Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8‑K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):      August 1, 2017            
JAMES RIVER GROUP HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)

Bermuda    001-36777    98-0585280

(State or other jurisdiction    (Commission    (IRS Employer
of incorporation)    File Number)    Identification No.)

Wellesley House, 2nd Floor, 90 Pitts Bay Road, Pembroke Bermuda    HM 08

(Address of principal executive offices)    (Zip Code)

Registrant’s telephone number, including area code:      +1-441-278-4580            


(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
o
Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)



o
Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)
o
Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act
(17 CFR 240.14d‑2(b))
o
Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act
(17 CFR 240.13e‑4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging Growth Company x
 
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. x





Item 2.02
Results of Operations and Financial Condition.
On August 1, 2017, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing its financial results for the second quarter and six months ended June 30, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 and in Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act unless specifically stated by the Company.
Item 8.01
Other Events.
On August 1, 2017, the Company announced that its board of directors declared a cash dividend of $0.30 per common share of the Company to be paid on September 29, 2017 to shareholders of record on September 11, 2017.
Item 9.01    Financial Statements and Exhibits.
(d)    Exhibits
The following Exhibit is furnished as a part of this Form 8-K:
Exhibit No.
 
Description
99.1
 
Press Release of the Company dated August 1, 2017





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
JAMES RIVER GROUP HOLDINGS, LTD.
Dated: August 1, 2017    By:     /s/ Sarah C. Doran    
Name: Sarah C. Doran    
Title: Chief Financial Officer    







EXHIBIT INDEX
Exhibit No.
 
   Description
99.1
 
Press Release of the Company dated August 1, 2017


Exhibit
Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11723614&doc=3

    

JAMES RIVER GROUP HOLDINGS, LTD. ANNOUNCES SECOND QUARTER 2017 RESULTS


SECOND QUARTER 2017 NET INCOME OF $14.5 MILLION -- $0.48 PER DILUTED SHARE, AND ADJUSTED NET OPERATING INCOME OF $14.9 MILLION -- $0.49 PER DILUTED SHARE
_______________________________

GROSS FEE INCOME OF $6.9 MILLION; 99% INCREASE OVER THE SECOND QUARTER OF 2016
_______________________________

8.6% GROWTH IN PRE DIVIDEND TANGIBLE EQUITY PER SHARE SINCE DECEMBER 31, 2016; 13.4% SIX MONTH ANNUALIZED ADJUSTED NET OPERATING RETURN ON AVERAGE TANGIBLE EQUITY
_______________________________

RECORD LOW EXPENSE RATIO OF 26.5%; 4.9 PERCENTAGE POINT IMPROVEMENT OVER SECOND QUARTER OF 2016
______________________________


Pembroke, Bermuda, August 1, 2017 - James River Group Holdings, Ltd. (NASDAQ: JRVR) today reported second quarter 2017 net income of $14.5 million ($0.48 per diluted share), compared to $14.6 million ($0.49 per diluted share) for the second quarter of 2016. Adjusted net operating income for the second quarter of 2017 was $14.9 million ($0.49 per diluted share), compared to $13.7 million ($0.46 per diluted share) for the same period in 2016.

Earnings Per Diluted Share
Three Months Ended
June 30,
 
 
2017
 
2016
 
 
 
 
 
 
Net Income
$
0.48

 
$
0.49

 
Adjusted Net Operating Income
$
0.49

 
$
0.46

 

-MORE-

Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda
Mailing address l P.O. Box 1502, Hamilton HM FX, Bermuda
Tel 441.278.4580 l Fax 441.278.4588


JRVR Announces Second Quarter Results
Page 2
August 1, 2017


J. Adam Abram, Chairman and Chief Executive Officer of James River Group Holdings, Ltd. commented, “We are pleased with our second quarter results. Our low expense ratio allows us to maintain our focus on underwriting profit while still growing. This quarter we also reacted to some negative developments in our business; it is our practice to do so quickly. With our 13.4% annualized operating return on tangible equity based on year-to-date results, we reiterate our guidance of a 12% or greater return.”
Second Quarter 2017 Operating Results
Net written premiums of $207.8 million, consisting of the following:

 
Three Months Ended June 30,
 
($ in thousands)
2017
 
2016
 
% Change
Excess and Surplus Lines
$
124,197

 
$
81,890

 
52
%
Specialty Admitted Insurance
16,900

 
11,679

 
45
%
Casualty Reinsurance
66,727

 
39,489

 
69
%
 
$
207,824

 
$
133,058

 
56
%

Net earned premiums of $184.1 million, consisting of the following:

 
Three Months Ended June 30,
 
($ in thousands)
2017
 
2016
 
% Change
Excess and Surplus Lines
$
117,268

 
$
70,565

 
66
%
Specialty Admitted Insurance
17,760

 
12,207

 
45
%
Casualty Reinsurance
49,049

 
35,783

 
37
%
 
$
184,077

 
$
118,555

 
55
%

The Excess and Surplus Lines segment grew largely due to increases in Commercial Auto (with a focus on the Company’s rideshare business), Environmental and Allied Health divisions, which were partially offset by declines in Manufacturing & Contractors and Excess Casualty;
The Specialty Admitted Insurance segment grew largely due to the June 2016 addition of a significant fronting contract, 90% of which is reinsured to third parties;
The Casualty Reinsurance Segment grew largely due to a timing difference of a renewal treaty;
Accident year loss ratio of 70.3% increased from 68.7% in the prior year quarter due to changes in mix of business, specifically growth in the Commercial Auto division within the Excess and Surplus Lines segment which carries a higher initial loss pick but also a lower expense ratio than the segment as a whole;
Combined ratio of 97.7% increased from 96.1% in the prior year quarter principally due to a prior period commission adjustment for three profitable contracts in the Casualty Reinsurance segment. As a result of this adjustment, other operating expense was increased by $2.0 million, or 4.0 combined ratio points on the segment and 1.1 points on the Company as a whole;
Expense ratio of 26.5% improved from 31.4% in the prior year quarter, driven principally by increased net earned premium and fee income, as well as growth in lines of business

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JRVR Announces Second Quarter Results
Page 3
August 1, 2017


which carry relatively low expense ratios, partially offset by the commission adjustment in the Casualty Reinsurance segment;
Unfavorable reserve development of $1.7 million compared to favorable reserve development of $4.7 million in the prior year quarter (representing a 0.9 point increase and 4.0 point reduction to the Company’s loss ratio in each period, respectively). The current year quarter's unfavorable development was largely driven by reported losses in the Casualty Reinsurance segment from the 2010 and 2012 treaty years of one reinsurance program which the Company no longer writes and adverse development from canceled programs in the Specialty Admitted segment, offset partially by favorable development in the Excess and Surplus Lines segment and workers' compensation business. Pre-tax favorable (unfavorable) reserve development by segment was as follows:

 
Three Months Ended
June 30,
($ in thousands)
2017
 
2016
Excess and Surplus Lines
$
1,440

 
$
3,611

Specialty Admitted Insurance
(949
)
 
617

Casualty Reinsurance
(2,206
)
 
520

 
$
(1,715
)
 
$
4,748


Gross fee income of $6.9 million, an increase of 99% over the prior year quarter as a result of increased program and fronting volume in the Specialty Admitted Insurance segment and increased fee-for-service business in the Excess and Surplus Lines segment. This fee income resulted in a 3.7 percentage point reduction to the Company’s second quarter 2017 expense ratio;
Net investment income of $13.7 million, an increase of 19% over the prior year quarter, driven by an increased contribution from renewable energy investments which significantly exceeded our expectations. Further details can be found in the ‘Investment Results’ section below.
Investment Results
Net investment income for the second quarter of 2017 was $13.7 million, which compares to $11.6 million for the same period in 2016. The increase was principally driven by fair value gains in the Company’s renewable energy portfolio which significantly exceeded our expectations. The Company’s net investment income consisted of the following:
 
Three Months Ended
June 30,
 
($ in thousands)
2017
 
2016
 
% Change
Renewable Energy Investments
$
1,521

 
$
(1,451
)
 
-

Other Private Investments
838

 
1,972

 
(58
)%
All Other Net Investment Income
11,355

 
11,032

 
3
 %
Total Net Investment Income
$
13,714

 
$
11,553

 
19
 %
The Company’s annualized gross investment yield on average fixed maturity and bank loan securities for the three months ended June 30, 2017 was 3.6% (3.5% for the three months ended

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JRVR Announces Second Quarter Results
Page 4
August 1, 2017


June 30, 2016) and the average duration of the fixed maturity and bank loan portfolio was 3.4 years at June 30, 2017 (3.7 years at June 30, 2016).
During the second quarter, the Company recognized $307,000 of pre-tax net realized gains ($1.6 million of net realized gains in the same period in 2016) which included $321,000 of realized gains on bank loan participations.
Taxes
The tax rate for the three months ended June 30, 2017 and 2016 was 6.5% and 6.4%, respectively.
Tangible Equity
Tangible equity before dividends increased 9.4% from $472.5 million at December 31, 2016 to $517.0 million at June 30, 2017, largely due to net income of $33.0 million and $10.7 million of unrealized gains, net of taxes, on available-for-sale securities. Tangible equity after dividends increased 5.7% from $472.5 million at December 31, 2016 to $499.3 million at June 30, 2017. Tangible equity per common share was $16.94 at June 30, 2017, net of $17.7 million of dividends the Company paid during 2017. The year-to-date annualized adjusted net operating income return on average tangible equity was 13.4%, which compares to 10.9% for the same period in 2016.
Capital Management
The Company announced that its Board of Directors declared a cash dividend of $0.30 per common share, the same amount as the prior quarter. This dividend is payable on Friday, September 29, 2017 to all shareholders of record on Monday, September 11, 2017. James River Group Holdings, Ltd. has paid cumulative dividends, including this upcoming payment, of approximately $140 million since its December 2014 initial public offering.
Conference Call
James River Group Holdings, Ltd. will hold a conference call to discuss its second quarter results tomorrow, August 2, 2017, at 8:00 a.m. Eastern Daylight Time. Investors may access the conference call by dialing (877) 930-8055 Conference ID# 53066366 or via the internet by going to www.jrgh.net and clicking on the “Investor Relations” link. Please visit the website at least 15 minutes early to register and download any necessary audio software. A replay of the call will be available until 11:00 a.m. (Eastern Daylight Time) on September 1, 2017 and can be accessed by dialing (855) 859-2056 or by visiting the company website.
Forward-Looking Statements
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements may be identified by terms such as believe, expect, seek, may, will, 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 factors, 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 which may expose us to greater risks than intended; the potential loss of key members

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JRVR Announces Second Quarter Results
Page 5
August 1, 2017


of our management team or key employees and our ability to attract and retain personnel; adverse economic factors; a decline in our financial strength rating resulting in a reduction of new or renewal business; 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 such relationships; a failure of any of the loss limitations or exclusions we employ; potential effects on our business of emerging claim and coverage issues; exposure to credit risk, interest rate risk and other market risk in our investment portfolio; changes in laws or government regulation, including tax or insurance laws and regulations; our ability to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us; losses resulting from reinsurance counterparties failing to pay us on reinsurance claims or insurance companies with whom we have a fronting arrangement failing to pay us for claims; the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents; our ability to manage our growth effectively; inadequacy of premiums we charge to compensate us for our losses incurred; 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; failure to maintain effective internal controls in accordance with Sarbanes-Oxley Act of 2002, as amended; and changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those in the forward-looking statements, is contained in our filings with the U.S. Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K filed with the SEC on March 10, 2017. 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, adjusted net operating income, tangible equity and pre dividend tangible equity per share, 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. (or “the Company”) is a Bermuda-based insurance holding company which owns and operates a group of specialty insurance and reinsurance companies founded by members of our management team. The Company operates in three specialty property-casualty insurance and reinsurance segments: Excess and Surplus Lines, Specialty Admitted

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JRVR Announces Second Quarter Results
Page 6
August 1, 2017


Insurance and Casualty Reinsurance. The Company tends to focus on accounts associated with small or medium-sized businesses in each of its segments. Each of the Company’s regulated insurance subsidiaries are rated “A” (Excellent) by A.M. Best Company.
Visit James River Group Holdings, Ltd. on the web at www.jrgh.net
For more information contact:
Kevin Copeland
Investor Relations
441-278-4573
InvestorRelations@jrgh.net





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JRVR Announces Second Quarter Results
Page 7
August 1, 2017


James River Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(Unaudited)

 
June 30,
2017
 
December 31, 2016
 
($ in thousands, except for share data)
ASSETS
 
 
 
Invested assets:
 
 
 
Fixed maturity securities, available-for-sale
$
982,133

 
$
941,077

Fixed maturity securities, trading
3,814

 
5,063

Equity securities, available-for-sale
81,357

 
76,401

Bank loan participations, held-for-investment
241,516

 
203,526

Short-term investments
41,348

 
50,844

Other invested assets
65,481

 
55,419

Total invested assets
1,415,649

 
1,332,330

 
 
 
 
Cash and cash equivalents
87,771

 
109,784

Accrued investment income
6,802

 
7,246

Premiums receivable and agents’ balances
329,519

 
265,315

Reinsurance recoverable on unpaid losses
221,553

 
182,737

Reinsurance recoverable on paid losses
8,422

 
2,877

Deferred policy acquisition costs
69,382

 
64,789

Goodwill and intangible assets
220,464

 
220,762

Other assets
172,491

 
160,693

Total assets
$
2,532,053

 
$
2,346,533

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Reserve for losses and loss adjustment expenses
$
1,061,061

 
$
943,865

Unearned premiums
420,997

 
390,563

Senior debt
88,300

 
88,300

Junior subordinated debt
104,055

 
104,055

Accrued expenses
35,123

 
36,884

Other liabilities
102,798

 
89,645

Total liabilities
1,812,334

 
1,653,312

 
 
 
 
Total shareholders’ equity
719,719

 
693,221

Total liabilities and shareholders’ equity
$
2,532,053

 
$
2,346,533

 
 
 
 
Tangible equity (a)
$
499,255

 
$
472,459

Tangible equity per common share outstanding (a)
$
16.94

 
$
16.15

Total shareholders’ equity per common share
   outstanding
$
24.42



$
23.69

Common shares outstanding
29,467,647

 
29,257,566

Debt (b) to total capitalization ratio
21.1
%
 
21.7
%
(a)    See “Reconciliation of Non-GAAP Measures”.
(b)    Includes senior debt and junior subordinated debt.
 
 
 


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JRVR Announces Second Quarter Results
Page 8
August 1, 2017


James River Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated Income Statement Data
(Unaudited)

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
($ in thousands, except for share data)
REVENUES
 
 
 
 
 
 
 
Gross written premiums
$
281,475

 
$
170,671

 
$
505,654

 
$
303,742

Net written premiums
207,824

 
133,058

 
365,734

 
239,959

 
 
 
 
 
 
 
 
Net earned premiums
184,077

 
118,555

 
338,764

 
235,685

Net investment income
13,714

 
11,553

 
30,447

 
22,825

Net realized investment gains
307

 
1,619

 
1,354

 
2,166

Other income
4,296

 
2,784

 
8,231

 
5,164

Total revenues
202,394

 
134,511

 
378,796

 
265,840

 
 
 
 
 
 
 
 
EXPENSES
 
 
 
 
 
 
 
Losses and loss adjustment expenses
131,084

 
76,659

 
236,453

 
150,165

Other operating expenses
53,036

 
39,974

 
101,929

 
81,153

Other expenses
346

 
91

 
232

 
79

Interest expense
2,224

 
2,041

 
4,347

 
4,215

Amortization of intangible assets
149

 
149

 
298

 
298

Total expenses
186,839

 
118,914

 
343,259

 
235,910

Income before taxes
15,555

 
15,597

 
35,537

 
29,930

Income tax expense
1,014

 
1,001

 
2,546

 
2,497

NET INCOME
$
14,541

 
$
14,596

 
$
32,991

 
$
27,433

ADJUSTED NET OPERATING INCOME (a)
$
14,864

 
$
13,665

 
$
32,583

 
$
26,503

 
 
 
 
 
 
 
 
EARNINGS PER SHARE
 
 
 
 
 
 
 
Basic
$
0.49

 
$
0.50

 
$
1.12

 
$
0.95

Diluted
$
0.48

 
$
0.49

 
$
1.09

 
$
0.92

 
 
 
 
 
 
 
 
ADJUSTED NET OPERATING INCOME PER SHARE
 
 
 
 
 
 
Basic
$
0.51

 
$
0.47

 
$
1.11

 
$
0.91

Diluted
$
0.49

 
$
0.46

 
$
1.07

 
$
0.89

 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
29,406,877

 
29,035,512

 
29,348,557

 
28,994,260

Diluted
30,307,099

 
29,825,914

 
30,317,585

 
29,784,083

Cash dividends declared per common share
$
0.30

 
$
0.20

 
$
0.60

 
$
0.40

 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
Loss ratio
71.2
%
 
64.7
%
 
69.8
%
 
63.7
%
Expense ratio
26.5
%
 
31.4
%
 
27.7
%
 
32.3
%
Combined ratio
97.7
%
 
96.1
%
 
97.5
%
 
96.0
%
Accident year loss ratio
70.3
%
 
68.7
%
 
70.3
%
 
67.7
%
(a) See "Reconciliation of Non-GAAP Measures".

 
 
 
 
 
 


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JRVR Announces Second Quarter Results
Page 9
August 1, 2017



James River Group Holdings, Ltd. and Subsidiaries
Segment Results

EXCESS AND SURPLUS LINES
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
$
138,004

 
$
97,427

 
41.6
%
 
$
246,999

 
$
179,535

 
37.6
%
Net written premiums
$
124,197

 
$
81,890

 
51.7
%
 
$
221,168

 
$
153,425

 
44.2
%
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
117,268

 
$
70,565

 
66.2
%
 
$
211,117

 
$
136,070

 
55.2
%
Losses and loss adjustment expenses
(86,521
)
 
(46,061
)
 
87.8
%
 
(153,089
)
 
(86,724
)
 
76.5
%
Underwriting expenses
(19,018
)
 
(14,721
)
 
29.2
%
 
(37,499
)
 
(30,359
)
 
23.5
%
Underwriting profit (a), (b)
$
11,729

 
$
9,783

 
19.9
%
 
$
20,529

 
$
18,987

 
8.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
73.8
%
 
65.3
%
 
 
 
72.5
%
 
63.7
%
 
 
Expense ratio
16.2
%
 
20.9
%
 
 
 
17.8
%
 
22.3
%
 
 
Combined ratio
90.0
%
 
86.1
%
 
 
 
90.3
%
 
86.0
%
 
 
Accident year loss ratio
75.0
%
 
70.4
%
 
 
 
74.7
%
 
69.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 
 
 
 
 
 
(b) Underwriting results include fee income of $4.2 million and $2.7 million for the three months ended June 30, 2017 and 2016, respectively, and $8.1 million and $5.0 million for the respective six month periods. These amounts are included in “Other income” in our Condensed Consolidated Income Statements.


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JRVR Announces Second Quarter Results
Page 10
August 1, 2017


SPECIALTY ADMITTED INSURANCE
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
$
76,771

 
$
34,201

 
124.5
%
 
$
149,235

 
$
62,888

 
137.3
%
Net written premiums
$
16,900

 
$
11,679

 
44.7
%
 
$
34,959

 
$
24,725

 
41.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
17,760

 
$
12,207

 
45.5
%
 
$
34,013

 
$
23,612

 
44.0
%
Losses and loss adjustment expenses
(11,867
)
 
(7,480
)
 
58.6
%
 
(21,848
)
 
(14,080
)
 
55.2
%
Underwriting expenses
(5,340
)
 
(4,602
)
 
16.0
%
 
(10,770
)
 
(8,932
)
 
20.6
%
Underwriting profit (a), (b)
$
553

 
$
125

 
342.4
%
 
$
1,395

 
$
600

 
132.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
66.8
%
 
61.3
%
 
 
 
64.2
%
 
59.6
%
 
 
Expense ratio
30.1
%
 
37.7
%
 
 
 
31.7
%
 
37.8
%
 
 
Combined ratio
96.9
%
 
99.0
%
 
 
 
95.9
%
 
97.5
%
 
 
Accident year loss ratio
61.5
%
 
66.3
%
 
 
 
61.6
%
 
63.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 
 
 
 
 
 
(b) Underwriting results include fee income of $2.7 million and $742,000 for the three months ended June 30, 2017 and 2016, respectively, and $4.7 million and $1.6 million for the respective six month periods.

CASUALTY REINSURANCE
 
Three Months Ended
June 30,
 
 
 
Six Months Ended
June 30,
 
 
 
2017
 
2016
 
% Change
 
2017
 
2016
 
% Change
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
Gross written premiums
$
66,700

 
$
39,043

 
70.8
%
 
$
109,420

 
$
61,319

 
78.4
%
Net written premiums
$
66,727

 
$
39,489

 
69.0
%
 
$
109,607

 
$
61,809

 
77.3
%
 
 
 
 
 
 
 
 
 
 
 
 
Net earned premiums
$
49,049

 
$
35,783

 
37.1
%
 
$
93,634

 
$
76,003

 
23.2
%
Losses and loss adjustment expenses
(32,696
)
 
(23,118
)
 
41.4
%
 
(61,516
)
 
(49,361
)
 
24.6
%
Underwriting expenses
(18,376
)
 
(12,459
)
 
47.5
%
 
(33,048
)
 
(26,102
)
 
26.6
%
Underwriting (loss) profit (a)
$
(2,023
)
 
$
206

 
-

 
$
(930
)
 
$
540

 
-

 
 
 
 
 
 
 
 
 
 
 
 
Ratios:
 
 
 
 
 
 
 
 
 
 
 
Loss ratio
66.7
%
 
64.6
%
 
 
 
65.7
%
 
64.9
%
 
 
Expense ratio
37.4
%
 
34.8
%
 
 
 
35.3
%
 
34.3
%
 
 
Combined ratio
104.1
%
 
99.4
%
 
 
 
101.0
%
 
99.3
%
 
 
Accident year loss ratio
62.2
%
 
66.1
%
 
 
 
63.5
%
 
65.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 
 
 
 
 
 


-MORE-

JRVR Announces Second Quarter Results
Page 11
August 1, 2017


RECONCILIATION OF NON-GAAP MEASURES

Underwriting Profit

The following table reconciles the underwriting profit (loss) by individual operating segment and for the entire Company to consolidated income before taxes. We believe that these measures are useful to investors in evaluating the performance of our Company and its operating segments because our objective is to consistently earn underwriting profits. We evaluate the performance of our operating segments and allocate resources based primarily on underwriting profit (loss) of operating segments. Our definition of underwriting profit (loss) of operating segments and underwriting profit (loss) may not be comparable to that of other companies.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
(in thousands)
Underwriting profit (loss) of the operating segments:
 
 
 
 
 
 
 
Excess and Surplus Lines
$
11,729

 
$
9,783

 
$
20,529

 
$
18,987

Specialty Admitted Insurance
553

 
125

 
1,395

 
600

Casualty Reinsurance
(2,023
)
 
206

 
(930
)
 
540

Total underwriting profit of operating segments
10,259

 
10,114

 
20,994

 
20,127

Other operating expenses of the Corporate and Other segment
(6,095
)
 
(5,475
)
 
(12,556
)
 
(10,727
)
Underwriting profit (a)
4,164

 
4,639

 
8,438

 
9,400

Net investment income
13,714

 
11,553

 
30,447

 
22,825

Net realized investment gains
307

 
1,619

 
1,354

 
2,166

Other income and expenses
(257
)
 
(24
)
 
(57
)
 
52

Interest expense
(2,224
)
 
(2,041
)
 
(4,347
)
 
(4,215
)
Amortization of intangible assets
(149
)
 
(149
)
 
(298
)
 
(298
)
Consolidated income before taxes
$
15,555

 
$
15,597

 
$
35,537

 
$
29,930

 
 
 
 
 
 
 
 
(a)    Included in underwriting results for the three months ended June 30, 2017 and 2016 is fee income of $6.9 million and $3.5 million, respectively, and $12.8 million and $6.6 million for the respective six month periods.

Adjusted Net Operating Income

We define adjusted net operating income as net income excluding net realized investment gains and losses, as well as non-operating expenses including those that relate to due diligence costs for various merger and acquisition activities, professional fees related to the filing of a registration statement for the sale of our securities, and 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 before taxes and net income for the three and six months ended June 30, 2017 and 2016, respectively, reconciles to our adjusted net operating income as follows:

-MORE-

JRVR Announces Second Quarter Results
Page 12
August 1, 2017



 
Three Months Ended June 30,
 
2017
 
2016
 
Income Before Taxes
 
Net Income
 
Income Before Taxes
 
Net Income
 
(in thousands)
Income as reported
$
15,555

 
$
14,541

 
$
15,597

 
$
14,596

Net realized investment gains
(307
)
 
(248
)
 
(1,619
)
 
(1,257
)
Other expenses (a)
346

 
368

 
91

 
127

Interest expense on leased building the Company is deemed to own for accounting purposes
313

 
203

 
306

 
199

Adjusted net operating income
$
15,907

 
$
14,864

 
$
14,375

 
$
13,665

 
 
 
 
 
 
 
 
 
Six Months Ended June 30,
 
2017
 
2016
 
Income Before Taxes
 
Net Income
 
Income Before Taxes
 
Net Income
 
(in thousands)
Income as reported
$
35,537

 
$
32,991

 
$
29,930

 
$
27,433

Net realized investment gains
(1,354
)
 
(1,082
)
 
(2,166
)
 
(1,564
)
Other expenses (a)
232

 
268

 
79

 
119

Interest expense on leased building the Company is deemed to own for accounting purposes
625

 
406

 
792

 
515

Adjusted net operating income
$
35,040

 
$
32,583

 
$
28,635

 
$
26,503

 
 
 
 
 
 
 
 
(a) Other expenses in 2017 were primarily legal and other professional services associated with the Company's May 2017 secondary offering.

Tangible Equity (per Share) and Pre Dividend Tangible Equity (per Share)

We define tangible equity as shareholders’ equity less goodwill and intangible assets (net of amortization). Our definition of tangible 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 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 for June 30, 2017, December 31, 2016, and June 30, 2016 and reconciles tangible equity to tangible equity before dividends for June 30, 2017.
 
June 30, 2017
 
December 31, 2016
 
June 30, 2016
($ in thousands, except for share data)
Equity
 
Equity per share
 
Equity
 
Equity per share
 
Equity
 
Equity per share
Shareholders' equity
$
719,719

 
$
24.42

 
$
693,221

 
$
23.69

 
$
729,898

 
$
25.09

Goodwill and intangible assets
220,464

 
7.48

 
220,762

 
7.54

 
221,061

 
7.60

Tangible equity
$
499,255

 
$
16.94

 
$
472,459

 
$
16.15

 
$
508,837

 
$
17.49

Dividends to shareholders for the six months ended June 30, 2017
17,728

 
0.60

 
 
 
 
 
 
 
 
Pre dividend tangible equity
$
516,983

 
$
17.54

 
 
 
 
 
 
 
 


-END-