Document
false 0001620459 0001620459 2020-04-28 2020-04-28


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):
April 28, 2020
JAMES RIVER GROUP HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Bermuda
001-36777
98-0585280
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS 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)
 
(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):
Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)
Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))
Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, par value $0.0002 per share
JRVR
NASDAQ Global Select Market

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
 
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.







Item 2.02
Results of Operations and Financial Condition.
On April 29, 2020, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”).

The information in this 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 5.07
Submission of Matters to a Vote of Security Holders.

On April 28, 2020, the Company held its annual general meeting of shareholders (the "Annual Meeting"). At the Annual Meeting, the Company's shareholders (i) elected J. Adam Abram, Robert P. Myron, and Michael T. Oakes as Class III directors to hold office until the 2023 annual general meeting of shareholders, (ii) approved the re-appointment of Ernst & Young LLP as the Company's independent auditor to serve until the Company's 2021 annual general meeting of shareholders and authorized the Company's Board of Directors, acting by the Audit Committee, to determine the independent auditor's remuneration, and (iii) approved, on a non-binding, advisory basis, the 2019 compensation of the Company's named executive officers.

The following is a summary of the voting results for each matter presented to the shareholders:

Proposal 1 - Election of three directors to hold office until the 2023 annual general meeting of shareholders:
Director
For
Withhold
Broker Non-Votes
J. Adam Abram
17,063,042
10,631,974
1,077,784
Robert P. Myron
16,992,031
10,702,985
1,077,784
Michael T. Oakes
12,647,159
15,047,857
1,077,784

Proposal 2 - The re-appointment of Ernst & Young LLP as the Company's independent auditor to serve until the Company's 2021 annual general meeting of shareholders and to authorize the Company's Board of Directors, acting by the Audit Committee, to determine the independent auditor's remuneration:
For
Against
Abstain
Broker Non-Votes
28,398,964
321,669
52,167

Proposal 3 - The approval, on a non-binding, advisory basis of the 2019 compensation of the Company's named executive officers:
For
Against
Abstain
Broker Non-Votes
26,404,772
1,287,318
2,926
1,077,784

Item 8.01
Other Events.

(a) On April 28, 2020, the Company’s board of directors (the “Board”) considered the voting results for the election of directors at the Annual Meeting in light of the receipt by Michael T. Oakes of less than 50% of shareholder “for” votes supporting his nomination as a Class III director. After careful consideration of the skills and qualities Mr. Oakes brings to the Board, the Board unanimously determined that the continued service of Mr. Oakes as a Class III director of the Company remains a benefit to the Company. The Board’s determination was based upon its belief that Mr. Oakes brings leadership, strategic thinking and knowledge of the industry, the operations of the Company and the competitive position of the Company, and his leadership of the Nominating and Corporate Governance Committee of the Board, to which he was appointed Chair earlier this year, and of the Investment Committee of the Board.


    





(b) On April 29, 2020, 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 June 30, 2020 to shareholders of record on June 15, 2020.

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
 


    




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: April 29, 2020        
By: /s/ Sarah C. Doran     
Sarah C. Doran
Chief Financial Officer



Exhibit
Exhibit 99.1


a20192stqtrjrvrpressrimage1a.jpg     
JAMES RIVER ANNOUNCES FIRST QUARTER
2020 RESULTS

First Quarter 2020 Net Loss of $36.8 million -- $1.21 per diluted share and Adjusted Net Operating Income of $15.4 million -- $0.50 per diluted share

The Net Loss was driven by investment volatility, primarily in the Company’s $202.9 million senior secured bank loan portfolio. In connection with the Company’s adoption of an accounting change, the assets are measured at fair value with changes reported through the income statement as of January 1, 2020. The portfolio, which had previously been carried at amortized cost net of allowance for any credit losses, experienced an unrealized loss during the quarter, a substantial amount of which has been recovered subsequent to the end of the first quarter.

37% growth in Core (Excluding Commercial Auto) Excess and Surplus Lines ("E&S") Gross Written Premium versus the prior year quarter

Year-to-date 2020 annualized Adjusted Net Operating Return on Average Tangible Equity of 11.6%

Net Investment Income of $20.8 million, an increase of 7%, or $1.4 million, over the prior year quarter

Pembroke, Bermuda, April 29 , 2020 - James River Group Holdings, Ltd. ("James River" or the "Company") (NASDAQ: JRVR) today reported first quarter 2020 net loss of $36.8 million ($1.21 per diluted share), compared to net income of $22.7 million ($0.75 per diluted share) for the first quarter of 2019. Adjusted net operating income for the first quarter of 2020 was $15.4 million ($0.50 per diluted share), compared to adjusted net operating income of $21.7 million ($0.71 per diluted share) for the same period in 2019.
Earnings Per Diluted Share
Three Months Ended
March 31,
 
2020
 
2019
 
 
 
 
Net (Loss) Income
$
(1.21
)
 
$
0.75

Adjusted Net Operating Income 1
$
0.50

 
$
0.71

 
 
 
 
1 See "Reconciliation of Non-GAAP Measures" below.


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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 First Quarter Results
Page 2
April 29, 2020


J. Adam Abram, the Company’s Chairman and Chief Executive Officer, commented, “I am pleased to report that all of our colleagues are safe and healthy and that we have been able to operate efficiently as a team while moving to remote work.   Despite the disruptions, uncertainties and the concerns brought on by the spread of the coronavirus, our team delivered a very strong start to the year. Gross written premiums in the core E&S business grew by 37%, renewal pricing was up by 13% and submission flow increased 20%.  This was the 13th consecutive quarter in which rates increased in core E&S.  In combination with results from our Specialty Admitted and Reinsurance Segments, we earned an 11.6% annualized Adjusted Net Operating Return on Average Tangible Equity.   In this quarter, we adopted a mark-to-market approach to reporting results from a professionally managed portfolio of bank loans we have owned for many years.  Those loans proved very volatile during the quarter, as the debt markets responded to concerns about the impact of COVID-19 on business conditions. We also saw a decline in the value of our high grade investment portfolio in the quarter.   A substantial part of the decline we report in the quarter has been reversed as debt markets have recovered significantly from quarter end.”
First Quarter 2020 Operating Results
Gross written premium of $283.8 million, consisting of the following:

 
Three Months Ended
March 31,
 
($ in thousands)
2020
 
2019
 
% Change
Excess and Surplus Lines
$
136,197

 
$
186,549

 
(27
)%
Specialty Admitted Insurance
102,802

 
102,953

 
0
 %
Casualty Reinsurance
44,842

 
37,832

 
19
 %
 
$
283,841

 
$
327,334

 
(13
)%

Net written premium of $134.7 million, consisting of the following:

 
Three Months Ended
March 31,
 
($ in thousands)
2020
 
2019
 
% Change
Excess and Surplus Lines
$
92,206

 
$
154,861

 
(40
)%
Specialty Admitted Insurance
13,356

 
15,021

 
(11
)%
Casualty Reinsurance
29,092

 
37,859

 
(23
)%
 
$
134,654

 
$
207,741

 
(35
)%

Net earned premium of $145.9 million, consisting of the following:

 
Three Months Ended
March 31,
 
($ in thousands)
2020
 
2019
 
% Change
Excess and Surplus Lines
$
99,739

 
$
141,672

 
(30
)%
Specialty Admitted Insurance
13,283

 
12,360

 
7
 %
Casualty Reinsurance
32,896

 
36,120

 
(9
)%
 
$
145,918

 
$
190,152

 
(23
)%


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JRVR Announces First Quarter Results
Page 3
April 29, 2020


Core (non-commercial auto) Excess and Surplus Lines gross written premium increased 37% (eleven out of twelve core underwriting divisions grew), and net written premium increased 16%. Commercial auto gross written premium decreased from $92.0 million in the first quarter of 2019 to $6.7 million in the current quarter due to the cancellation, effective December 31, 2019, of all policies issued to one large commercial auto insured;
While gross written premium for the Specialty Admitted Insurance segment was flat quarter over quarter, net written premium decreased from the prior year quarter as the Company increased the cession rate of the individual risk workers' compensation third party quota share from 50% to 70% effective January 1, 2020;
Gross written premium in the Casualty Reinsurance segment increased from the prior year quarter due to the change in renewal date of a fronted treaty where the Company retains no net underwriting risk, while net written premium and net earned premium declined;
There was overall unfavorable reserve development of $0.9 million compared to unfavorable reserve development of $1.0 million in the prior year quarter (representing a 0.6 and 0.5 percentage point increase to the Company’s loss ratio in the periods, respectively);
Pre-tax (unfavorable) favorable reserve development by segment was as follows:
 
Three Months Ended
March 31,
($ in thousands)
2020
 
2019
Excess and Surplus Lines
$
3

 
$
10

Specialty Admitted Insurance
1,011

 
2,004

Casualty Reinsurance
(1,888
)
 
(2,982
)
 
$
(874
)
 
$
(968
)
    

The Specialty Admitted Insurance segment experienced $1.0 million of favorable development in its individual risk workers' compensation business. The Casualty Reinsurance segment experienced $1.9 million of unfavorable development, primarily related to loss reserves from treaties the Company no longer writes, which was partially offset by commission slide adjustments of $0.3 million;
Group combined ratio of 100.6% versus 96.2% in the prior year quarter;
Group expense ratio of 34.2% increased from 22.6% in the prior year quarter, principally due to the mix shift away from commercial auto business, which carried a lower expense ratio and higher loss ratio than other lines of business;
Underwriting results for the Specialty Admitted Insurance segment in the three months ended March 31, 2020 were negatively impacted by higher reported losses on involuntary assigned risk pools for workers' compensation and an accrual for ceded minimum premium on one fronting arrangement, resulting in an additional 7.0 combined ratio points;
Gross fee income by segment was as follows:
 
Three Months Ended
March 31,
 
($ in thousands)
2020
 
2019
 
% Change
Excess and Surplus Lines
$
1,275

 
$
2,673

 
(52
)%
Specialty Admitted Insurance
4,211

 
3,772

 
12
 %
 
$
5,486

 
$
6,445

 
(15
)%
Fee income in the Excess and Surplus Lines segment decreased from its level in the prior year quarter due to the December 31, 2019 cancellation of all policies issued to one large

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JRVR Announces First Quarter Results
Page 4
April 29, 2020


commercial auto insured. Fee income in the Specialty Admitted Insurance segment increased as a result of a mix shift to fronting arrangements with higher fees;
Net investment income was $20.8 million, an increase of 7% from the prior year quarter. Further details can be found in the "Investment Results" section below.

Investment Results
Net investment income for the first quarter of 2020 was $20.8 million, which compares to $19.4 million for the same period in 2019. The increase was due to a larger fixed maturity portfolio and income relating to restricted cash equivalents withdrawn in October 2019 from a collateral trust established in favor of the Company by a captive insurance company affiliate of a former insured. The funds withdrawn from the collateral trust were invested in short term securities and are included in restricted cash equivalents on the Company's consolidated balance sheet.  As these assets were classified as cash equivalents, they were not included in the calculations of annualized gross investment yield on average fixed maturity, bank loan and equity securities and average duration of the fixed maturity and bank loan portfolio.
The Company’s net investment income consisted of the following:
 
Three Months Ended
March 31,
 
($ in thousands)
2020
 
2019
 
% Change
Renewable Energy Investments
$
834

 
$
921

 
(9
)%
Other Private Investments
(317
)
 
2,483

 
-

All Other Net Investment Income
20,319

 
16,027

 
27
 %
Total Net Investment Income
$
20,836

 
$
19,431

 
7
 %
The Company’s annualized gross investment yield on average fixed maturity, bank loan and equity securities for the three months ended March 31, 2020 was 3.6% (versus 4.1% for the three months ended March 31, 2019 ) and the average duration of the fixed maturity and bank loan portfolio was 3.6 years at March 31, 2020 (versus 3.3 years at March 31, 2019 ). Renewable energy and other private investments produced an annualized return of 3.8% for the three months ended March 31, 2020 (18.6% for the three months ended March 31, 2019 ).
During the three months ended March 31, 2020 the Company experienced realized and unrealized mark-to-market investment losses. Changes in the fair value of bank loan participations and equity securities are reflected in the income statement as net realized and unrealized gains or losses on investments, while changes in the fair value of fixed maturity securities are a component of other comprehensive income. These losses are summarized below:
 
Three Months Ended
($ in thousands)
March 31, 2020
 
December 31, 2019
 
March 31, 2019
Change in the Fair Value of Bank Loan Participations
$
(43,947
)
 
$

 
$

Change in the Fair Value of Equity Securities
(13,315
)
 
(2,443
)
 
3,549

Change in the Fair Value of Fixed Maturity Securities
(5,310
)
 
(4,098
)
 
21,706

Total Change in Fair Value
$(62,572)
 
$(6,541)
 
$
25,255


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JRVR Announces First Quarter Results
Page 5
April 29, 2020


Recently Adopted Accounting Standard and the Bank Loan Portfolio Unrealized Loss
As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2020.

Beginning this quarter, the Company's senior secured bank loan portfolio is reported at fair value, and changes in unrealized gains and losses in the portfolio are reported through the income statement as net realized and unrealized gains (losses) on investments.

The outbreak of the coronavirus pandemic and uncertainty around the extent of its economic impact caused severe volatility in the capital markets in the first quarter of 2020. As a result of this volatility, net realized and unrealized losses on investments includes losses of $(43.9) million related to changes in unrealized losses in the senior secured bank loan portfolio for the three months ended March 31, 2020.
Taxes
Generally the Company's effective tax rate fluctuates from period to period based on the relative mix of income reported by country and the respective tax rates imposed by each tax jurisdiction. The Company had a tax benefit for the three months ended March 31, 2020 , driven by the pre-tax loss for the quarter. The tax rate for the three months ended March 31, 2020 and March 31, 2019 was 10.7% and 10.8%, respectively.

Tangible Equity
Tangible equity before dividends decreased 8.7% from $559.8 million at December 31, 2019 to $511.0 million at March 31, 2020 , principally due to a $36.8 million net loss, $8.1 million cumulative effect loss associated with newly adopted accounting standards and $3.9 million of after tax unrealized losses in the Company's fixed income investment portfolio.
March 31, 2020 tangible equity of $501.7 million after dividends decreased 10.4% from $559.8 million at December 31, 2019 . Tangible equity per common share was $16.44 at March 31, 2020 , net of $0.30 of dividends per share the Company paid during the first three months of 2020. The year-to-date annualized adjusted net operating income return on average tangible equity was 11.6%, which compares to 16.9% for the same period in 2019.
Capital Management
The Company announced that its Board of Directors declared a cash dividend of $0.30 per common share. This dividend is payable on Tuesday, June 30, 2020 to all shareholders of record on Monday, June 15, 2020.
Conference Call
James River Group Holdings, Ltd. will hold a conference call to discuss its first quarter results tomorrow, April 30, 2020, at 8:00 a.m. Eastern Time. Investors may access the conference call by dialing (877) 930-8055, Conference ID# 1126408 , or via the internet by visiting www.jrgh.net and clicking on the “Investor Relations” link. Please access the website at least 15 minutes early to

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JRVR Announces First Quarter Results
Page 6
April 29, 2020


register and download any necessary audio software. A replay of the call will be available until 11:00 a.m. (Eastern Time) on May 30, 2020 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 may expose us to greater risks than intended; 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 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, or decision to terminate, such relationships; 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 an insured group of companies with whom we have an indemnification arrangement failing to perform their reimbursement obligations; changes in laws or government regulation, including tax or insurance law and regulations; the ongoing effect of Public Law No. 115-97, informally titled the Tax Cuts and Jobs Act, which may have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as on our shareholders; in the event we do not qualify for the insurance company exception to the passive foreign investment company (“PFIC”) rules and are therefore considered a PFIC, there could be material adverse tax consequences to an investor that is subject to U.S. federal income taxation; the Company or any of its foreign subsidiaries becoming subject to U.S. federal income taxation; a failure of any of the loss limitations or exclusions we utilize to shield us from unanticipated financial losses or legal exposures, or other liabilities; losses from catastrophic events, such as natural disasters and terrorist acts, which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events; potential effects on our business of emerging claim and coverage issues; the effects of the COVID-19 pandemic and associated government actions on our operations and financial  performance; exposure to credit risk, interest rate risk and other market risk in our investment portfolio; 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; 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; failure to maintain effective internal controls in accordance with Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); and changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends.

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JRVR Announces First Quarter Results
Page 7
April 29, 2020


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 February 27, 2020. 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, adjusted net operating return on average tangible equity (which is calculated as annualized adjusted net operating income divided by average 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. is a Bermuda-based insurance holding company which owns and operates a group of specialty insurance and reinsurance companies. The Company operates in three specialty property-casualty insurance and reinsurance segments: Excess and Surplus Lines, Specialty Admitted Insurance and Casualty Reinsurance. Each of the Company’s regulated insurance subsidiaries are rated “A” (Excellent) by A.M. Best Company.
Visit James River Group Holdings, Ltd. on the web at www.jrgh.net
For more information contact:
Kevin Copeland
SVP Finance & Chief Investment Officer
Investor Relations
441-278-4573
InvestorRelations@jrgh.net

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JRVR Announces First Quarter Results
Page 8
April 29, 2020


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

 
March 31, 2020
 
December 31, 2019
 
($ in thousands, except for share data)
ASSETS
 
 
 
Invested assets:
 
 
 
Fixed maturity securities, available-for-sale
$
1,570,605

 
$
1,433,626

Equity securities, at fair value
71,394

 
80,735

Bank loan participations, at fair value
202,888

 
260,864

Short-term investments
71,058

 
156,925

Other invested assets
47,697

 
61,210

Total invested assets
1,963,642

 
1,993,360

 
 
 
 
Cash and cash equivalents
291,223

 
206,912

Restricted cash equivalents
1,107,321

 
1,199,164

Accrued investment income
13,781

 
13,597

Premiums receivable and agents’ balances
312,842

 
369,462

Reinsurance recoverable on unpaid losses
691,669

 
668,045

Reinsurance recoverable on paid losses
42,201

 
33,221

Deferred policy acquisition costs
58,618

 
62,006

Goodwill and intangible assets
218,622

 
218,771

Other assets
296,891

 
259,867

Total assets
$
4,996,810

 
$
5,024,405

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Reserve for losses and loss adjustment expenses
$
2,043,358

 
$
2,045,506

Unearned premiums
539,564

 
524,377

Funds held
1,107,321

 
1,199,164

Senior debt
277,300

 
158,300

Junior subordinated debt
104,055

 
104,055

Accrued expenses
51,808

 
58,416

Other liabilities
153,087

 
156,006

Total liabilities
4,276,493

 
4,245,824

 
 
 
 
Total shareholders’ equity
720,317

 
778,581

Total liabilities and shareholders’ equity
$
4,996,810

 
$
5,024,405

 
 
 
 
Tangible equity (a)
$
501,695

 
$
559,810

Tangible equity per common share outstanding (a)
$
16.44

 
$
18.40

Total shareholders’ equity per common share
   outstanding
$
23.60



$
25.59

Common shares outstanding
30,520,428

 
30,424,391

(a)     See “Reconciliation of Non-GAAP Measures”.
 
 
 

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JRVR Announces First Quarter Results
Page 9
April 29, 2020


James River Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated (Loss) Income Statement Data
(Unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
 
($ in thousands, except for share data)
REVENUES
 
 
 
Gross written premiums
$
283,841

 
$
327,334

Net written premiums
134,654

 
207,741

 
 
 
 
Net earned premiums
145,918

 
190,152

Net investment income
20,836

 
19,431

Net realized and unrealized (losses) gains on investments (a)
(58,407
)
 
1,625

Other income
1,937

 
2,919

Total revenues
110,284

 
214,127

 
 
 
 
EXPENSES
 
 
 
Losses and loss adjustment expenses
96,856

 
139,927

Other operating expenses
51,621

 
45,752

Interest expense
2,876

 
2,808

Amortization of intangible assets
149

 
149

Total expenses
151,502

 
188,636

(Loss) income before taxes
(41,218
)
 
25,491

Income tax (benefit) expense
(4,403
)
 
2,763

NET (LOSS) INCOME
$
(36,815
)
 
$
22,728

ADJUSTED NET OPERATING INCOME (b)
$
15,418

 
$
21,713

 
 
 
 
(LOSS) EARNINGS PER SHARE
 
 
 
Basic
$
(1.21
)
 
$
0.76

Diluted
$
(1.21
)
 
$
0.75

 
 
 
 
ADJUSTED NET OPERATING INCOME PER SHARE
 
 
 
Basic
$
0.51

 
$
0.72

Diluted (c)
$
0.50

 
$
0.71

 
 
 
 
Weighted-average common shares outstanding:
 
 
 
Basic
30,476,307

 
30,059,398

Diluted
30,476,307

 
30,472,304

Cash dividends declared per common share
$
0.30

 
$
0.30

 
 
 
 
Ratios:
 
 
 
Loss ratio
66.4
%
 
73.6
%
Expense ratio (d)
34.2
%
 
22.6
%
Combined ratio
100.6
%
 
96.2
%
Accident year loss ratio
65.8
%
 
73.1
%
(a) Includes losses of $13.3 million and gains of $3.5 million for the change in net unrealized gains/losses on equity securities in the three months ended March 31, 2020 and 2019, respectively, and losses of $43.9 million for the change in net unrealized losses on bank loan participations in the three months ended March 31, 2020 following the Company's election of the fair value option for bank loans effective January 1, 2020.
(b) See "Reconciliation of Non-GAAP Measures".
(c) Common share equivalents of 309,443 were dilutive for the calculation of diluted adjusted net operating income per share for the three months ended March 31, 2020.
(d) Calculated with a numerator comprising other operating expenses less gross fee income included in “Other income” in our Condensed Consolidated Income Statements and a denominator of net earned premiums.

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JRVR Announces First Quarter Results
Page 10
April 29, 2020



James River Group Holdings, Ltd. and Subsidiaries
Segment Results

EXCESS AND SURPLUS LINES
 
Three Months Ended
March 31,
 
 
 
2020
 
2019
 
% Change
 
($ in thousands)
Gross written premiums
$
136,197

 
$
186,549

 
(27.0
)%
Net written premiums
$
92,206

 
$
154,861

 
(40.5
)%
 
 
 
 
 
 
Net earned premiums
$
99,739

 
$
141,672

 
(29.6
)%
Losses and loss adjustment expenses
(65,529
)
 
(108,205
)
 
(39.4
)%
Underwriting expenses
(26,098
)
 
(20,365
)
 
28.2
 %
Underwriting profit (a), (b)
$
8,112

 
$
13,102

 
(38.1
)%
 
 
 
 
 
 
Ratios:
 
 
 
 
 
Loss ratio
65.7
%
 
76.4
%
 
 
Expense ratio
26.2
%
 
14.4
%
 
 
Combined ratio
91.9
%
 
90.8
%
 
 
Accident year loss ratio
65.7
%
 
76.4
%
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 
(b) Underwriting results include fee income of $1.3 million and $2.7 million for the three months ended March 31, 2020 and 2019, respectively. These amounts are included in “Other income” in our Condensed Consolidated Income Statements.


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JRVR Announces First Quarter Results
Page 11
April 29, 2020


SPECIALTY ADMITTED INSURANCE
 
Three Months Ended
March 31,
 
 
 
2020
 
2019
 
% Change
 
($ in thousands)
Gross written premiums
$
102,802

 
$
102,953

 
(0.1
)%
Net written premiums
$
13,356

 
$
15,021

 
(11.1
)%
 
 
 
 
 
 
Net earned premiums
$
13,283

 
$
12,360

 
7.5
 %
Losses and loss adjustment expenses
(9,905
)
 
(7,202
)
 
37.5
 %
Underwriting expenses
(4,366
)
 
(3,535
)
 
23.5
 %
Underwriting (loss) profit (a), (b)
$
(988
)
 
$
1,623

 
-
 
 
 
 
 
 
Ratios:
 
 
 
 
 
Loss ratio
74.6
%
 
58.3
%
 
 
Expense ratio
32.8
%
 
28.6
%
 
 
Combined ratio
107.4
%
 
86.9
%
 
 
Accident year loss ratio
82.2
%
 
74.5
%
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 
(b) Underwriting results include fee income of $4.2 million and $3.8 million for the three months ended March 31, 2020 and 2019, respectively.

CASUALTY REINSURANCE
 
Three Months Ended
March 31,
 
 
 
2020
 
2019
 
% Change
 
($ in thousands)
Gross written premiums
$
44,842

 
$
37,832

 
18.5
 %
Net written premiums
$
29,092

 
$
37,859

 
(23.2
)%
 
 
 
 
 
 
Net earned premiums
$
32,896

 
$
36,120

 
(8.9
)%
Losses and loss adjustment expenses
(21,422
)
 
(24,520
)
 
(12.6
)%
Underwriting expenses
(11,267
)
 
(11,273
)
 
(0.1
)%
Underwriting profit (a)
$
207

 
$
327

 
(36.7
)%
 
 
 
 
 
 
Ratios:
 
 
 
 
 
Loss ratio
65.1
%
 
67.9
%
 
 
Expense ratio
34.3
%
 
31.2
%
 
 
Combined ratio
99.4
%
 
99.1
%
 
 
Accident year loss ratio
59.4
%
 
59.6
%
 
 
 
 
 
 
 
 
(a) See "Reconciliation of Non-GAAP Measures".
 
 
 
 
 


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JRVR Announces First Quarter Results
Page 12
April 29, 2020


RECONCILIATION OF NON-GAAP MEASURES

Underwriting (Loss) Profit

The following table reconciles the underwriting profit (loss) by individual operating segment and for the entire Company to consolidated (loss) 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 of operating segments. Our definition of underwriting profit of operating segments and underwriting profit may not be comparable to that of other companies.
 
Three Months Ended
March 31,
 
2020
 
2019
 
(in thousands)
Underwriting profit (loss) of the operating segments:
 
 
 
Excess and Surplus Lines
$
8,112

 
$
13,102

Specialty Admitted Insurance
(988
)
 
1,623

Casualty Reinsurance
207

 
327

Total underwriting profit of operating segments
7,331

 
15,052

Other operating expenses of the Corporate and Other segment
(8,279
)
 
(7,906
)
Underwriting (loss) profit (a)
(948
)
 
7,146

Net investment income
20,836

 
19,431

Net realized and unrealized (losses) gains on investments (b)
(58,407
)
 
1,625

Other income
326

 
246

Interest expense
(2,876
)
 
(2,808
)
Amortization of intangible assets
(149
)
 
(149
)
Consolidated (loss) income before taxes
$
(41,218
)
 
$
25,491

 
 
 
 
(a)    Included in underwriting results for the three months ended March 31, 2020 and 2019 is fee income of $5.5 million and $6.4 million, respectively.
(b)    Includes losses of $13.3 million and gains of $3.5 million for the change in net unrealized gains/losses on equity securities in the three months ended March 31, 2020 and 2019, respectively, and losses of $43.9 million for the change in net unrealized losses on bank loan participations in the three months ended March 31, 2020 following the Company's election of the fair value option for bank loans effective January 1, 2020.

Adjusted Net Operating Income

We define adjusted net operating income as net income excluding net realized and unrealized gains (losses) on investments (net realized investment gains (losses) and the change in unrealized gains (losses) on equity securities and bank loan participations effective with the Company's election of the fair value option for bank loans on January 1, 2020), 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 registration statements for the sale of our securities, and costs associated with former 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.


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JRVR Announces First Quarter Results
Page 13
April 29, 2020


Our (loss) income before taxes and net (loss) income reconciles to our adjusted net operating income as follows:
 
Three Months Ended March 31,
 
2020
 
2019
 
(Loss) Income Before Taxes
 
Net (Loss) Income
 
Income Before Taxes
 
Net Income
 
(in thousands)
(Loss) income as reported
$
(41,218
)
 
$
(36,815
)
 
$
25,491

 
$
22,728

Net realized and unrealized losses (gains) on investments (a)
58,407

 
52,233

 
(1,625
)
 
(1,015
)
Adjusted net operating income
$
17,189

 
$
15,418

 
$
23,866

 
$
21,713

 
 
 
 
 
 
 
 
(a)    Includes losses of $13.3 million and gains of $3.5 million for the change in net unrealized gains/losses on equity securities in the three months ended March 31, 2020 and 2019, respectively, and losses of $43.9 million for the change in net unrealized losses on bank loan participations in the three months ended March 31, 2020 following the Company's election of the fair value option for bank loans effective January 1, 2020.

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 March 31, 2020 , December 31, 2019 , and March 31, 2019 and reconciles tangible equity to tangible equity before dividends for March 31, 2020 .

 
March 31, 2020
 
December 31, 2019
 
March 31, 2019
($ in thousands, except for share data)
Equity
 
Equity per share
 
Equity
 
Equity per share
 
Equity
 
Equity per share
Shareholders' equity
$
720,317

 
$
23.60

 
$
778,581

 
$
25.59

 
$
754,297

 
$
25.01

Goodwill and intangible assets
218,622

 
7.16

 
218,771

 
7.19

 
219,219

 
7.27

Tangible equity
$
501,695

 
$
16.44

 
$
559,810

 
$
18.40

 
$
535,078

 
$
17.74

Dividends to shareholders for the three months ended March 31, 2020
9,267

 
0.30

 
 
 
 
 
 
 
 
Pre-dividend tangible equity
$
510,962

 
$
16.74

 
 
 
 
 
 
 
 

-END-