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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2022
or
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
 
Commission File Number: 001-36777
JAMES RIVER GROUP HOLDINGS, LTD.
 
(Exact name of registrant as specified in its charter)
Bermuda 98-0585280
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
Wellesley House, 2nd Floor, 90 Pitts Bay Road, Pembroke HM08, Bermuda
(Address of principal executive offices)
(Zip Code)
(441) 278-4580
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Names of each exchange on which registered
Common Shares, par value $0.0002 per shareJRVRNASDAQGlobal Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filerNon-accelerated filer Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No   x
Number of shares of the registrant's common shares outstanding at July 29, 2022: 37,450,264



James River Group Holdings, Ltd.
Form 10-Q
Index
 Page
Number
 
   
 
   
 
   
 
   
 
   
 
   
 
   
   
 
   
   
  
 
   
  
 
2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the fact that they do not relate strictly to historical or current facts. You may identify forward-looking statements in this Quarterly Report by the use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans”, “seeks” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.” These forward-looking statements include, among others, all statements relating to our future financial performance, our business prospects and strategy, anticipated financial position and financial strength ratings, liquidity and capital needs and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
 
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Quarterly Report as a result of various factors, many of which are beyond our control, including, among others:
 
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 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;
a persistent high inflationary environment could have a negative impact 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 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;
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;
3


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”);
changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends; and
other risks and uncertainties discussed elsewhere in this Quarterly Report.
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 Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.
Forward-looking statements speak only as of the date of this Quarterly Report. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Quarterly Report, whether as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this Quarterly Report or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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Table of Contents
 
PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements
 
 
JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets
(Unaudited) June 30,
2022
December 31,
2021
 (in thousands)
Assets  
Invested assets:  
Fixed maturity securities, available-for-sale, at fair value (amortized cost: 2022 – $1,728,217; 2021 – $1,643,865)
$1,597,695 $1,677,561 
Equity securities, at fair value (cost: 2022 – $97,018; 2021 – $95,783)
98,653 108,410 
Bank loan participations, at fair value159,885 156,043 
Short-term investments130,435 136,563 
Other invested assets51,348 51,908 
Total invested assets2,038,016 2,130,485 
Cash and cash equivalents350,740 190,123 
Restricted cash equivalents102,099 102,005 
Accrued investment income11,834 11,037 
Premiums receivable and agents’ balances, net374,465 393,967 
Reinsurance recoverable on unpaid losses, net1,570,885 1,348,628 
Reinsurance recoverable on paid losses106,509 82,235 
Prepaid reinsurance premiums300,890 291,498 
Deferred policy acquisition costs60,651 68,526 
Intangible assets, net35,857 36,039 
Goodwill181,831 181,831 
Other assets131,498 112,176 
Total assets$5,265,275 $4,948,550 
 
See accompanying notes.
 

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets (continued)
  
(Unaudited) June 30,
2022
December 31,
2021
 (in thousands, except share amounts)
Liabilities and Shareholders’ Equity  
Liabilities:  
Reserve for losses and loss adjustment expenses$2,730,631 $2,748,473 
Unearned premiums723,062 727,552 
Payables to reinsurers155,645 135,617 
Funds held353,685 97,360 
Senior debt222,300 262,300 
Junior subordinated debt104,055 104,055 
Accrued expenses55,047 57,920 
Other liabilities181,566 89,911 
Total liabilities4,525,991 4,223,188 
Commitments and contingent liabilities
Series A redeemable preferred shares – 2022 and 2021: $0.00125 par value; 20,000,000 shares authorized; 150,000 and no shares issued and outstanding, respectively
144,898  
Shareholders’ equity:  
Common shares – 2022 and 2021: $0.0002 par value; 200,000,000 shares authorized; 37,450,264 and 37,373,066 shares issued and outstanding, respectively
7 7 
Additional paid-in capital865,081 862,040 
Retained deficit(156,109)(166,663)
Accumulated other comprehensive (loss) income(114,593)29,978 
Total shareholders’ equity594,386 725,362 
Total liabilities, Series A redeemable preferred shares, and shareholders’ equity$5,265,275 $4,948,550 
 
See accompanying notes.

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 JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Statements of Income (Loss) and Comprehensive (Loss) Income (Unaudited)

 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in thousands, except share amounts)
Revenues    
Gross written premiums$399,714 $380,146 $759,650 $753,401 
Ceded written premiums(205,023)(186,542)(389,100)(385,198)
Net written premiums194,691 193,604 370,550 368,203 
Change in net unearned premiums(8,429)(20,899)5,536 (34,905)
Net earned premiums186,262 172,705 376,086 333,298 
Net investment income14,705 14,348 30,972 29,437 
Net realized and unrealized (losses) gains on investments(17,110)3,483 (22,120)9,755 
Other income949 1,031 1,816 2,057 
Total revenues184,806 191,567 386,754 374,547 
Expenses   
Losses and loss adjustment expenses121,369 110,000 256,977 383,500 
Other operating expenses49,036 45,840 99,097 93,221 
Other expenses 904 368 1,525 
Interest expense4,049 2,249 6,341 4,465 
Amortization of intangible assets91 91 182 182 
Total expenses174,545 159,084 362,965 482,893 
Income (loss) before taxes10,261 32,483 23,789 (108,346)
Income tax expense (benefit)2,597 11,640 5,920 (25,729)
Net income (loss)7,664 20,843 17,869 (82,617)
Dividends on Series A preferred shares(2,625) (3,500) 
Net income (loss) available to common shareholders$5,039 $20,843 $14,369 $(82,617)
Other comprehensive (loss) income:   
Net unrealized (losses) gains, net of taxes of $(7,998) and $(19,648) in 2022 and $2,013 and $(3,635) in 2021
(58,600)15,358 (144,571)(27,330)
Total comprehensive (loss) income$(50,936)$36,201 $(126,702)$(109,947)
Net income (loss) per common share:   
Basic$0.13 $0.61 $0.38 $(2.54)
Diluted$0.13 $0.60 $0.38 $(2.54)
Dividend declared per common share$0.05 $0.30 $0.10 $0.60 
Weighted-average common shares outstanding:   
Basic37,449,621 34,418,472 37,428,385 32,576,463 
Diluted37,732,371 34,586,997 37,643,634 32,576,463 

 
See accompanying notes.
 

 
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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)


 
 Number of
Common
Shares
Outstanding
Common
Shares (Par)
Additional
Paid-in
Capital
Retained
Deficit
Accumulated
Other
Comprehensive
(Loss) Income
Total
 (in thousands, except share amounts)
Balances at March 31, 202237,448,314 $7 $862,904 $(159,241)$(55,993)$647,677 
Net income— — — 7,664 — 7,664 
Other comprehensive loss— — — — (58,600)(58,600)
Vesting of RSUs1,950 — (19)— — (19)
Compensation expense under share incentive plans— — 2,196 — — 2,196 
Dividends on Series A preferred shares— — — (2,625)— (2,625)
Dividends on common shares— — — (1,907)— (1,907)
Balances at June 30, 202237,450,264 $7 $865,081 $(156,109)$(114,593)$594,386 
Balances at December 31, 202137,373,066 $7 $862,040 $(166,663)$29,978 $725,362 
Net income— — — 17,869 — 17,869 
Other comprehensive loss— — — — (144,571)(144,571)
Vesting of RSUs77,198 — (941)— — (941)
Compensation expense under share incentive plans— — 3,982 — — 3,982 
Dividends on Series A preferred shares— — — (3,500)— (3,500)
Dividends on common shares— — — (3,815)— (3,815)
Balances at June 30, 202237,450,264 $7 $865,081 $(156,109)$(114,593)$594,386 

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)


 
 Number of
Common
Shares
Outstanding
Common
Shares (Par)
Additional
Paid-in
Capital
Retained
(Deficit) Earnings
Accumulated
Other
Comprehensive
Income
Total
 (in thousands, except share amounts)
Balances at March 31, 202130,774,930 $6 $663,987 $(63,576)$39,211 $639,628 
Net income— — — 20,843 — 20,843 
Other comprehensive income— — — — 15,358 15,358 
Issuance of common shares6,497,500 1 192,106 — — 192,107 
Vesting of RSUs3,132 — (39)— — (39)
Compensation expense under share incentive plans— — 1,862 — — 1,862 
Dividends on common shares— — — (11,260)— (11,260)
Balances at June 30, 202137,275,562 $7 $857,916 $(53,993)$54,569 $858,499 
Balances at December 31, 202030,649,261 $6 $664,476 $49,227 $81,899 $795,608 
Net loss— — — (82,617)— (82,617)
Other comprehensive loss— — — — (27,330)(27,330)
Issuance of common shares6,497,500 1 192,106 — — 192,107 
Exercise of stock options16,471 — 159 — — 159 
Vesting of RSUs112,330 — (2,592)— — (2,592)
Compensation expense under share incentive plans— — 3,767 — — 3,767 
Dividends on common shares— — — (20,603)— (20,603)
Balances at June 30, 202137,275,562 $7 $857,916 $(53,993)$54,569 $858,499 

See accompanying notes.
 
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 JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Statements of Cash Flows (Unaudited)

 Six Months Ended June 30,
 20222021
 (in thousands)
Operating activities  
Net cash provided by (used in) operating activities (a)$139,321 $(93,003)
Investing activities  
Securities available-for-sale:  
Purchases – fixed maturity securities(351,715)(273,016)
Sales – fixed maturity securities158,469 36,591 
Maturities and calls – fixed maturity securities109,184 142,895 
Purchases – equity securities(6,751)(10,326)
Sales – equity securities5,171 6,734 
Bank loan participations:  
Purchases(59,450)(71,011)
Sales32,679 36,059 
Maturities11,360 23,713 
Other invested assets:  
Purchases (10,545)
Return of capital998 336 
Short-term investments, net6,128 90,626 
Securities receivable or payable, net22,042 16,229 
Purchases of property and equipment(3,175)(1,876)
Net cash used in investing activities(75,060)(13,591)
Financing activities  
Senior debt repayments(40,000) 
Issuance of Series A preferred shares144,898  
Issuance of common shares - public offering 192,107 
Issuance of common shares under equity incentive plans 329 
Common share repurchases(941)(2,762)
Dividends on Series A preferred shares(3,500) 
Dividends on common shares(4,007)(20,804)
Net cash provided by financing activities96,450 168,870 
Change in cash, cash equivalents, and restricted cash equivalents160,711 62,276 
Cash, cash equivalents, and restricted cash equivalents at beginning of period292,128 1,022,180 
Cash, cash equivalents, and restricted cash equivalents at end of period$452,839 $1,084,456 
Supplemental information  
Interest paid$5,455 $4,716 
Restricted cash equivalents at beginning of period$102,005 $859,920 
Restricted cash equivalents at end of period$102,099 $723,525 
Change in restricted cash equivalents$94 $(136,395)

(a) Cash used in operating activities for the six months ended June 30, 2021 primarily reflects restricted cash equivalents returned to a former insured, per the terms of a collateral trust. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book”. Excluding the restricted cash activity above, cash provided by operating activities was $139.2 million and $43.4 million for the six months ended June 30, 2022 and 2021, respectively.
See accompanying notes.
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 JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements

1.    Accounting Policies
Organization
James River Group Holdings, Ltd. (referred to as “JRG Holdings” or, with its subsidiaries, the “Company”) is an exempted holding company registered in Bermuda, organized for the purpose of acquiring and managing insurance and reinsurance entities.
The Company owns five insurance companies based in the United States (“U.S.”) focused on specialty insurance niches and two Bermuda-based reinsurance companies as described below:
James River Group Holdings UK Limited (“James River UK”) is an insurance holding company formed in 2015 in the United Kingdom (“U.K.”). JRG Holdings contributed James River Group, Inc. (“James River Group”), a U.S. insurance holding company, to James River UK in 2015.
James River Group is a Delaware domiciled insurance holding company formed in 2002 which owns all of the Company’s U.S.-based subsidiaries, either directly or indirectly through one of its wholly-owned U.S. subsidiaries. James River Group oversees the Company’s U.S. insurance operations and maintains all of the outstanding debt in the U.S.
James River Insurance Company is an Ohio domiciled excess and surplus lines insurance company that, with its wholly-owned insurance subsidiary, James River Casualty Company, a Virginia domiciled company, is authorized to write business in every state and the District of Columbia.
Falls Lake National Insurance Company (“Falls Lake National”) is an Ohio domiciled insurance company which wholly owns Stonewood Insurance Company (“Stonewood Insurance”), a North Carolina domiciled company, and Falls Lake Fire and Casualty Company, a California domiciled company. Falls Lake National and its subsidiaries primarily write specialty admitted fronting and program business and individual risk workers' compensation insurance.
JRG Reinsurance Company Ltd. (“JRG Re”) was formed in 2007 and commenced operations in 2008. JRG Re, a Bermuda domiciled reinsurer, primarily provides non-catastrophe casualty reinsurance to U.S. third parties and, through December 31, 2017, to the Company’s U.S.-based insurance subsidiaries.
Carolina Re Ltd (“Carolina Re”) was formed in 2018 and as of January 1, 2018 provides reinsurance to the Company’s U.S.-based insurance subsidiaries. Carolina Re was also the cedent on an aggregate stop loss reinsurance treaty with JRG Re through December 31, 2021.
Basis of Presentation
The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements include the results of the Company and its subsidiaries from their respective dates of inception or acquisition, as applicable. Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a more complete description of the Company’s business and accounting policies. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results of operations for the full year. The consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited annual consolidated financial statements.
Intercompany transactions and balances have been eliminated.
Estimates and Assumptions
Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


Variable Interest Entities
Entities that do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (“VIE”). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose, and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.
The Company holds interests in VIEs through certain equity method investments included in “other invested assets” in the accompanying condensed consolidated balance sheets. The Company has determined that it should not consolidate any of the VIEs as it is not the primary beneficiary in any of the relationships. Although the investments resulted in the Company holding variable interests in the entities, they did not empower the Company to direct the activities that most significantly impact the economic performance of the entities. The Company’s investments related to these VIEs totaled $28.6 million and $26.9 million at June 30, 2022 and December 31, 2021, respectively, representing the Company’s maximum exposure to loss.
Income Tax Expense
Our 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. For U.S.-sourced income, the Company’s U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities, dividends received income, and excess tax benefits on share based compensation. For the six months ended June 30, 2022, our U.S. federal income tax expense was 24.9% of the income before taxes. The effective rate exceeded the 21.0% U.S. statutory rate due to a projected annual loss in Bermuda that does not provide a tax benefit and certain discreet items including excess tax expenses associated with vested restricted share units (“RSUs”) in the six months ended June 30, 2022. The Company had a pre-tax loss of $108.3 million for the six months ended June 30, 2021 and recorded a U.S. federal income tax benefit of $25.7 million. For the six months ended June 30, 2021, our U.S. federal income tax benefit was 23.7% of the loss before taxes. The pre-tax loss was largely driven by the $166.7 million of net adverse reserve development on prior accident years, including $161.2 million of net adverse development from the Excess and Surplus Lines segment that was primarily related to a former commercial auto account.
Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock and became effective for interim and annual periods beginning after December 15, 2021. The Company adopted the new standard concurrent with the issuance of our Series A preferred shares on March 1, 2022. Under ASU 2020-06, embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. The new guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and generally requires them to include the effect of potential share settlement for instruments that may be settled in cash or shares. Adoption of the new standard did not materially impact our financial position, results of operations, or earnings per share for the six months ended June 30, 2022.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


2.    Investments
The Company’s available-for-sale fixed maturity securities are summarized as follows:
 Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
 (in thousands)
June 30, 2022    
Fixed maturity securities:    
State and municipal
$340,365 $938 $(38,898)$302,405 
Residential mortgage-backed
312,407 392 (22,244)290,555 
Corporate
656,466 215 (49,860)606,821 
Commercial mortgage and asset-backed
340,434 4 (18,234)322,204 
U.S. Treasury securities and obligations guaranteed by the U.S. government
78,545 31 (2,866)75,710 
Total fixed maturity securities, available-for-sale$1,728,217 $1,580 $(132,102)$1,597,695 
December 31, 2021    
Fixed maturity securities:    
State and municipal
$323,773 $12,156 $(2,212)$333,717 
Residential mortgage-backed
246,586 2,384 (2,339)246,631 
Corporate
711,930 26,119 (5,714)732,335 
Commercial mortgage and asset-backed
301,247 4,941 (1,700)304,488 
U.S. Treasury securities and obligations guaranteed by the U.S. government
60,329 653 (592)60,390 
Total fixed maturity securities, available-for-sale$1,643,865 $46,253 $(12,557)$1,677,561 
The amortized cost and fair value of available-for-sale investments in fixed maturity securities at June 30, 2022 are summarized, by contractual maturity, as follows:
 Cost or
Amortized
Cost
Fair
Value
 (in thousands)
One year or less$65,952 $65,352 
After one year through five years431,295 414,082 
After five years through ten years325,615 289,925 
After ten years252,514 215,577 
Residential mortgage-backed312,407 290,555 
Commercial mortgage and asset-backed340,434 322,204 
Total$1,728,217 $1,597,695 
 
Actual maturities may differ for some securities because borrowers have the right to call or prepay obligations with or without penalties.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


The following table shows the Company’s gross unrealized losses and fair value for available-for-sale securities aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:
 Less Than 12 Months12 Months or MoreTotal
 Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
 (in thousands)
June 30, 2022      
Fixed maturity securities:      
State and municipal$264,848 $(37,476)$6,707 $(1,422)$271,555 $(38,898)
Residential mortgage-backed207,169 (16,405)45,750 (5,839)252,919 (22,244)
Corporate475,416 (37,398)68,605 (12,462)544,021 (49,860)
Commercial mortgage and asset-backed288,044 (16,986)23,225 (1,248)311,269 (18,234)
U.S. Treasury securities and obligations guaranteed by the U.S. government
48,446 (1,212)17,100 (1,654)65,546 (2,866)
Total fixed maturity securities, available-for-sale$1,283,923 $(109,477)$161,387 $(22,625)$1,445,310 $(132,102)
December 31, 2021      
Fixed maturity securities:      
State and municipal$93,313 $(2,162)$1,150 $(50)$94,463 $(2,212)
Residential mortgage-backed140,386 (2,337)147 (2)140,533 (2,339)
Corporate179,078 (4,232)18,635 (1,482)197,713 (5,714)
Commercial mortgage and asset-backed159,289 (1,695)1,229 (5)160,518 (1,700)
U.S. Treasury securities and obligations guaranteed by the U.S. government
24,378 (592)  24,378 (592)
Total fixed maturity securities, available-for-sale$596,444 $(11,018)$21,161 $(1,539)$617,605 $(12,557)
 
At June 30, 2022, the Company held fixed maturity securities of 528 issuers that were in an unrealized loss position with a total fair value of $1,445.3 million and gross unrealized losses of $132.1 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment. At June 30, 2022, 99.6% of the Company’s fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or received an equivalent rating from another nationally recognized rating agency. Fixed maturity securities with ratings below investment grade by Standard & Poor’s or another nationally recognized rating agency at June 30, 2022 had an aggregate fair value of $6.7 million and an aggregate net unrealized loss of $237,000.
The Company reviews its available-for-sale fixed maturities to determine whether unrealized losses are due to credit-related factors. An allowance for credit losses is established for any credit-related impairments, limited to the amount by which fair value is below amortized cost. Changes in the allowance for credit losses are recognized in earnings and included in net realized and unrealized gains (losses) on investments. Unrealized losses that are not credit-related are recognized in other comprehensive income.
The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at June 30, 2022, December 31, 2021, or June 30, 2021. Management does not intend to sell the securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


Bank loan participations are measured at fair value pursuant to the Company's election of the fair value option, and changes in unrealized gains and losses in bank loan participations are reported in our income statement as net realized and unrealized gains (losses) on investments. Applying the fair value option to the bank loan portfolio increases volatility in the Company's financial statements, but management believes it is less subjective and less burdensome to implement and maintain than the requirements of ASU 2016-13. At June 30, 2022, the Company's bank loan portfolio had an aggregate fair value of $159.9 million and unpaid principal of $175.8 million. Investment income on bank loan participations included in net investment income was $2.7 million and $5.1 million for the three and six months ended June 30, 2022, respectively ($2.5 million and $5.4 million for the three and six months ended June 30, 2021, respectively). Net realized and unrealized gains (losses) on investments includes losses of $9.9 million and $12.0 million for the three and six months ended June 30, 2022, respectively (gains of $1.9 million and $5.8 million for the three and six months ended June 30, 2021, respectively). For the three and six months ended June 30, 2022 and 2021, management concluded that none of the unrealized losses were due to credit-related impairments. Losses due to credit-related impairments are determined based upon consultations and advice from the Company's specialized investment manager and consideration of any adverse situations that could affect the borrower's ability to repay, the estimated value of underlying collateral, and other relevant factors.
Bank loan participations generally provide a higher yield than our portfolio of fixed maturities and have a credit rating that is below investment grade (i.e. below “BBB-” for Standard & Poor’s) at the date of purchase. These bank loans are primarily senior, secured floating-rate debt rated “BB”, “B”, or “CCC” by Standard & Poor’s or an equivalent rating from another nationally recognized rating agency. These bank loans include assignments of, and participations in, performing and non-performing senior corporate debt generally acquired through primary bank syndications and in secondary markets. Bank loans consist of, but are not limited to, term loans, the funded and unfunded portions of revolving credit loans, and other similar loans and investments. Management believed that it was probable at the time that these loans were acquired that the Company would be able to collect all contractually required payments receivable.
Interest income on bank loan participations is accrued on the unpaid principal balance, and discounts and premiums on bank loan participations are amortized to income using the interest method. Generally, the accrual of interest on a bank loan participation is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest. A bank loan participation may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Generally, bank loan participations are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Interest received on nonaccrual loans generally is reported as investment income. There were no bank loans on nonaccrual status at June 30, 2022 or December 31, 2021.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


The Company’s net realized and unrealized gains and losses on investments are summarized as follows:
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2022202120222021
 (in thousands)
Fixed maturity securities:    
Gross realized gains$1,332 $135 $1,698 $1,191 
Gross realized losses(278)(2)(442)(23)
 1,054 133 1,256 1,168 
Bank loan participations:    
Gross realized gains18 120 113 318 
Gross realized losses(122)(523)(