UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported):
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(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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(Address of principal executive offices)
(Zip Code)
(
441
)
278-4580
(Registrant
'
s telephone number, including area code)
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(Former name or former address, if changed since last report.)
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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):
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Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)
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Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))
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Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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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.
☐
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Item 2.02
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Results of Operations and Financial Condition.
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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.
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Item 5.07
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Submission of Matters to a Vote of Security Holders.
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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:
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Director
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For
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Withhold
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Broker Non-Votes
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J. Adam Abram
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17,063,042
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10,631,974
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1,077,784
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Robert P. Myron
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16,992,031
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10,702,985
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1,077,784
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Michael T. Oakes
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12,647,159
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15,047,857
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1,077,784
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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:
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For
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Against
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Abstain
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Broker Non-Votes
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28,398,964
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321,669
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52,167
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—
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Proposal 3
- The approval, on a non-binding, advisory basis of the 2019 compensation of the Company's named executive officers:
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For
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Against
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Abstain
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Broker Non-Votes
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26,404,772
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1,287,318
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2,926
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1,077,784
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Item 8.01
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Other Events.
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(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.
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Item 9.01
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Financial Statements and Exhibits.
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(d) Exhibits
The following Exhibit is furnished as a part of this Form 8-K:
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Exhibit No.
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Description
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99.1
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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 99.1
JAMES RIVER ANNOUNCES FIRST QUARTER
2020 RESULTS
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▪
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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
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▪
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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.
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▪
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37% growth in Core (Excluding Commercial Auto) Excess and Surplus Lines ("E&S") Gross Written Premium versus the prior year quarter
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▪
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Year-to-date 2020 annualized Adjusted Net Operating Return on Average Tangible Equity of 11.6%
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▪
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Net Investment Income of $20.8 million, an increase of 7%, or $1.4 million, over the prior year quarter
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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 ($0.71 per diluted share) for the same period in 2019.
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Earnings Per Diluted Share
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Three Months Ended
March 31, |
||||||
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2020
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2019
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||||||
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Net (Loss) Income
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$
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(1.21
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)
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$
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0.75
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Adjusted Net Operating Income
1
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$
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0.50
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$
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0.71
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1 See "Reconciliation of Non-GAAP Measures" below.
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-MORE-
Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda
Mailing address
l
P.O. Box 1502, Hamilton HM FX, Bermuda
Tel 441.278.4580
l
Fax 441.278.4588
JRVR Announces 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
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•
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Gross written premium of $283.8 million, consisting of the following:
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Three Months Ended
March 31, |
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($ in thousands)
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2020
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2019
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% Change
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Excess and Surplus Lines
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$
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136,197
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$
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186,549
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(27
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)%
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Specialty Admitted Insurance
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102,802
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102,953
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0
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%
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Casualty Reinsurance
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44,842
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37,832
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19
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%
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$
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283,841
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$
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327,334
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(13
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)%
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•
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Net written premium of $134.7 million, consisting of the following:
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Three Months Ended
March 31, |
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($ in thousands)
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2020
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2019
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% Change
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Excess and Surplus Lines
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$
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92,206
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$
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154,861
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(40
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)%
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Specialty Admitted Insurance
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13,356
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15,021
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(11
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)%
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Casualty Reinsurance
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29,092
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37,859
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(23
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)%
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$
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134,654
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$
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207,741
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(35
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)%
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•
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Net earned premium of $145.9 million, consisting of the following:
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Three Months Ended
March 31, |
||||||||||
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($ in thousands)
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2020
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2019
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% Change
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Excess and Surplus Lines
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$
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99,739
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$
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141,672
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(30
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)%
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Specialty Admitted Insurance
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13,283
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12,360
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7
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%
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Casualty Reinsurance
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32,896
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36,120
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(9
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)%
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$
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145,918
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$
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190,152
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(23
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)%
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-MORE-
JRVR Announces First Quarter Results
Page
3
April 29, 2020
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•
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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;
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•
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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;
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•
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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;
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•
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There was overall unfavorable reserve development of $0.9 million compared to unfavorable reserve development of $1.0 million in the prior year quarter (representing a 0.6 and 0.5 percentage point increase to the Company’s loss ratio in the periods, respectively);
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•
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Pre-tax (unfavorable) favorable reserve development by segment was as follows:
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Three Months Ended
March 31, |
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($ in thousands)
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2020
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2019
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|||||
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Excess and Surplus Lines
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$
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3
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$
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10
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Specialty Admitted Insurance
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1,011
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2,004
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|||
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Casualty Reinsurance
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(1,888
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)
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(2,982
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)
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|||
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$
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(874
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)
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$
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(968
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)
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||
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•
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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 $0.3 million;
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•
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Group combined ratio of 100.6% versus 96.2% in the prior year quarter;
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•
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Group expense ratio of 34.2% increased from 22.6% in the prior year quarter, principally due to the mix shift away from commercial auto business, which carried a lower expense ratio and higher loss ratio than other lines of business;
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•
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Underwriting results for the Specialty Admitted Insurance segment in the three months ended March 31, 2020 were negatively impacted by higher reported losses on involuntary assigned risk pools for workers' compensation and an accrual for ceded minimum premium on one fronting arrangement, resulting in an additional 7.0 combined ratio points;
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•
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Gross fee income by segment was as follows:
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Three Months Ended
March 31, |
||||||||||
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($ in thousands)
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2020
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2019
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% Change
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|||||||
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Excess and Surplus Lines
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$
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1,275
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$
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2,673
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(52
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)%
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||
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Specialty Admitted Insurance
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4,211
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3,772
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12
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%
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||||
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$
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5,486
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$
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6,445
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(15
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)%
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|||
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•
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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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-MORE-
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;
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•
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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.
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Investment Results
Net investment income for the first quarter of 2020 was $20.8 million, which compares to $19.4 million for the same period in 2019. The increase was due to a larger fixed maturity portfolio and income relating to restricted cash equivalents withdrawn in October 2019 from a collateral trust established in favor of the Company by a captive insurance company affiliate of a former insured. The funds withdrawn from the collateral trust were invested in short term securities and are included in restricted cash equivalents on the Company's consolidated balance sheet. As these assets were classified as cash equivalents, they were not included in the calculations of annualized gross investment yield on average fixed maturity, bank loan and equity securities and average duration of the fixed maturity and bank loan portfolio.
The Company’s net investment income consisted of the following:
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Three Months Ended
March 31, |
||||||||||
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($ in thousands)
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2020
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2019
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% Change
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|||||||
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Renewable Energy Investments
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$
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834
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$
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921
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(9
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)%
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||
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Other Private Investments
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(317
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)
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2,483
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-
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||||
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All Other Net Investment Income
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20,319
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16,027
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27
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%
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||||
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Total Net Investment Income
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$
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20,836
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$
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19,431
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7
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%
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||
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:
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Three Months Ended
|
|||||||||||
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($ in thousands)
|
March 31, 2020
|
December 31, 2019
|
March 31, 2019
|
||||||||
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Change in the Fair Value of Bank Loan Participations
|
$
|
(43,947
|
)
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$
|
—
|
|
$
|
—
|
|
||
|
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
|
)
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21,706
|
|
|||||
|
Total Change in Fair Value
|
$(62,572)
|
$(6,541)
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$
|
25,255
|
|
||||||
-MORE-
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
-MORE-
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
-MORE-
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”.
|
|||||||
-MORE-
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 $43.9 million for the change in net unrealized losses on bank loan participations in the three months ended March 31, 2020 following the Company's election of the fair value option for bank loans effective January 1, 2020.
|
|||||||
|
(b) See "Reconciliation of Non-GAAP Measures".
|
|||||||
|
(c) Common share equivalents of 309,443 were dilutive for the calculation of diluted adjusted net operating income per share for the three months ended March 31, 2020.
|
|||||||
|
(d) Calculated with a numerator comprising other operating expenses less gross fee income included in “Other income” in our Condensed Consolidated Income Statements and a denominator of net earned premiums.
|
|||||||
-MORE-
JRVR Announces First Quarter Results
Page
10
April 29, 2020
James River Group Holdings, Ltd. and Subsidiaries
Segment Results
EXCESS AND SURPLUS LINES
|
Three Months Ended
March 31, |
||||||||||
|
2020
|
2019
|
% Change
|
||||||||
|
($ 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 $2.7 million for the three months ended March 31, 2020 and 2019, respectively. These amounts are included in “Other income” in our Condensed Consolidated Income Statements.
|
||||||||||
-MORE-
JRVR Announces First Quarter Results
Page
11
April 29, 2020
SPECIALTY ADMITTED INSURANCE
|
Three Months Ended
March 31, |
||||||||||
|
2020
|
2019
|
% Change
|
||||||||
|
($ 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".
|
||||||||||
-MORE-
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.
-MORE-
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-