James River Group Holdings, Ltd. ("James River" or the "Company")
(NASDAQ: JRVR) today reported the following results for the fourth
quarter 2023 as compared to the same period in 2022:
|
Three Months EndedDecember
31, |
|
Three Months EndedDecember
31, |
($ in thousands,
except for share data) |
|
2023 |
|
|
per diluted share |
|
|
2022 |
|
|
per diluted share |
Net income from continuing operations available to common
shareholders |
$ |
17,431 |
|
|
$ |
0.46 |
|
|
$ |
23,236 |
|
|
$ |
0.60 |
|
Net loss from discontinued
operations |
|
(170,211 |
) |
|
$ |
(3.89 |
) |
|
|
(8,136 |
) |
|
$ |
(0.20 |
) |
Net (loss) income available to
common shareholders |
|
(152,780 |
) |
|
$ |
(3.43 |
) |
|
|
15,100 |
|
|
$ |
0.40 |
|
Adjusted net operating
income1 |
|
12,442 |
|
|
$ |
0.33 |
|
|
|
16,415 |
|
|
$ |
0.44 |
|
Due to the pending sale of JRG Reinsurance
Company Ltd. ("JRG Re"), pursuant to the Stock Purchase Agreement
entered into in the fourth quarter, full results for the Casualty
Reinsurance segment have been reclassified to discontinued
operations for all periods. All necessary regulatory approvals for
the sale have been received and the transaction is expected to
close in the first quarter of 2024. The net loss available to
common shareholders for the fourth quarter of 2023 was driven by
the net loss from discontinued operations, which included an $80.4
million loss on held for sale classification of JRG Re and an $89.8
million loss from discontinued operations. The loss from
discontinued operations included $53.2 million associated with JRG
Re's fixed maturity securities as the Company no longer has the
intent or ability to hold securities in an unrealized loss position
until a recovery of their fair value could occur.
Adjusted net operating income1 of $12.4 million
($0.33 per diluted share) for the fourth quarter of 2023 reflected
strong investment income and profitable underwriting results from
continuing operations, particularly from our Excess and Surplus
Lines ("E&S") segment, which wrote the largest annual and
second largest quarterly amount of gross written premium in its
history.
Unless specified otherwise, all underwriting
performance ratios presented herein are for our continuing
operations and business not subject to retroactive reinsurance
accounting for loss portfolio transfers ("LPTs").
Highlights for the year and quarter
included:
- Full year 2023
Group combined ratio of 96.5%.
- E&S segment
gross written premium exceeded $1.0 billion, a record level,
including 12.1% growth in the fourth quarter of 2023 compared to
the prior year quarter. New business submissions increased 14.9% in
the fourth quarter of 2023 compared to the prior year period, while
renewal submission growth remained strong.
- E&S segment
combined ratio of 94.2% for the fourth quarter of 2023. E&S
renewal rate increased 11.0% in the fourth quarter of 2023,
including 10.5% in casualty lines, with nearly all underwriting
divisions reporting positive pricing increases.
- Specialty
Admitted segment combined ratio of 92.2% for the fourth quarter of
2023, with fronting and program gross written premium growth of
12.5% compared to the prior year quarter, excluding the non-renewed
California workers' compensation program.
- Net investment
income increased 67.0% in the fourth quarter of 2023 compared to
the prior year quarter, with all asset classes reporting
meaningfully higher income.
- Shareholders'
equity per share of $14.20 decreased 4.7%2 sequentially from
September 30, 2023, due to the previously cited loss on sale of JRG
Re, which was partially offset by net income from continuing
operations and unrealized gains in the fixed maturity portfolio
during the quarter.
Frank D'Orazio, the Company’s Chief Executive
Officer, commented, “2023 was a year of significant transformation
and strategic progress for James River, with the Company now purely
focused on our E&S and fronting platforms. During the fourth
quarter we eclipsed $1 billion in annual E&S premium, a
significant milestone for the organization that demonstrates the
strength of our franchise, driven by meaningful submission growth.
We expect to continue to build on this momentum in 2024 as our team
remains focused on leveraging sustained attractive market
conditions. Our Board of Directors continues its exploration of
strategic alternatives for the Company that was announced in
November. We expect to provide an update on the process in due
course.”
___________________1 Adjusted net operating
income 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.2 Percent change before common
dividends paid.
Fourth Quarter 2023 Operating Results -
Continuing Operations
- Gross written premium of $389.3 million, consisting of the
following:
|
Three Months EndedDecember
31, |
|
($ in
thousands) |
|
2023 |
|
|
2022 |
|
% Change |
Excess and Surplus Lines |
$ |
275,171 |
|
$ |
245,462 |
|
12 |
% |
Specialty Admitted
Insurance |
|
114,134 |
|
|
116,142 |
|
(2)% |
|
$ |
389,305 |
|
$ |
361,604 |
|
8 |
% |
|
|
|
|
|
|
|
|
|
- Net written premium of $172.2 million, consisting of the
following:
|
Three Months EndedDecember
31, |
|
($ in
thousands) |
|
2023 |
|
|
2022 |
|
% Change |
Excess and Surplus Lines |
$ |
146,628 |
|
$ |
156,358 |
|
(6)% |
Specialty Admitted Insurance |
|
25,573 |
|
|
18,866 |
|
36 |
% |
|
$ |
172,201 |
|
$ |
175,224 |
|
(2)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Net earned premium of $182.0 million, consisting of the
following:
|
Three Months EndedDecember
31, |
|
($ in
thousands) |
|
2023 |
|
|
2022 |
|
% Change |
Excess and Surplus Lines |
$ |
153,926 |
|
$ |
147,317 |
|
4 |
% |
Specialty Admitted
Insurance |
|
28,027 |
|
|
18,854 |
|
49 |
% |
|
$ |
181,953 |
|
$ |
166,171 |
|
9 |
% |
|
|
|
|
|
|
|
|
|
- E&S segment
gross written premium increased 12.1% compared to the prior year
quarter, with broad strength from most underwriting divisions.
Renewal rate increases were 11.0% during the fourth quarter of
2023. Premium retention in the segment was lower than recent
periods and net written premium declined 6.2% from the prior year
quarter due to the impact of the restructured ceded reinsurance
structure put in place at mid-year 2023, which is designed to
further limit volatility, and $4.1 million of reinsurance
reinstatement premiums incurred during the current quarter.
- Gross written
premium for fronting and program business increased 12.5% compared
to the prior year quarter excluding the impact of our large
workers' compensation fronted program that was previously not
renewed. Fronting and program business growth was driven by both
existing programs and new programs initiated earlier in 2023. Gross
written premium for the Specialty Admitted Insurance segment
declined 1.7% compared to the fourth quarter of 2022, with the
reduction due to the impact of the non-renewed workers'
compensation program and the renewal rights sale of the individual
risk workers' compensation business.
- The fourth
quarter of 2023 reflected $25.0 million of unfavorable reserve
development in the E&S segment and minimal reserve movements in
the Specialty Admitted segment. Reserve development in the E&S
segment related to accident years 2015 through 2020 for primary
general liability. During the fourth quarter of 2023, the Company
also reduced its estimate of current accident year losses and loss
adjustment expenses to reflect the strong level of rate increases,
meaningfully above both plan and trend, and other underwriting
improvements.
- Pre-tax
favorable (unfavorable) reserve development by segment on business
not subject to retroactive reinsurance accounting for loss
portfolio transfers was as follows:
|
Three Months EndedDecember
31, |
($ in thousands) |
|
2023 |
|
|
|
2022 |
Excess and Surplus Lines |
$ |
(25,005 |
) |
|
$ |
258 |
Specialty Admitted
Insurance |
|
(38 |
) |
|
|
1,400 |
|
$ |
(25,043 |
) |
|
$ |
1,658 |
-
Additionally, the Company recognized adverse prior year development
of $3.8 million on the reserves subject to the Commercial Auto LPT,
which provides unlimited coverage. Retroactive benefits of $5.0
million were recorded in loss and loss adjustment expenses during
the fourth quarter and the deferred retroactive reinsurance gain on
the Balance Sheet is $20.7 million as of December 31, 2023.
-
Gross fee income was as follows:
|
Three Months EndedDecember
31, |
|
($ in thousands) |
|
2023 |
|
|
2022 |
|
% Change |
Specialty Admitted
Insurance |
$ |
5,874 |
|
$ |
6,267 |
|
(6)% |
-
The consolidated expense ratio was 24.2% for the fourth quarter of
2023, which was an increase from 22.0% in the prior year fourth
quarter. The expense ratio was primarily impacted by changes in
reinsurance cessions in both E&S and Specialty Admitted
segments that resulted in a lower level of ceding commissions in
the current period, with an offset for lower compensation expenses
due to performance relative to Company targets.
Investment Results
Net investment income for the fourth quarter of
2023 was $25.6 million, an increase of 67.0% compared to $15.3
million in the prior year quarter. Growth in income was broad-based
across the portfolio, as positive operating cash flow and portfolio
cash flow was deployed at higher yields. On a sequential basis,
income increased modestly in most asset classes. For the fourth
quarter of 2023, income from private investments included
approximately $2.5 million related to a performance based
contingent payment from a renewable energy investment that was sold
during the fourth quarter of 2022.
The Company’s net investment income consisted of
the following:
|
Three Months EndedDecember
31, |
|
($ in
thousands) |
|
2023 |
|
|
2022 |
|
% Change |
Private Investments |
|
3,199 |
|
|
1,422 |
|
125 |
% |
All Other Investments |
|
22,389 |
|
|
13,896 |
|
61 |
% |
Total Net Investment
Income |
$ |
25,588 |
|
$ |
15,318 |
|
67 |
% |
The Company’s annualized gross investment yield
on average fixed maturity, bank loan and equity securities for the
three months ended December 31, 2023 was 4.8% (versus 3.9% for the
three months ended December 31, 2022). The investment yield
increased primarily as a result of higher market yields on fixed
maturity securities and bank loans.
Net realized and unrealized gains on investments
of $8.0 million for the three months ended December 31, 2023
compared to net realized and unrealized gains on investments of
$3.9 million in the prior year quarter. The majority of the
realized and unrealized gains during the fourth quarter of 2023
were related to our equity securities and secured bank loan
portfolio.
Taxes
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 effective tax rate on net income from continuing
operations for the year ended December 31, 2023 was 29.6%.
Tangible Equity
Shareholders' equity of $534.6 million at
December 31, 2023 declined 5.0% compared to shareholders' equity of
$562.5 million at September 30, 2023. Tangible equity3 of $485.6
million at December 31, 2023 decreased 8.4% compared to
tangible equity of $530.4 million at September 30, 2023, as net
income from continuing operations and unrealized investment gains
in accumulated other comprehensive loss ("AOCI") were offset by the
loss from discontinued operations, primarily reflecting the sale of
the Casualty Reinsurance business.
___________________3 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.
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, March 29, 2024 to all shareholders
of record on Monday, March 11, 2024.
Other
On November 8, 2023, the Company entered into an
agreement to sell JRG Re. The sale will result in the full
disposition of the Company's Casualty Reinsurance business and
related assets. All necessary regulatory approvals for the sale
have been received and we are expecting the transaction to close in
the first quarter of 2024. The operating results of JRG Re have
been classified as discontinued operations and the related assets
and liabilities have been classified as held for sale for all
periods presented. The net loss from discontinued operations was
$170.2 million for the fourth quarter of 2023, which included an
$80.4 million loss on held for sale classification of JRG Re and
$53.2 million associated with JRG Re's fixed maturity securities as
the Company no longer has the intent or ability to hold securities
in an unrealized loss position until a recovery of their fair value
could occur.
As previously disclosed, in preparing our
unaudited consolidated financial statements for the three and nine
months ended September 30, 2023, the Company became aware that the
unaudited consolidated financial statements for the six months
ended June 30, 2023 contained material misstatements related to
unrecorded reinsurance reinstatement premium. Management of the
Company concluded that the deficiencies in controls over the review
of the determination of when reinstatement premiums for reinsurance
should be recognized were a material weakness in the Company's
internal control over financial reporting.
The material weakness has been remediated as of
December 31, 2023.
Conference Call
James River will hold a conference call to
discuss its fourth quarter results tomorrow, February 29, 2024 at
8:30 a.m. Eastern Time. Investors may access the conference call by
dialing (800) 715-9871, Conference ID 1369790, 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 business that our subsidiaries write, our competitive
position, and our financial condition; the timing of the, or
potential failure to, close the sale by the Company of the common
shares of JRG Re announced on November 8, 2023; potential
uncertainty regarding the outcome of our exploration of strategic
alternatives, and the impacts that it may have on our business; 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 investments and investment returns,
and 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, adequately
protect our company against financial loss and that supports our
growth plans; 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; changes in U.S. tax laws and the interpretation of
certain provisions of Public Law No. 115-97, informally titled the
2017 Tax Cuts and Jobs Act (including associated regulations),
which may be retroactive and could 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; 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 the
Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); changes
in our financial condition, regulations or other factors that may
restrict our subsidiaries’ ability to pay us dividends; and an
adverse result in any litigation or legal proceedings we are or may
become subject to. 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, tangible equity, tangible common equity, adjusted
net operating return on tangible equity (which is calculated as
annualized adjusted net operating income divided by the average
quarterly tangible equity balances in the respective period), and
adjusted net operating return on tangible common equity excluding
AOCI (which is calculated as annualized adjusted net operating
income divided by the average quarterly tangible common equity
balances in the respective period, excluding AOCI), 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 companies. The Company operates in two
specialty property-casualty insurance segments: Excess and Surplus
Lines and Specialty Admitted Insurance. Each of the Company’s
regulated U.S. insurance subsidiaries are rated “A-” (Excellent) by
A.M. Best Company.
Visit James River Group Holdings, Ltd. on the
web at www.jrvrgroup.com.
|
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated Balance Sheet
Data (Unaudited) |
|
($ in thousands,
except for share data) |
December 31, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Invested assets: |
|
|
|
Fixed maturity securities, available-for-sale, at fair value |
$ |
1,324,476 |
|
$ |
1,171,303 |
Equity securities, at fair
value |
|
119,945 |
|
|
115,155 |
Bank loan participations, at
fair value |
|
156,169 |
|
|
54,281 |
Short-term investments |
|
72,137 |
|
|
95,351 |
Other invested assets |
|
33,134 |
|
|
27,447 |
Total invested assets |
|
1,705,861 |
|
|
1,463,537 |
|
|
|
|
Cash and cash equivalents |
|
274,298 |
|
|
159,200 |
Restricted cash equivalents
(a) |
|
72,449 |
|
|
103,215 |
Accrued investment income |
|
12,106 |
|
|
9,768 |
Premiums receivable and
agents’ balances, net |
|
249,490 |
|
|
239,944 |
Reinsurance recoverable on
unpaid losses, net |
|
1,358,474 |
|
|
1,259,617 |
Reinsurance recoverable on
paid losses |
|
157,991 |
|
|
114,242 |
Deferred policy acquisition
costs |
|
31,497 |
|
|
32,837 |
Goodwill and intangible
assets |
|
214,644 |
|
|
217,507 |
Other assets |
|
457,047 |
|
|
391,409 |
Assets of discontinued
operations held-for-sale |
|
783,393 |
|
|
1,145,799 |
Total assets |
$ |
5,317,250 |
|
$ |
5,137,075 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Reserve for losses and loss
adjustment expenses |
$ |
2,606,107 |
|
$ |
2,340,963 |
Unearned premiums |
|
587,899 |
|
|
578,196 |
Funds held (a) |
|
65,235 |
|
|
97,360 |
Deferred reinsurance gain |
|
20,733 |
|
|
15,742 |
Senior debt |
|
222,300 |
|
|
222,300 |
Junior subordinated debt |
|
104,055 |
|
|
104,055 |
Accrued expenses |
|
56,722 |
|
|
56,881 |
Other liabilities |
|
333,183 |
|
|
271,625 |
Liabilities of discontinued
operations held-for-sale |
|
641,497 |
|
|
751,289 |
Total liabilities |
|
4,637,731 |
|
|
4,438,411 |
|
|
|
|
Series A redeemable preferred
shares |
|
144,898 |
|
|
144,898 |
Total shareholders’
equity |
|
534,621 |
|
|
553,766 |
Total liabilities, Series A
redeemable preferred shares, and shareholders’ equity |
$ |
5,317,250 |
|
$ |
5,137,075 |
|
|
|
|
Tangible equity (b) |
$ |
485,608 |
|
$ |
501,248 |
Tangible equity per share
(b) |
$ |
11.13 |
|
$ |
11.63 |
Tangible common equity per
share (b) |
$ |
9.05 |
|
$ |
9.51 |
Shareholders' equity per
share |
$ |
14.20 |
|
$ |
14.78 |
Common shares outstanding |
|
37,641,563 |
|
|
37,470,237 |
|
|
|
|
(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. |
(b) See “Reconciliation of
Non-GAAP Measures” |
|
|
|
|
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated Income
Statement Data (Unaudited) |
|
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
($ in thousands, except for share data) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
REVENUES |
|
|
|
|
|
|
|
Gross written premiums |
$ |
389,305 |
|
|
$ |
361,604 |
|
|
$ |
1,508,660 |
|
|
$ |
1,411,372 |
|
Net written premiums |
|
172,201 |
|
|
|
175,224 |
|
|
|
693,901 |
|
|
|
665,446 |
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
181,953 |
|
|
|
166,171 |
|
|
|
708,005 |
|
|
|
629,734 |
|
Net investment income |
|
25,588 |
|
|
|
15,318 |
|
|
|
84,046 |
|
|
|
43,188 |
|
Net realized and unrealized
gains (losses) on investments |
|
7,954 |
|
|
|
3,878 |
|
|
|
10,441 |
|
|
|
(15,720 |
) |
Other income |
|
2,609 |
|
|
|
1,438 |
|
|
|
9,517 |
|
|
|
4,312 |
|
Total revenues |
|
218,104 |
|
|
|
186,805 |
|
|
|
812,009 |
|
|
|
661,514 |
|
EXPENSES |
|
|
|
|
|
|
|
Losses and loss adjustment
expenses (a) |
|
133,162 |
|
|
|
105,376 |
|
|
|
500,157 |
|
|
|
440,642 |
|
Other operating expenses |
|
45,734 |
|
|
|
37,616 |
|
|
|
193,656 |
|
|
|
152,570 |
|
Other expenses |
|
2,325 |
|
|
|
217 |
|
|
|
3,792 |
|
|
|
795 |
|
Interest expense |
|
6,561 |
|
|
|
5,158 |
|
|
|
24,627 |
|
|
|
13,872 |
|
Intangible asset amortization
and impairment |
|
91 |
|
|
|
91 |
|
|
|
2,863 |
|
|
|
363 |
|
Total expenses |
|
187,873 |
|
|
|
148,458 |
|
|
|
725,095 |
|
|
|
608,242 |
|
Income from continuing
operations before income taxes |
|
30,231 |
|
|
|
38,347 |
|
|
|
86,914 |
|
|
|
53,272 |
|
Income tax expense on
continuing operations |
|
10,175 |
|
|
|
12,486 |
|
|
|
25,705 |
|
|
|
18,414 |
|
Net income from continuing
operations |
|
20,056 |
|
|
|
25,861 |
|
|
|
61,209 |
|
|
|
34,858 |
|
Net loss from discontinued
operations |
|
(170,211 |
) |
|
|
(8,136 |
) |
|
|
(168,893 |
) |
|
|
(3,885 |
) |
NET INCOME
(LOSS) |
$ |
(150,155 |
) |
|
$ |
17,725 |
|
|
$ |
(107,684 |
) |
|
$ |
30,973 |
|
Dividends on Series A
preferred shares |
|
(2,625 |
) |
|
|
(2,625 |
) |
|
|
(10,500 |
) |
|
|
(8,750 |
) |
NET INCOME (LOSS)
AVAILABLE TO COMMON SHAREHOLDERS |
$ |
(152,780 |
) |
|
$ |
15,100 |
|
|
$ |
(118,184 |
) |
|
$ |
22,223 |
|
ADJUSTED NET OPERATING
INCOME (b) |
$ |
12,442 |
|
|
$ |
16,415 |
|
|
$ |
50,317 |
|
|
$ |
51,710 |
|
|
|
|
|
|
|
|
|
INCOME (LOSS) PER
COMMON SHARE |
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.46 |
|
|
$ |
0.62 |
|
|
$ |
1.35 |
|
|
$ |
0.70 |
|
Discontinued operations |
$ |
(4.52 |
) |
|
$ |
(0.22 |
) |
|
$ |
(4.49 |
) |
|
$ |
(0.11 |
) |
|
$ |
(4.06 |
) |
|
$ |
0.40 |
|
|
$ |
(3.14 |
) |
|
$ |
0.59 |
|
Diluted (c) |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.46 |
|
|
$ |
0.60 |
|
|
$ |
1.34 |
|
|
$ |
0.69 |
|
Discontinued operations |
$ |
(3.89 |
) |
|
$ |
(0.20 |
) |
|
$ |
(4.47 |
) |
|
$ |
(0.10 |
) |
|
$ |
(3.43 |
) |
|
$ |
0.40 |
|
|
$ |
(3.13 |
) |
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
ADJUSTED
NET OPERATING INCOME PER COMMON SHARE |
|
|
|
|
Basic |
$ |
0.33 |
|
|
$ |
0.44 |
|
|
$ |
1.34 |
|
|
$ |
1.38 |
|
Diluted (d) |
$ |
0.33 |
|
|
$ |
0.44 |
|
|
$ |
1.33 |
|
|
$ |
1.37 |
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
37,656,268 |
|
|
|
37,463,802 |
|
|
|
37,618,660 |
|
|
|
37,442,856 |
|
Diluted |
|
43,744,208 |
|
|
|
43,315,837 |
|
|
|
37,810,440 |
|
|
|
37,650,969 |
|
Cash dividends declared per
common share |
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
Loss ratio |
|
73.9 |
% |
|
|
66.4 |
% |
|
|
69.9 |
% |
|
|
67.5 |
% |
Expense ratio (e) |
|
24.2 |
% |
|
|
22.0 |
% |
|
|
26.6 |
% |
|
|
23.6 |
% |
Combined ratio |
|
98.1 |
% |
|
|
88.4 |
% |
|
|
96.5 |
% |
|
|
91.1 |
% |
Accident year loss ratio
(f) |
|
58.8 |
% |
|
|
67.4 |
% |
|
|
64.0 |
% |
|
|
68.2 |
% |
Accident year loss ratio
ex-catastrophe losses (f) |
|
58.8 |
% |
|
|
67.4 |
% |
|
|
64.0 |
% |
|
|
67.4 |
% |
|
|
|
|
|
|
|
|
(a) Losses and
loss adjustment expenses include $(1.3) million and $5.0 million of
(benefit) expense for deferred retroactive reinsurance gains for
the three and twelve months ended December 31, 2023, respectively
($(5.0) million and $15.7 million in the respective three and
twelve month prior year periods). |
(b) See
"Reconciliation of Non-GAAP Measures". |
(c) The
outstanding Series A preferred shares were dilutive for the three
months ended December 31, 2023. Dividends on the Series A
preferred shares were added back to the numerator in the
calculation and 5,971,184 common shares from an assumed conversion
of the Series A preferred shares were included in the
denominator. |
(d) The
outstanding Series A preferred shares were anti-dilutive for the
three months ended December 31, 2023. Dividends on the Series
A preferred shares were not added back to the numerator in the
calculation and 5,971,184 common shares from an assumed conversion
of the Series A preferred shares were excluded from the
denominator. |
(e) 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 $1.7 million and $5.3
million for the three and twelve months ended months ended
December 31, 2023, respectively ($1.1 million and $3.8 million
in the respective prior year periods), and a denominator of net
earned premiums. |
(f) Ratio of losses and loss adjustment expenses for the current
accident year, excluding development on prior accident year
reserves, to net earned premiums for the current year (excluding
net earned premium adjustments on reinstatement premiums associated
with prior years of $4.1 million and $16.4 million for the three
and twelve months ended December 31, 2023). |
|
James River Group Holdings, Ltd. and
SubsidiariesSegment Results |
EXCESS AND SURPLUS LINES |
|
|
Three Months EndedDecember
31, |
|
|
|
Twelve Months EndedDecember
31, |
|
|
($ in
thousands) |
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
Gross written premiums |
$ |
275,171 |
|
|
$ |
245,462 |
|
|
12.1 |
% |
|
$ |
1,007,351 |
|
|
$ |
921,164 |
|
|
9.4 |
% |
Net written premiums (a) |
$ |
146,628 |
|
|
$ |
156,358 |
|
|
(6.2)% |
|
$ |
589,551 |
|
|
$ |
589,056 |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums (a) |
$ |
153,926 |
|
|
$ |
147,317 |
|
|
4.5 |
% |
|
$ |
609,566 |
|
|
$ |
555,597 |
|
|
9.7 |
% |
Losses and loss adjustment
expenses excluding retroactive reinsurance |
|
(112,680 |
) |
|
|
(95,888 |
) |
|
17.5 |
% |
|
|
(420,044 |
) |
|
|
(366,352 |
) |
|
14.7 |
% |
Underwriting expenses |
|
(32,348 |
) |
|
|
(28,571 |
) |
|
13.2 |
% |
|
|
(135,175 |
) |
|
|
(106,194 |
) |
|
27.3 |
% |
Underwriting profit (b) |
$ |
8,898 |
|
|
$ |
22,858 |
|
|
(61.1)% |
|
$ |
54,347 |
|
|
$ |
83,051 |
|
|
(34.6)% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
73.2 |
% |
|
|
65.1 |
% |
|
|
|
|
68.9 |
% |
|
|
65.9 |
% |
|
|
Expense ratio |
|
21.0 |
% |
|
|
19.4 |
% |
|
|
|
|
22.2 |
% |
|
|
19.2 |
% |
|
|
Combined ratio |
|
94.2 |
% |
|
|
84.5 |
% |
|
|
|
|
91.1 |
% |
|
|
85.1 |
% |
|
|
Accident year loss ratio
(c) |
|
55.5 |
% |
|
|
65.3 |
% |
|
|
|
|
61.9 |
% |
|
|
66.0 |
% |
|
|
Accident year loss ratio
ex-catastrophe losses (c) |
|
55.5 |
% |
|
|
65.3 |
% |
|
|
|
|
61.9 |
% |
|
|
65.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Net written
and earned premiums were negatively impacted by $4.1 million and
$16.4 million of reinstatement premiums related to casualty
treaties during the three and twelve months ended December 31,
2023, respectively. |
(b) See
"Reconciliation of Non-GAAP Measures". |
(c) Ratio of
losses and loss adjustment expenses for the current accident year,
excluding development on prior accident year reserves, to net
earned premiums for the current year (excluding net earned premium
adjustments on reinstatement premiums associated with prior
years). |
SPECIALTY ADMITTED INSURANCE
|
Three Months EndedDecember
31, |
|
|
|
Twelve Months EndedDecember
31, |
|
|
($ in
thousands) |
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
Gross written premiums |
$ |
114,134 |
|
|
$ |
116,142 |
|
|
(1.7)% |
|
$ |
501,309 |
|
|
$ |
490,208 |
|
|
2.3 |
% |
Net written premiums |
$ |
25,573 |
|
|
$ |
18,866 |
|
|
35.6 |
% |
|
$ |
104,350 |
|
|
$ |
76,390 |
|
|
36.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
28,027 |
|
|
$ |
18,854 |
|
|
48.7 |
% |
|
$ |
98,439 |
|
|
$ |
74,137 |
|
|
32.8 |
% |
Losses and loss adjustment
expenses |
|
(21,752 |
) |
|
|
(14,519 |
) |
|
49.8 |
% |
|
|
(75,122 |
) |
|
|
(58,548 |
) |
|
28.3 |
% |
Underwriting expenses |
|
(4,080 |
) |
|
|
(1,847 |
) |
|
120.9 |
% |
|
|
(19,240 |
) |
|
|
(11,355 |
) |
|
69.4 |
% |
Underwriting profit (a),
(b) |
$ |
2,195 |
|
|
$ |
2,488 |
|
|
(11.8)% |
|
$ |
4,077 |
|
|
$ |
4,234 |
|
|
(3.7)% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
77.6 |
% |
|
|
77.0 |
% |
|
|
|
|
76.3 |
% |
|
|
79.0 |
% |
|
|
Expense ratio |
|
14.6 |
% |
|
|
9.8 |
% |
|
|
|
|
19.6 |
% |
|
|
15.3 |
% |
|
|
Combined ratio |
|
92.2 |
% |
|
|
86.8 |
% |
|
|
|
|
95.9 |
% |
|
|
94.3 |
% |
|
|
Accident year loss ratio |
|
77.5 |
% |
|
|
84.4 |
% |
|
|
|
|
77.3 |
% |
|
|
84.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP
Measures". |
|
|
(b) Underwriting results for the three and twelve months ended
December 31, 2023 include gross fee income of $5.9 million and
$24.2 million, respectively ($6.3 million and $23.6 million in the
respective prior year periods). |
Underwriting Performance Ratios
The following table provides the underwriting
performance ratios of the Company's continuing operations inclusive
of the business subject to retroactive reinsurance accounting for a
loss portfolio transfer. 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 EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Excess and Surplus
Lines: |
|
|
|
|
|
|
|
Loss Ratio |
73.2 |
% |
|
65.1 |
% |
|
68.9 |
% |
|
65.9 |
% |
Impact of retroactive
reinsurance |
(0.8)% |
|
(3.4)% |
|
0.8 |
% |
|
2.8 |
% |
Loss Ratio including impact of
retroactive reinsurance |
72.4 |
% |
|
61.7 |
% |
|
69.7 |
% |
|
68.7 |
% |
|
|
|
|
|
|
|
|
Combined Ratio |
94.2 |
% |
|
84.5 |
% |
|
91.1 |
% |
|
85.1 |
% |
Impact of retroactive
reinsurance |
(0.8)% |
|
(3.4)% |
|
0.8 |
% |
|
2.8 |
% |
Combined Ratio including
impact of retroactive reinsurance |
93.4 |
% |
|
81.1 |
% |
|
91.9 |
% |
|
87.9 |
% |
|
|
|
|
|
|
|
|
Consolidated: |
|
|
|
|
|
|
|
Loss Ratio |
73.9 |
% |
|
66.4 |
% |
|
69.9 |
% |
|
67.5 |
% |
Impact of retroactive
reinsurance |
(0.7)% |
|
(3.0)% |
|
0.7 |
% |
|
2.5 |
% |
Loss Ratio including impact of
retroactive reinsurance |
73.2 |
% |
|
63.4 |
% |
|
70.6 |
% |
|
70.0 |
% |
|
|
|
|
|
|
|
|
Combined Ratio |
98.1 |
% |
|
88.4 |
% |
|
96.5 |
% |
|
91.1 |
% |
Impact of retroactive
reinsurance |
(0.7)% |
|
(3.0)% |
|
0.7 |
% |
|
2.5 |
% |
Combined Ratio including
impact of retroactive reinsurance |
97.4 |
% |
|
85.4 |
% |
|
97.2 |
% |
|
93.6 |
% |
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 on business from continuing
operations not subject to retroactive reinsurance accounting for
loss portfolio transfers 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 EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
($ in thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Underwriting profit of the
operating segments: |
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
8,898 |
|
|
$ |
22,858 |
|
|
$ |
54,347 |
|
|
$ |
83,051 |
|
Specialty Admitted Insurance |
|
2,195 |
|
|
|
2,488 |
|
|
|
4,077 |
|
|
|
4,234 |
|
Total underwriting profit of
operating segments |
|
11,093 |
|
|
|
25,346 |
|
|
|
58,424 |
|
|
|
87,285 |
|
Other operating expenses of
the Corporate and Other segment |
|
(7,628 |
) |
|
|
(6,051 |
) |
|
|
(33,940 |
) |
|
|
(31,260 |
) |
Underwriting profit (a) |
|
3,465 |
|
|
|
19,295 |
|
|
|
24,484 |
|
|
|
56,025 |
|
Losses and loss adjustment
expenses - retroactive reinsurance |
|
1,270 |
|
|
|
5,031 |
|
|
|
(4,991 |
) |
|
|
(15,742 |
) |
Net investment income |
|
25,588 |
|
|
|
15,318 |
|
|
|
84,046 |
|
|
|
43,188 |
|
Net realized and unrealized
gains (losses) on investments |
|
7,954 |
|
|
|
3,878 |
|
|
|
10,441 |
|
|
|
(15,720 |
) |
Other (expense) income |
|
(1,394 |
) |
|
|
74 |
|
|
|
424 |
|
|
|
(244 |
) |
Interest expense |
|
(6,561 |
) |
|
|
(5,158 |
) |
|
|
(24,627 |
) |
|
|
(13,872 |
) |
Amortization of intangible
assets |
|
(91 |
) |
|
|
(91 |
) |
|
|
(363 |
) |
|
|
(363 |
) |
Impairment of IRWC trademark
intangible asset |
|
— |
|
|
|
— |
|
|
|
(2,500 |
) |
|
|
— |
|
Income from continuing
operations before taxes |
$ |
30,231 |
|
|
$ |
38,347 |
|
|
$ |
86,914 |
|
|
$ |
53,272 |
|
|
|
|
|
|
|
|
|
(a) Included in underwriting results for the three and twelve
months ended December 31, 2023 is gross fee income of $5.9
million and $24.2 million, respectively ($6.3 million and $23.6
million in the respective prior year periods). |
Adjusted Net Operating
Income
We define adjusted net operating income as
income available to common shareholders excluding a) income (loss)
from discontinued operations b) the impact of retroactive
reinsurance accounting for a loss portfolio transfer, c) net
realized and unrealized gains (losses) on investments, d) certain
non-operating expenses such as professional service fees related to
a purported class action lawsuit, various strategic initiatives,
and the filing of registration statements for the offering of
securities, and e) severance costs associated with terminated
employees. We use adjusted net operating income as an internal
performance measure in the management of our operations because we
believe it gives our management and other users of our financial
information useful insight into our results of operations and our
underlying business performance. Adjusted net operating income
should not be viewed as a substitute for net income calculated in
accordance with GAAP, and our definition of adjusted net operating
income may not be comparable to that of other companies.
Our income available to common shareholders
reconciles to our adjusted net operating income as follows:
|
Three Months Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
IncomeBeforeTaxes |
|
NetIncome |
(Loss) income available to common shareholders |
$ |
(142,605 |
) |
|
$ |
(152,780 |
) |
|
$ |
27,586 |
|
|
$ |
15,100 |
|
Loss from discontinued
operations |
|
170,211 |
|
|
|
170,211 |
|
|
|
8,136 |
|
|
|
8,136 |
|
Losses and loss adjustment
expenses - retroactive reinsurance |
|
(1,270 |
) |
|
|
(1,003 |
) |
|
|
(5,031 |
) |
|
|
(3,974 |
) |
Net realized and unrealized
investment gains |
|
(7,954 |
) |
|
|
(6,284 |
) |
|
|
(3,878 |
) |
|
|
(3,064 |
) |
Other expenses |
|
2,321 |
|
|
|
2,298 |
|
|
|
217 |
|
|
|
217 |
|
Adjusted net operating
income |
$ |
20,703 |
|
|
$ |
12,442 |
|
|
$ |
27,030 |
|
|
$ |
16,415 |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
IncomeBeforeTaxes |
|
NetIncome |
(Loss) income available to
common shareholders |
$ |
(92,479 |
) |
|
$ |
(118,184 |
) |
|
$ |
40,637 |
|
|
$ |
22,223 |
|
Loss from discontinued
operations |
|
168,893 |
|
|
|
168,893 |
|
|
|
3,885 |
|
|
|
3,885 |
|
Losses and loss adjustment
expenses - retroactive reinsurance |
|
4,991 |
|
|
|
3,943 |
|
|
|
15,742 |
|
|
|
12,437 |
|
Net realized and unrealized
investment (gains) losses |
|
(10,441 |
) |
|
|
(8,248 |
) |
|
|
15,720 |
|
|
|
12,418 |
|
Other expenses |
|
1,588 |
|
|
|
1,938 |
|
|
|
747 |
|
|
|
747 |
|
Impairment of IRWC trademark
intangible asset |
|
2,500 |
|
|
|
1,975 |
|
|
|
— |
|
|
|
— |
|
Adjusted net operating
income |
$ |
75,052 |
|
|
$ |
50,317 |
|
|
$ |
76,731 |
|
|
$ |
51,710 |
|
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 December 31, 2023, September 30, 2023, December 31,
2022, and September 30, 2022.
|
December 31, 2023 |
|
September 30, 2023 |
|
December 31, 2022 |
|
September 30, 2022 |
($ in thousands,
except for share data) |
|
|
|
|
|
|
|
Shareholders' equity |
$ |
534,621 |
|
$ |
562,544 |
|
$ |
553,766 |
|
$ |
526,804 |
Plus: Series A redeemable
preferred shares |
|
144,898 |
|
|
144,898 |
|
|
144,898 |
|
|
144,898 |
Plus: Deferred reinsurance
gain (a) |
|
20,733 |
|
|
37,653 |
|
|
20,091 |
|
|
20,773 |
Less: Goodwill and intangible
assets |
|
214,644 |
|
|
214,735 |
|
|
217,507 |
|
|
217,598 |
Tangible equity |
$ |
485,608 |
|
$ |
530,360 |
|
$ |
501,248 |
|
$ |
474,877 |
Less: Series A redeemable
preferred shares |
|
144,898 |
|
|
144,898 |
|
|
144,898 |
|
|
144,898 |
Tangible common equity |
$ |
340,710 |
|
$ |
385,462 |
|
$ |
356,350 |
|
$ |
329,979 |
|
|
|
|
|
|
|
|
Common shares outstanding |
|
37,641,563 |
|
|
37,619,749 |
|
|
37,470,237 |
|
|
37,450,438 |
Common shares from assumed
conversion of Series A preferred shares |
|
5,971,184 |
|
|
5,640,158 |
|
|
5,640,158 |
|
|
5,640,158 |
Common shares outstanding
after assumed conversion of Series A preferred shares |
|
43,612,747 |
|
|
43,259,907 |
|
|
43,110,395 |
|
|
43,090,596 |
|
|
|
|
|
|
|
|
Equity per share: |
|
|
|
|
|
|
|
Shareholders' equity |
$ |
14.20 |
|
$ |
14.95 |
|
$ |
14.78 |
|
$ |
14.07 |
Tangible equity |
$ |
11.13 |
|
$ |
12.26 |
|
$ |
11.63 |
|
$ |
11.02 |
Tangible common equity |
$ |
9.05 |
|
$ |
10.25 |
|
$ |
9.51 |
|
$ |
8.81 |
|
|
|
|
|
|
|
|
(a) Deferred
reinsurance gain for the period ending December 31, 2023 excludes
the deferred retroactive reinsurance gain of $33.2 million related
to the Casualty Reinsurance LPT in discontinued operations. |
For more information contact:
Brett Shirreffs
SVP, Finance, Investments and Investor Relations
Investors@jrvrgroup.com
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