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): | November 2, 2016 |
| 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.) |
| 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):
| ¨ | 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)) |
| Item 2.02 | Results of Operations and Financial Condition. |
On November 2, 2016, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing its financial results for the third quarter and the nine month period ended September 30, 2016. 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 November 2, 2016, the Company announced that its board of directors declared a quarterly cash dividend of $0.30 per common share of the Company to be paid on December 29, 2016 to shareholders of record on December 16, 2016. The Company also announced that its Board of Directors declared a special cash dividend of $1.35 per common share of the Company, also to be paid on December 29, 2016 to shareholders of record on December 16, 2016.
| 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 November 2, 2016 |
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: November 2, 2016 | By: | /s/ Gregg Davis |
| Name: | Gregg Davis | |
| Title: | Chief Financial Officer |
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release of the Company dated November 2, 2016 |
Exhibit 99.1
FOR IMMEDIATE RELEASE
JAMES RIVER GROUP HOLDINGS REPORTS 2016 THIRD QUARTER RESULTS:
EARNINGS PER SHARE OF $0.71 PER DILUTED SHARE
_____________________________________________
NET OPERATING EARNINGS PER SHARE OF $0.72 PER DILUTED SHARE
_____________________________________________
12.7% AND 12.6% GROWTH IN NET INCOME AND OPERATING EARNINGS
_____________________________________________
21.4% GROWTH IN E&S SEGMENT GROSS WRITTEN PREMIUMS
_____________________________________________
SUBSTANTIAL GROWTH IN SPECIALTY ADMITTED SEGMENT GROSS WRITTEN PREMIUMS
_____________________________________________
INCREASES QUARTERLY DIVIDEND TO $0.30 PER SHARE
_____________________________________________
DECLARES A $1.35 PER SHARE SPECIAL DIVIDEND
_____________________________________________
Pembroke, Bermuda, November 2, 2016—James River Group Holdings, Ltd. (NASDAQ:JRVR) today announced financial results for the third quarter and nine months ended September 30, 2016.
J. Adam Abram, Chairman and Chief Executive Officer of James River Group Holdings, Ltd. commented, “The combination of underwriting focus, expense discipline and new product development is continuing to produce strong returns for our Company. As a result, we delivered a 93.7% combined ratio for the quarter with a 3.1% increase in tangible equity per share. Our low volatility model continues to generate consistent returns.”
“Our profitable growth permitted our Board to increase our quarterly dividend to $0.30 per share and to supplement this quarter’s dividend with an additional special dividend of $1.35 per share to be paid in the fourth quarter.”
Significant factors for the third quarter of 2016 include:
| · | Each of the Company’s operating segments made an underwriting profit; |
| · | Fully diluted earnings per share of $0.71 compared to $0.64 in the prior year; |
| · | Diluted operating earnings per share of $0.72 compared to $0.65 in the prior year; |
| · | Net income of $21.4 million compared to $19.0 million in the prior year; |
| · | Net operating income of $21.6 million compared to $19.2 million in the prior year; |
| · | An expense ratio of 31.1% compared to 34.7% in the prior year; |
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 2
| · | A combined ratio of 93.7% compared to 89.0% in the prior year; |
| · | Favorable reserve development of $5.3 million compared to $9.6 million in the prior year (representing a 4.0 point and 7.8 point reduction of our loss and combined ratio, respectively); |
| · | Gross written premiums of $260.2 million, as follows: |
| Three Months Ended September 30, | |||||
| ($ in thousands) | 2016 | 2015 | Change | ||
| Excess and Surplus Lines | $ 99,882 | $ 82,249 | 21.4% | ||
| Specialty Admitted Insurance | 56,119 | 22,898 | 145.1% | ||
| Casualty Reinsurance | 104,165 | 43,089 | 141.7% | ||
| $ 260,166 | $ 148,236 | 75.5% | |||
| · | Net written premiums of $205.1 million, as follows: |
| Three Months Ended September 30, | |||||
| ($ in thousands) | 2016 | 2015 | Change | ||
| Excess and Surplus Lines | $ 86,193 | $ 68,731 | 25.4% | ||
| Specialty Admitted Insurance | 14,774 | 11,110 | 33.0% | ||
| Casualty Reinsurance | 104,174 | 43,087 | 141.8% | ||
| $ 205,141 | $ 122,928 | 66.9% | |||
| · | Our net premium retention decreased from 82.9% to 78.9% on a quarter-over-quarter basis as our fronting and program business continues to grow, the majority of which is ceded to third party reinsurers. Specifically, we ceded 73.7% of our Specialty Admitted Insurance segment’s business this quarter and 13.7% of our Excess and Surplus premiums. |
Significant factors for the nine-month period ended September 30, 2016 include:
| · | Each of the Company’s operating segments made an underwriting profit; |
| · | Fully diluted earnings per share of $1.64 compared to $1.40 in the prior year; |
| · | Diluted operating earnings per share of $1.61 compared to $1.48 in the prior year; |
| · | Net income of $48.8 million compared to $40.8 million in the prior year; |
| · | Net operating income of $48.1 million compared to $43.2 million in the prior year; |
| · | An expense ratio of 31.9% compared to 34.1% in the prior year; |
| · | A combined ratio of 95.2% compared to 94.6% in the prior year; |
| · | Favorable reserve development of $14.7 million compared to $14.6 million in the prior year (representing a 4.0 point and 4.2 point reduction of our loss and combined ratio, respectively); |
| · | Gross written premiums of $563.9 million, as follows: |
| Nine Months Ended September 30, | |||||||||
| ($ in thousands) | 2016 | % of Total | 2015 | % of Total | Change | ||||
| Excess and Surplus Lines | $ 279,417 | 49.6% | $ 235,384 | 50.8% | 18.7% | ||||
| Specialty Admitted Insurance | 119,007 | 21.1% | 61,755 | 13.3% | 92.7% | ||||
| Casualty Reinsurance | 165,484 | 29.3% | 166,366 | 35.9% | (0.5)% | ||||
| $ 563,908 | 100.0% | $ 463,505 | 100.0% | 21.7% | |||||
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
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| · | Net written premiums of $445.1 million, as follows: |
| Nine Months Ended September 30, | |||||||||
| ($ in thousands) | 2016 | % of Total | 2015 | % of Total | Change | ||||
| Excess and Surplus Lines | $ 239,618 | 53.8% | $ 191,951 | 49.2% | 24.8% | ||||
| Specialty Admitted Insurance | 39,499 | 8.9% | 31,751 | 8.1% | 24.4% | ||||
| Casualty Reinsurance | 165,983 | 37.3% | 166,699 | 42.7% | (0.4)% | ||||
| $ 445,100 | 100.0% | $ 390,401 | 100.0% | 14.0% | |||||
| · | Our net premium retention decreased from 84.2% to 78.9% on a year-over-year basis as our fronting and program business continues to grow, the majority of which is ceded to third party reinsurers. Specifically, we ceded 66.8% of our Specialty Admitted Insurance segment’s business this year and 14.2% of our Excess and Surplus premiums. |
The combined ratio for the quarter ended September 30, 2016 was 93.7% which compares to 89.0% in the prior year. For the nine months ended September 30, 2016, our combined ratio was 95.2% which compares to 94.6% in the prior year.
The loss ratio for the quarter ended September 30, 2016 was 62.6% which compares to 54.4% in the prior year. For the nine months ended September 30, 2016, the loss ratio was 63.3% compared to 60.5% in the prior year. The increase in the loss ratio for the quarter was due to less favorable reserve development as explained in the paragraph below, as well as higher accident year loss picks for newer business lines such as commercial auto, where we have a higher initial loss pick but also a lower expense ratio than our Excess and Surplus Lines Segment as a whole. The increase in the loss ratio for the year to date was also primarily due to the higher initial loss picks for newer business lines, which have the aforementioned lower expense ratio.
Results for the quarter ended September 30, 2016 include favorable prior year reserve development of $5.3 million, representing 4.0 combined ratio points, compared to favorable reserve development of $9.6 million in the third quarter of 2015, representing 7.8 combined ratio points. After-tax, favorable reserve development for the quarter was $4.6 million ($8.3 million in the prior year). Year-to-date, 2016 includes favorable prior year reserve development of $14.7 million ($13.0 million on an after-tax basis) representing 4.0 combined ratio points. For the nine months ended September 30, 2015, favorable reserve development was $14.6 million ($12.4 million on an after-tax basis) representing 4.2 combined ratio points. Of note are the percentage of net IBNR to total reserves, which grew from 68.0% at December 31, 2015 to 69.0% at September 30, 2016, and the accident year loss ratio, which increased from 64.7% for the nine months ended September 30, 2015 to 67.3% for the nine months ended September 30, 2016.
The pre-tax reserve development by segment was as follows:
| Three
Months Ended September 30, |
Nine
Months Ended September 30, |
||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||
| (in thousands) | |||||||||||
| Excess and Surplus Lines | $ 5,774 | $ 10,073 | $ (4,299) | $ 13,778 | $ 18,447 | $ (4,669) | |||||
| Specialty Admitted Insurance | 1,571 | 1,970 | (399) | 2,499 | 2,166 | 333 | |||||
| Casualty Reinsurance | (2,012) | (2,458) | 446 | (1,529) | (6,021) | 4,492 | |||||
| $ 5,333 | $ 9,585 | $ (4,252) | $ 14,748 | $ 14,592 | $ 156 | ||||||
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 4
The expense ratio for the quarter ended September 30, 2016 was 31.1% which compares to 34.7% in the prior year. For the nine months ended September 30, 2016, our expense ratio was 31.9% which compares to 34.1% in the prior year. The downward trend in our expense ratio is a result of scale, increasing fee income, and the lower expense ratio for some of our new business lines as mentioned above.
Tangible equity value increased 3.1% for the third quarter of 2016 from $508.8 million at June 30, 2016 to $524.9 million at September 30, 2016. The increase primarily reflects net income of $21.4 million offset by $1.7 million in other comprehensive loss and $5.9 million of dividends during the third quarter of 2016. Tangible equity per share was $18.03 at September 30, 2016.
On a year-to-date basis, tangible equity increased 14.2% from $459.7 million at December 31, 2015 to $524.9 million at September 30, 2016, resulting primarily from $48.8 million of net income and $26.7 million of other comprehensive income offset by $17.6 million of dividends.
Net investment income for the third quarter of 2016 was $15.8 million which compares to $9.5 million for the same period in 2015. On a year-to-date basis, net investment income for 2016 was $38.6 million which compares to $34.5 million for the same period in 2015. The details of the change in our net investment income are as follows:
| Three
Months Ended September 30, |
Nine
Months Ended September 30, |
||||||||||
| 2016 | 2015 | % Change |
2016 | 2015 | % Change | ||||||
| ($ in thousands) | |||||||||||
| Renewable Energy Investments | $ 2,745 | $ (659) | - | $ 1,976 | $ 3,956 | (50.1)% | |||||
| Other Private Investments | 2,034 | 32 | - | 4,491 | 1,628 | 175.9% | |||||
| All Other Net Investment Income | 11,018 | 10,137 | 8.7% | 32,155 | 28,912 | 11.2% | |||||
| Total Net Investment Income | $15,797 | $ 9,510 | 66.1% | $ 38,622 | $ 34,496 | 12.0% | |||||
Our annualized gross investment yield on average fixed maturity securities for the three and nine months ended September 30, 2016 was 3.4% for both periods and the average duration of our portfolio was 3.6 years at the quarter-end.
During the third quarter, we recognized $210,000 of pre-tax net realized gains ($17,000 of losses in the same period in 2015). Year-to-date, we have recognized $2.4 million in pre-tax net realized gains ($2.5 million of realized losses in the same period in 2015).
Generally, 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. Our tax rate for the three months ended September 30, 2016 and 2015 was 4.1% and 9.8%, respectively. For the nine months ended September 30, 2016 and 2015, our tax rate was 6.5% and 9.4%, respectively. The tax rate in the third quarter of 2016 was favorably impacted by higher than expected deductions on certain compensation expense items and the tax jurisdictions where we earned our profits.
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 5
Dividend
The Company announced that its Board of Directors had increased its cash dividend to $0.30 per common share. This dividend is payable on Thursday, December 29, 2016 to all shareholders of record on Friday, December 16, 2016.
Special Dividend
The Company also announced that its Board of Directors declared a cash dividend of $1.35 per common share. This dividend is payable on Thursday, December 29, 2016 to all shareholders of record on Friday, December 16, 2016.
Guidance
The Company has reaffirmed its guidance to achieve a 12.0% or better operating return on average tangible equity and a combined ratio of between 92% and 95% for 2016.
Conference Call
James River Group Holdings will hold a conference call to discuss this press release tomorrow, November 3, 2016, at 9:00 a.m. Eastern time. Investors may access the conference call by dialing (877) 930-8055 Conference ID# 93514437 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 at both the number above and the website until 11:00am (Eastern Standard Time) on December 3, 2016.
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 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: losses exceeding reserves or amounts of reinsurance purchased by the Company; loss of key members of our management or employees; adverse economic factors; a decline in our financial strength; loss of a group of brokers or agents that generate significant portions of our business; loss of a customer that generates a significant portion of our business; additional government or market regulation; a failure of any loss limitation or exclusions employed by the Company or from emerging claim and coverage issues; losses in our investment portfolio; potentially becoming subject to United States taxation and other risks described in the Company's filings with the Securities and Exchange Commission. 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.
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 6
Non-GAAP Financial Measures
In presenting James River Group Holdings’ 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, net operating income and tangible equity 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 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 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 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:
Robert Myron
President and Chief Operating Officer
441-278-4583
InvestorRelations@jrgh.net
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 7
James River Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(Unaudited)
|
|
September 30, 2016 |
December 31, 2015 |
|||||
| ($ in thousands, except for share amounts) | |||||||
| ASSETS | |||||||
| Invested assets: | |||||||
| Fixed maturity securities, available-for-sale | $ | 978,034 | $ | 899,660 | |||
| Fixed maturity securities, trading | 5,068 | 5,046 | |||||
| Equity securities, available-for-sale | 89,708 | 74,111 | |||||
| Bank loan participations, held-for-investment | 211,355 | 191,700 | |||||
| Short-term investments | 23,256 | 19,270 | |||||
| Other invested assets | 52,432 | 54,504 | |||||
| Total invested assets | 1,359,853 | 1,244,291 | |||||
| Cash and cash equivalents | 90,873 | 106,406 | |||||
| Accrued investment income | 7,438 | 8,068 | |||||
| Premiums receivable and agents’ balances | 280,462 | 176,685 | |||||
| Reinsurance recoverable on unpaid losses | 156,286 | 131,788 | |||||
| Reinsurance recoverable on paid losses | 6,561 | 11,298 | |||||
| Deferred policy acquisition costs | 74,929 | 60,754 | |||||
| Goodwill and intangible assets | 220,912 | 221,359 | |||||
| Other assets | 150,597 | 94,848 | |||||
| Total assets | $ | 2,347,911 | $ | 2,055,497 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Reserve for losses and loss adjustment expenses | $ | 874,662 | $ | 785,322 | |||
| Unearned premiums | 414,009 | 301,104 | |||||
| Senior debt | 88,300 | 88,300 | |||||
| Junior subordinated debt | 104,055 | 104,055 | |||||
| Accrued expenses | 35,508 | 29,476 | |||||
| Other liabilities | 85,612 | 66,202 | |||||
| Total liabilities | 1,602,146 | 1,374,459 | |||||
| Total shareholders’ equity | 745,765 | 681,038 | |||||
| Total liabilities and shareholders’ equity | $ | 2,347,911 | $ | 2,055,497 | |||
| Tangible equity | $ | 524,853 | $ | 459,679 | |||
| Total shareholders’ equity per common share Outstanding | $ | 25.61 | $ | 23.53 | |||
| Tangible equity per common share outstanding | $ | 18.03 | $ | 15.88 | |||
| Common shares outstanding at end-of-period | 29,116,496 | 28,941,547 | |||||
| Debt to total capitalization ratio | 20.5% | 22.0% | |||||
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 8
James River Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated Income Statement Data
(Unaudited)
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| ($ in thousands, except for share data) | ||||||||||||||||
| REVENUES | ||||||||||||||||
| Gross written premiums | $ | 260,166 | $ | 148,236 | $ | 563,908 | $ | 463,505 | ||||||||
| Net written premiums | $ | 205,141 | $ | 122,928 | $ | 445,100 | $ | 390,401 | ||||||||
| Net earned premiums | $ | 133,149 | $ | 122,705 | $ | 368,834 | $ | 345,776 | ||||||||
| Net investment income | 15,797 | 9,510 | 38,622 | 34,496 | ||||||||||||
| Net realized investment gains (losses) | 210 | (17 | ) | 2,376 | (2,473 | ) | ||||||||||
| Other income | 2,209 | 925 | 7,373 | 2,018 | ||||||||||||
| Total revenues | 151,365 | 133,123 | 417,205 | 379,817 | ||||||||||||
| EXPENSES | ||||||||||||||||
| Losses and loss adjustment expenses | 83,326 | 66,718 | 233,491 | 209,133 | ||||||||||||
| Other operating expenses | 43,579 | 43,387 | 124,732 | 119,764 | ||||||||||||
| Other expenses | (43 | ) | 69 | 36 | 207 | |||||||||||
| Interest expense | 2,079 | 1,769 | 6,294 | 5,217 | ||||||||||||
| Amortization of intangible assets | 149 | 149 | 447 | 447 | ||||||||||||
| Total expenses | 129,090 | 112,092 | 365,000 | 334,768 | ||||||||||||
| Income before taxes | 22,275 | 21,031 | 52,205 | 45,049 | ||||||||||||
| Income tax expense | (909 | ) | (2,070 | ) | (3,406 | ) | (4,222 | ) | ||||||||
| NET INCOME | $ | 21,366 | $ | 18,961 | $ | 48,799 | $ | 40,827 | ||||||||
| NET OPERATING INCOME | $ | 21,594 | $ | 19,177 | $ | 48,097 | $ | 43,230 | ||||||||
| EARNINGS PER SHARE | ||||||||||||||||
| Basic | $ | 0.73 | $ | 0.66 | $ | 1.68 | $ | 1.43 | ||||||||
| Diluted | $ | 0.71 | $ | 0.64 | $ | 1.64 | $ | 1.40 | ||||||||
| NET OPERATING INCOME PER SHARE | ||||||||||||||||
| Basic | $ | 0.74 | $ | 0.67 | $ | 1.66 | $ | 1.51 | ||||||||
| Diluted | $ | 0.72 | $ | 0.65 | $ | 1.61 | $ | 1.48 | ||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 29,101,550 | 28,735,087 | 29,030,284 | 28,608,398 | ||||||||||||
| Diluted | 29,935,152 | 29,418,251 | 29,834,686 | 29,244,520 | ||||||||||||
| Cash dividends declared per common share | $ | 0.20 | $ | 0.16 | $ | 0.60 | $ | 0.48 | ||||||||
| Ratios: | ||||||||||||||||
| Loss ratio | 62.6 | % | 54.4 | % | 63.3 | % | 60.5 | % | ||||||||
| Expense ratio | 31.1 | % | 34.7 | % | 31.9 | % | 34.1 | % | ||||||||
| Combined ratio | 93.7 | % | 89.0 | % | 95.2 | % | 94.6 | % | ||||||||
| Accident year loss ratio | 66.6 | % | 62.2 | % | 67.3 | % | 64.7 | % | ||||||||
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 9
James River Group Holdings, Ltd. and Subsidiaries
Segment Results
EXCESS AND SURPLUS LINES
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||||||||||
| 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 99,882 | $ | 82,249 | 21.4 | % | $ | 279,417 | $ | 235,384 | 18.7 | % | ||||||||||||
| Net written premiums | $ | 86,193 | $ | 68,731 | 25.4 | % | $ | 239,618 | $ | 191,951 | 24.8 | % | ||||||||||||
| Net earned premiums | $ | 81,672 | $ | 65,804 | 24.1 | % | $ | 217,742 | $ | 178,071 | 22.3 | % | ||||||||||||
| Losses and loss adjustment expenses | (50,733 | ) | (32,853 | ) | 54.4 | % | (137,457 | ) | (101,383 | ) | 35.6 | % | ||||||||||||
| Underwriting expenses | (18,531 | ) | (15,904 | ) | 16.5 | % | (48,890 | ) | (46,429 | ) | 5.3 | % | ||||||||||||
| Underwriting profit (a), (b) | $ | 12,408 | $ | 17,047 | (27.2 | )% | $ | 31,395 | $ | 30,259 | 3.8 | % | ||||||||||||
| Ratios: | ||||||||||||||||||||||||
| Loss ratio | 62.1 | % | 49.9 | % | 63.1 | % | 56.9 | % | ||||||||||||||||
| Expense ratio | 22.7 | % | 24.2 | % | 22.5 | % | 26.1 | % | ||||||||||||||||
| Combined ratio | 84.8 | % | 74.1 | % | 85.6 | % | 83.0 | % | ||||||||||||||||
| Accident year loss ratio | 69.2 | % | 65.2 | % | 69.5 | % | 67.3 | % | ||||||||||||||||
| (a) | See "Reconciliation of Non-GAAP Measures." |
| (b) | Underwriting results include fee income of $2.1 million and $(595,000) for the three months ended September 30, 2016 and 2015, respectively, and $7.2 million and $1.8 million for the respective nine month periods. These amounts are included in “Other income” in our Condensed Consolidated Income Statements. |
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JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 10
SPECIALTY ADMITTED INSURANCE
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||||||||||
| 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 56,119 | $ | 22,898 | 145.1 | % | $ | 119,007 | $ | 61,755 | 92.7 | % | ||||||||||||
| Net written premiums | $ | 14,774 | $ | 11,110 | 33.0 | % | $ | 39,499 | $ | 31,751 | 24.4 | % | ||||||||||||
| Net earned premiums | $ | 13,204 | $ | 10,743 | 22.9 | % | $ | 36,816 | $ | 30,448 | 20.9 | % | ||||||||||||
| Losses and loss adjustment expenses | (7,978 | ) | (6,448 | ) | 23.7 | % | (22,058 | ) | (18,377 | ) | 20.0 | % | ||||||||||||
| Underwriting expenses | (4,524 | ) | (3,833 | ) | 18.0 | % | (13,456 | ) | (11,565 | ) | 16.4 | % | ||||||||||||
| Underwriting profit (a), (b) | $ | 702 | $ | 462 | 51.9 | % | $ | 1,302 | $ | 506 | 157.3 | % | ||||||||||||
| Ratios: | ||||||||||||||||||||||||
| Loss ratio | 60.4 | % | 60.0 | % | 59.9 | % | 60.4 | % | ||||||||||||||||
| Expense ratio | 34.3 | % | 35.7 | % | 36.5 | % | 38.0 | % | ||||||||||||||||
| Combined ratio | 94.7 | % | 95.7 | % | 96.5 | % | 98.3 | % | ||||||||||||||||
| Accident year loss ratio | 72.3 | % | 78.4 | % | 66.7 | % | 67.5 | % | ||||||||||||||||
| (a) | See "Reconciliation of Non-GAAP Measures." |
| (b) | Underwriting results include fee income of $938,000 and $404,000 for the three months ended September 30, 2016 and 2015, respectively, and $2.5 million and $1.2 million for the respective nine month periods. These amounts are included in “Other operating expenses” in our Condensed Consolidated Income Statements. |
CASUALTY REINSURANCE
| Three
Months Ended September 30, | Nine
Months Ended September 30, | |||||||||||||||||||||||
| 2016 | 2015 | % Change | 2016 | 2015 | % Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 104,165 | $ | 43,089 | 141.7 | % | $ | 165,484 | $ | 166,366 | (0.5 | )% | ||||||||||||
| Net written premiums | $ | 104,174 | $ | 43,087 | 141.8 | % | $ | 165,983 | $ | 166,699 | (0.4 | )% | ||||||||||||
| Net earned premiums | $ | 38,273 | $ | 46,158 | (17.1 | )% | $ | 114,276 | $ | 137,257 | (16.7 | )% | ||||||||||||
| Losses and loss adjustment expenses | (24,615 | ) | (27,417 | ) | (10.2 | )% | (73,976 | ) | (89,373 | ) | (17.2 | )% | ||||||||||||
| Underwriting expenses | (13,525 | ) | (18,465 | ) | (26.8 | )% | (39,627 | ) | (46,973 | ) | (15.6 | )% | ||||||||||||
| Underwriting profit (a) | $ | 133 | $ | 276 | (51.8 | )% | $ | 673 | $ | 911 | (26.1 | )% | ||||||||||||
| Ratios: | ||||||||||||||||||||||||
| Loss ratio | 64.3 | % | 59.4 | % | 64.7 | % | 65.1 | % | ||||||||||||||||
| Expense ratio | 35.3 | % | 40.0 | % | 34.7 | % | 34.2 | % | ||||||||||||||||
| Combined ratio | 99.7 | % | 99.4 | % | 99.4 | % | 99.3 | % | ||||||||||||||||
| Accident year loss ratio | 59.1 | % | 54.1 | % | 63.4 | % | 60.7 | % | ||||||||||||||||
(a) See "Reconciliation of Non-GAAP Measures."
| - MORE - |
JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 11
RECONCILIATION OF NON-GAAP MEASURES
Underwriting Profit
The following table reconciles the underwriting profit by individual operating segment and of the whole 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 the 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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Underwriting profit of the operating segments: | ||||||||||||||||
| Excess and Surplus Lines | $ | 12,408 | $ | 17,047 | $ | 31,395 | $ | 30,259 | ||||||||
| Specialty Admitted Insurance | 702 | 462 | 1,302 | 506 | ||||||||||||
| Casualty Reinsurance | 133 | 276 | 673 | 911 | ||||||||||||
| Total underwriting profit of operating segments | 13,243 | 17,785 | 33,370 | 31,676 | ||||||||||||
| Other operating expenses of the Corporate and Other segment | (4,870 | ) | (4,324 | ) | (15,597 | ) | (12,958 | ) | ||||||||
| Underwriting profit (a) | 8,373 | 13,461 | 17,773 | 18,718 | ||||||||||||
| Net investment income | 15,797 | 9,510 | 38,622 | 34,496 | ||||||||||||
| Net realized investment gains (losses) | 210 | (17 | ) | 2,376 | (2,473 | ) | ||||||||||
| Other income and expenses | 123 | (5 | ) | 175 | (28 | ) | ||||||||||
| Interest expense | (2,079 | ) | (1,769 | ) | (6,294 | ) | (5,217 | ) | ||||||||
| Amortization of intangible assets | (149 | ) | (149 | ) | (447 | ) | (447 | ) | ||||||||
| Consolidated income before taxes | $ | 22,275 | $ | 21,031 | $ | 52,205 | $ | 45,049 | ||||||||
| (a) | Included in underwriting results for the three months ended September 30, 2016 and 2015 is fee income of $3.1 million and $(191,000) respectively, and $9.7 million and $3.1 million for the respective nine month periods. |
Net Operating Income
We define net operating income as net income excluding net realized investment gains and losses, expenses related to due diligence for various merger and acquisition activities, costs associated with our initial public offering, severance costs associated with terminated employees, impairment charges on goodwill and intangible assets and gains on extinguishment of debt. We use net operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Net operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and our definition of net operating income may not be comparable to that of other companies.
Our income before taxes and net income for the three and nine months ended September 30, 2016 and 2015, respectively, reconciles to our net operating income as follows:
| - MORE - |
JRVR Announces Third Quarter and Year-to-Date 2016 Results
Page 12
| Three Months Ended September 30, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Income Before Taxes | Net Income | Income Before Taxes | Net Income | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Income as reported | $ | 22,275 | $ | 21,366 | $ | 21,031 | $ | 18,961 | ||||||||
| Net realized investment (gains) losses | (210 | ) | 56 | 17 | 63 | |||||||||||
| Other expenses | (43 | ) | (28 | ) | 69 | 45 | ||||||||||
| Interest expense on leased building the Company is deemed to own for accounting purposes | 308 | 200 | 166 | 108 | ||||||||||||
| Net operating income | $ | 22,330 | $ | 21,594 | $ | 21,283 | $ | 19,177 | ||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Income Before Taxes | Net Income | Income Before Taxes | Net Income | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Income as reported | $ | 52,205 | $ | 48,799 | $ | 45,049 | $ | 40,827 | ||||||||
| Net realized investment (gains) losses | (2,376 | ) | (1,508 | ) | 2,473 | 1,946 | ||||||||||
| Other expenses | 36 | 91 | 207 | 135 | ||||||||||||
| Interest expense on leased building the Company is deemed to own for accounting purposes | 1,100 | 715 | 496 | 322 | ||||||||||||
| Net operating income | $ | 50,965 | $ | 48,097 | $ | 48,225 | $ | 43,230 | ||||||||
Tangible Equity and 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 September 30, 2016, June 30, 2016 and December 31, 2015.
| September 30, 2016 | June 30, 2016 | December 31, 2015 | ||||||||||||||||||||||
| ($ in thousands, except for share data) | Equity | Equity per share | Equity | Equity per share | Equity | Equity per share | ||||||||||||||||||
| Shareholders' equity | $ | 745,765 | $ | 25.61 | $ | 729,898 | $ | 25.09 | $ | 681,038 | $ | 23.53 | ||||||||||||
| Goodwill and intangible assets | 220,912 | 7.58 | 221,061 | 7.60 | 221,359 | 7.65 | ||||||||||||||||||
| Tangible equity | $ | 524,853 | $ | 18.03 | $ | 508,837 | $ | 17.49 | $ | 459,679 | $ | 15.88 | ||||||||||||
- END -
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