 18.1 points of prior year and 2.9 points of current year loss strengthening, primarily in the casualty reinsurance line of business. Casualty reinsurance prior year loss reserves were strengthened in the 2019 fourth quarter by $24.0 million, primarily due to a higher than anticipated level of reported losses on one professional lines quota share treaty program and one non-renewed multi-line quota share treaty. In addition, the 2019 fourth quarter experienced $5.0 million, or 3.7 points, of catastrophe losses, primarily due to Typhoon Hagibis in Japan.

The acquisition expense ratio was 25.6% in the 2020 fourth quarter, compared to 22.3% in the 2019 fourth quarter. These ratio movements reflected changes in mix and the type of business.

The general and administrative expense ratio was 4.2% in the 2020 fourth quarter, compared to 5.1% in the 2019 fourth quarter. The 0.9 point decrease versus the prior year quarter was attributable to a reduction in professional fees. Removing certain corporate expenses, our adjusted general and administrative expense ratio was 2.8% in the 2020 fourth quarter, compared to 3.7% in the 2019 fourth quarter.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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Investments

The following table summarizes the Company’s key investment returns on a consolidated basis:

	Three Months Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019
	($ in thousands)
Interest income	$	31,560		$	40,775		$	140,390		$	163,888
Investment management fees - related parties	(4,199)			(4,807)			(17,193)			(18,392)
Borrowing and miscellaneous other investment expenses	(2,718)			(6,142)			(16,807)			(29,285)
Net interest income	24,643			29,826			106,390			116,211
Realized gains (losses) on investments	9,839			(10,664)			12,217			(7,948)
Unrealized gains (losses) on investments	60,234			16,769			7,412			32,191
Investment performance fees - related parties	(10,279)			(3,849)			(12,037)			(12,191)
Net investment income (loss)	$	84,437		$	32,082		$	113,982		$	128,263
Unrealized gains on investments (balance sheet)	$	81,653		$	47,203		$	81,653		$	47,203
Unrealized losses on investments (balance sheet)	(125,495)			(110,448)			(125,495)			(110,448)
Net unrealized gains (losses) on investments (balance sheet)	$	(43,842)		$	(63,245)		$	(43,842)		$	(63,245)
Net interest income yield on average net assets (1)	1.1		%	1.4		%	5.1		%	5.4		%
Non-investment grade portfolio (1)	1.5		%	1.7		%	6.7		%	6.8		%
Investment grade portfolio (1)	0.3		%	0.6		%	1.6		%	2.5		%
Net investment income return on average net assets (1)	3.8		%	1.5		%	5.4		%	6.0		%
Non-investment grade portfolio (1)	5.5		%	1.7		%	6.5		%	6.8		%
Investment grade portfolio (1)	0.4		%	0.9		%	3.0		%	3.9		%
Net investment income return on average total investments (excluding accrued investment income) (2)	3.3		%	1.2		%	4.4		%	4.6		%
Non-investment grade portfolio (2)	4.5		%	1.4		%	5.3		%	5.7		%
Investment grade portfolio (2)	0.4		%	0.9		%	3.0		%	3.9		%

(1) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. Net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. For the three- and twelve-month periods, average net assets is calculated using the averages of each quarterly period. However, for the investment grade portfolio component of these returns, revolving credit agreement borrowings are not subtracted from the net assets calculation. The separate components of these returns (non-investment grade portfolio and investment grade portfolio) are non-U.S. GAAP financial measures. See “Comments on Regulation G” for further discussion, including a reconciliation of these components of our net interest income yield on average net assets and net investment income return on average net assets.

(2) Net investment income return on average total investments (excluding accrued investment income) is calculated by dividing net investment income by average total investments. For the three- and twelve-month periods, average total investments is calculated using the averages of each quarterly period. The separate components of these returns (non-investment grade portfolio and investment grade portfolio) are non-U.S. GAAP financial measures. See “Comments on Regulation G” for further discussion, including a reconciliation of these components of our net investment income return on average total investments (excluding accrued investment income).

Results for the three months ended December 31, 2020versus 2019:

Net investment income was $84.4 million for the three months ended December 31, 2020 compared to net investment income of $32.1 million for the three months ended December 31, 2019, an increase of $52.3 million. The 2020 fourth quarter net investment income return on average net assets was 3.8% as compared to 1.5% for the prior year period.

The 2020 fourth quarter net investment income return was driven by net unrealized gains of $60.2 million and net realized gains of $9.8 million, as the non-investment grade credit spreads continued to tighten through the quarter. Net interest income decreased to $24.6 million from $29.8 million, a decrease of 17.4% compared to the prior year quarter.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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The 2020 fourth quarter non-investment grade portfolio net interest income yield on average net assets was 1.5%, a decrease from 1.7% in the fourth quarter of 2019. The reduced yield for the 2020 fourth quarter reflected a portfolio shift to higher rated investments and a decrease in LIBOR. The net realized and unrealized gains reported in the 2020 fourth quarter were $69.4 million, reflective of the credit spread recovery discussed above.

The 2020 fourth quarter investment grade portfolio net interest income yield on average net assets was 0.3%, a decrease from 0.6% in the fourth quarter of 2019. The reduced yield for the 2020 fourth quarter reflected a reduction in interest rates. In addition, the investment grade portfolio recognized $0.6 million of net realized and unrealized gains in the quarter, as compared to net realized and unrealized gains of $2.4 million in the fourth quarter of 2019.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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The following tables summarize the composition of the Company's non-investment grade and investment grade portfolios by sector as of December 31, 2020 and September 30, 2020:

	December 31, 2020
	Total		Financials		Health Care		Technology		Consumer Services		Industrials		Consumer Goods		Oil & Gas		All Other (1)
	($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments	$	851,539	$	191,608	$	162,255	$	159,747	$	79,477	$	131,820	$	24,079	$	29,679	$	72,874
Corporate bonds	312,620		26,565		23,929		53,493		81,990		21,899		18,759		34,955		51,030
Equities - sector specific	101,464		71,574		22,463		2,724		—		2,822		—		479		1,402
Short-term investments - sector specific	12,637		—		490		—		8,961		—		—		—		3,186
Subtotal	1,278,260		289,747		209,137		215,964		170,428		156,541		42,838		65,113		128,492
Equities - non-sector specific	16,737
Short-term investments - non-sector specific	288,753
Asset-backed securities	140,508
Total Non-Investment Grade Portfolio	$	1,724,258	$	289,747	$	209,137	$	215,964	$	170,428	$	156,541	$	42,838	$	65,113	$	128,492
Investment Grade Portfolio:
Corporate bonds	$	197,247	$	55,430	$	11,190	$	17,863	$	28,002	$	13,989	$	41,543	$	14,473	$	14,757
Short-term investments	117,300
U.S. government and government agency bonds	202,488
Non-U.S. government and government agency bonds	158,839
Asset-backed securities	80,258
Mortgage-backed securities	16,663
Municipal government and government agency bonds	1,788
Total Investment Grade Portfolio	$	774,583	$	55,430	$	11,190	$	17,863	$	28,002	$	13,989	$	41,543	$	14,473	$	14,757
Total Investments	$	2,498,841	$	345,177	$	220,327	$	233,827	$	198,430	$	170,530	$	84,381	$	79,586	$	143,249

(1) Includes telecommunications, utilities and basic materials.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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	September 30, 2020
	Total		Financials		Health Care		Technology		Consumer Services		Industrials		Consumer Goods		Oil & Gas		All Other (1)
	($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments	$	893,030	$	188,791	$	155,104	$	154,834	$	136,778	$	121,996	$	27,779	$	29,779	$	77,969
Corporate bonds	456,655		44,767		50,186		32,676		95,102		41,723		66,282		36,173		89,746
Equities - sector specific	96,641		63,740		21,812		7,168		—		2,437		—		311		1,173
Short-term investments - sector specific	2,265		—		443		1,822		—		—		—		—		—
Subtotal	1,448,591		297,298		227,545		196,500		231,880		166,156		94,061		66,263		168,888
Equities - non-sector specific	17,139
Short-term investments - non-sector specific	250,636
Asset-backed securities	164,990
Mortgage-backed securities	8,600
Total Non-Investment Grade Portfolio	$	1,889,956	$	297,298	$	227,545	$	196,500	$	231,880	$	166,156	$	94,061	$	66,263	$	168,888
Investment Grade Portfolio:
Corporate bonds	$	193,357	$	52,606	$	10,390	$	18,844	$	24,440	$	14,713	$	42,506	$	15,221	$	14,637
Short-term investments	97,490
U.S. government and government agency bonds	203,452
Non-U.S. government and government agency bonds	150,782
Asset-backed securities	84,701
Mortgage-backed securities	18,115
Municipal government and government agency bonds	1,793
Total Investment Grade Portfolio	$	749,690	$	52,606	$	10,390	$	18,844	$	24,440	$	14,713	$	42,506	$	15,221	$	14,637
Total Investments	$	2,639,646	$	349,904	$	237,935	$	215,344	$	256,320	$	180,869	$	136,567	$	81,484	$	183,525

(1) Includes telecommunications, utilities and basic materials.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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The tables below summarize the credit quality of the Company's non-investment grade and investment grade portfolios as of December 31, 2020 and September 30, 2020, as rated by Standard & Poor’s Financial Services, LLC, or Standard & Poor’s, Moody’s Investors Service, or Moody’s, Fitch Ratings Inc., or Fitch, Kroll Bond Rating Agency, or KBRA, or DBRS Morningstar, or DBRS, as applicable:

	Credit Rating (1)
December 31, 2020	Fair Value		AAA		AA		A		BBB		BB		B		CCC		CC		C		Not Rated
	($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments	$	851,539	$	—	$	—	$	—	$	11,352	$	19,486	$	588,215	$	185,221	$	7,406	$	2,727	$	37,132
Corporate bonds	312,620		—		—		—		—		31,089		194,418		59,421		8,280		1,894		17,518
Asset-backed securities	140,508		—		—		—		73,911		26,799		8,385		8,262		837		—		22,314
Short-term investments	301,390		83,308		124,830		89,577		—		—		3,186		489		—		—		—
Total fixed income instruments and short-term investments	1,606,057		83,308		124,830		89,577		85,263		77,374		794,204		253,393		16,523		4,621		76,964
Equities	118,201
Total Non-Investment Grade Portfolio	$	1,724,258	$	83,308	$	124,830	$	89,577	$	85,263	$	77,374	$	794,204	$	253,393	$	16,523	$	4,621	$	76,964
Investment Grade Portfolio:
Corporate bonds	$	197,247	$	—	$	19,812	$	82,379	$	87,913	$	7,143	$	—	$	—	$	—	$	—	$	—
U.S. government and government agency bonds	202,488		—		202,488		—		—		—		—		—		—		—		—
Asset-backed securities	80,258		—		—		15,675		59,560		5,023		—		—		—		—		—
Mortgage-backed securities	16,663		—		—		2,092		14,571		—		—		—		—		—		—
Non-U.S. government and government agency bonds	158,839		—		158,839		—		—		—		—		—		—		—		—
Municipal government and government agency bonds	1,788		783		592		413		—		—		—		—		—		—		—
Short-term investments	117,300		6,211		43,870		19,328		47,891		—		—		—		—		—		—
Total Investment Grade Portfolio	$	774,583	$	6,994	$	425,601	$	119,887	$	209,935	$	12,166	$	—	$	—	$	—	$	—	$	—
Total	$	2,498,841	$	90,302	$	550,431	$	209,464	$	295,198	$	89,540	$	794,204	$	253,393	$	16,523	$	4,621	$	76,964

(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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	Credit Rating (1)
September 30, 2020	Fair Value		AAA		AA		A		BBB		BB		B		CCC		CC		C		D		Not Rated
	($ in thousands)
Non-Investment Grade Portfolio:
Term loan investments	$	893,030	$	—	$	—	$	—	$	11,074	$	27,214	$	533,876	$	233,186	$	8,970	$	4,469	$	13,325	$	60,916
Corporate bonds	456,655		—		—		—		14,037		68,968		207,670		126,388		6,070		1,171		14,415		17,936
Asset-backed securities	164,990		—		—		5,989		88,704		28,452		9,277		8,667		842		—		—		23,059
Mortgage-backed securities	8,600		—		—		—		—		1,182		—		—		—		—		3,149		4,269
Short-term investments	252,901		54,458		132,306		63,871		—		—		—		443		—		—		—		1,823
Total fixed income instruments and short-term investments	1,776,176		54,458		132,306		69,860		113,815		125,816		750,823		368,684		15,882		5,640		30,889		108,003
Other Investments	—
Equities	113,780
Total Non-Investment Grade Portfolio	$	1,889,956	$	54,458	$	132,306	$	69,860	$	113,815	$	125,816	$	750,823	$	368,684	$	15,882	$	5,640	$	30,889	$	108,003
Investment Grade Portfolio:
Corporate bonds	$	193,357	$	—	$	20,016	$	87,672	$	80,678	$	4,991	$	—	$	—	$	—	$	—	$	—	$	—
U.S. government and government agency bonds	203,452		—		203,452		—		—		—		—		—		—		—		—		—
Asset-backed securities	84,701		—		—		16,757		63,216		4,728		—		—		—		—		—		—
Mortgage-backed securities	18,115		—		—		1,733		16,382		—		—		—		—		—		—		—
Non-U.S. government and government agency bonds	150,782		—		150,782		—		—		—		—		—		—		—		—		—
Municipal government and government agency bonds	1,793		784		595		414		—		—		—		—		—		—		—		—
Short-term investments	97,490		5,116		43,889		—		48,485		—		—		—		—		—		—		—
Total Investment Grade Portfolio	$	749,690	$	5,900	$	418,734	$	106,576	$	208,761	$	9,719	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	2,639,646	$	60,358	$	551,040	$	176,436	$	322,576	$	135,535	$	750,823	$	368,684	$	15,882	$	5,640	$	30,889	$	108,003

(1) For individual fixed maturity investments, Standard & Poor’s ratings are used. In the absence of a Standard & Poor’s rating, ratings from Moody’s are used, followed by ratings from Fitch, followed by ratings from KBRA, followed by ratings from DBRS.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-10-

Corporate Function

The Company has a corporate function that includes general and administrative expenses related to corporate activities, interest expense, transaction costs and other, net foreign exchange gains (losses), income tax expense and items related to the Company’s contingently redeemable preference shares.

The Company incurred an interest expense of $2.9 million and $3.0 million for the three months ended December 31, 2020 and 2019, respectively, in relation to the Company’s 6.5% senior notes issued on July 2, 2019. Interest is paid semi-annually in arrears on January 2 and July 2.

Preference dividends were $1.1 million and $1.2 million for the three months ended December 31, 2020 and 2019, respectively.

During the 2020 fourth quarter, the Company incurred $4.0 million of transaction costs, which included various legal, advisory and other consulting costs associated with the previously announced Merger Agreement between the Company and Arch Capital Group Ltd. (“Arch”).

There were no common share repurchases during the 2020 fourth quarter. As of December 31, 2020, approximately $47.1 million of share repurchases were available under the Company’s previously announced $50 million share repurchase program. The Company does not anticipate making any further repurchases under its current share repurchase program due to its pending acquisition by Greysbridge Holdings Ltd. (“HoldCo”), a newly-formed company organized by Arch.

Conference Call

The Company will not hold a conference call to discuss its 2020 fourth quarter results due to the previously announced Merger Agreement between the Company and Arch.

About Watford Holdings Ltd.

Watford Holdings Ltd. is a global property and casualty insurance and reinsurance company with approximately $1.2 billion in capital as of December 31, 2020, comprised of: $172.7 million of senior notes, $52.4 million of contingently redeemable preference shares and $941.3 million of common shareholders’ equity, with operations in Bermuda, the United States and Europe. Its operating subsidiaries have been assigned financial strength ratings of “A-” (Excellent) from A.M. Best and “A” with an Outlook of Negative from KBRA. On November 19, 2020, A.M. Best announced that it has maintained its “under review with negative implications” status for the financial strength ratings of our operating subsidiaries.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-11-

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	(Unaudited)
	December 31,		December 31,
	2020		2019
Assets	($ in thousands)
Investments:
Term loans, fair value option (Amortized cost: $890,996 and $1,113,212)	$	851,539	$	1,061,934
Fixed maturities, fair value option (Amortized cost: $477,548 and $432,576)	455,162		416,594
Short-term investments, fair value option (Cost: $412,762 and $325,542)	418,690		329,303
Equity securities, fair value option	64,994		59,799
Other investments, fair value option	—		30,461
Investments, fair value option	1,790,385		1,898,091
Fixed maturities, available for sale (Amortized cost: $638,075 and $739,456)	655,249		745,708
Equity securities, fair value through net income	53,207		65,338
Total investments	2,498,841		2,709,137
Cash and cash equivalents	211,451		102,437
Accrued investment income	14,679		14,025
Premiums receivable	224,377		273,657
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses	286,590		170,974
Prepaid reinsurance premiums	122,339		132,577
Deferred acquisition costs, net	53,705		64,044
Receivable for securities sold	37,423		16,288
Intangible assets	7,650		7,650
Funds held by reinsurers	45,989		42,505
Other assets	29,016		17,562
Total assets	$	3,532,060	$	3,550,856
Liabilities
Reserve for losses and loss adjustment expenses	$	1,519,583	$	1,263,628
Unearned premiums	407,714		438,907
Losses payable	59,397		61,314
Reinsurance balances payable	63,269		77,066
Payable for securities purchased	16,916		18,180
Payable for securities sold short	21,975		66,257
Revolving credit agreement borrowings	211,640		484,287
Senior notes	172,689		172,418
Amounts due to affiliates	7,708		4,467
Investment management and performance fees payable	21,641		17,762
Other liabilities	35,786		21,912
Total liabilities	$	2,538,318	$	2,626,198
Commitments and contingencies
Contingently redeemable preference shares	52,398		52,305
Shareholders’ equity
Common shares ($0.01 par; shares authorized: 120 million; shares issued: 22,804,128 and 22,692,300)	228		227
Additional paid-in capital	899,491		898,083
Retained earnings (deficit)	103,554		43,470
Accumulated other comprehensive income (loss)	15,994		5,629
Common shares held in treasury, at cost (shares: 2,917,149 and 2,789,405)	(77,923)		(75,056)
Total shareholders’ equity	941,344		872,353
Total liabilities, contingently redeemable preference shares and shareholders’ equity	$	3,532,060	$	3,550,856

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-12-

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	(Unaudited)				(Unaudited)
	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
Revenues	($ in thousands except share and per share data)
Gross premiums written	$	138,237	$	156,254	$	728,546	$	754,881
Gross premiums ceded	(40,520)		(43,901)		(190,957)		(222,019)
Net premiums written	97,717		112,353		537,589		532,862
Change in unearned premiums	45,029		21,093		22,762		23,828
Net premiums earned	142,746		133,446		560,351		556,690
Other underwriting income (loss)	498		568		2,045		2,412
Interest income	31,560		40,775		140,390		163,888
Investment management fees - related parties	(4,199)		(4,807)		(17,193)		(18,392)
Borrowing and miscellaneous other investment expenses	(2,718)		(6,142)		(16,807)		(29,285)
Net interest income	24,643		29,826		106,390		116,211
Realized and unrealized gains (losses) on investments	70,073		6,105		19,629		24,243
Investment performance fees - related parties	(10,279)		(3,849)		(12,037)		(12,191)
Net investment income (loss)	84,437		32,082		113,982		128,263
Total revenues	227,681		166,096		676,378		687,365
Expenses
Loss and loss adjustment expenses	(109,207)		(134,655)		(440,482)		(453,135)
Acquisition expenses	(36,578)		(29,785)		(125,541)		(126,788)
General and administrative expenses	(6,015)		(6,825)		(28,341)		(30,843)
Interest expense	(2,912)		(2,950)		(11,647)		(5,791)
Net foreign exchange gains (losses)	(6,139)		(7,536)		(1,387)		(8,247)
Transaction costs and other	(4,040)		—		(4,040)		—
Total expenses	(164,891)		(181,751)		(611,438)		(624,804)
Income (loss) before income taxes	62,790		(15,655)		64,940		62,561
Income tax expense	(359)		—		(26)		(20)
Net income (loss) before preference dividends and redemption costs	62,431		(15,655)		64,914		62,541
Preference dividends	(1,061)		(1,209)		(4,402)		(13,632)
Accelerated amortization of costs related to the redemption of preference shares	—		—		—		(4,164)
Net income (loss) available to common shareholders	$	61,370	$	(16,864)	$	60,512	$	44,745
Other comprehensive income (loss) net of income tax:
Available-for-sale investments:
Unrealized holding gains (losses) arising during the period	$	7,255	$	(1,749)	$	16,695	$	12,649
Unrealized foreign currency gains (losses) arising during the period	7,051		7,596		5,360		3,372
Credit loss recognized in net income (loss)	(213)		—		197		—
Reclassification of net realized (gains) losses, net of income taxes, included in net income (loss)	(765)		(2,146)		(11,133)		(5,611)
Unrealized holding gains (losses) of available for sale investments	13,328		3,701		11,119		10,410
Foreign currency translation adjustments	(531)		(384)		(754)		(51)
Other comprehensive income (loss) net of income tax	12,797		3,317		10,365		10,359
Comprehensive income (loss)	$	74,167	$	(13,547)	$	70,877	$	55,104
Earnings (loss) per share:
Basic	$	3.09	$	(0.79)	$	3.04	$	2.00
Diluted	$	3.08	$	(0.79)	$	3.04	$	2.00
Weighted average number of ordinary shares used in the determination of earnings (loss) per share:
Basic	19,890,784		21,277,287		19,899,137		22,366,682
Diluted	19,952,166		21,277,287		19,921,231		22,373,968

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-13-

	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
Numerator:	($ in thousands except share and per share data)
Net income (loss) before preference dividends and redemption costs	$	62,431	$	(15,655)	$	64,914	$	62,541
Preference dividends	(1,061)		(1,209)		(4,402)		(13,632)
Accelerated amortization of costs related to the redemption of preference shares	—		—		—		(4,164)
Net income (loss) available to common shareholders	$	61,370	$	(16,864)	$	60,512	$	44,745
Denominator:
Weighted average common shares outstanding - basic	19,890,784		21,277,287		19,899,137		22,366,682
Effect of dilutive common share equivalents:
Weighted average non-vested restricted share units (1)	61,382		—		22,094		7,286
Weighted average common shares outstanding - diluted	19,952,166		21,277,287		19,921,231		22,373,968
Earnings (loss) per common share:
Basic	$	3.09	$	(0.79)	$	3.04	$	2.00
Diluted	$	3.08	$	(0.79)	$	3.04	$	2.00

(1) The weighted average non-vested restricted share units are excluded from the calculation of diluted weighted average common shares outstanding for the three months ended December 31, 2019, due to a net loss reported.

	December 31, 2020		September 30, 2020		June 30, 2020 (1)		March 31, 2020 (2)		December 31, 2019
Numerator:	($ in thousands except share and per share data)
Total shareholders’ equity	$	941,344	$	866,899	$	776,151	$	564,054	$	872,353
Denominator:
Common shares outstanding - basic (1)(2)	19,890,784		19,890,784		19,890,784		19,863,328		19,976,397
Effect of dilutive common share equivalents:
Non-vested restricted share units (2)	103,820		103,820		103,820		131,277		82,360
Common shares outstanding - diluted	19,994,604		19,994,604		19,994,604		19,994,605		20,058,757
Book value per common share	$47.33		$43.58		$39.02		$28.40		$43.67
Book value per diluted common share	$47.08		$43.36		$38.82		$28.21		$43.49

(1) During the second quarter of 2020, the Company issued 100,958 common shares, related to the restricted share units granted to certain employees and directors in the second quarter of 2019. Of these shares, 27,456 common shares vested in the second quarter of 2020.

(2) During the first quarter of 2020, the Company granted 63,591 restricted share units and common shares to certain employees and directors, 48,916 of which are non-vested as of December 31, 2020.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-14-

Comments on Regulation G

Throughout this release, the Company presents its operations in the way it believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use the Company’s financial information in evaluating the performance of the Company and that investors and such other persons benefit from having a consistent basis for comparison between quarters and for comparison with other companies within the industry. These measures may not, however, be comparable to similarly titled measures used by companies outside of the insurance industry. Investors are cautioned not to place undue reliance on these non-U.S. GAAP financial measures in assessing the Company’s overall financial performance.

This presentation includes the use of “underwriting income (loss)” (which is defined as net premiums earned less loss and loss adjustment expenses, acquisition expenses and general and administrative expenses), “adjusted underwriting income (loss)” (which is defined as underwriting income (loss) plus other underwriting income (loss) less certain corporate expenses), and “adjusted combined ratio” (which is calculated by dividing the sum of loss and loss adjustment expenses, acquisition expenses and general and administrative expenses, less certain corporate expenses, by the sum of net premiums earned and other underwriting income (loss)). Certain corporate expenses are generally comprised of certain non-recurring costs associated with the ongoing operations of the holding company, such as compensation of certain executives and costs associated with the initial setup of subsidiaries.

The presentation of underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio are non-U.S. GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net income (loss) available to common shareholders (the most directly comparable U.S. GAAP financial measure) in accordance with Regulation G is included on the following pages of this release.

Underwriting income (loss) is useful in evaluating our underwriting performance, without regard to other underwriting income (losses), net investment income (losses), net foreign exchange gains (losses), interest expense, transaction costs and other, income tax expenses and preference dividends, and adjusted underwriting income (loss) is useful in evaluating our underwriting performance, without regard to net investment income (losses), net foreign exchange gains (losses), interest expense, transaction costs and other, income tax expenses, preference dividends and certain corporate expenses, and the adjusted combined ratio is a key indicator of our profitability, without regard to certain corporate expenses. The Company believes that preference dividends, income tax expense, foreign exchange gains (losses), transaction cost and other, interest expense, net investment income (loss), other underwriting income (loss) and certain corporate expenses in any particular period are not indicative of the performance of, or trends in, the Company’s underwriting performance. Although preference dividends, income tax expense, foreign exchange gains (losses), transaction costs and other, interest expense, net investment income (loss) and other underwriting income (loss) are an integral part of the Company’s operations, the decision to realize investment gains or losses, the recognition of the change in the carrying value of investments accounted for using the fair value option in net realized gains or losses, and the recognition of foreign exchange gains or losses are independent of the underwriting process and result, in large part, from general economic and financial market conditions. Furthermore, certain users of the Company’s financial information believe that, for many companies, the timing of the realization of investment gains or losses is largely opportunistic. The Company believes that certain corporate expenses, due to their non-recurring nature, are not indicative of the performance of, or trends in, the Company’s business performance. Due to these reasons, the Company excludes preference dividends, income tax expense, foreign exchange gains (losses), transaction costs and other, interest expense, net investment income (loss), other underwriting income (loss) from the calculation of underwriting income (loss), and excludes preference dividends, income tax expense, foreign exchange gains (losses), transaction costs and other, interest expense, net investment income (loss) and certain

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-15-

corporate expenses from the calculation of adjusted underwriting income (loss) and the adjusted combined ratio.

The Company believes that showing underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio exclusive of the items referred to above reflects the underlying fundamentals of the Company’s business since the Company evaluates the performance of its business using underwriting income (loss), adjusted underwriting income (loss) and the adjusted combined ratio. The Company believes that this presentation enables investors and other users of the Company’s financial information to analyze the Company’s performance in a manner similar to how the Company’s management analyzes performance. The Company also believes that this measure follows industry practice and, therefore, allows the users of the Company’s financial information to compare the Company’s performance with its industry peer group. The Company believes that the equity analysts and certain rating agencies, which follow the Company and the insurance industry as a whole generally exclude these items from their analysis for the same reasons.

This presentation also includes the non-investment grade portfolio and investment grade portfolio components of our investment returns: “net interest income yield on average net assets” (calculated as net interest income divided by average net assets), “net investment income return on average total investments (excluding accrued investment income)” (calculated as net investment income divided by average total investments), and “net investment income return on average net assets” (calculated as net investment income divided by average net assets). Net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less revolving credit agreement borrowings, payable for securities purchased and payables for securities sold short. For the three- and twelve-month periods, average net assets is calculated using the averages of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss) or the net assets calculation.

The presentation of the separate components of our investment returns (non-investment grade portfolio and investment grade portfolio) are non-U.S. GAAP financial measures as defined in Regulation G. The reconciliation of such measures to net interest income and net investment income (loss), the most directly comparable U.S. GAAP financial measures, in accordance with Regulation G is included on the following pages of this release.

The non-investment grade portfolio and investment grade portfolio components of our investment returns (net interest income yield on average net assets, net investment income return on average net assets and on average total investments (excluding accrued investment income), respectively) are useful in evaluating our investment performance. The non-investment grade portfolio components of these investment returns reflect the performance of our investment strategy under HPS Investment Partners, LLC (“HPS”), which includes the use of leverage. The investment grade portfolio component of these returns reflects the performance of the investment portfolios that predominantly support our underwriting collateral.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-16-

The following tables present a reconciliation of underwriting income (loss) to net income (loss) available to common shareholders, and a reconciliation of adjusted underwriting income (loss) to underwriting income (loss):

	Three Months Ended December 31,				Year Ended December 31,
	2020		2019		2020		2019
	($ in thousands)
Net income (loss) available to common shareholders	$	61,370	$	(16,864)	$	60,512	$	44,745
Preference dividends	1,061		1,209		4,402		13,632
Accelerated amortization of costs related to the redemption of preference shares	—		—		—		4,164
Net income (loss) before preference dividends and redemption costs	62,431		(15,655)		64,914		62,541
Income tax expense	359		—		26		20
Interest expense	2,912		2,950		11,647		5,791
Transaction costs and other	4,040		—		4,040		—
Net foreign exchange (gains) losses	6,139		7,536		1,387		8,247
Net investment (income) loss	(84,437)		(32,082)		(113,982)		(128,263)
Other underwriting (income) loss	(498)		(568)		(2,045)		(2,412)
Underwriting income (loss)	(9,054)		(37,819)		(34,013)		(54,076)
Certain corporate expenses	2,102		1,882		11,133		10,812
Other underwriting income (loss)	498		568		2,045		2,412
Adjusted underwriting income (loss)	$	(6,454)	$	(35,369)	$	(20,835)	$	(40,852)

The adjusted combined ratio reconciles to the combined ratio for the three months and years ended December 31, 2020 and 2019 as follows:

	Three Months Ended December 31,
	2020								2019
	Amount			Adjustment		As Adjusted			Amount			Adjustment		As Adjusted
	($ in thousands)
Losses and loss adjustment expenses	$	109,207		$	—	$	109,207		$	134,655		$	—	$	134,655
Acquisition expenses	36,578			—		36,578			29,785			—		29,785
General & administrative expenses (1)	6,015			(2,102)		3,913			6,825			(1,882)		4,943
Net premiums earned (1)	142,746			498		143,244			133,446			568		134,014
Loss ratio	76.5		%						100.9		%
Acquisition expense ratio	25.6		%						22.3		%
General & administrative expense ratio	4.2		%						5.1		%
Combined ratio	106.3		%						128.3		%
Adjusted loss ratio						76.2		%						100.5		%
Adjusted acquisition expense ratio						25.5		%						22.2		%
Adjusted general & administrative expense ratio						2.8		%						3.7		%
Adjusted combined ratio						104.5		%						126.4		%

(1) Adjustments include certain corporate expenses, which are deducted from general and administrative expenses, and other underwriting income (loss), which is added to net premiums earned.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-17-

	Year Ended December 31,
	2020								2019
	Amount			Adjustment		As Adjusted			Amount			Adjustment		As Adjusted
	($ in thousands)
Losses and loss adjustment expenses	$	440,482		$	—	$	440,482		$	453,135		$	—	$	453,135
Acquisition expenses	125,541			—		125,541			126,788			—		126,788
General & administrative expenses (1)	28,341			(11,133)		17,208			30,843			(10,812)		20,031
Net premiums earned (1)	560,351			2,045		562,396			556,690			2,412		559,102
Loss ratio	78.6		%						81.4		%
Acquisition expense ratio	22.4		%						22.8		%
General & administrative expense ratio	5.1		%						5.5		%
Combined ratio	106.1		%						109.7		%
Adjusted loss ratio						78.3		%						81.0		%
Adjusted acquisition expense ratio						22.3		%						22.7		%
Adjusted general & administrative expense ratio						3.1		%						3.6		%
Adjusted combined ratio						103.7		%						107.3		%

(1) Adjustments include certain corporate expenses, which are deducted from general and administrative expenses, and other underwriting income (loss), which is added to net premiums earned.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-18-

The following tables summarize the components of our total investment return for the three months and years ended December 31, 2020 and 2019:

	Three Months Ended December 31, 2020												Three Months Ended December 31, 2019
	Non-Investment Grade			Investment Grade			Cost of U/W Collateral (4)			Total			Non-Investment Grade			Investment Grade			Cost of U/W Collateral (4)			Total
	($ in thousands)
Interest income	$	28,857		$	2,703		$	—		$	31,560		$	34,435		$	6,340		$	—		$	40,775
Investment management fees - related parties	(3,877)			(322)			—			(4,199)			(4,431)			(376)			—			(4,807)
Borrowing and miscellaneous other investment expenses	(2,280)			(318)			(120)			(2,718)			(2,807)			(316)			(3,019)			(6,142)
Net interest income	22,700			2,063			(120)			24,643			27,197			5,648			(3,019)			29,826
Net realized gains (losses) on investments	9,196			643			—			9,839			(13,539)			2,875			—			(10,664)
Net unrealized gains (losses) on investments (1)	60,238			(4)			—			60,234			17,283			(514)			—			16,769
Investment performance fees - related parties	(10,279)			—			—			(10,279)			(3,849)			—			—			(3,849)
Net investment income (loss)	$	81,855		$	2,702		$	(120)		$	84,437		$	27,092		$	8,009		$	(3,019)		$	32,082
Average total investments (2)	$	1,807,107		$	762,137		$	—		$	2,569,244		$	1,869,300		$	870,208		$	—		$	2,739,508
Average net assets (3)	$	1,497,478		$	764,930		$	(24,750)		$	2,237,658		$	1,635,302		$	872,771		$	(328,750)		$	2,179,323
Net interest income yield on average net assets (3)	1.5		%	0.3		%				1.1		%	1.7		%	0.6		%				1.4		%
Net investment income return on average total investments (excluding accrued investment income) (2)	4.5		%	0.4		%				3.3		%	1.4		%	0.9		%				1.2		%
Net investment income return on average net assets (3)	5.5		%	0.4		%	(0.5)		%	3.8		%	1.7		%	0.9		%	(0.9)		%	1.5		%

(1) Net unrealized gains (losses) on investments excludes unrealized gains and losses from the available for sale portfolios, which are recorded in other comprehensive income.

(2) Net investment income return on average total investments (excluding accrued investment income) is calculated by dividing net investment income by average total investments. For the three-month period, average total investments is calculated using the average of the beginning and ending balance of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of revolving credit agreement borrowings is not subtracted from net investment income.

(3) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. For the non-investment grade component of investment returns and total investment returns, net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less total revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss), or the net assets calculation.

(4) The cost of underwriting collateral is calculated as the revolving credit agreement expenses for the investment grade portfolios divided by the average total revolving credit agreement borrowings for the investment grade portfolios during the period.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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	Twelve Months Ended December 31, 2020,												Twelve Months Ended December 31, 2019,
	Non-Investment Grade			Investment Grade			Cost of U/W Collateral (4)			Total			Non-Investment Grade			Investment Grade			Cost of U/W Collateral (4)			Total
	($ in thousands)
Interest income	$	125,504		$	14,886		$	—		$	140,390		$	139,280		$	24,608		$	—		$	163,888
Investment management fees - related parties	(15,817)			(1,376)			—			(17,193)			(16,877)			(1,515)			—			(18,392)
Borrowing and miscellaneous other investment expenses	(10,290)			(1,025)			(5,492)			(16,807)			(15,047)			(983)			(13,255)			(29,285)
Net interest income	99,397			12,485			(5,492)			106,390			107,356			22,110			(13,255)			116,211
Net realized gains (losses) on investments	1,190			11,027			—			12,217			(13,147)			5,199			—			(7,948)
Net unrealized gains (losses) on investments (1)	7,369			43			—			7,412			24,729			7,462			—			32,191
Investment performance fees - related parties	(12,037)			—			—			(12,037)			(12,191)			—			—			(12,191)
Net investment income (loss)	$	95,919		$	23,555		$	(5,492)		$	113,982		$	106,747		$	34,771		$	(13,255)		$	128,263
Average total investments (2)	$1,812,010			$786,937			$	—		$2,598,947			$1,872,835			$900,641			$	—		$2,773,476
Average net assets (3)	$1,484,777			$791,754			$(173,500)			$2,103,031			$1,568,980			$900,069			$(325,527)			$2,143,522
Net interest income yield on average net assets (3)	6.7		%	1.6		%				5.1		%	6.8		%	2.5		%				5.4		%
Net investment income return on average total investments (excluding accrued investment income) (2)	5.3		%	3.0		%				4.4		%	5.7		%	3.9		%				4.6		%
Net investment income return on average net assets (3)	6.5		%	3.0		%	(3.2)		%	5.4		%	6.8		%	3.9		%	(4.1)		%	6.0		%

(1) Net unrealized gains (losses) on investments excludes unrealized gains and losses from the available for sale portfolios, which are recorded in other comprehensive income.

(2) Net investment income return on average total investments (excluding accrued investment income) is calculated by dividing net investment income by average total investments. For the twelve-month period, average total investments is calculated using the average of the beginning and ending balance of each quarterly period. However, for the investment grade portfolio component of these returns, the impact of revolving credit agreement borrowings is not subtracted from net investment income.

(3) Net interest income yield on average net assets and net investment income return on average net assets are calculated by dividing net interest income, and net investment income (loss), respectively, by average net assets. For the non-investment grade component of investment returns and total investment returns, net assets is calculated as the sum of total investments, accrued investment income and receivables for securities sold, less total revolving credit agreement borrowings, payable for securities purchased and payable for securities sold short. However, for the investment grade portfolio component of these returns, the impact of the revolving credit agreement borrowings is not subtracted from net interest income, net investment income (loss), or the net assets calculation.

(4) The cost of underwriting collateral is calculated as the revolving credit agreement expenses for the investment grade portfolios divided by the average total revolving credit agreement borrowings for the investment grade portfolios during the period.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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	As of December 31, 2020									As of December 31, 2019
	Non-Investment Grade			Investment Grade		Borrowings for U/W Collateral		Total		Non-Investment Grade			Investment Grade		Borrowings for U/W Collateral		Total
	($ in thousands)
Average total investments - QTD	$	1,807,107		$	762,137	$	—	$	2,569,244	$	1,869,300		$	870,208	$	—	$	2,739,508
Average total investments - YTD	1,812,010			786,937		—		2,598,947		1,872,835			900,641		—		2,773,476
Average net assets - QTD	1,497,478			764,930		(24,750)		2,237,658		1,635,302			872,771		(328,750)		2,179,323
Average net assets - YTD	1,484,777			791,754		(173,500)		2,103,031		1,568,980			900,069		(325,527)		2,143,522
Total investments	$	1,724,258		$	774,583	$	—	$	2,498,841	$	1,862,253		$	846,884	$	—	$	2,709,137
Accrued investment income	11,640			3,039		—		14,679		9,679			4,346		—		14,025
Receivable for securities sold	37,412			11		—		37,423		16,275			13		—		16,288
Less: Payable for securities purchased	16,916			—		—		16,916		18,180			—		—		18,180
Less: Payable for securities sold short	21,975			—		—		21,975		66,257			—		—		66,257
Less: Revolving credit agreement borrowings	186,890			—		24,750		211,640		155,537			—		328,750		484,287
Net assets	$	1,547,529		$	777,633	$	(24,750)	$	2,300,412	$	1,648,233		$	851,243	$	(328,750)	$	2,170,726
Non-investment grade borrowing ratio (1)	12.1		%							9.4		%
Unrealized gains on investments	$	59,501		$	22,152	$	—	$	81,653	$	38,057		$	9,146	$	—	$	47,203
Unrealized losses on investments	(120,891)			(4,604)		—		(125,495)		(108,444)			(2,004)		—		(110,448)
Net unrealized gains (losses) on investments	$	(61,390)		$	17,548	$	—	$	(43,842)	$	(70,387)		$	7,142	$	—	$	(63,245)

(1) The non-investment grade borrowing ratio is calculated as revolving credit agreement borrowings divided by net assets.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

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Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “PSLRA”) provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of the Company may include forward-looking statements, which reflect the Company’s current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements. Forward-looking statements, for purposes of the PSLRA or otherwise, can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” and similar statements of a future or forward-looking nature or their negative or variations or similar terminology. These forward-looking statements include statements regarding the Company’s return on equity potential and prospects for further book value growth.

Forward-looking statements involve the Company’s current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements. Important factors that could cause actual events or results to differ materially from those indicated in such statements are discussed below and elsewhere in this release and in the Company’s periodic reports filed with the Securities and Exchange Commission (the “SEC”), and include:

◦our limited operating history;

◦fluctuations in the results of our operations;

◦our ability to compete successfully with more established competitors;

◦our losses exceeding our reserves;

◦downgrades, potential downgrades or other negative actions by rating agencies, including A.M. Best’s announcement that it has placed under review with negative implications the financial strength and credit ratings of our operating subsidiaries;

◦our dependence on key executives and inability to attract qualified personnel, or the potential loss of Bermudian personnel as a result of Bermuda employment restrictions;

◦our dependence on letter of credit facilities that may not be available on commercially acceptable terms;

◦our potential inability to pay dividends or distributions;

◦our potential need for additional capital in the future and the potential unavailability of such capital to us on favorable terms or at all;

◦our dependence on clients’ evaluations of risks associated with such clients’ insurance underwriting;

◦the suspension or revocation of our subsidiaries’ insurance licenses;

◦Watford Holdings potentially being deemed an investment company under U.S. federal securities law;

◦the potential characterization of us and/or any of our subsidiaries as a passive foreign investment company (“PFIC”);

◦our dependence on certain subsidiaries of Arch for services critical to our underwriting operations;

◦changes to our strategic relationship with Arch or the termination by Arch of any of our services agreements or quota share agreements;

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-22-

◦our dependence on HPS and Arch Investment Management Ltd. (“AIM”) to implement our investment strategy;

◦the termination by HPS or AIM of any of our investment management agreements;

◦risks associated with our investment strategy being greater than those faced by competitors;

◦changes in the regulatory environment;

◦our potentially becoming subject to U.S. federal income taxation;

◦our potentially becoming subject to U.S. withholding and information reporting requirements under the U.S. Foreign Account Tax Compliance Act (“FATCA”) provisions;

◦our ability to complete acquisitions and integrate businesses successfully;

◦adverse general, societal, economic and market conditions, including those caused by pandemics, including COVID-19, and government actions in response thereto;

◦uncertainties regarding the proposed acquisition of the Company by HoldCo;

◦legal proceedings that have been, and additional proceedings that may be initiated against the Company or its directors related to the proposed transaction with HoldCo;

◦the business of the Company may suffer as a result of uncertainty surrounding the proposed transaction with HoldCo, and there may be challenges with employee retention as a result of the proposed transaction with HoldCo;

◦the proposed transaction with HoldCo may involve unexpected costs, liabilities or delays; and

◦the other matters set forth under Item 1A “Risk Factors,” Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other sections of the Company’s Annual Report on Form 10-K, as well as the other factors set forth in the Company’s other documents on file with the SEC, and management’s response to any of the aforementioned factors.

◦There continues to be significant uncertainties surrounding the ultimate number of insurance claims and scope of damage resulting from the COVID-19 global pandemic. The Company’s estimates across its insurance and reinsurance lines of business are based on currently available information derived from modeling techniques, preliminary claims information obtained from the Company’s clients and brokers, a review of relevant in-force contracts with potential exposure to the pandemic, estimates of reinsurance recoverables, and reflects our interpretation of the legal environment. These estimates include losses only related to claims incurred as of December 31, 2020. Actual losses from these events may vary materially from the estimates due to several factors, including the inherent uncertainties in making such determinations and the evolving nature of this pandemic.

We believe that we are relatively less exposed to COVID-19 global pandemic-related underwriting losses than many industry peers. For example, we have either no, or de minimis, premium writings in life, accident and health, event cancellation, trade credit, travel or pandemic specific coverages that respond directly to COVID-19 global pandemic-related losses. With regard to the potential exposure to business interruption losses, we write a limited amount of commercial property exposure, mainly emanating from our property catastrophe line of business, which is consistent with our strategy to target longer duration lines of business. We incurred a loss of $5.5 million in 2020 for COVID-19 related business interruption losses in our property catastrophe lines of business. We continue to monitor our potential COVID-19 exposures.

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-23-

All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact

Robert L. Hawley: (441) 278-3456

rhawley@watfordre.com

Watford Holdings Ltd.

100 Pitts Bay Road, Pembroke HM08 Bermuda

Tel: 441-278-3454 www.watfordre.com

-24-