James River Group Holdings, Ltd. ("James River" or the "Company")
(NASDAQ: JRVR) today reported first quarter 2022 net income
available to common shareholders of $9.3 million ($0.25 per diluted
share), compared to a net loss of $103.5 million ($3.37 per diluted
share) for the first quarter of 2021. Adjusted net operating
income1 for the first quarter of 2022 was $13.9 million ($0.37 per
diluted share), compared to an adjusted net operating loss1 of
$108.8 million ($3.54 per diluted share) for the same period in
2021.
_____________________1 Adjusted net operating
income (loss) is a non-GAAP financial measure. See “Non-GAAP
Financial Measures” and “Reconciliation of Non-GAAP Financial
Measures” at the end of this press release.
Earnings (Loss) Per
Diluted Share |
Three Months EndedMarch 31, |
|
2022 |
|
2021 |
|
|
|
|
Net Income (Loss) |
$ |
0.25 |
|
$ |
(3.37 |
) |
Adjusted Net Operating Income
(Loss)1 |
$ |
0.37 |
|
$ |
(3.54 |
) |
|
|
|
|
1 See
"Reconciliation of Non-GAAP Measures" below. |
Frank D'Orazio, the Company’s Chief Executive
Officer, commented, “The first quarter represented a strong start
to the year, highlighted by continued attractive market conditions
for our E&S segment allowing us to produce broad-based growth
in an attractive underwriting environment. Our E&S renewal
pricing reflected the twenty-first consecutive quarter of positive
rate, compounding to 52% over that period. During the quarter, we
also grew fee income in our Specialty Admitted segment by 8%, while
premium in our workers' compensation unit and Casualty Reinsurance
segment declined as we remain disciplined in our plan to deliver
underwriting profitability.”
First Quarter 2022 Operating
Results
- Gross written premium of $359.9 million, consisting of the
following:
|
|
Three Months EndedMarch 31, |
|
|
|
($ in
thousands) |
2022 |
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
204,282 |
|
$ |
181,358 |
|
13% |
|
Specialty Admitted
Insurance |
|
125,710 |
|
|
127,036 |
|
(1)% |
|
Casualty Reinsurance |
|
29,944 |
|
|
64,861 |
|
(54)% |
|
|
$ |
359,936 |
|
$ |
373,255 |
|
(4)% |
- Net written premium of $175.9 million, consisting of the
following:
|
|
Three Months EndedMarch 31, |
|
|
|
($ in
thousands) |
2022 |
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
125,710 |
|
$ |
108,433 |
|
16% |
|
Specialty Admitted
Insurance |
|
20,205 |
|
|
22,005 |
|
(8)% |
|
Casualty Reinsurance |
|
29,944 |
|
|
44,161 |
|
(32)% |
|
|
$ |
175,859 |
|
$ |
174,599 |
|
1% |
- Net earned premium of $189.8 million, consisting of the
following:
|
|
Three Months EndedMarch 31, |
|
|
|
($ in
thousands) |
2022 |
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
131,301 |
|
$ |
113,708 |
|
15% |
|
Specialty Admitted
Insurance |
|
19,318 |
|
|
16,357 |
|
18% |
|
Casualty Reinsurance |
|
39,205 |
|
|
30,528 |
|
28% |
|
|
$ |
189,824 |
|
$ |
160,593 |
|
18% |
- E&S gross
written premium increased 12.6% compared to the prior year quarter,
with eleven out of thirteen underwriting divisions experiencing
growth and ten of the underwriting divisions reporting double-digit
growth.
- Gross written
premium for the Specialty Admitted Insurance segment declined 1.0%
from the prior year due to shrinkage in both our individual risk
workers' compensation business and our large workers' compensation
fronted program. Taken together, gross written premium in these two
areas declined 12.6%, while remaining segment premium increased
6.5%.
- Gross written
premium in the Casualty Reinsurance segment decreased 53.8% from
the prior year quarter primarily driven by the non-renewal of
several treaties. The decline in gross written premium is
consistent with our previously announced strategy for this segment.
Since the earning patterns of the business can extend over multiple
years, changes in net earned premium for this segment will lag the
expected decline in gross and net written premium.
- Pre-tax
favorable (unfavorable) reserve development by segment was as
follows:
|
|
Three Months EndedMarch 31, |
|
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
Excess and Surplus Lines |
$ |
59 |
|
|
$ |
(168,651 |
) |
|
Specialty Admitted
Insurance |
|
(63 |
) |
|
|
1,000 |
|
|
Casualty Reinsurance |
|
(6,800 |
) |
|
|
(2,483 |
) |
|
|
$ |
(6,804 |
) |
|
$ |
(170,134 |
) |
-
As previously disclosed, the prior year reserve development in the
quarter included $6.8 million (representing a 3.6 percentage point
increase to the Company's loss ratio) associated with the
Retrocession Transaction. Net reserve development on the remaining
E&S and Specialty Admitted business was de minimis during the
quarter.
-
Separately, as previously disclosed, the Retrocession Transaction
resulted in $4.7 million of additional current accident year losses
in the Casualty Reinsurance segment (representing a 2.5 percentage
point increase to the Company's loss ratio). As part of the
Retrocession Transaction, the Company did not recognize any
earnings on the portfolio during the first quarter, resulting in
the additional current accident year losses.
-
Gross fee income was as follows:
|
|
Three Months EndedMarch 31, |
|
|
|
($ in
thousands) |
2022 |
|
2021 |
|
% Change |
|
Specialty Admitted Insurance |
$ |
5,558 |
|
$ |
5,128 |
|
8% |
-
The consolidated expense ratio was 26.0% for the first quarter of
2022, down from 28.9% in the prior year first quarter. The expense
ratio benefited from 18.2% growth in net earned premium that was
well in excess of growth in underwriting expenses as we continue to
manage costs effectively.
Investment Results
Net investment income for the first quarter of
2022 was $16.3 million, an increase of 7.8% compared to $15.1
million for the same period in 2021.
The Company’s net investment income consisted of
the following:
|
Three Months EndedMarch 31, |
|
($ in
thousands) |
2022 |
|
|
2021 |
|
|
% Change |
Renewable Energy Investments |
$ |
2,682 |
|
$ |
(681 |
) |
|
NM |
Other Private Investments |
|
217 |
|
|
1,015 |
|
|
(79)% |
All Other Net Investment
Income |
|
13,368 |
|
|
14,755 |
|
|
(9)% |
Total Net Investment
Income |
$ |
16,267 |
|
$ |
15,089 |
|
|
8% |
The Company’s annualized gross investment yield
on average fixed maturity, bank loan and equity securities for the
three months ended March 31, 2022 was 3.0% (versus 3.2% for the
three months ended March 31, 2021). The investment yield decreased
primarily as a result of lower market yields on fixed maturity
securities and bank loans.
Net realized and unrealized losses on
investments of $5.0 million for the three months ended March 31,
2022 compares to net realized and unrealized gains on investments
of $6.3 million in the prior year quarter.
Taxes
Generally the Company's effective tax rate
fluctuates from period to period based on the relative mix of
income reported by country and the respective tax rates imposed by
each tax jurisdiction. The tax rate for the three months ended
March 31, 2022 was 24.6%. The rate was impacted by both
geographical mix of income and discreet tax items for the quarter
primarily related to tax expenses associated with vested stock
compensation.
Tangible Equity
Tangible equity2 of $574.8 million at
March 31, 2022 increased 13.3% compared to tangible equity of
$507.5 million at December 31, 2021, as net income available to
common shareholders and the proceeds of the Series A preferred
shares issued during the quarter were partially offset by an
increase in unrealized losses in the Company's fixed maturity
portfolio.
Capital Management
The Company announced that its Board of
Directors declared a cash dividend of $0.05 per common share. This
dividend is payable on Thursday, June 30, 2022 to all shareholders
of record on Monday, June 13, 2022.
_____________________2 Tangible equity is a
non-GAAP financial measure. See “Non-GAAP Financial Measures” and
“Reconciliation of Non-GAAP Financial Measures” at the end of this
press release.
Conference Call
James River will hold a conference call to
discuss its third quarter results tomorrow, May 10, 2022 at 8:30
a.m. Eastern Time. Investors may access the conference call by
dialing (877) 930-8055, Conference ID# 7872437, or via the internet
by visiting www.jrgh.net and clicking on the “Investor Relations”
link. Please access the website at least 15 minutes early to
register and download any necessary audio software. A replay of the
call will be available until 11:00 a.m. (Eastern Time) on June 9,
2022 and can be accessed by dialing (855) 859-2056 or by visiting
the company website.
Forward-Looking Statements
This press release contains forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. In some cases, such forward-looking
statements may be identified by terms such as believe, expect,
seek, may, will, should, intend, project, anticipate, plan,
estimate, guidance or similar words. Forward-looking statements
involve risks and uncertainties that could cause actual results to
differ materially from those in the forward-looking statements.
Although it is not possible to identify all of these risks and
uncertainties, they include, among others, the following: the
inherent uncertainty of estimating reserves and the possibility
that incurred losses may be greater than our loss and loss
adjustment expense reserves; inaccurate estimates and judgments in
our risk management may expose us to greater risks than intended;
the downgrade in the financial strength rating of our regulated
insurance subsidiaries announced on May 7, 2021, or further
downgrades, impacting our ability to attract and retain insurance
and reinsurance business that our subsidiaries write, our
competitive position, and our financial condition; the potential
loss of key members of our management team or key employees and our
ability to attract and retain personnel; adverse economic factors
resulting in the sale of fewer policies than expected or an
increase in the frequency or severity of claims, or both; the
impact of a persistent high inflationary environment on our
reserves, the values of our investment returns, and on our
compensation expenses; reliance on a select group of brokers and
agents for a significant portion of our business and the impact of
our potential failure to maintain such relationships; reliance on a
select group of customers for a significant portion of our business
and the impact of our potential failure to maintain, or decision to
terminate, such relationships; our ability to obtain reinsurance
coverage at prices and on terms that allow us to transfer risk and
adequately protect our company against financial loss; losses
resulting from reinsurance counterparties failing to pay us on
reinsurance claims, insurance companies with whom we have a
fronting arrangement failing to pay us for claims, or a former
customer with whom we have an indemnification arrangement failing
to perform their reimbursement obligations; inadequacy of premiums
we charge to compensate us for our losses incurred; changes in laws
or government regulation, including tax or insurance law and
regulations; the ongoing effect of Public Law No. 115-97,
informally titled the Tax Cuts and Jobs Act, which may have a
significant effect on us including, among other things, by
potentially increasing our tax rate, as well as on our
shareholders; in the event we do not qualify for the insurance
company exception to the passive foreign investment company
(“PFIC”) rules and are therefore considered a PFIC, there could be
material adverse tax consequences to an investor that is subject to
U.S. federal income taxation; the Company or any of its foreign
subsidiaries becoming subject to U.S. federal income taxation; a
failure of any of the loss limitations or exclusions we utilize to
shield us from unanticipated financial losses or legal exposures,
or other liabilities; losses from catastrophic events, such as
natural disasters and terrorist acts, which substantially exceed
our expectations and/or exceed the amount of reinsurance we have
purchased to protect us from such events; the effects of the
COVID-19 pandemic and associated government actions on our
operations and financial performance; potential effects on our
business of emerging claim and coverage issues; exposure to credit
risk, interest rate risk and other market risk in our investment
portfolio; the potential impact of internal or external fraud,
operational errors, systems malfunctions or cyber security
incidents; our ability to manage our growth effectively; failure to
maintain effective internal controls in accordance with
Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); and
changes in our financial condition, regulations or other factors
that may restrict our subsidiaries’ ability to pay us dividends.
Additional information about these risks and uncertainties, as well
as others that may cause actual results to differ materially from
those in the forward-looking statements, is contained in our
filings with the U.S. Securities and Exchange Commission ("SEC"),
including our most recently filed Annual Report on Form 10-K. These
forward-looking statements speak only as of the date of this
release and the Company does not undertake any obligation to update
or revise any forward-looking information to reflect changes in
assumptions, the occurrence of unanticipated events, or
otherwise.
Non-GAAP Financial Measures
In presenting James River Group Holdings, Ltd.’s
results, management has included financial measures that are not
calculated under standards or rules that comprise accounting
principles generally accepted in the United States (“GAAP”). Such
measures, including underwriting profit (loss), adjusted net
operating income (loss), tangible equity, tangible common equity,
adjusted net operating return on average tangible equity (which is
calculated as annualized adjusted net operating income (loss)
divided by average tangible equity), and adjusted net operating
return on average tangible common equity (which is calculated as
annualized adjusted net operating income (loss) divided by average
tangible common equity), are referred to as non-GAAP measures.
These non-GAAP measures may be defined or calculated differently by
other companies. These measures should not be viewed as a
substitute for those measures determined in accordance with GAAP.
Reconciliations of such measures to the most comparable GAAP
figures are included at the end of this press release.
About James River Group Holdings,
Ltd.
James River Group Holdings, Ltd. is a
Bermuda-based insurance holding company that owns and operates a
group of specialty insurance and reinsurance companies. The Company
operates in three specialty property-casualty insurance and
reinsurance segments: Excess and Surplus Lines, Specialty Admitted
Insurance and Casualty Reinsurance. Each of the Company’s regulated
insurance subsidiaries are rated “A-” (Excellent) by A.M. Best
Company.
Visit James River Group Holdings, Ltd. on the
web at www.jrgh.net
For more information
contact:
Brett ShirreffsSVP, Finance, Investments and
Investor RelationsInvestorRelations@jrgh.net
|
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated Balance Sheet
Data(Unaudited) |
|
|
|
|
($ in thousands,
except for share data) |
March 31, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
Invested assets: |
|
|
|
Fixed maturity securities, available-for-sale, at fair value |
$ |
1,662,278 |
|
$ |
1,677,561 |
Equity securities, at fair
value |
|
102,973 |
|
|
108,410 |
Bank loan participations, at
fair value |
|
159,084 |
|
|
156,043 |
Short-term investments |
|
147,334 |
|
|
136,563 |
Other invested assets |
|
53,298 |
|
|
51,908 |
Total invested assets |
|
2,124,967 |
|
|
2,130,485 |
|
|
|
|
Cash and cash equivalents |
|
270,195 |
|
|
190,123 |
Restricted cash equivalents
(a) |
|
102,009 |
|
|
102,005 |
Accrued investment income |
|
11,730 |
|
|
11,037 |
Premiums receivable and
agents’ balances, net |
|
367,991 |
|
|
393,967 |
Reinsurance recoverable on
unpaid losses, net |
|
1,617,884 |
|
|
1,348,628 |
Reinsurance recoverable on
paid losses |
|
87,595 |
|
|
82,235 |
Deferred policy acquisition
costs |
|
66,028 |
|
|
68,526 |
Goodwill and intangible
assets |
|
217,779 |
|
|
217,870 |
Other assets |
|
401,040 |
|
|
403,674 |
Total assets |
$ |
5,267,218 |
|
$ |
4,948,550 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Reserve for losses and loss
adjustment expenses |
$ |
2,750,188 |
|
$ |
2,748,473 |
Unearned premiums |
|
706,770 |
|
|
727,552 |
Funds held (a) |
|
371,853 |
|
|
97,360 |
Senior debt |
|
222,300 |
|
|
262,300 |
Junior subordinated debt |
|
104,055 |
|
|
104,055 |
Accrued expenses |
|
48,229 |
|
|
57,920 |
Other liabilities |
|
271,248 |
|
|
225,528 |
Total liabilities |
|
4,474,643 |
|
|
4,223,188 |
|
|
|
|
Series A redeemable preferred
shares |
|
144,898 |
|
|
0 |
Total shareholders’
equity |
|
647,677 |
|
|
725,362 |
Total liabilities, Series A
redeemable preferred shares, and shareholders’ equity |
$ |
5,267,218 |
|
$ |
4,948,550 |
|
|
|
|
Tangible equity (b) |
$ |
574,796 |
|
$ |
507,492 |
Tangible equity per share outstanding (b) |
$ |
13.34 |
|
$ |
13.58 |
Shareholders' equity per share
outstanding |
$ |
17.30 |
|
$ |
19.41 |
Common shares outstanding |
|
37,448,314 |
|
|
37,373,066 |
|
|
|
|
(a) Restricted cash equivalents and the funds held liability
includes funds posted by the Company to a trust account for the
benefit of a third party administrator handling the claims on the
Rasier commercial auto policies in run-off. Such funds held in
trust secure the Company's obligations to reimburse the
administrator for claims payments, and are primarily sourced from
the collateral posted to the Company by Rasier and its affiliates
to support their obligations under the indemnity agreements and the
loss portfolio transfer reinsurance agreement with the Company. The
funds held liability also includes a notional funds withheld
account balance related to the Retrocession Transaction that will
be reduced on a quarterly basis by paid losses on the subject
business. |
(b) See “Reconciliation of
Non-GAAP Measures” |
|
|
|
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated (Loss) Income
Statement Data(Unaudited) |
|
|
Three Months EndedMarch 31, |
($ in thousands, except for share data) |
|
2022 |
|
|
|
2021 |
|
REVENUES |
|
|
|
Gross written premiums |
$ |
359,936 |
|
|
$ |
373,255 |
|
Net written premiums |
|
175,859 |
|
|
|
174,599 |
|
|
|
|
|
Net earned premiums |
|
189,824 |
|
|
|
160,593 |
|
Net investment income |
|
16,267 |
|
|
|
15,089 |
|
Net realized and unrealized
(losses) gains on investments |
|
(5,010 |
) |
|
|
6,272 |
|
Other income |
|
867 |
|
|
|
1,026 |
|
Total revenues |
|
201,948 |
|
|
|
182,980 |
|
|
|
|
|
EXPENSES |
|
|
|
Losses and loss adjustment
expenses |
|
135,608 |
|
|
|
273,500 |
|
Other operating expenses |
|
50,061 |
|
|
|
47,381 |
|
Other expenses |
|
368 |
|
|
|
621 |
|
Interest expense |
|
2,292 |
|
|
|
2,216 |
|
Amortization of intangible
assets |
|
91 |
|
|
|
91 |
|
Total expenses |
|
188,420 |
|
|
|
323,809 |
|
Income (loss) before
taxes |
|
13,528 |
|
|
|
(140,829 |
) |
Income tax expense
(benefit) |
|
3,323 |
|
|
|
(37,369 |
) |
NET INCOME
(LOSS) |
$ |
10,205 |
|
|
$ |
(103,460 |
) |
Dividends on Series A
preferred shares |
|
(875 |
) |
|
|
0 |
|
NET INCOME (LOSS)
AVAILABLE TO COMMON SHAREHOLDERS |
$ |
9,330 |
|
|
$ |
(103,460 |
) |
ADJUSTED NET OPERATING
INCOME (LOSS) (a) |
$ |
13,867 |
|
|
$ |
(108,795 |
) |
|
|
|
|
INCOME (LOSS) PER
COMMON SHARE |
|
|
|
Basic |
$ |
0.25 |
|
|
$ |
(3.37 |
) |
Diluted |
$ |
0.25 |
|
|
$ |
(3.37 |
) |
|
|
|
|
ADJUSTED NET OPERATING
INCOME (LOSS) PER COMMON SHARE |
|
|
|
Basic |
$ |
0.37 |
|
|
$ |
(3.54 |
) |
Diluted |
$ |
0.37 |
|
|
$ |
(3.54 |
) |
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
Basic |
|
37,406,913 |
|
|
|
30,713,986 |
|
Diluted |
|
37,554,662 |
|
|
|
30,713,986 |
|
Cash dividends declared per
common share |
$ |
0.05 |
|
|
$ |
0.30 |
|
|
|
|
|
Ratios: |
|
|
|
Loss ratio |
|
71.4 |
% |
|
|
170.3 |
% |
Expense ratio (b) |
|
26.0 |
% |
|
|
28.9 |
% |
Combined ratio |
|
97.4 |
% |
|
|
199.2 |
% |
Accident year loss ratio |
|
67.9 |
% |
|
|
64.4 |
% |
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
(b) Calculated with a numerator comprising other operating expenses
less gross fee income (in specific instances when the Company is
not retaining insurance risk) included in “Other income” in our
Condensed Consolidated Income Statements of $800,000 and $927,000
for the three months ended March 31, 2022 and 2021,
respectively, and a denominator of net earned premiums. |
James River Group Holdings, Ltd. and
SubsidiariesSegment Results |
|
EXCESS
AND SURPLUS LINES |
|
|
|
|
|
Three Months EndedMarch 31, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
204,282 |
|
|
$ |
181,358 |
|
|
12.6 |
% |
Net written premiums |
$ |
125,710 |
|
|
$ |
108,433 |
|
|
15.9 |
% |
|
|
|
|
|
|
Net earned premiums |
$ |
131,301 |
|
|
$ |
113,708 |
|
|
15.5 |
% |
Losses and loss adjustment
expenses |
|
(84,925 |
) |
|
|
(241,742 |
) |
|
(64.9) % |
Underwriting expenses |
|
(24,919 |
) |
|
|
(22,912 |
) |
|
8.8 |
% |
Underwriting profit (loss)
(a) |
$ |
21,457 |
|
|
$ |
(150,946 |
) |
|
— |
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
Loss ratio |
|
64.7 |
% |
|
|
212.6 |
% |
|
|
Expense ratio |
|
19.0 |
% |
|
|
20.1 |
% |
|
|
Combined ratio |
|
83.7 |
% |
|
|
232.7 |
% |
|
|
Accident year loss ratio |
|
64.7 |
% |
|
|
64.3 |
% |
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
SPECIALTY
ADMITTED INSURANCE |
|
|
Three Months EndedMarch 31, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
125,710 |
|
|
$ |
127,036 |
|
|
(1.0) % |
Net written premiums |
$ |
20,205 |
|
|
$ |
22,005 |
|
|
(8.2) % |
|
|
|
|
|
|
Net earned premiums |
$ |
19,318 |
|
|
$ |
16,357 |
|
|
18.1 |
% |
Losses and loss adjustment
expenses |
|
(15,435 |
) |
|
|
(10,742 |
) |
|
43.7 |
% |
Underwriting expenses |
|
(3,674 |
) |
|
|
(4,349 |
) |
|
(15.5) % |
Underwriting profit (a),
(b) |
$ |
209 |
|
|
$ |
1,266 |
|
|
(83.5)% |
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
Loss ratio |
|
79.9 |
% |
|
|
65.7 |
% |
|
|
Expense ratio |
|
19.0 |
% |
|
|
26.6 |
% |
|
|
Combined ratio |
|
98.9 |
% |
|
|
92.3 |
% |
|
|
Accident year loss ratio |
|
79.6 |
% |
|
|
71.8 |
% |
|
|
|
|
|
|
|
|
(a) See "Reconciliation of
Non-GAAP Measures". |
|
|
|
|
|
(b) Underwriting results include gross fee income of $5.6 million
and $5.1 million for the three months ended March 31, 2022 and
2021, respectively. |
CASUALTY
REINSURANCE |
|
|
Three Months EndedMarch 31, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
29,944 |
|
|
$ |
64,861 |
|
|
(53.8)% |
Net written premiums |
$ |
29,944 |
|
|
$ |
44,161 |
|
|
(32.2)% |
|
|
|
|
|
|
Net earned premiums |
$ |
39,205 |
|
|
$ |
30,528 |
|
|
28.4 |
% |
Losses and loss adjustment
expenses |
|
(35,248 |
) |
|
|
(21,016 |
) |
|
67.7 |
% |
Underwriting expenses |
|
(12,794 |
) |
|
|
(11,137 |
) |
|
14.9 |
% |
Underwriting loss (a) |
$ |
(8,837 |
) |
|
$ |
(1,625 |
) |
|
— |
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
Loss ratio |
|
89.9 |
% |
|
|
68.8 |
% |
|
|
Expense ratio |
|
32.6 |
% |
|
|
36.5 |
% |
|
|
Combined ratio |
|
122.5 |
% |
|
|
105.3 |
% |
|
|
Accident year loss ratio |
|
72.6 |
% |
|
|
60.7 |
% |
|
|
|
|
|
|
|
|
(a) See "Reconciliation of
Non-GAAP Measures". |
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP MEASURES
Underwriting Profit (Loss)
The following table reconciles the underwriting
profit (loss) by individual operating segment and for the entire
Company to consolidated income (loss) before taxes. We believe that
these measures are useful to investors in evaluating the
performance of our Company and its operating segments because our
objective is to consistently earn underwriting profits. We evaluate
the performance of our operating segments and allocate resources
based primarily on underwriting profit (loss) of operating
segments. Our definition of underwriting profit (loss) of operating
segments and underwriting profit (loss) may not be comparable to
that of other companies.
|
Three Months EndedMarch 31, |
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
Underwriting profit (loss) of
the operating segments: |
|
|
|
Excess and Surplus Lines |
$ |
21,457 |
|
|
$ |
(150,946 |
) |
Specialty Admitted Insurance |
|
209 |
|
|
|
1,266 |
|
Casualty Reinsurance |
|
(8,837 |
) |
|
|
(1,625 |
) |
Total underwriting profit
(loss) of operating segments |
|
12,829 |
|
|
|
(151,305 |
) |
Other operating expenses of
the Corporate and Other segment |
|
(7,874 |
) |
|
|
(8,056 |
) |
Underwriting profit (loss)
(a) |
|
4,955 |
|
|
|
(159,361 |
) |
Net investment income |
|
16,267 |
|
|
|
15,089 |
|
Net realized and unrealized
(losses) gains on investments |
|
(5,010 |
) |
|
|
6,272 |
|
Other expense |
|
(301 |
) |
|
|
(522 |
) |
Interest expense |
|
(2,292 |
) |
|
|
(2,216 |
) |
Amortization of intangible
assets |
|
(91 |
) |
|
|
(91 |
) |
Consolidated income (loss)
before taxes |
$ |
13,528 |
|
|
$ |
(140,829 |
) |
|
|
|
|
(a) Included in underwriting results for the three months ended
March 31, 2022 and 2021 is gross fee income of $5.6 million
and $5.1 million, respectively. |
Adjusted Net Operating Income
(Loss)
We define adjusted net operating income (loss)
as net income (loss) available to common shareholders excluding net
realized and unrealized (losses) gains on investments, and certain
non-operating expenses such as professional service fees related to
a purported class action lawsuit, various strategic initiatives,
and the filing of registration statements for the offering of
securities, and severance costs associated with terminated
employees. We use adjusted net operating income (loss) as an
internal performance measure in the management of our operations
because we believe it gives our management and other users of our
financial information useful insight into our results of operations
and our underlying business performance. Adjusted net operating
income (loss) should not be viewed as a substitute for net income
(loss) calculated in accordance with GAAP, and our definition of
adjusted net operating income (loss) may not be comparable to that
of other companies.
Our income (loss) available to common
shareholders reconciles to our adjusted net operating income (loss)
as follows:
|
Three Months Ended March 31, |
|
2022 |
|
2021 |
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
LossBeforeTaxes |
|
NetLoss |
Income (loss) available to common shareholders |
$ |
12,653 |
|
$ |
9,330 |
|
$ |
(140,829 |
) |
|
$ |
(103,460 |
) |
Net realized and unrealized
losses (gains) on investments |
|
5,010 |
|
|
4,190 |
|
|
(6,272 |
) |
|
|
(5,751 |
) |
Other expenses |
|
347 |
|
|
347 |
|
|
527 |
|
|
|
416 |
|
Adjusted net operating income
(loss) |
$ |
18,010 |
|
$ |
13,867 |
|
$ |
(146,574 |
) |
|
$ |
(108,795 |
) |
Tangible Equity (per Share) and Tangible
Common Equity (per Share)
We define tangible equity as shareholders'
equity plus mezzanine Series A preferred shares less goodwill and
intangible assets (net of amortization). We define tangible common
equity as tangible equity less mezzanine Series A preferred shares.
Our definition of tangible equity and tangible common equity may
not be comparable to that of other companies, and it should not be
viewed as a substitute for shareholders’ equity calculated in
accordance with GAAP. We use tangible equity and tangible common
equity internally to evaluate the strength of our balance sheet and
to compare returns relative to this measure. The following table
reconciles shareholders’ equity to tangible equity and tangible
common equity for March 31, 2022, December 31, 2021, and
March 31, 2021.
|
March 31, 2022 |
|
December 31, 2021 |
|
March 31, 2021 |
($ in thousands,
except for share data) |
Equity |
|
Equity pershare |
|
Equity |
|
Equity pershare |
|
Equity |
|
Equity pershare |
Shareholders' equity |
$ |
647,677 |
|
$ |
17.30 |
|
$ |
725,362 |
|
$ |
19.41 |
|
$ |
639,628 |
|
$ |
20.78 |
Plus: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
— |
|
|
|
|
— |
|
|
Less: Goodwill and intangible
assets |
|
217,779 |
|
|
|
|
217,870 |
|
|
|
|
218,142 |
|
|
Tangible equity |
$ |
574,796 |
|
$ |
13.34 |
|
$ |
507,492 |
|
$ |
13.58 |
|
$ |
421,486 |
|
$ |
13.70 |
Less: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
— |
|
|
|
|
— |
|
|
Tangible common equity |
$ |
429,898 |
|
$ |
11.48 |
|
$ |
507,492 |
|
$ |
13.58 |
|
$ |
421,486 |
|
$ |
13.70 |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
37,448,314 |
|
|
|
|
37,373,066 |
|
|
|
|
30,774,930 |
|
|
Common shares from assumed
conversion of Series A preferred shares |
|
5,640,158 |
|
|
|
|
— |
|
|
|
|
— |
|
|
Common shares outstanding
after assumed conversion of Series A preferred shares |
|
43,088,472 |
|
|
|
|
37,373,066 |
|
|
|
|
30,774,930 |
|
|
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