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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 September 30, 2023
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 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 November 13, 2023: 37,639,568



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;
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 failure to close the sale by James River Group Holdings, Ltd. of the common shares of JRG Reinsurance Company Ltd. 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 the 2017 Tax 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;
3


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;
the failure to remediate the material weakness in our internal controls over financial reporting described in Item 4 of this Form 10Q, and the failure to otherwise 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;
an adverse result in any litigation or legal proceedings we are or may become subject to; 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, 2022 filed with the SEC on February 28, 2023.
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.

4

Table of Contents
 
PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements
 
 
JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets
(Unaudited) September 30,
2023
December 31,
2022
 (in thousands)
Assets  
Invested assets:  
Fixed maturity securities, available-for-sale, at fair value (amortized cost: 2023 – $2,054,727; 2022 – $1,969,783)
$1,836,324 $1,783,417 
Equity securities, at fair value (cost: 2023 – $117,573; 2022 – $117,169)
115,754 118,627 
Bank loan participations, at fair value152,068 154,991 
Short-term investments54,129 107,812 
Other invested assets31,247 27,447 
Total invested assets2,189,522 2,192,294 
Cash and cash equivalents232,923 173,164 
Restricted cash equivalents106,858 103,215 
Accrued investment income16,681 14,418 
Premiums receivable and agents’ balances, net303,116 340,525 
Reinsurance recoverable on unpaid losses, net1,509,447 1,520,113 
Reinsurance recoverable on paid losses158,841 114,242 
Prepaid reinsurance premiums284,179 274,165 
Deferred policy acquisition costs42,140 59,603 
Intangible assets, net32,904 35,676 
Goodwill181,831 181,831 
Other assets135,045 127,829 
Total assets$5,193,487 $5,137,075 
 
See accompanying notes.
 

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets (continued)
  
(Unaudited) September 30,
2023
December 31,
2022
 (in thousands, except share amounts)
Liabilities and Shareholders’ Equity  
Liabilities:  
Reserve for losses and loss adjustment expenses$2,887,352 $2,768,995 
Unearned premiums616,663 676,016 
Payables to reinsurers153,330 123,502 
Funds held257,653 310,953 
Deferred reinsurance gain37,653 20,091 
Senior debt222,300 222,300 
Junior subordinated debt104,055 104,055 
Accrued expenses55,788 59,566 
Other liabilities151,251 152,933 
Total liabilities4,486,045 4,438,411 
Commitments and contingent liabilities
Series A redeemable preferred shares – 2023 and 2022: $0.00125 par value; 20,000,000 shares authorized; 150,000 shares issued and outstanding
144,898 144,898 
Shareholders’ equity:  
Common shares – 2023 and 2022: $0.0002 par value; 200,000,000 shares authorized; 37,619,749 and 37,470,237 shares issued and outstanding, respectively
7 7 
Additional paid-in capital874,577 868,858 
Retained deficit(123,215)(152,055)
Accumulated other comprehensive loss(188,825)(163,044)
Total shareholders’ equity562,544 553,766 
Total liabilities, Series A redeemable preferred shares, and shareholders’ equity$5,193,487 $5,137,075 
 
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
September 30,
Nine Months Ended
September 30,
 2023202220232022
 (in thousands, except share amounts)
Revenues    
Gross written premiums$342,503 $358,505 $1,134,137 $1,118,155 
Ceded written premiums(193,030)(168,254)(595,586)(557,354)
Net written premiums149,473 190,251 538,551 560,801 
Change in net unearned premiums53,152 (62)69,524 5,474 
Net earned premiums202,625 190,189 608,075 566,275 
Net investment income26,305 17,306 77,252 48,278 
Net realized and unrealized gains (losses) on investments362 (7,754)2,914 (29,874)
Other income4,135 1,488 6,908 3,304 
Total revenues233,427 201,229 695,149 587,983 
Expenses   
Losses and loss adjustment expenses139,171 153,008 435,767 409,985 
Other operating expenses57,129 47,584 176,253 146,681 
Other expenses641 210 1,467 578 
Interest expense7,332 4,950 20,889 11,291 
Amortization of intangible assets90 90 272 272 
Impairment of intangible assets2,500  2,500  
Total expenses206,863 205,842 637,148 568,807 
Income (loss) before taxes26,564 (4,613)58,001 19,176 
Income tax expense7,013 8 15,530 5,928 
Net income (loss)19,551 (4,621)42,471 13,248 
Dividends on Series A preferred shares(2,625)(2,625)(7,875)(6,125)
Net income (loss) available to common shareholders$16,926 $(7,246)$34,596 $7,123 
Other comprehensive loss:   
Net unrealized losses, net of taxes of $(7,624) and $(6,255) in 2023 and $(8,910) and $(28,558) in 2022
(40,226)(60,656)(25,781)(205,227)
Total comprehensive (loss) income$(20,675)$(65,277)$16,690 $(191,979)
Net income (loss) per common share:   
Basic$0.45 $(0.19)$0.92 $0.19 
Diluted$0.45 $(0.19)$0.91 $0.19 
Dividend declared per common share$0.05 $0.05 $0.15 $0.15 
Weighted-average common shares outstanding:   
Basic37,642,632 37,450,381 37,605,986 37,435,798 
Diluted37,822,906 37,450,381 37,822,774 37,642,656 

 
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
Total
 (in thousands, except share amounts)
Balances at June 30, 202337,619,226 $7 $872,359 $(138,225)$(148,599)$585,542 
Net income— — — 19,551 — 19,551 
Other comprehensive loss— — — — (40,226)(40,226)
Vesting of RSUs523 — (6)— — (6)
Compensation expense under share incentive plans— — 2,224 — — 2,224 
Dividends on Series A preferred shares— — — (2,625)— (2,625)
Dividends on common shares— — — (1,916)— (1,916)
Balances at September 30, 202337,619,749 $7 $874,577 $(123,215)$(188,825)$562,544 
Balances at December 31, 202237,470,237 $7 $868,858 $(152,055)$(163,044)$553,766 
Net income— — — 42,471 — 42,471 
Other comprehensive loss— — — — (25,781)(25,781)
Vesting of RSUs149,512 — (1,513)— — (1,513)
Compensation expense under share incentive plans— — 7,232 — — 7,232 
Dividends on Series A preferred shares— — — (7,875)— (7,875)
Dividends on common shares— — — (5,756)— (5,756)
Balances at September 30, 202337,619,749 $7 $874,577 $(123,215)$(188,825)$562,544 

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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 June 30, 202237,450,264 $7 $865,081 $(156,109)$(114,593)$594,386 
Net loss— — — (4,621)— (4,621)
Other comprehensive loss— — — — (60,656)(60,656)
Vesting of RSUs174 — — — — — 
Compensation expense under share incentive plans— — 2,228 — — 2,228 
Dividends on Series A preferred shares— — — (2,625)— (2,625)
Dividends on common shares— — — (1,908)— (1,908)
Balances at September 30, 202237,450,438 $7 $867,309 $(165,263)$(175,249)$526,804 
Balances at December 31, 202137,373,066 $7 $862,040 $(166,663)$29,978 $725,362 
Net income— — — 13,248 — 13,248 
Other comprehensive loss— — — — (205,227)(205,227)
Vesting of RSUs77,372 — (941)— — (941)
Compensation expense under share incentive plans— — 6,210 — — 6,210 
Dividends on Series A preferred shares— — — (6,125)— (6,125)
Dividends on common shares— — — (5,723)— (5,723)
Balances at September 30, 202237,450,438 $7 $867,309 $(165,263)$(175,249)$526,804 

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

 Nine Months Ended September 30,
 20232022
 (in thousands)
Operating activities  
Net cash provided by operating activities (a)$97,751 $168,129 
Investing activities  
Securities available-for-sale:  
Purchases – fixed maturity securities(194,222)(546,239)
Sales – fixed maturity securities11,181 206,790 
Maturities and calls – fixed maturity securities96,917 143,015 
Purchases – equity securities(9,310)(36,850)
Sales – equity securities10,033 11,251 
Bank loan participations:  
Purchases(47,805)(78,371)
Sales39,513 43,257 
Maturities18,369 17,340 
Other invested assets:  
Purchases(11,525) 
Return of capital1,508 1,768 
Proceeds from sales7,570  
Short-term investments, net53,683 (72,341)
Securities receivable or payable, net9,379 52,763 
Purchases of property and equipment(3,307)(4,564)
Net cash used in investing activities(18,016)(262,181)
Financing activities  
Senior debt repayments (40,000)
Issuance of Series A preferred shares (Note 12) 144,898 
Payroll taxes withheld and remitted on net settlement of RSUs(1,513)(941)
Dividends on Series A preferred shares(7,875)(6,125)
Dividends on common shares(5,810)(5,879)
Payment of debt issuance costs(1,135) 
Net cash (used in) provided by financing activities(16,333)91,953 
Change in cash, cash equivalents, and restricted cash equivalents63,402 (2,099)
Cash, cash equivalents, and restricted cash equivalents at beginning of period276,379 292,128 
Cash, cash equivalents, and restricted cash equivalents at end of period$339,781 $290,029 
Supplemental information  
Interest paid$22,744 $10,746 
Restricted cash equivalents at beginning of period$103,215 $102,005 
Restricted cash equivalents at end of period$106,858 $102,485 
Change in restricted cash equivalents$3,643 $480 

(a) Cash provided by operating activities for the nine months ended September 30, 2023 and 2022 includes the restricted cash activity above related 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, cash provided by operating activities was $94.1 million and $167.6 million for the nine months ended September 30, 2023 and 2022, 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 a Bermuda-based reinsurance company 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.
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, 2022 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, 2022 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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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 $8.9 million at September 30, 2023 and $9.2 million at December 31, 2022, 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 or expenses on share based compensation. For the nine months ended September 30, 2023 and 2022, our U.S. federal income tax expense was 26.8% and 30.9%, respectively, of the income before taxes. The effective rate exceeded the 21.0% U.S. statutory rate due to projected annual losses in Bermuda that do not provide a tax benefit and due to discrete items in the respective periods primarily related to excess tax expenses associated with vested restricted share units (“RSUs”).
Adopted Accounting Standards
There were no new accounting standards adopted in 2023 that materially impacted the Company's financial statements.
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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)
September 30, 2023    
Fixed maturity securities:    
State and municipal
$382,965 $343 $(59,647)$323,661 
Residential mortgage-backed
471,291 2 (54,405)416,888 
Corporate
795,601 179 (76,180)719,600 
Commercial mortgage and asset-backed
332,440  (25,488)306,952 
U.S. Treasury securities and obligations guaranteed by the U.S. government
72,430  (3,207)69,223 
Total fixed maturity securities, available-for-sale$2,054,727 $524 $(218,927)$1,836,324 
December 31, 2022    
Fixed maturity securities:    
State and municipal
$386,456 $712 $(56,316)$330,852 
Residential mortgage-backed
437,702 801 (37,254)401,249 
Corporate
734,976 1,528 (66,292)670,212 
Commercial mortgage and asset-backed
335,066 76 (26,127)309,015 
U.S. Treasury securities and obligations guaranteed by the U.S. government
75,583 8 (3,502)72,089 
Total fixed maturity securities, available-for-sale$1,969,783 $3,125 $(189,491)$1,783,417 
The amortized cost and fair value of available-for-sale investments in fixed maturity securities at September 30, 2023 are summarized, by contractual maturity, as follows:
 Cost or
Amortized
Cost
Fair
Value
 (in thousands)
One year or less$95,503 $93,936 
After one year through five years518,494 488,596 
After five years through ten years374,112 320,897 
After ten years262,887 209,055 
Residential mortgage-backed471,291 416,888 
Commercial mortgage and asset-backed332,440 306,952 
Total$2,054,727 $1,836,324 
 
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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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)
September 30, 2023      
Fixed maturity securities:      
State and municipal$70,679 $(3,766)$246,789 $(55,881)$317,468 $(59,647)
Residential mortgage-backed177,236 (9,228)239,508 (45,177)416,744 (54,405)
Corporate212,440 (6,810)492,570 (69,370)705,010 (76,180)
Commercial mortgage and asset-backed37,528 (863)269,424 (24,625)306,952 (25,488)
U.S. Treasury securities and obligations guaranteed by the U.S. government
13,519 (420)55,704 (2,787)69,223 (3,207)
Total fixed maturity securities, available-for-sale$511,402 $(21,087)$1,303,995 $(197,840)$1,815,397 $(218,927)
December 31, 2022      
Fixed maturity securities:      
State and municipal$241,586 $(34,840)$72,805 $(21,476)$314,391 $(56,316)
Residential mortgage-backed225,870 (18,823)98,594 (18,431)324,464 (37,254)
Corporate412,942 (33,417)167,541 (32,875)580,483 (66,292)
Commercial mortgage and asset-backed184,985 (12,829)114,955 (13,298)299,940 (26,127)
U.S. Treasury securities and obligations guaranteed by the U.S. government
47,106 (1,699)21,808 (1,803)68,914 (3,502)
Total fixed maturity securities, available-for-sale$1,112,489 $(101,608)$475,703 $(87,883)$1,588,192 $(189,491)
 
At September 30, 2023, the Company held fixed maturity securities of 555 issuers that were in an unrealized loss position with a total fair value of $1,815.4 million and gross unrealized losses of $218.9 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on a scheduled principal or interest payment. At September 30, 2023, 99.9% 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. The Company holds one fixed maturity security that is not rated by Standard & Poor's or another nationally recognized rating agency with a fair value of $1.3 million at September 30, 2023.
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 September 30, 2023, December 31, 2022, or September 30, 2022. In the nine months ended September 30, 2023, management recognized an impairment loss of $85,000 for one fixed maturity security due to an intent to sell the security. For the remainder of securities in an unrealized loss position, management does not intend to sell the securities, 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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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 the 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 September 30, 2023, the Company's bank loan portfolio had an aggregate fair value of $152.1 million and unpaid principal of $161.6 million. Investment income on bank loan participations included in net investment income was $4.3 million and $13.0 million for the three and nine months ended September 30, 2023, respectively ($3.4 million and $8.4 million for the three and nine months ended September 30, 2022, respectively). Net realized and unrealized gains (losses) on bank loan participations included gains of $2.5 million and $6.0 million for the three and nine months ended September 30, 2023, respectively (losses of $2.2 million and $14.2 million for the three and nine months ended September 30, 2022, respectively). For the three months ended September 30, 2023, management concluded that none of the unrealized losses were due to credit impairments. For the nine months ended September 30, 2023, management concluded that $2.4 million of the unrealized losses were due to credit-related impairments. For the three and nine months ended September 30, 2022, management concluded that unrealized losses were largely market-driven and 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 September 30, 2023 or December 31, 2022.
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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
September 30,
Nine Months Ended
September 30,
 2023202220232022
 (in thousands)
Fixed maturity securities:    
Gross realized gains$2 $1 $47 $1,699 
Gross realized losses(480)(973)(894)(1,415)
 (478)(972)(847)284 
Bank loan participations:    
Gross realized gains140 70 245 183 
Gross realized losses(580)(253)(4,933)(559)
Changes in fair values of bank loan participations2,950 (2,018)10,729 (13,818)
 2,510 (2,201)6,041 (14,194)
Equity securities:    
Gross realized gains349 758 1,283 787 
Gross realized losses(2)(359)(268)(740)
Changes in fair values of equity securities(2,016)(4,967)(3,278)(15,959)
 (1,669)(4,568)(2,263)(15,912)
Short-term investments and other:    
Gross realized gains 1 3 1 
Gross realized losses(1)(14)(20)(53)
Changes in fair values of short-term investments and other    
 (1)(13)(17)(52)
Total$362 $(7,754)$2,914 $(29,874)
  
Realized investment gains or losses are determined on a specific identification basis.
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Notes to Condensed Consolidated Financial Statements (continued)


The Company invests selectively in private debt and equity opportunities. These investments, which together comprise the Company’s other invested assets, are primarily focused in renewable energy, limited partnerships, and private debt.
 Carrying ValueInvestment Income
 September 30,December 31,Three Months Ended
September 30,
Nine Months Ended
September 30,
 202320222023202220232022
 (in thousands)
Renewable energy LLCs (a)
Excess and Surplus Lines$8,921 $9,159 $98 $(30)$796 $2,331 
Corporate & Other   7 170 266 
8,921 9,159 98 (23)966 2,597 
Renewable energy notes receivable (b)
Excess and Surplus Lines608 1,202 18 69 90 209 
Corporate & Other761 1,503 23 88 113 262 
1,369 2,705 41 157 203 471 
Limited partnerships (c)
Excess and Surplus Lines11,124 10,019 (171)(252)450 (948)
Corporate & Other664 1,064  (392) (392)
11,788 11,083 (171)(644)450 (1,340)
Private Debt (d)
Excess and Surplus Lines9,169 4,500 59 86 231 258 
Corporate & Other      
9,169 4,500 59 86 231 258 
Total other invested assets
Excess and Surplus Lines29,822 24,880 4 (127)1,567 1,850 
Corporate & Other1,425 2,567 23 (297)283 136 
$31,247 $27,447 $27 $(424)$1,850 $1,986 
 
(a)The Company's Excess and Surplus Lines segment owns equity interests ranging from 2.5% to 4.9% in various LLCs whose principal objective is capital appreciation and income generation from owning and operating renewable energy production facilities (wind and solar). The Corporate and Other segment also held an interest in one of the LLCs until the fourth quarter of 2022. The LLCs are managed by an entity for which two former directors served as officers, and the former Non-Executive Chairman of the Company invested in certain of these LLCs. The equity method is used to account for the Company’s LLC investments. Income for the LLCs primarily reflects adjustments to the carrying values of investments in renewable energy projects to their determined fair values. The fair value adjustments are included in revenues for the LLCs. Expenses for the LLCs are not significant and are comprised of administrative and interest expenses. The Company received cash distributions from these investments totaling $50,000 and $1.4 million in the nine months ended September 30, 2023 and 2022, respectively. During the fourth quarter of 2022, the underlying projects in two of our LLCs were sold at the manager's discretion. In the three months ended March 31, 2023, the Company received additional proceeds from the sales of $1.2 million comprised of $984,000 in the Excess and Surplus Lines segment and $170,000 in the Corporate and Other segment. We could receive additional contingent payments in the future according to terms of the transaction.
(b)The Company's Excess and Surplus Lines and Corporate and Other segments have invested in notes receivable for renewable energy projects. At September 30, 2023, the Company held two notes issued by an entity for which two of our former directors serve as officers. Interest on the notes, which mature in 2025, is fixed at 12%.
(c)The Company owns investments in limited partnerships that invest in concentrated portfolios including publicly-traded small cap equities, loans of middle market private equity sponsored companies, private equity general partnership interests, commercial mortgage-backed securities, specialty private credit, and tranches of distressed home loans. Income from the partnerships is recognized under the equity method of accounting. At September 30, 2023, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $6.7 million in the limited partnerships.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


(d)The Company's Excess and Surplus Lines segment has invested in two notes receivable for structured private specialty credit. Interest on the notes, which mature in 2031, is fixed at 4.25% and 5.25%. At September 30, 2023, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $7.7 million in these notes. Previously, the Company's Excess and Surplus Lines segment held $4.5 million of subordinated notes issued by a bank holding company for which the former Non-Executive Chairman of the Company was previously the Lead Independent Director. The notes matured on August 12, 2023. Interest on the notes was fixed at 7.6% per annum.
3.    Goodwill and Intangible Assets
On December 11, 2007, the Company completed an acquisition of James River Group by acquiring 100% of the outstanding shares of James River Group common stock, referred to herein as the “Merger”. The transaction was accounted for under the purchase method of accounting, and goodwill and intangible assets were recognized by the Company as a result of the transaction. Goodwill resulting from the Merger was $181.8 million at September 30, 2023 and December 31, 2022.
On September 25, 2023, the Company announced that certain of its subsidiaries entered into an agreement to sell the renewal rights to the Individual Risk Workers’ Compensation (“IRWC”) business in the Specialty Admitted Insurance segment. Upon closing of the transaction on September 29, 2023, the Company recognized an impairment charge of $2.5 million related to the trademark intangible asset associated with the IRWC business.
The gross carrying amounts and accumulated amortization for each major specifically identifiable intangible asset class were as follows: 
  September 30, 2023December 31, 2022
 Life
(Years)
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
  ($ in thousands)
Intangible Assets     
TrademarksIndefinite$19,700 $— $22,200 $— 
Insurance licenses and authoritiesIndefinite8,964 — 8,964 — 
Identifiable intangible assets not subject to amortization 28,664 — 31,164 — 
Broker relationships24.611,611 7,371 11,611 7,099 
Identifiable intangible assets subject to amortization 11,611 7,371 11,611 7,099 
  $40,275 $7,371 $42,775 $7,099 
 
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


4.    Earnings (Loss) Per Share
The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per common share computations contained in the condensed consolidated financial statements:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(in thousands, except share and per share amounts)
Net income (loss)$19,551 $(4,621)$42,471 $13,248 
Less: Dividends on Series A preferred shares(2,625)(2,625)(7,875)(6,125)
Net income (loss) available to common shareholders$16,926 $(7,246)$34,596 $7,123 
Weighted average common shares outstanding:
Basic37,642,632 37,450,381 37,605,986 37,435,798 
Dilutive potential common shares180,274  216,788 206,858 
Diluted37,822,906 37,450,381 37,822,774 37,642,656 
Net income (loss) per common share:
Basic$0.45 $(0.19)$0.92 $0.19 
Dilutive potential common shares  (0.01) 
Diluted$0.45 $(0.19)$0.91 $0.19 
For the three and nine months