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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 August 2, 2021: 37,275,736



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


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the fact that they do not relate strictly to historical or current facts. You may identify forward-looking statements in this Quarterly Report by the use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans”, “seeks” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.” These forward-looking statements include, among others, all statements relating to our future financial performance, our business prospects and strategy, anticipated financial position and financial strength ratings, liquidity and capital needs and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
 
Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Quarterly Report as a result of various factors, many of which are beyond our control, including, among others:
 
the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves;
inaccurate estimates and judgments in our risk management may expose us to greater risks than intended;
the downgrade in the financial strength rating of our regulated insurance subsidiaries announced May 7, 2021, or further downgrades, impacting our ability to attract and retain insurance and reinsurance business that our subsidiaries write, our competitive position, and our financial condition;
the potential loss of key members of our management team or key employees and our ability to attract and retain personnel;
adverse economic factors resulting in the sale of fewer policies than expected or an increase in the frequency or severity of claims, or both;
reliance on a select group of brokers and agents for a significant portion of our business and the impact of our potential failure to maintain, such relationships;
reliance on a select group of customers for a significant portion of our business and the impact of our potential failure to maintain, or decision to terminate, such relationships;
our ability to obtain reinsurance coverage at prices and on terms that allow us to transfer risk and adequately protect our Company against financial loss;
losses resulting from reinsurance counterparties failing to pay us on reinsurance claims, insurance companies with whom we have a fronting arrangement failing to pay us for claims, or a former customer with whom we have an indemnification arrangement failing to perform their reimbursement obligations;
inadequacy of premiums we charge to compensate us for our losses incurred;
changes in laws or government regulation, including tax or insurance law and regulations;
the ongoing effect of Public Law No. 115-97, informally titled the Tax Cuts and Jobs Act, which may have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as on our shareholders;
in the event we do not qualify for the insurance company exception to the passive foreign investment company (“PFIC”) rules and are therefore considered a PFIC, there could be material adverse tax consequences to an investor that is subject to U.S. federal income taxation;
the Company or any of its foreign subsidiaries becoming subject to U.S. federal income taxation;
a failure of any of the loss limitations or exclusions we utilize to shield us from unanticipated financial losses or legal exposures, or other liabilities;
losses from catastrophic events, such as natural disasters and terrorist acts, which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events;
the effects of the COVID-19 pandemic and associated government actions on our operations and financial  performance;
3


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;
the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents;
our ability to manage our growth effectively;
failure to maintain effective internal controls in accordance with Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); 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 Part II, Item 1A "Risk Factors" in this Quarterly Report, and 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, 2020 filed with the SEC on February 26, 2021.
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) June 30,
2021
December 31,
2020
 (in thousands)
Assets  
Invested assets:  
Fixed maturity securities, available-for-sale, at fair value (amortized cost: 2021 – $1,783,267; 2020 – $1,690,890)
$1,845,054 $1,783,642 
Equity securities, at fair value (cost:  2021 – $84,909; 2020 – $81,698)
95,346 88,975 
Bank loan participations, at fair value165,217 147,604 
Short-term investments39,663 130,289 
Other invested assets57,003 46,548 
Total invested assets2,202,283 2,197,058 
Cash and cash equivalents360,931 162,260 
Restricted cash equivalents723,525 859,920 
Accrued investment income11,399 10,980 
Premiums receivable and agents’ balances, net413,647 369,577 
Reinsurance recoverable on unpaid losses, net935,561 805,684 
Reinsurance recoverable on paid losses52,932 46,118 
Prepaid reinsurance premiums287,936 243,741 
Deferred policy acquisition costs67,286 62,953 
Intangible assets, net36,220 36,402 
Goodwill181,831 181,831 
Other assets118,265 86,548 
Total assets$5,391,816 $5,063,072 
 
See accompanying notes.
 

5

Table of Contents
 
JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES
 
Condensed Consolidated Balance Sheets (continued)
  
(Unaudited) June 30,
2021
December 31,
2020
 (in thousands, except share amounts)
Liabilities and Shareholders’ Equity  
Liabilities:  
Reserve for losses and loss adjustment expenses$2,447,002 $2,192,080 
Unearned premiums709,479 630,371 
Payables to reinsurers144,147 110,431 
Funds held723,525 859,920 
Senior debt262,300 262,300 
Junior subordinated debt104,055 104,055 
Accrued expenses55,317 55,989 
Other liabilities87,492 52,318 
Total liabilities4,533,317 4,267,464 
Commitments and contingent liabilities  
Shareholders’ equity:  
Common Shares – 2021 and 2020: $0.0002 par value; 200,000,000 shares authorized; 37,275,562 and 30,649,261 shares issued and outstanding, respectively
7 6 
Preferred Shares – 2021 and 2020: $0.00125 par value; 20,000,000 shares authorized; no shares issued and outstanding
  
Additional paid-in capital857,916 664,476 
Retained (deficit) earnings(53,993)49,227 
Accumulated other comprehensive income54,569 81,899 
Total shareholders’ equity858,499 795,608 
Total liabilities and shareholders’ equity$5,391,816 $5,063,072 
 
See accompanying notes.

6

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

 Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
 (in thousands, except share amounts)
Revenues    
Gross written premiums$380,146 $301,639 $753,401 $585,480 
Ceded written premiums(186,542)(135,882)(385,198)(285,069)
Net written premiums193,604 165,757 368,203 300,411 
Change in net unearned premiums(20,899)(16,942)(34,905)(5,678)
Net earned premiums172,705 148,815 333,298 294,733 
Net investment income14,348 15,350 29,437 36,186 
Net realized and unrealized gains (losses) on investments3,483 21,593 9,755 (36,814)
Other income1,031 991 2,057 2,928 
Total revenues191,567 186,749 374,547 297,033 
Expenses   
Losses and loss adjustment expenses110,000 98,746 383,500 195,602 
Other operating expenses45,840 43,397 93,221 95,018 
Other expenses904 1,732 1,525 1,732 
Interest expense2,249 2,965 4,465 5,841 
Amortization of intangible assets91 149 182 298 
Total expenses159,084 146,989 482,893 298,491 
Income (loss) before taxes32,483 39,760 (108,346)(1,458)
Income tax expense (benefit)11,640 4,146 (25,729)(257)
Net income (loss)20,843 35,614 (82,617)(1,201)
Other comprehensive income (loss):   
Net unrealized gains (losses), net of taxes of $2,013 and $(3,635) in 2021 and $6,927 and $5,535 in 2020
15,358 46,313 (27,330)42,394 
Total comprehensive income (loss)$36,201 $81,927 $(109,947)$41,193 
Per share data:   
Basic earnings (loss) per share$0.61 $1.17 $(2.54)$(0.04)
Diluted earnings (loss) per share$0.60 $1.16 $(2.54)$(0.04)
Dividend declared per share$0.30 $0.30 $0.60 $0.60 
Weighted-average common shares outstanding:   
Basic34,418,472 30,529,241 32,576,463 30,502,774 
Diluted34,586,997 30,782,609 32,576,463 30,502,774 

 
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)
Preferred
Shares
Additional
Paid-in
Capital
Retained
 (Deficit) Earnings
Accumulated
Other
Comprehensive Income
Total
 (in thousands, except share amounts)
Balances at March 31, 2021
30,774,930 $6 $ $663,987 $(63,576)$39,211 $639,628 
Net income— — — — 20,843 — 20,843 
Other comprehensive income— — — — — 15,358 15,358 
Dividends— — — — (11,260)— (11,260)
Issuance of common shares6,497,500 1 — 192,106 — — 192,107 
Vesting of RSUs3,132 — — (39)— — (39)
Compensation expense under share incentive plans— — — 1,862 — — 1,862 
Balances at June 30, 202137,275,562 $7 $ $857,916 $(53,993)$54,569 $858,499 
Balances at December 31, 202030,649,261 $6 $ $664,476 $49,227 $81,899 $795,608 
Net loss— — — — (82,617)— (82,617)
Other comprehensive loss— — — — — (27,330)(27,330)
Dividends— — — — (20,603)— (20,603)
Issuance of common shares6,497,500 1 — 192,106 — — 192,107 
Exercise of stock options16,471 — — 159 — — 159 
Vesting of RSUs112,330 — — (2,592)— — (2,592)
Compensation expense under share incentive plans— — — 3,767 — — 3,767 
Balances at June 30, 202137,275,562 $7 $ $857,916 $(53,993)$54,569 $858,499 
 
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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)
Preferred
Shares
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
 (in thousands, except share amounts)
Balances at March 31, 202030,520,428 $6 $ $657,704 $35,412 $27,195 $720,317 
Net income— — — — 35,614 — 35,614 
Other comprehensive income— — — — — 46,313 46,313 
Dividends— — — — (9,256)— (9,256)
Exercise of stock options29,141 — — 838 — — 838 
Vesting of RSUs3,609 — — (25)— — (25)
Compensation expense under share incentive plans— — — 1,910 — — 1,910 
Balances at June 30, 202030,553,178 $6 $ $660,427 $61,770 $73,508 $795,711 
Balances at December 31, 201930,424,391 $6 $ $657,875 $89,586 $31,114 $778,581 
Net loss— — — — (1,201)— (1,201)
Other comprehensive income— — — — — 42,394 42,394 
Dividends— — — — (18,523)— (18,523)
Exercise of stock options29,141 — — 838 — — 838 
Vesting of RSUs99,646 — — (2,063)— — (2,063)
Compensation expense under share incentive plans— — — 3,777 — — 3,777 
Cumulative effect of fair value option election— — — — (7,827)— (7,827)
Cumulative effect of adoption of ASU No. 2016-13— — — (265)— (265)
Balances at June 30, 202030,553,178 $6 $ $660,427 $61,770 $73,508 $795,711 

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

 Six Months Ended June 30,
 20212020
 (in thousands)
Operating activities  
Net cash used in operating activities (a)$(93,003)$(136,231)
Investing activities  
Securities available-for-sale:  
Purchases – fixed maturity securities(273,016)(368,975)
Sales – fixed maturity securities36,591 9,432 
Maturities and calls – fixed maturity securities142,895 92,395 
Purchases – equity securities(10,326)(9,993)
Sales – equity securities6,734 3,295 
Bank loan participations:  
Purchases(71,011)(24,107)
Sales36,059 103,933 
Maturities23,713 17,238 
Other invested assets:  
Purchases(10,545)(438)
Return of capital336 251 
Redemptions 13,612 
Short-term investments, net90,626 60,660 
Securities receivable or payable, net16,229 19,098 
Purchases of property and equipment(1,876)(211)
Net cash used in investing activities(13,591)(83,810)
Financing activities  
Senior debt issuances 119,000 
Senior debt repayments (60,000)
Dividends paid(20,804)(18,645)
Issuance of common shares - public offering (Note 12)192,107  
Issuance of common shares under equity incentive plans329 838 
Common share repurchases(2,762)(2,063)
Net cash provided by financing activities168,870 39,130 
Change in cash, cash equivalents, and restricted cash equivalents62,276 (180,911)
Cash, cash equivalents, and restricted cash equivalents at beginning of period1,022,180 1,406,076 
Cash, cash equivalents, and restricted cash equivalents at end of period$1,084,456 $1,225,165 
Supplemental information  
Interest paid$4,716 $6,526 
Restricted cash equivalents at beginning of period$859,920 $1,199,164 
Restricted cash equivalents at end of period$723,525 $1,020,856 
Change in restricted cash equivalents$(136,395)$(178,308)

(a) Cash used in operating activities for the six months ended June 30, 2021 and 2020 primarily reflect $136.4 million and $178.3 million, respectively, of restricted cash equivalents returned to a former insured, per the terms of a collateral trust (see Amounts Recoverable from an Indemnifying Party in Liquidity and Capital Resources). Excluding the reduction in the collateral funds, cash provided by operating activities was $43.4 million and $42.1 million for the six months ended June 30, 2021 and 2020, respectively.
See accompanying notes.
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 JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements

1.    Accounting Policies
Organization
James River Group Holdings, Ltd. (referred to as “JRG Holdings” or, with its subsidiaries, the “Company”) is an exempted holding company registered in Bermuda, organized for the purpose of acquiring and managing insurance and reinsurance entities.
The Company owns five insurance companies based in the United States (“U.S.”) focused on specialty insurance niches and two Bermuda-based reinsurance companies as described below:
James River Group Holdings UK Limited (“James River UK”) is an insurance holding company formed in 2015 in the United Kingdom (“U.K.”). JRG Holdings contributed James River Group, Inc. (“James River Group”), a U.S. insurance holding company, to James River UK in 2015.
James River Group is a Delaware domiciled insurance holding company formed in 2002 which owns all of the Company’s U.S.-based subsidiaries, either directly or indirectly through one of its wholly-owned U.S. subsidiaries. James River Group oversees the Company’s U.S. insurance operations and maintains all of the outstanding debt in the U.S.
James River Insurance Company is an Ohio domiciled excess and surplus lines insurance company that, with its wholly-owned insurance subsidiary, James River Casualty Company, a Virginia domiciled company, is authorized to write business in every state and the District of Columbia.
Falls Lake National Insurance Company (“Falls Lake National”) is an Ohio domiciled insurance company which wholly owns Stonewood Insurance Company (“Stonewood Insurance”), a North Carolina domiciled company, and Falls Lake Fire and Casualty Company, a California domiciled company. Falls Lake National and its subsidiaries primarily write specialty admitted fronting and program business and individual risk workers' compensation insurance.
JRG Reinsurance Company Ltd. (“JRG Re”) was formed in 2007 and commenced operations in 2008. JRG Re, a Bermuda domiciled reinsurer, primarily provides non-catastrophe casualty reinsurance to U.S. third parties and, through December 31, 2017, to the Company’s U.S.-based insurance subsidiaries.
Carolina Re Ltd (“Carolina Re”) was formed in 2018 and as of January 1, 2018 provides reinsurance to the Company’s U.S.-based insurance subsidiaries. Carolina Re is also the cedent on an aggregate stop loss reinsurance treaty with JRG Re.
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, 2020 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, 2020 was derived from the Company’s audited annual consolidated financial statements.
Intercompany transactions and balances have been eliminated.
Estimates and Assumptions
Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


Variable Interest Entities
Entities that do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (“VIE”). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose, and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.
The Company holds interests in VIEs through certain equity method investments included in “other invested assets” in the accompanying condensed consolidated balance sheets. The Company has determined that it should not consolidate any of the VIEs as it is not the primary beneficiary in any of the relationships. Although the investments resulted in the Company holding variable interests in the entities, they did not empower the Company to direct the activities that most significantly impact the economic performance of the entities. The Company’s investments related to these VIEs totaled $29.1 million and $30.1 million at June 30, 2021 and December 31, 2020, respectively, representing the Company’s maximum exposure to loss.
Income Tax Expense
Our effective tax rate fluctuates from period to period based on the relative mix of income reported by country and the respective tax rates imposed by each tax jurisdiction. For U.S.-sourced income, the Company’s U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities, dividends received income, and excess tax benefits on share based compensation. The Company had a pre-tax loss of $108.3 million for the six months ended June 30, 2021 and recorded a U.S. federal income tax benefit of $25.7 million. The pre-tax loss was largely driven by the $166.7 million of net adverse reserve development on prior accident years, including $161.2 million of net adverse development from the Excess and Surplus Lines segment that was primarily related to a former commercial auto account. For the six months ended June 30, 2021, our U.S. federal income tax benefit was 23.7% of the loss before taxes. The outbreak of the coronavirus pandemic in 2020 led to significant unrealized losses in our investment portfolio that were recognized in earnings. As a result, the Company had a pre-tax loss of $1.5 million for the six months ended June 30, 2020 and recorded a U.S. federal income tax benefit of $257,000. For the six months ended June 30, 2020, our U.S. federal income tax benefit was 17.6% of the loss before taxes. The change in effective tax rate for the two periods reflects changes in reserve estimates between accident years in the commercial auto business, and the related impact on the mix of income reported by country in those respective periods.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


2.    Investments
The Company’s available-for-sale fixed maturity securities are summarized as follows:
 Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
 (in thousands)
June 30, 2021    
Fixed maturity securities:    
State and municipal
$337,445 $16,397 $(684)$353,158 
Residential mortgage-backed
282,773 4,373 (1,165)285,981 
Corporate
742,324 37,134 (2,983)776,475 
Commercial mortgage and asset-backed
332,316 8,372 (747)339,941 
U.S. Treasury securities and obligations guaranteed by the U.S. government
88,409 1,322 (232)89,499 
Total fixed maturity securities, available-for-sale$1,783,267 $67,598 $(5,811)$1,845,054 
December 31, 2020    
Fixed maturity securities:    
State and municipal
$277,241 $19,203 $(39)$296,405 
Residential mortgage-backed
286,104 7,784 (40)293,848 
Corporate
715,145 52,098 (421)766,822 
Commercial mortgage and asset-backed
314,911 12,611 (803)326,719 
U.S. Treasury securities and obligations guaranteed by the U.S. government
97,489 2,360 (1)99,848 
Total fixed maturity securities, available-for-sale$1,690,890 $94,056 $(1,304)$1,783,642 
The amortized cost and fair value of available-for-sale investments in fixed maturity securities at June 30, 2021 are summarized, by contractual maturity, as follows:
 Cost or
Amortized
Cost
Fair
Value
 (in thousands)
One year or less$122,086 $123,390 
After one year through five years469,124 491,034 
After five years through ten years321,114 332,544 
After ten years255,854 272,164 
Residential mortgage-backed282,773 285,981 
Commercial mortgage and asset-backed332,316 339,941 
Total$1,783,267 $1,845,054 
 
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)
June 30, 2021      
Fixed maturity securities:      
State and municipal$49,220 $(684)$ $ $49,220 $(684)
Residential mortgage-backed126,896 (1,157)219 (8)127,115 (1,165)
Corporate133,327 (2,983)  133,327 (2,983)
Commercial mortgage and asset-backed90,552 (729)2,727 (18)93,279 (747)
U.S. Treasury securities and obligations guaranteed by the U.S. government
24,126 (232)  24,126 (232)
Total fixed maturity securities, available-for-sale$424,121 $(5,785)$2,946 $(26)$427,067 $(5,811)
December 31, 2020      
Fixed maturity securities:      
State and municipal$7,193 $(39)$ $ $7,193 $(39)
Residential mortgage-backed3,649 (40)  3,649 (40)
Corporate28,607 (421)  28,607 (421)
Commercial mortgage and asset-backed18,427 (447)38,802 (356)57,229 (803)
U.S. Treasury securities and obligations guaranteed by the U.S. government
2,291 (1)  2,291 (1)
Total fixed maturity securities, available-for-sale$60,167 $(948)$38,802 $(356)$98,969 $(1,304)
 
At June 30, 2021, the Company held fixed maturity securities of 135 issuers that were in an unrealized loss position with a total fair value of $427.1 million and gross unrealized losses of $5.8 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on, a scheduled principal or interest payment. At June 30, 2021, 99.5% of the Company’s fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or received an equivalent rating from another nationally recognized rating agency. Fixed maturity securities with ratings below investment grade by Standard & Poor’s or another nationally recognized rating agency at June 30, 2021 had an aggregate fair value of $10.1 million and an aggregate net unrealized gain of $113,000.
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2020. This update changed the impairment model for available-for-sale fixed maturities and requires the Company to determine whether unrealized losses on available-for-sale fixed maturities 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 continue to be recognized in other comprehensive income.
The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at June 30, 2021, December 31, 2020, or June 30, 2020. Management does not intend to sell the securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


In connection with the adoption of ASU 2016-13, the Company elected the fair value option in accounting for bank loan participations effective January 1, 2020. The targeted transition relief offered by ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief was applied to elect the fair value option to account for bank loan participations already held at the January 1, 2020 date of adoption. Under the fair value option, bank loan participations are measured at fair value, and changes in unrealized gains and losses in bank loan participations are reported in our income statement as net realized and unrealized gains (losses) on investments. At adoption on January 1, 2020, the Company applied the amendments on a modified retrospective basis, reducing the carrying value of its bank loan portfolio to fair value through an $8.4 million adjustment with a $7.8 million (net of tax) cumulative effect adjustment to reduce retained earnings.
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 ASU 2016-13, which would have otherwise been required. At June 30, 2021, the Company's bank loan portfolio had an aggregate fair value of $165.2 million and unpaid principal of $170.2 million. Investment income on bank loan participations included in net investment income was $2.5 million and $5.4 million for the three and six months ended June 30, 2021, respectively ($3.1 million and $7.3 million for the three and six months ended June 30, 2020, respectively). Net realized and unrealized gains (losses) on investments includes gains of $2.3 million and $6.3 million for the three and six months ended June 30, 2021, respectively, related to changes in unrealized gains and losses on bank loan participations (gains of $26.6 million and losses of $17.4 million in the three and six months ended June 30, 2020, respectively). For the three and six months ended June 30, 2021, management concluded that none of the unrealized losses were due to credit-related impairments. Management concluded that $2.8 million and $7.8 million of unrealized losses in the three and six months ended June 30, 2020, respectively, were due to credit-related impairments. Losses due to credit-related impairments are determined based upon consultations and advice from the Company's specialized investment manager and consideration of any adverse situations that could affect the borrower's ability to repay, the estimated value of underlying collateral, and other relevant factors.
Bank loan participations generally provide a higher yield than our portfolio of fixed maturities and have a credit rating that is below investment grade (i.e. below “BBB-” for Standard & Poor’s) at the date of purchase. These bank loans are primarily senior, secured floating-rate debt rated “BB”, “B”, or “CCC” by Standard & Poor’s or an equivalent rating from another nationally recognized rating agency. These bank loans include assignments of, and participations in, performing and non-performing senior corporate debt generally acquired through primary bank syndications and in secondary markets. Bank loans consist of, but are not limited to, term loans, the funded and unfunded portions of revolving credit loans, and other similar loans and investments. Management believed that it was probable at the time that these loans were acquired that the Company would be able to collect all contractually required payments receivable.
Interest income on bank loan participations is accrued on the unpaid principal balance, and discounts and premiums on bank loan participations are amortized to income using the interest method. Generally, the accrual of interest on a bank loan participation is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest. A bank loan participation may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Generally, bank loan participations are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Interest received on nonaccrual loans generally is reported as investment income. There were no bank loans on nonaccrual status at June 30, 2021 or December 31, 2020.
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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)


The Company’s net realized and unrealized gains and losses on investments are summarized as follows:
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2021202020212020
 (in thousands)
Fixed maturity securities:    
Gross realized gains$135 $305 $1,191 $521 
Gross realized losses(2) (23)(1)
 133 305 1,168 520 
Bank loan participations:    
Gross realized gains120 230 318 332 
Gross realized losses(523)(9,669)(783)(10,978)
Changes in fair values of bank loan participations2,340 26,570 6,250 (17,377)
 1,937 17,131 5,785 (28,023)
Equity securities:    
Gross realized gains82  111  
Gross realized losses(94)