James River Group Holdings, Ltd. ("James River" or the "Company")
(NASDAQ: JRVR) today reported a third quarter 2022 net loss
available to common shareholders of $7.2 million ($0.19 per diluted
share), compared to a net loss available to common shareholders of
$23.9 million ($0.64 per diluted share) for the third quarter of
2021. Adjusted net operating income1 for the third quarter of 2022
was $15.5 million ($0.41 per diluted share), compared to an
adjusted net operating loss1 of $26.8 million ($0.72 per diluted
share) for the third quarter of 2021.
Highlights for the quarter included:
- Third quarter
2022 Group combined ratio of 94.1% on business not subject to
retroactive reinsurance accounting for loss portfolio transfers
("combined ratio"), and 91.5% excluding the impact of catastrophe
losses; adjusted net operating return on tangible common equity1 of
17.5%. Unless specified otherwise, all underwriting performance
ratios presented herein are for our business not subject to
retroactive reinsurance accounting for loss portfolio
transfers.
- Excess and
Surplus Lines ("E&S") segment combined ratio of 88.2%, and
84.6% excluding the impact of catastrophe losses.
- As a result of
adverse development on the reserves subject to the commercial auto
loss portfolio transfer agreement ("Commercial Auto LPT"),
retroactive reinsurance accounting treatment results in a net loss
for the quarter. However, the Company recognized a substantial
benefit in the quarter from the Commercial Auto LPT, which provides
unlimited coverage of adverse development on the portfolio.
- Net written
premium growth of 20.3% due to increased net retention in the
E&S segment; E&S renewal pricing increased 8.4%, largely
unchanged from the increase in renewal pricing of the same quarter
last year.
- Net catastrophe
losses related to Hurricane Ian of $5.0 million, or 2.6 percentage
points on the Group loss ratio.
- Net investment
income increased 17.7% sequentially compared to the second quarter
of 2022.
-
Year to date combined ratio of 94.2% and adjusted net operating
return on tangible common equity1 of 16.0%.
________________
1 Adjusted net operating income (loss) and adjusted net
operating return on tangible common equity are non-GAAP financial
measures. See “Non-GAAP Financial Measures” and “Reconciliation of
Non-GAAP Financial Measures” at the end of this press release.
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.
Frank D'Orazio, the Company’s Chief Executive
Officer, commented, “During the third quarter of 2022 we continued
to demonstrate our focus on disciplined underwriting and consistent
performance, with all segments reporting an underwriting profit.
E&S renewal rate increases remain strong and in excess of our
view of loss trend. While we took proactive underwriting actions on
discrete elements of our portfolio where renewal pricing did not
meet our appetite, we continued to benefit from ample opportunities
and robust market conditions overall as policy count grew by 7.3%
and we increased our net retention in E&S by ten percentage
points. Additionally, our results validate our heightened focus on
risk management and highlight the value of recent strategic actions
as we had modest exposure to Hurricane Ian and benefited from the
legacy commercial auto loss portfolio transfer that we executed
last year. The results of these combined actions produced a very
attractive adjusted net operating return on tangible common equity
of 17.5% in the quarter.”
Third Quarter 2022 Operating
Results
- Gross written premium of $358.5 million, consisting of the
following:
|
Three Months EndedSeptember
30, |
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
Excess and Surplus Lines |
$ |
204,785 |
|
$ |
217,673 |
|
(6)% |
Specialty Admitted Insurance |
|
123,389 |
|
|
121,175 |
|
2 |
% |
Casualty Reinsurance |
|
30,331 |
|
|
7,751 |
|
291 |
% |
|
$ |
358,505 |
|
$ |
346,599 |
|
3 |
% |
- Net written premium of $190.3 million, consisting of the
following:
|
Three Months EndedSeptember
30, |
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
Excess and Surplus Lines |
$ |
140,984 |
|
$ |
127,881 |
|
10 |
% |
Specialty Admitted
Insurance |
|
18,929 |
|
|
22,578 |
|
(16)% |
Casualty Reinsurance |
|
30,338 |
|
|
7,751 |
|
291 |
% |
|
$ |
190,251 |
|
$ |
158,210 |
|
20 |
% |
- Net earned premium of $190.2 million, consisting of the
following:
|
Three Months EndedSeptember
30, |
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
Excess and Surplus Lines |
$ |
139,095 |
|
$ |
119,760 |
|
16 |
% |
Specialty Admitted
Insurance |
|
17,824 |
|
|
19,704 |
|
(10)% |
Casualty Reinsurance |
|
33,270 |
|
|
31,144 |
|
7 |
% |
|
$ |
190,189 |
|
$ |
170,608 |
|
11 |
% |
- E&S gross
written premium decreased 5.9% compared to the prior year quarter,
while net written premium increased 10.2% due to higher net
retention. The decline was driven by discrete actions taken on
renewal business that did not meet our appetite. Renewal rate
increases were 8.4% during the third quarter of 2022, representing
the twenty-third consecutive quarter of renewal rate increases
compounding to 61.5%. On a year to date basis, E&S gross
written premium has increased 10.2% with most underwriting
divisions experiencing double digit growth.
- Gross written
premium for the Specialty Admitted Insurance segment increased 1.8%
from the prior year quarter. During the quarter there was a
combined 4.0% reduction to premium from our individual risk
workers' compensation business and our large workers' compensation
fronted program. The remaining segment premium increased 5.1%
despite the loss of a fronting partner that was acquired at the end
of 2021.
- Gross written
premium in the Casualty Reinsurance segment increased significantly
compared to the prior year quarter primarily driven by premium
adjustments and a timing difference with one renewal and extension.
On a year to date basis, gross premium has declined 37.6% and we
remain on track to reduce gross premium by approximately $100
million during 2022. Since the earning patterns of the business can
extend over multiple years, changes in net earned premium for this
segment will lag the expected decline in gross and net written
premium.
- Pre-tax
favorable (unfavorable) reserve development by segment on business
not subject to retroactive reinsurance accounting for loss
portfolio transfers was as follows:
|
Three Months EndedSeptember
30, |
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
Excess and Surplus Lines |
$ |
(139 |
) |
|
$ |
(29,535 |
) |
Specialty Admitted
Insurance |
|
1,268 |
|
|
|
500 |
|
Casualty Reinsurance |
|
0 |
|
|
|
(15,063 |
) |
|
$ |
1,129 |
|
|
$ |
(44,098 |
) |
-
During the third quarter of 2022, due to adverse paid loss trends
on the legacy commercial auto portfolio, the Company recognized
adverse prior year development of $46.7 million on the reserves
subject to the Commercial Auto LPT. Because the reserves were fully
subject to the agreement that provides unlimited coverage, the
Company does not expect any economic impact from this development.
The Company recorded a retroactive reinsurance benefit of $25.9
million in loss and loss adjustment expenses and a deferred
retroactive reinsurance gain of $20.8 million on the Balance
Sheet.
-
Net catastrophe losses related to Hurricane Ian were $5.0 million,
or 2.6 percentage points on the Group loss ratio. The losses were
primarily related to the Excess Property underwriting division in
the E&S segment. Because the Company purchases significant
property catastrophe reinsurance, it does not expect additional net
catastrophe losses from events during the quarter.
-
Gross fee income was as follows:
|
Three Months EndedSeptember
30, |
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
Specialty Admitted Insurance |
$ |
5,935 |
|
$ |
5,627 |
|
5 |
% |
-
The consolidated expense ratio was 24.6% for the third quarter of
2022, largely unchanged from 24.8% in the prior year third quarter.
The expense ratio benefited from 11.5% growth in net earned premium
and 5.5% growth in fee income, while underwriting expenses
increased at a slightly lower rate.
Investment Results
Net investment income for the third quarter of
2022 was $17.3 million, an increase of 13.2% compared to $15.3
million for the same period in 2021. Income from fixed maturities
and equities increased due to higher yields and growth in the
portfolio, while income from renewable energy and other private
investments declined from the prior year period primarily due to
market volatility. Growth in income from fixed maturities, bank
loans and equities increased 31.0% compared to the prior year
period and 16.7% compared to the second quarter of 2022.
The Company’s net investment income consisted of
the following:
|
Three Months EndedSeptember
30, |
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
% Change |
Renewable Energy
Investments |
$ |
134 |
|
|
$ |
918 |
|
(85)% |
Other Private Investments |
|
(557 |
) |
|
|
842 |
|
NM |
All Other Net Investment Income |
|
17,729 |
|
|
|
13,529 |
|
31 |
% |
Total Net Investment
Income |
$ |
17,306 |
|
|
$ |
15,289 |
|
13 |
% |
The Company’s annualized gross investment yield
on average fixed maturity, bank loan and equity securities for the
three months ended September 30, 2022 was 3.6% (versus 2.8% for the
three months ended September 30, 2021). The investment yield
increased primarily as a result of higher market yields on fixed
maturity securities and bank loans.
Net realized and unrealized losses on
investments of $7.8 million for the three months ended September
30, 2022 compares to net realized and unrealized gains on
investments of $4.0 million in the prior year quarter. The majority
of the realized and unrealized losses during the third quarter of
2022 were related to changes in fair values of our preferred and
common equity securities and, to a lesser extent, our secured bank
loan portfolio.
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 nine months ended
September 30, 2022 was 30.9%. The tax rate is impacted by the
geographic mix of income.
Tangible Equity
Tangible equity2 of $474.9 million at
September 30, 2022 declined 9.0% compared to tangible equity
of $521.6 million at June 30, 2022, due to an increase in
unrealized losses in the Company's fixed maturity portfolio.
Accumulated other comprehensive (loss) income ("AOCI") declined by
$60.7 million during the third quarter of 2022, with higher
interest rates driving a decline in the value of the Company's
fixed maturity securities. Tangible equity excluding AOCI was
$650.1 million at September 30, 2022 compared to $477.5 million at
December 31, 2021, with the increase driven by proceeds from the
Series A preferred shares issued during the first quarter of 2022
and positive net income available to common shareholders.
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 Friday, December 30, 2022 to all
shareholders of record on Monday, December 12, 2022.
Conference Call
James River will hold a conference call to
discuss its third quarter results tomorrow, November 2, 2022 at
8:00 a.m. Eastern Time. Investors may access the conference call by
dialing (800) 715-9871, Conference ID 2262462, or via the internet
by visiting www.jrvrgroup.com and clicking on the “Investor
Relations” link. A webcast replay of the call will be available 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;
downgrades in the financial strength rating of our regulated
insurance subsidiaries 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; exposure to credit risk, interest rate risk
and other market risk in our investment portfolio; 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 its reimbursement
obligations, and our potential inability to demand or maintain
adequate collateral to mitigate such risks; 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; 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 tangible equity (which is
calculated as annualized adjusted net operating income (loss)
divided by the average quarterly tangible equity balances in the
respective period), and adjusted net operating return on tangible
common equity (which is calculated as annualized adjusted net
operating income (loss) divided by the average quarterly tangible
common equity balances in the respective period), 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.jrvrgroup.com.
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) |
September 30, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
Invested assets: |
|
|
|
Fixed maturity securities, available-for-sale, at fair value |
$ |
1,639,248 |
|
$ |
1,677,561 |
Equity securities, at fair
value |
|
118,114 |
|
|
108,410 |
Bank loan participations, at
fair value |
|
160,296 |
|
|
156,043 |
Short-term investments |
|
208,904 |
|
|
136,563 |
Other invested assets |
|
49,471 |
|
|
51,908 |
Total invested assets |
|
2,176,033 |
|
|
2,130,485 |
|
|
|
|
Cash and cash equivalents |
|
187,544 |
|
|
190,123 |
Restricted cash equivalents
(a) |
|
102,485 |
|
|
102,005 |
Accrued investment income |
|
13,778 |
|
|
11,037 |
Premiums receivable and
agents’ balances, net |
|
341,655 |
|
|
393,967 |
Reinsurance recoverable on
unpaid losses, net |
|
1,584,836 |
|
|
1,348,628 |
Reinsurance recoverable on
paid losses |
|
110,260 |
|
|
82,235 |
Deferred policy acquisition
costs |
|
62,883 |
|
|
68,526 |
Goodwill and intangible
assets |
|
217,598 |
|
|
217,870 |
Other assets |
|
408,419 |
|
|
403,674 |
Total assets |
$ |
5,205,491 |
|
$ |
4,948,550 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Reserve for losses and loss
adjustment expenses |
$ |
2,786,700 |
|
$ |
2,748,473 |
Unearned premiums |
|
696,452 |
|
|
727,552 |
Funds held (a) |
|
335,233 |
|
|
97,360 |
Deferred reinsurance gain |
|
20,773 |
|
|
0 |
Senior debt |
|
222,300 |
|
|
262,300 |
Junior subordinated debt |
|
104,055 |
|
|
104,055 |
Accrued expenses |
|
52,010 |
|
|
57,920 |
Other liabilities |
|
316,266 |
|
|
225,528 |
Total liabilities |
|
4,533,789 |
|
|
4,223,188 |
|
|
|
|
Series A redeemable preferred
shares |
|
144,898 |
|
|
0 |
Total shareholders’
equity |
|
526,804 |
|
|
725,362 |
Total liabilities, Series A
redeemable preferred shares, and shareholders’ equity |
$ |
5,205,491 |
|
$ |
4,948,550 |
|
|
|
|
Tangible equity (b) |
$ |
474,877 |
|
$ |
507,492 |
Tangible equity per share outstanding (b) |
$ |
11.02 |
|
$ |
13.58 |
Shareholders' equity per share
outstanding |
$ |
14.07 |
|
$ |
19.41 |
Common shares outstanding |
|
37,450,438 |
|
|
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 loss portfolio transfer retrocession
transaction that our Casualty Reinsurance segment entered into in
the first quarter of 2022, which 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 Income (Loss)
Statement Data(Unaudited)
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
($ in thousands, except for share data) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
REVENUES |
|
|
|
|
|
|
|
Gross written premiums |
$ |
358,505 |
|
|
$ |
346,599 |
|
|
$ |
1,118,155 |
|
|
$ |
1,100,000 |
|
Net written premiums |
|
190,251 |
|
|
|
158,210 |
|
|
|
560,801 |
|
|
|
526,413 |
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
190,189 |
|
|
|
170,608 |
|
|
|
566,275 |
|
|
|
503,906 |
|
Net investment income |
|
17,306 |
|
|
|
15,289 |
|
|
|
48,278 |
|
|
|
44,726 |
|
Net realized and unrealized
(losses) gains on investments |
|
(7,754 |
) |
|
|
3,983 |
|
|
|
(29,874 |
) |
|
|
13,738 |
|
Other income |
|
1,488 |
|
|
|
1,113 |
|
|
|
3,304 |
|
|
|
3,170 |
|
Total revenues |
|
201,229 |
|
|
|
190,993 |
|
|
|
587,983 |
|
|
|
565,540 |
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
Losses and loss adjustment
expenses (a) |
|
153,008 |
|
|
|
166,078 |
|
|
|
409,985 |
|
|
|
549,578 |
|
Other operating expenses |
|
47,584 |
|
|
|
43,193 |
|
|
|
146,681 |
|
|
|
136,414 |
|
Other expenses |
|
210 |
|
|
|
706 |
|
|
|
578 |
|
|
|
2,231 |
|
Interest expense |
|
4,950 |
|
|
|
2,227 |
|
|
|
11,291 |
|
|
|
6,692 |
|
Amortization of intangible
assets |
|
90 |
|
|
|
90 |
|
|
|
272 |
|
|
|
272 |
|
Total expenses |
|
205,842 |
|
|
|
212,294 |
|
|
|
568,807 |
|
|
|
695,187 |
|
(Loss) income before
taxes |
|
(4,613 |
) |
|
|
(21,301 |
) |
|
|
19,176 |
|
|
|
(129,647 |
) |
Income tax (benefit)
expense |
|
8 |
|
|
|
2,588 |
|
|
|
5,928 |
|
|
|
(23,141 |
) |
NET (LOSS)
INCOME |
$ |
(4,621 |
) |
|
$ |
(23,889 |
) |
|
$ |
13,248 |
|
|
$ |
(106,506 |
) |
Dividends on Series A
preferred shares |
|
(2,625 |
) |
|
|
0 |
|
|
|
(6,125 |
) |
|
|
0 |
|
NET (LOSS) INCOME
AVAILABLE TO COMMON SHAREHOLDERS |
$ |
(7,246 |
) |
|
$ |
(23,889 |
) |
|
$ |
7,123 |
|
|
$ |
(106,506 |
) |
ADJUSTED NET OPERATING
INCOME (LOSS)(b) |
$ |
15,499 |
|
|
$ |
(26,814 |
) |
|
$ |
49,391 |
|
|
$ |
(116,780 |
) |
|
|
|
|
|
|
|
|
(LOSS) INCOME PER
COMMON SHARE |
|
|
|
|
|
|
|
Basic |
$ |
(0.19 |
) |
|
$ |
(0.64 |
) |
|
$ |
0.19 |
|
|
$ |
(3.12 |
) |
Diluted |
$ |
(0.19 |
) |
|
$ |
(0.64 |
) |
|
$ |
0.19 |
|
|
$ |
(3.12 |
) |
|
|
|
|
|
|
|
|
ADJUSTED
NET OPERATING INCOME (LOSS) PER COMMON SHARE |
|
|
|
|
Basic |
$ |
0.41 |
|
|
$ |
(0.72 |
) |
|
$ |
1.32 |
|
|
$ |
(3.42 |
) |
Diluted |
$ |
0.41 |
|
|
$ |
(0.72 |
) |
|
$ |
1.31 |
|
|
$ |
(3.42 |
) |
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
37,450,381 |
|
|
|
37,278,469 |
|
|
|
37,435,798 |
|
|
|
34,161,022 |
|
Diluted |
|
37,450,381 |
|
|
|
37,278,469 |
|
|
|
37,642,656 |
|
|
|
34,161,022 |
|
Cash dividends declared per
common share |
$ |
0.05 |
|
|
$ |
0.30 |
|
|
$ |
0.15 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
Loss ratio |
|
69.5 |
% |
|
|
97.3 |
% |
|
|
68.7 |
% |
|
|
109.1 |
% |
Expense ratio (c) |
|
24.6 |
% |
|
|
24.8 |
% |
|
|
25.5 |
% |
|
|
26.5 |
% |
Combined ratio |
|
94.1 |
% |
|
|
122.1 |
% |
|
|
94.2 |
% |
|
|
135.6 |
% |
Accident year loss ratio |
|
70.1 |
% |
|
|
71.5 |
% |
|
|
68.0 |
% |
|
|
67.2 |
% |
Accident year loss ratio
ex-catastrophe losses |
|
67.5 |
% |
|
|
68.6 |
% |
|
|
67.1 |
% |
|
|
66.2 |
% |
|
|
|
|
|
|
|
|
(a) Losses and
loss adjustment expenses include $20.8 million of unrecognized
deferred retroactive reinsurance gain for the three and nine months
ended September 30, 2022. |
(b) See
"Reconciliation of Non-GAAP Measures". |
(c) 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 $914,000 and $2.6
million for the three and nine months ended September 30,
2022, respectively ($1.0 million and $2.9 million in the respective
prior year periods), and a denominator of net earned premiums. |
James River Group Holdings, Ltd. and
SubsidiariesSegment Results
EXCESS AND SURPLUS LINES
|
Three Months EndedSeptember
30, |
|
|
|
Nine Months EndedSeptember
30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
204,785 |
|
|
$ |
217,673 |
|
|
(5.9)% |
|
$ |
675,702 |
|
|
$ |
613,045 |
|
|
10.2 |
% |
Net written premiums |
$ |
140,984 |
|
|
$ |
127,881 |
|
|
10.2 |
% |
|
$ |
432,698 |
|
|
$ |
371,477 |
|
|
16.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
139,095 |
|
|
$ |
119,760 |
|
|
16.1 |
% |
|
$ |
408,280 |
|
|
$ |
351,413 |
|
|
16.2 |
% |
Losses and loss adjustment
expenses excluding retroactive reinsurance |
|
(96,355 |
) |
|
|
(117,214 |
) |
|
(17.8)% |
|
|
(270,464 |
) |
|
|
(428,550 |
) |
|
(36.9)% |
Underwriting expenses |
|
(26,338 |
) |
|
|
(24,073 |
) |
|
9.4 |
% |
|
|
(77,623 |
) |
|
|
(68,419 |
) |
|
13.5 |
% |
Underwriting profit (loss)
(a) |
$ |
16,402 |
|
|
$ |
(21,527 |
) |
|
— |
|
|
$ |
60,193 |
|
|
$ |
(145,556 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
69.3 |
% |
|
|
97.9 |
% |
|
|
|
|
66.2 |
% |
|
|
122.0 |
% |
|
|
Expense ratio |
|
18.9 |
% |
|
|
20.1 |
% |
|
|
|
|
19.1 |
% |
|
|
19.4 |
% |
|
|
Combined ratio |
|
88.2 |
% |
|
|
118.0 |
% |
|
|
|
|
85.3 |
% |
|
|
141.4 |
% |
|
|
Accident year loss ratio |
|
69.2 |
% |
|
|
73.2 |
% |
|
|
|
|
66.2 |
% |
|
|
67.7 |
% |
|
|
Accident year loss ratio
ex-catastrophe losses |
|
65.6 |
% |
|
|
69.0 |
% |
|
|
|
|
65.0 |
% |
|
|
66.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
SPECIALTY ADMITTED INSURANCE
|
Three Months EndedSeptember
30, |
|
|
|
Nine Months EndedSeptember
30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
123,389 |
|
|
$ |
121,175 |
|
|
1.8 |
% |
|
$ |
374,066 |
|
|
$ |
377,400 |
|
|
(0.9)% |
Net written premiums |
$ |
18,929 |
|
|
$ |
22,578 |
|
|
(16.2)% |
|
$ |
57,524 |
|
|
$ |
66,081 |
|
|
(12.9)% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
17,824 |
|
|
$ |
19,704 |
|
|
(9.5)% |
|
$ |
55,283 |
|
|
$ |
54,656 |
|
|
1.1 |
% |
Losses and loss adjustment expenses |
|
(15,377 |
) |
|
|
(15,263 |
) |
|
0.7 |
% |
|
|
(44,029 |
) |
|
|
(39,371 |
) |
|
11.8 |
% |
Underwriting expenses |
|
(2,162 |
) |
|
|
(1,357 |
) |
|
59.3 |
% |
|
|
(9,508 |
) |
|
|
(8,797 |
) |
|
8.1 |
% |
Underwriting (loss) profit
(a), (b) |
$ |
285 |
|
|
$ |
3,084 |
|
|
(90.8)% |
|
$ |
1,746 |
|
|
$ |
6,488 |
|
|
(73.1)% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
86.3 |
% |
|
|
77.5 |
% |
|
|
|
|
79.6 |
% |
|
|
72.0 |
% |
|
|
Expense ratio |
|
12.1 |
% |
|
|
6.8 |
% |
|
|
|
|
17.2 |
% |
|
|
16.1 |
% |
|
|
Combined ratio |
|
98.4 |
% |
|
|
84.3 |
% |
|
|
|
|
96.8 |
% |
|
|
88.1 |
% |
|
|
Accident year loss ratio |
|
93.4 |
% |
|
|
80.0 |
% |
|
|
|
|
84.6 |
% |
|
|
76.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
|
|
|
|
|
|
|
|
|
|
(b) Underwriting results for the three and nine months ended
September 30, 2022 include gross fee income of $5.9 million
and $17.4 million, respectively ($5.6 million and $16.2 million in
the respective prior year periods). |
CASUALTY REINSURANCE
|
Three Months EndedSeptember
30, |
|
|
|
Nine Months EndedSeptember
30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
% Change |
|
|
2022 |
|
|
|
2021 |
|
|
% Change |
Gross written premiums |
$ |
30,331 |
|
|
$ |
7,751 |
|
|
291.3 |
% |
|
$ |
68,387 |
|
|
$ |
109,555 |
|
|
(37.6)% |
Net written premiums |
$ |
30,338 |
|
|
$ |
7,751 |
|
|
291.4 |
% |
|
$ |
70,579 |
|
|
$ |
88,855 |
|
|
(20.6)% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
33,270 |
|
|
$ |
31,144 |
|
|
6.8 |
% |
|
$ |
102,712 |
|
|
$ |
97,837 |
|
|
5.0 |
% |
Losses and loss adjustment
expenses |
|
(20,503 |
) |
|
|
(33,601 |
) |
|
(39.0)% |
|
|
(74,719 |
) |
|
|
(81,657 |
) |
|
(8.5)% |
Underwriting expenses |
|
(9,723 |
) |
|
|
(9,454 |
) |
|
2.8 |
% |
|
|
(31,727 |
) |
|
|
(33,037 |
) |
|
(4.0)% |
Underwriting profit (loss)
(a) |
$ |
3,044 |
|
|
$ |
(11,911 |
) |
|
— |
|
|
$ |
(3,734 |
) |
|
$ |
(16,857 |
) |
|
(77.8)% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
61.6 |
% |
|
|
107.9 |
% |
|
|
|
|
72.7 |
% |
|
|
83.5 |
% |
|
|
Expense ratio |
|
29.3 |
% |
|
|
30.3 |
% |
|
|
|
|
30.9 |
% |
|
|
33.7 |
% |
|
|
Combined ratio |
|
90.9 |
% |
|
|
138.2 |
% |
|
|
|
|
103.6 |
% |
|
|
117.2 |
% |
|
|
Accident year loss ratio |
|
61.6 |
% |
|
|
59.5 |
% |
|
|
|
|
66.1 |
% |
|
|
60.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
|
|
|
|
|
|
|
|
|
|
Underwriting Performance Ratios
The following table provides the underwriting
performance ratios of the Company inclusive of the business subject
to retroactive reinsurance accounting for loss portfolio transfers.
There is no economic impact to the Company over the life of a loss
portfolio transfer contract so long as any additional losses
subject to the contract are within the limit of the loss portfolio
transfer and the counterparty performs under the contract.
Retroactive reinsurance accounting is not indicative of our current
and ongoing operations. Management believes that providing loss
ratios and combined ratios on business not subject to retroactive
reinsurance accounting for loss portfolio transfers gives the users
of our financial statements useful information in evaluating our
current and ongoing operations.
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Excess and Surplus
Lines: |
|
|
|
|
|
|
|
Loss Ratio |
69.3 |
% |
|
97.9 |
% |
|
66.2 |
% |
|
122.0 |
% |
Impact of retroactive
reinsurance |
14.9 |
% |
|
— |
% |
|
5.1 |
% |
|
— |
% |
Loss Ratio including impact of
retroactive reinsurance |
84.2 |
% |
|
97.9 |
% |
|
71.3 |
% |
|
122.0 |
% |
|
|
|
|
|
|
|
|
Combined Ratio |
88.2 |
% |
|
118.0 |
% |
|
85.3 |
% |
|
141.4 |
% |
Impact of retroactive
reinsurance |
14.9 |
% |
|
— |
% |
|
5.1 |
% |
|
— |
% |
Combined Ratio including
impact of retroactive reinsurance |
103.1 |
% |
|
118.0 |
% |
|
90.4 |
% |
|
141.4 |
% |
|
|
|
|
|
|
|
|
Consolidated: |
|
|
|
|
|
|
|
Loss Ratio |
69.5 |
% |
|
97.3 |
% |
|
68.7 |
% |
|
109.1 |
% |
Impact of retroactive
reinsurance |
10.9 |
% |
|
— |
% |
|
3.7 |
% |
|
— |
% |
Loss Ratio including impact of
retroactive reinsurance |
80.4 |
% |
|
97.3 |
% |
|
72.4 |
% |
|
109.1 |
% |
|
|
|
|
|
|
|
|
Combined Ratio |
94.1 |
% |
|
122.1 |
% |
|
94.2 |
% |
|
135.6 |
% |
Impact of retroactive
reinsurance |
10.9 |
% |
|
— |
% |
|
3.7 |
% |
|
— |
% |
Combined Ratio including
impact of retroactive reinsurance |
105.0 |
% |
|
122.1 |
% |
|
97.9 |
% |
|
135.6 |
% |
RECONCILIATION OF NON-GAAP MEASURES
Underwriting Profit
The following table reconciles the underwriting
profit by individual operating segment and for the entire Company
to consolidated income before taxes. We believe that the disclosure
of underwriting profit by individual segment and of the Company as
a whole is useful to investors, analysts, rating agencies and other
users of our financial information in evaluating our performance
because our objective is to consistently earn underwriting profits.
We evaluate the performance of our segments and allocate resources
based primarily on underwriting profit. We define underwriting
profit as net earned premiums and gross fee income (in specific
instances when the Company is not retaining insurance risk) less
losses and loss adjustment expenses excluding the impact of loss
portfolio transfers accounted for as retroactive reinsurance and
other operating expenses. Other operating expenses include the
underwriting, acquisition, and insurance expenses of the operating
segments and, for consolidated underwriting profit, the expenses of
the Corporate and Other segment. Our definition of underwriting
profit may not be comparable to that of other companies.
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Underwriting profit (loss) of the operating segments: |
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
16,402 |
|
|
$ |
(21,527 |
) |
|
$ |
60,193 |
|
|
$ |
(145,556 |
) |
Specialty Admitted Insurance |
|
285 |
|
|
|
3,084 |
|
|
|
1,746 |
|
|
|
6,488 |
|
Casualty Reinsurance |
|
3,044 |
|
|
|
(11,911 |
) |
|
|
(3,734 |
) |
|
|
(16,857 |
) |
Total underwriting profit
(loss) of operating segments |
|
19,731 |
|
|
|
(30,354 |
) |
|
|
58,205 |
|
|
|
(155,925 |
) |
Other operating expenses of
the Corporate and Other segment |
|
(8,447 |
) |
|
|
(7,287 |
) |
|
|
(25,209 |
) |
|
|
(23,258 |
) |
Underwriting profit (loss)
(a) |
|
11,284 |
|
|
|
(37,641 |
) |
|
|
32,996 |
|
|
|
(179,183 |
) |
Losses and loss adjustment
expenses - retroactive reinsurance |
|
(20,773 |
) |
|
|
— |
|
|
|
(20,773 |
) |
|
|
— |
|
Net investment income |
|
17,306 |
|
|
|
15,289 |
|
|
|
48,278 |
|
|
|
44,726 |
|
Net realized and unrealized
(losses) gains on investments |
|
(7,754 |
) |
|
|
3,983 |
|
|
|
(29,874 |
) |
|
|
13,738 |
|
Other income (expense) |
|
364 |
|
|
|
(615 |
) |
|
|
112 |
|
|
|
(1,964 |
) |
Interest expense |
|
(4,950 |
) |
|
|
(2,227 |
) |
|
|
(11,291 |
) |
|
|
(6,692 |
) |
Amortization of intangible
assets |
|
(90 |
) |
|
|
(90 |
) |
|
|
(272 |
) |
|
|
(272 |
) |
Consolidated (loss) income
before taxes |
$ |
(4,613 |
) |
|
$ |
(21,301 |
) |
|
$ |
19,176 |
|
|
$ |
(129,647 |
) |
|
|
|
|
|
|
|
|
(a) Included in underwriting results for the three and nine months
ended September 30, 2022 is gross fee income of $5.9 million
and $17.4 million, respectively ($5.6 million and $16.2 million in
the respective prior year periods). |
Adjusted Net Operating
Income
We define adjusted net operating income as
income available to common shareholders excluding a) the impact of
loss portfolio transfers accounted for as retroactive reinsurance,
b) net realized and unrealized gains (losses) on investments, c)
certain non-operating expenses such as professional service fees
related to a purported class action lawsuit, various strategic
initiatives, and the filing of registration statements for the
offering of securities, and d) severance costs associated with
terminated employees. We use adjusted net operating income as an
internal performance measure in the management of our operations
because we believe it gives our management and other users of our
financial information useful insight into our results of operations
and our underlying business performance. Adjusted net operating
income should not be viewed as a substitute for net income
calculated in accordance with GAAP, and our definition of adjusted
net operating income may not be comparable to that of other
companies.
Our income (loss) available to common
shareholders reconciles to our adjusted net operating income (loss)
as follows:
|
Three Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
LossBeforeTaxes |
|
NetLoss |
Loss available to common shareholders |
$ |
(7,238 |
) |
|
$ |
(7,246 |
) |
|
$ |
(21,301 |
) |
|
$ |
(23,889 |
) |
Losses and loss adjustment
expenses - retroactive reinsurance |
|
20,773 |
|
|
|
16,411 |
|
|
|
— |
|
|
|
— |
|
Net realized and unrealized
investment losses (gains) |
|
7,754 |
|
|
|
6,581 |
|
|
|
(3,983 |
) |
|
|
(3,422 |
) |
Other (income) expenses |
|
(247 |
) |
|
|
(247 |
) |
|
|
625 |
|
|
|
497 |
|
Adjusted net operating income
(loss) |
$ |
21,042 |
|
|
$ |
15,499 |
|
|
$ |
(24,659 |
) |
|
$ |
(26,814 |
) |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2022 |
|
|
|
2021 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
LossBeforeTaxes |
|
NetLoss |
Income (loss) available to
common shareholders |
$ |
13,051 |
|
|
$ |
7,123 |
|
|
$ |
(129,647 |
) |
|
$ |
(106,506 |
) |
Losses and loss adjustment
expenses - retroactive reinsurance |
|
20,773 |
|
|
|
16,411 |
|
|
|
— |
|
|
|
— |
|
Net realized and unrealized
investment losses (gains) |
|
29,874 |
|
|
|
25,757 |
|
|
|
(13,738 |
) |
|
|
(11,914 |
) |
Other expenses |
|
100 |
|
|
|
100 |
|
|
|
1,963 |
|
|
|
1,640 |
|
Adjusted net operating income
(loss) |
$ |
63,798 |
|
|
$ |
49,391 |
|
|
$ |
(141,422 |
) |
|
$ |
(116,780 |
) |
Tangible Equity (per Share) and Tangible
Common Equity (per Share)
We define tangible equity as shareholders'
equity plus mezzanine Series A preferred shares and the
unrecognized deferred retroactive reinsurance gain on loss
portfolio transfers 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 September 30, 2022, June 30, 2022, and December 31,
2021.
|
September 30, 2022 |
|
June 30, 2022 |
|
December 31, 2021 |
($ in thousands,
except for share data) |
Equity |
|
Equity per share |
|
Equity |
|
Equity per share |
|
Equity |
|
Equity per share |
Shareholders' equity |
$ |
526,804 |
|
$ |
14.07 |
|
$ |
594,386 |
|
$ |
15.87 |
|
$ |
725,362 |
|
$ |
19.41 |
Plus: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
144,898 |
|
|
|
|
— |
|
|
Plus: Deferred reinsurance
gain |
|
20,773 |
|
|
|
|
— |
|
|
|
|
— |
|
|
Less: Goodwill and intangible
assets |
|
217,598 |
|
|
|
|
217,688 |
|
|
|
|
217,870 |
|
|
Tangible equity |
$ |
474,877 |
|
$ |
11.02 |
|
$ |
521,596 |
|
$ |
12.10 |
|
$ |
507,492 |
|
$ |
13.58 |
Less: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
144,898 |
|
|
|
|
— |
|
|
Tangible common equity |
$ |
329,979 |
|
$ |
8.81 |
|
$ |
376,698 |
|
$ |
10.06 |
|
$ |
507,492 |
|
$ |
13.58 |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
37,450,438 |
|
|
|
|
37,450,264 |
|
|
|
|
37,373,066 |
|
|
Common shares from assumed
conversion of Series A preferred shares |
|
5,640,158 |
|
|
|
|
5,640,158 |
|
|
|
|
— |
|
|
Common shares outstanding
after assumed conversion of Series A preferred shares |
|
43,090,596 |
|
|
|
|
43,090,422 |
|
|
|
|
37,373,066 |
|
|
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