UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.02 | Results of Operations and Financial Condition. |
On October 28, 2020, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”).
The information in this Item 2.02 and in Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act unless specifically stated by the Company.
| Item 7.01 | Regulation FD Disclosure. |
On October 28, 2020, the Company announced the retirement of its Chief Executive Officer, J. Adam Abram, and the appointment of Frank D’Orazio as Chief Executive Officer, effective as of November 2, 2020. Mr. Abram’s retirement will be effective November 1, 2020, but he will continue to serve on the Company’s board of directors (the “Board”) as non-executive chairman. In addition, the Company announced that Mr. D’Orazio has been named to the Board, and Robert P. Myron has elected to step down from the Board effective November 2, 2020 in order to reduce the number of inside directors on the Board. Mr. Myron will remain with the Company in his current role as President and Chief Operating Officer. A copy of the press release announcing these management changes is furnished as Exhibit 99.2 to this Form 8-K. Mr. Abram will discuss Mr. D’Orazio’s appointment and Mr. Abram’s retirement on the Company’s earnings call to be held at 8:00 A.M. Eastern Time on October 29, 2020. Dial-in instructions for the call are included in Exhibit 99.2.
| Item 8.01 | Other Events. |
On October 28, 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 December 31, 2020 to shareholders of record on December 14, 2020.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
The following Exhibit is furnished as a part of this Form 8-K:
| Exhibit No. | Description |
| 99.1 | Press Release of the Company dated October 28, 2020 |
| 99.2 | Press Release of the Company dated October 28, 2020 |
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: October 28, 2020 | By: | /s/ Sarah C. Doran | |
| Sarah C. Doran | |||
| Chief Financial Officer | |||
Exhibit 99.1
JAMES RIVER ANNOUNCES THIRD QUARTER 2020 RESULTS
| ▪ | Third Quarter 2020 Net Income of $26.3 million -- $0.85 per diluted share and Adjusted Net Operating Income of $17.4 million -- $0.56 per diluted share |
| ▪ | 28% growth in Core E&S Gross Written Premium and 12.8% increase in Excess and Surplus Lines ("E&S") renewal pricing, each versus the prior year quarter |
| ▪ | A combined ratio of 94.2% for the Group and 85.2% in the E&S segment |
| ▪ | An expense ratio of 24.8% for the quarter and 29.2% nine months year to date, significantly improved from 34.2% for the first quarter of this year |
| ▪ | Tangible Book Value per Share of $19.70, an increase of 7.1% from December 31, 2019 |
| ▪ | Year-to-date 2020 annualized Adjusted Net Operating Income Return on Average Tangible Equity of 11.9% |
Pembroke, Bermuda, October 28, 2020 - James River Group Holdings, Ltd. ("James River" or the "Company") (NASDAQ: JRVR) today reported third quarter 2020 net income of $26.3 million ($0.85 per diluted share), compared to net loss of $25.2 million ($0.83 per diluted share) for the third quarter of 2019. Adjusted net operating income for the third quarter of 2020 was $17.4 million ($0.56 per diluted share), compared to adjusted net operating loss of $22.2 million ($0.73 per diluted share) for the same period in 2019.
| Earnings Per Diluted Share | Three Months Ended September 30, | |||||||
| 2020 | 2019 | |||||||
Net Income (Loss) | $ | 0.85 | $ | (0.83 | ) | |||
| Adjusted Net Operating Income (Loss) 1 | $ | 0.56 | $ | (0.73 | ) | |||
1 See "Reconciliation of Non-GAAP Measures" below. | ||||||||
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Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda Mailing address l P.O. Box 1502, Hamilton HM FX, Bermuda Tel 441.278.4580 l Fax 441.278.4588
JRVR Announces Third Quarter Results
Page 2
October 28, 2020
J. Adam Abram, the Company’s Chairman and Chief Executive Officer, commented, “Our Company delivered another very strong quarter. Market conditions are extremely attractive across our businesses. Core E&S gross written premiums increased 28% this quarter compared to the same period a year ago. New business submissions in our E&S segment increased by 9% and renewal applications increased by 27%. This is an indication that risks are remaining in the non-admitted market longer than in prior years. We benefited from a 12.8% increase in rate in E&S. This was the 15th sequential quarter in which E&S rates have increased. E&S policies in force have grown by 26% since the third quarter of 2019.”
Our efforts to grow our fronting business continue to bear fruit, as evidenced by our 14% increase in fronted premium and 17% increase in fee income in our Specialty Admitted Insurance segment as compared to the third quarter of last year."
Third Quarter 2020 Operating Results
| • | Gross written premium of $311.9 million, consisting of the following: |
| Three Months Ended September 30, | ||||||||||||
| ($ in thousands) | 2020 | 2019 | % Change | |||||||||
| Excess and Surplus Lines | $ | 179,458 | $ | 241,045 | (26 | )% | ||||||
| Specialty Admitted Insurance | 112,589 | 100,459 | 12 | % | ||||||||
| Casualty Reinsurance | 19,805 | 46,724 | (58 | )% | ||||||||
| $ | 311,852 | $ | 388,228 | (20 | )% | |||||||
| • | Net written premium of $145.2 million, consisting of the following: |
| Three Months Ended September 30, | ||||||||||||
| ($ in thousands) | 2020 | 2019 | % Change | |||||||||
| Excess and Surplus Lines | $ | 109,170 | $ | 171,715 | (36 | )% | ||||||
| Specialty Admitted Insurance | 16,184 | 14,570 | 11 | % | ||||||||
| Casualty Reinsurance | 19,805 | 37,584 | (47 | )% | ||||||||
| $ | 145,159 | $ | 223,869 | (35 | )% | |||||||
| • | Net earned premium of $153.0 million, consisting of the following: |
| Three Months Ended September 30, | ||||||||||||
| ($ in thousands) | 2020 | 2019 | % Change | |||||||||
| Excess and Surplus Lines | $ | 104,933 | $ | 164,759 | (36 | )% | ||||||
| Specialty Admitted Insurance | 14,985 | 14,242 | 5 | % | ||||||||
| Casualty Reinsurance | 33,044 | 34,373 | (4 | )% | ||||||||
| $ | 152,962 | $ | 213,374 | (28 | )% | |||||||
| • | Core E&S gross written premium increased 28% (eight out of twelve core underwriting divisions grew). Due to continued stronger relative growth in our Excess Casualty underwriting division, where we cede a larger portion of risk as compared to other lines, retention in this segment declined and net written premium increased at a lower rate. Commercial auto gross written premium decreased from $108.4 million in the third quarter of 2019 to $9.7 million in the third quarter of 2020 due to the cancellation, effective December 31, 2019, of all policies issued to one large commercial auto insured; |
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JRVR Announces Third Quarter Results
Page 3
October 28, 2020
| • | Gross written premium for the Specialty Admitted Insurance segment increased from the prior year quarter due to a 14% increase in premiums written in our fronting business. The increase in premiums written is primarily attributable to growth in several recently begun fronting relationships. Through three quarters of 2020, the segment has added eight new fronting relationships; |
| • | Gross and net written premium in the Casualty Reinsurance segment decreased from the prior year quarter due to the non renewal of one large treaty and a change of the renewal dates of several treaties; |
| • | There was overall unfavorable reserve development of $4.2 million compared to unfavorable reserve development of $57.0 million in the prior year quarter (representing a 2.8 and 26.7 percentage point increase to the Company’s loss ratio in the periods, respectively); |
| • | Pre-tax (unfavorable) favorable reserve development by segment was as follows: |
| Three Months Ended September 30, | ||||||||
| ($ in thousands) | 2020 | 2019 | ||||||
| Excess and Surplus Lines | $ | (27 | ) | $ | (50,030 | ) | ||
| Specialty Admitted Insurance | 2,000 | 1,000 | ||||||
| Casualty Reinsurance | (6,207 | ) | (7,941 | ) | ||||
| $ | (4,234 | ) | $ | (56,971 | ) | |||
| • | The Specialty Admitted Insurance segment experienced $2.0 million of favorable development in its individual risk workers' compensation business. The Casualty Reinsurance segment experienced $6.2 million of unfavorable development, the effect of which was offset partially by a $2.9 million reduction to sliding scale commissions; |
| • | Group combined ratio of 94.2% versus 118.8% in the prior year quarter; |
| • | Group expense ratio of 24.8% increased from 18.5% in the prior year quarter, principally due to the mix shift away from commercial auto business, which carries a lower expense ratio and higher loss ratio than other lines of business. However, the expense ratio declined 3.8 percentage points from 28.6% in the second quarter of 2020 and 9.4 percentage points from 34.2% in the first quarter of 2020 due to recent expense reduction initiatives, growth in lines of business with lower net commissions and a reduction in sliding scale commissions in the Casualty Reinsurance segment that was $1.4 million greater than that of the prior year quarter; |
| • | Gross fee income by segment was as follows: |
| Three Months Ended September 30, | ||||||||||||
| ($ in thousands) | 2020 | 2019 | % Change | |||||||||
| Excess and Surplus Lines | $ | — | $ | 2,169 | (100 | )% | ||||||
| Specialty Admitted Insurance | 4,631 | 3,958 | 17 | % | ||||||||
| $ | 4,631 | $ | 6,127 | (24 | )% | |||||||
| • | 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 commercial auto insured. Fee income in the Specialty Admitted Insurance segment increased due to the continued growth of fronting relationships; |
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JRVR Announces Third Quarter Results
Page 4
October 28, 2020
| • | Net investment income was $15.0 million, a decrease of 16% from the prior year quarter. Further details can be found in the "Investment Results" section below. |
Investment Results
Net investment income for the third quarter of 2020 was $15.0 million, which compares to $17.9 million for the same period in 2019. The decrease was principally due to lower investment income from our bank loan portfolio resulting from a smaller portfolio and lower investment yields.
The Company’s net investment income consisted of the following:
| Three Months Ended September 30, | ||||||||||||
| ($ in thousands) | 2020 | 2019 | % Change | |||||||||
| Renewable Energy Investments | $ | (526 | ) | $ | 1,602 | - | ||||||
| Other Private Investments | 1,059 | (217 | ) | - | ||||||||
| All Other Net Investment Income | 14,426 | 16,493 | (13 | )% | ||||||||
| Total Net Investment Income | $ | 14,959 | $ | 17,878 | (16 | )% | ||||||
The Company’s annualized gross investment yield on average fixed maturity, bank loan and equity securities for the three months ended September 30, 2020 was 3.2% (versus 3.9% for the three months ended September 30, 2019). The yield decreased primarily as a result of the sale of floating rate bank loan investments during the second quarter of 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 tax rate for the three months ended September 30, 2020 was 14.5%. The tax rate for the nine months ended September 30, 2020 and September 30, 2019 was 14.4% and 22.4%, respectively.
Tangible Equity
Tangible equity before dividends increased 12.7% from $559.8 million at December 31, 2019 to $630.9 million at September 30, 2020, due to $47.4 million of after tax unrealized gains in the Company's fixed income investment portfolio and net income of $25.1 million.
September 30, 2020 tangible equity of $603.1 million after dividends increased 7.7% from $559.8 million at December 31, 2019. Tangible equity per common share was $19.70 at September 30, 2020, net of $0.90 of dividends per share the Company paid during the first nine months of 2020. The year-to-date annualized adjusted net operating income return on average tangible equity was 11.9%, which compares to 4.9% for the same period in 2019. Adjusted net operating income return on average tangible equity is calculated as annualized adjusted net operating income divided by average tangible equity. Reconciliations of these non-GAAP measures to the most comparable GAAP figures are included at the end of this press release.
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JRVR Announces Third Quarter Results
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October 28, 2020
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 Thursday, December 31, 2020 to all shareholders of record on Monday, December 14, 2020.
Conference Call
James River Group Holdings, Ltd. will hold a conference call to discuss its third quarter results tomorrow, October 29, 2020, at 8:00 a.m. Eastern Time. Investors may access the conference call by dialing (877) 930-8055, Conference ID# 1166528, 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 register and download any necessary audio software. A replay of the call will be available until 10:00 a.m. (Eastern Time) on November 28, 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 taxes on our shareholders; in the event we do not qualify for the insurance company exception to the passive foreign investment company (“PFIC”) rules and are therefore considered a PFIC, there could be material adverse tax consequences to an investor that is subject to U.S. federal income taxation; the Company or any of its foreign subsidiaries becoming subject to U.S. federal income taxation; a failure of any of the loss limitations or exclusions we utilize to shield us from unanticipated financial losses or legal exposures, or other liabilities; losses from catastrophic events, such as natural disasters and terrorist acts, which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events; the effects of the COVID-19 pandemic and associated government actions on our operations and financial performance; potential effects on our business of emerging claim and coverage issues; exposure to credit risk, interest rate risk and other market risk in our investment portfolio; 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. 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, and our Quarterly Report on Form 10-Q filed with the SEC on July 31, 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.
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JRVR Announces Third Quarter Results
Page 6
October 28, 2020
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 income 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
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JRVR Announces Third Quarter Results
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October 28, 2020
For more information contact:
Kevin Copeland
SVP Finance & Chief Investment Officer Investor Relations
441-278-4573
InvestorRelations@jrgh.net
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JRVR Announces Third Quarter Results
Page 8
October 28, 2020
James River Group
Holdings, Ltd. and Subsidiaries
Condensed Consolidated Balance Sheet Data
(Unaudited)
September 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| ASSETS | ($ in thousands, except for share data) | |||||||
| Invested assets: | ||||||||
| Fixed maturity securities, available-for-sale | $ | 1,813,471 | $ | 1,433,626 | ||||
| Equity securities, at fair value | 79,896 | 80,735 | ||||||
| Bank loan participations, at fair value in 2020 and at amortized cost, net of allowance in 2019 | 131,198 | 260,864 | ||||||
| Short-term investments | 71,986 | 156,925 | ||||||
| Other invested assets | 45,621 | 61,210 | ||||||
| Total invested assets | 2,142,172 | 1,993,360 | ||||||
| Cash and cash equivalents | 139,969 | 206,912 | ||||||
| Restricted cash equivalents | 940,221 | 1,199,164 | ||||||
| Accrued investment income | 11,730 | 13,597 | ||||||
| Premiums receivable and agents’ balances, net | 331,008 | 369,462 | ||||||
| Reinsurance recoverable on unpaid losses, net | 769,815 | 668,045 | ||||||
| Reinsurance recoverable on paid losses | 36,591 | 33,221 | ||||||
| Deferred policy acquisition costs | 53,967 | 62,006 | ||||||
| Goodwill and intangible assets | 218,324 | 218,771 | ||||||
| Other assets | 340,556 | 259,867 | ||||||
| Total assets | $ | 4,984,353 | $ | 5,024,405 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Reserve for losses and loss adjustment expenses | $ | 2,106,749 | $ | 2,045,506 | ||||
| Unearned premiums | 581,098 | 524,377 | ||||||
| Funds held | 940,221 | 1,199,164 | ||||||
| Senior debt | 217,300 | 158,300 | ||||||
| Junior subordinated debt | 104,055 | 104,055 | ||||||
| Accrued expenses | 54,907 | 58,416 | ||||||
| Other liabilities | 158,617 | 156,006 | ||||||
| Total liabilities | 4,162,947 | 4,245,824 | ||||||
| Total shareholders’ equity | 821,406 | 778,581 | ||||||
| Total liabilities and shareholders’ equity | $ | 4,984,353 | $ | 5,024,405 | ||||
| Tangible equity (a) | $ | 603,082 | $ | 559,810 | ||||
| Tangible equity per common share outstanding (a) | $ | 19.70 | $ | 18.40 | ||||
| Total shareholders’ equity per common share | ||||||||
| outstanding | $ | 26.83 | $ | 25.59 | ||||
| Common shares outstanding | 30,610,153 | 30,424,391 | ||||||
| (a) | See “Reconciliation of Non-GAAP Measures”. |
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JRVR Announces Third Quarter Results
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October 28, 2020
James River
Group Holdings, Ltd. and Subsidiaries
Condensed Consolidated Income (Loss) Statement Data
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
($ in thousands, except for share data) | ||||||||||||||||
| REVENUES | ||||||||||||||||
| Gross written premiums | $ | 311,852 | $ | 388,228 | $ | 897,332 | $ | 1,095,565 | ||||||||
| Net written premiums | 145,159 | 223,869 | 445,570 | 671,520 | ||||||||||||
| Net earned premiums | 152,962 | 213,374 | 447,695 | 602,640 | ||||||||||||
| Net investment income | 14,959 | 17,878 | 51,145 | 54,844 | ||||||||||||
| Net realized and unrealized gains (losses) on investments (a) | 8,929 | (2,357 | ) | (27,885 | ) | 331 | ||||||||||
| Other income | 615 | 2,579 | 3,543 | 8,160 | ||||||||||||
| Total revenues | 177,465 | 231,474 | 474,498 | 665,975 | ||||||||||||
| EXPENSES | ||||||||||||||||
| Losses and loss adjustment expenses | 106,155 | 214,084 | 301,757 | 501,064 | ||||||||||||
| Other operating expenses | 38,224 | 41,692 | 133,242 | 132,287 | ||||||||||||
| Other expenses | 60 | 372 | 1,792 | 1,055 | ||||||||||||
| Interest expense | 2,129 | 2,594 | 7,970 | 8,086 | ||||||||||||
| Amortization of intangible assets | 149 | 149 | 447 | 447 | ||||||||||||
| Total expenses | 146,717 | 258,891 | 445,208 | 642,939 | ||||||||||||
| Income (loss) before taxes | 30,748 | (27,417 | ) | 29,290 | 23,036 | |||||||||||
| Income tax expense (benefit) | 4,465 | (2,250 | ) | 4,208 | 5,168 | |||||||||||
| NET INCOME (LOSS) | $ | 26,283 | $ | (25,167 | ) | $ | 25,082 | $ | 17,868 | |||||||
| ADJUSTED NET OPERATING INCOME (LOSS) (b) | $ | 17,382 | $ | (22,208 | ) | $ | 50,179 | $ | 19,682 | |||||||
| EARNINGS (LOSS) PER SHARE | ||||||||||||||||
| Basic | $ | 0.86 | $ | (0.83 | ) | $ | 0.82 | $ | 0.59 | |||||||
| Diluted | $ | 0.85 | $ | (0.83 | ) | $ | 0.81 | $ | 0.58 | |||||||
| ADJUSTED NET OPERATING INCOME (LOSS) PER SHARE | ||||||||||||||||
| Basic | $ | 0.57 | $ | (0.73 | ) | $ | 1.64 | $ | 0.65 | |||||||
| Diluted | $ | 0.56 | $ | (0.73 | ) | $ | 1.63 | $ | 0.64 | |||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 30,582,540 | 30,382,105 | 30,529,557 | 30,230,490 | ||||||||||||
| Diluted | 30,946,843 | 30,382,105 | 30,838,595 | 30,659,389 | ||||||||||||
| Cash dividends declared per common share | $ | 0.30 | $ | 0.30 | $ | 0.90 | $ | 0.90 | ||||||||
| Ratios: | ||||||||||||||||
| Loss ratio | 69.4 | % | 100.3 | % | 67.4 | % | 83.1 | % | ||||||||
| Expense ratio (c) | 24.8 | % | 18.5 | % | 29.2 | % | 20.8 | % | ||||||||
| Combined ratio | 94.2 | % | 118.8 | % | 96.6 | % | 103.9 | % | ||||||||
| Accident year loss ratio | 66.6 | % | 73.6 | % | 66.0 | % | 73.1 | % | ||||||||
| (a) | Includes gains of $2.4 million and losses of $6.9 million for the change in net unrealized gains/losses on equity securities in the three and nine months ended September 30, 2020, respectively (gains of $3.3 million and $8.7 million for the respective prior year periods), and gains of $9.7 million and losses of $7.6 million for the change in net unrealized losses on bank loan participations in the three and nine months ended September 30, 2020, respectively, 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) | Calculated with a numerator comprising other operating expenses less gross fee income (in specific instances when the Company is not retaining insurance risk) included in “Other income” in our Condensed Consolidated Income Statements of $363,000 and $2.7 million for the three months and nine months ended September 30, 2020 ($2.3 million and $7.3 million for the respective prior year periods) and a denominator of net earned premiums. |
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JRVR Announces Third Quarter Results
Page 10
October 28, 2020
James River Group
Holdings, Ltd. and Subsidiaries
Segment Results
| EXCESS AND SURPLUS LINES | ||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % | September 30, | % | |||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 179,458 | $ | 241,045 | (25.6 | )% | $ | 502,649 | $ | 687,871 | (26.9 | )% | ||||||||||||
| Net written premiums | $ | 109,170 | $ | 171,715 | (36.4 | )% | $ | 328,190 | $ | 522,200 | (37.2 | )% | ||||||||||||
| Net earned premiums | $ | 104,933 | $ | 164,759 | (36.3 | )% | $ | 305,521 | $ | 457,352 | (33.2 | )% | ||||||||||||
| Losses and loss adjustment expenses | (69,938 | ) | (176,154 | ) | (60.3 | )% | (198,877 | ) | (399,996 | ) | (50.3 | )% | ||||||||||||
| Underwriting expenses | (19,414 | ) | (17,956 | ) | 8.1 | % | (66,856 | ) | (57,795 | ) | 15.7 | % | ||||||||||||
| Underwriting profit (loss) (a), (b) | $ | 15,581 | $ | (29,351 | ) | - | $ | 39,788 | $ | (439 | ) | - | ||||||||||||
| Ratios: | ||||||||||||||||||||||||
| Loss ratio | 66.7 | % | 106.9 | % | 65.1 | % | 87.5 | % | ||||||||||||||||
| Expense ratio | 18.5 | % | 10.9 | % | 21.9 | % | 12.6 | % | ||||||||||||||||
| Combined ratio | 85.2 | % | 117.8 | % | 87.0 | % | 100.1 | % | ||||||||||||||||
| Accident year loss ratio | 66.6 | % | 76.6 | % | 66.0 | % | 76.3 | % | ||||||||||||||||
| (a) | See "Reconciliation of Non-GAAP Measures". |
| (b) | Underwriting results include fee income of $— and $1.6 million for the three and nine months ended September 30, 2020, respectively ($2.2 million and $7.1 million for the respective prior year periods). These amounts are included in “Other income” in our Condensed Consolidated Income Statements. |
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JRVR Announces Third Quarter Results
Page 11
October 28, 2020
SPECIALTY ADMITTED INSURANCE
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % | September 30, | % | |||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 112,589 | $ | 100,459 | 12.1 | % | $ | 303,831 | $ | 292,884 | 3.7 | % | ||||||||||||
| Net written premiums | $ | 16,184 | $ | 14,570 | 11.1 | % | $ | 42,279 | $ | 43,625 | (3.1 | )% | ||||||||||||
| Net earned premiums | $ | 14,985 | $ | 14,242 | 5.2 | % | $ | 42,660 | $ | 39,688 | 7.5 | % | ||||||||||||
| Losses and loss adjustment expenses | (10,745 | ) | (9,481 | ) | 13.3 | % | (31,209 | ) | (25,085 | ) | 24.4 | % | ||||||||||||
| Underwriting expenses | (2,381 | ) | (3,924 | ) | (39.3 | )% | (9,150 | ) | (10,845 | ) | (15.6 | )% | ||||||||||||
| Underwriting profit (a), (b) | $ | 1,859 | $ | 837 | 122.1 | % | $ | 2,301 | $ | 3,758 | (38.8 | )% | ||||||||||||
| Ratios: Loss ratio | 71.7 | % | 66.6 | % | 73.2 | % | 63.2 | % | ||||||||||||||||
| Expense ratio | 15.9 | % | 27.5 | % | 21.4 | % | 27.3 | % | ||||||||||||||||
| Combined ratio | 87.6 | % | 94.1 | % | 94.6 | % | 90.5 | % | ||||||||||||||||
| Accident year loss ratio | 85.1 | % | 73.6 | % | 82.6 | % | 73.9 | % | ||||||||||||||||
| (a) | See "Reconciliation of Non-GAAP Measures". |
| (b) | Underwriting results include fee income of $4.6 million and $14.2 million for the three and nine months ended September 30, 2020, respectively ($4.0 million and $11.6 million for the respective prior year periods). |
| CASUALTY REINSURANCE | ||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| September 30, | % | September 30, | % | |||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||
| Gross written premiums | $ | 19,805 | $ | 46,724 | (57.6 | )% | $ | 90,852 | $ | 114,810 | (20.9 | )% | ||||||||||||
| Net written premiums | $ | 19,805 | $ | 37,584 | (47.3 | )% | $ | 75,101 | $ | 105,695 | (28.9 | )% | ||||||||||||
| Net earned premiums | $ | 33,044 | $ | 34,373 | (3.9 | )% | $ | 99,514 | $ | 105,600 | (5.8 | )% | ||||||||||||
| Losses and loss adjustment expenses | (25,472 | ) | (28,449 | ) | (10.5 | )% | (71,671 | ) | (75,983 | ) | (5.7 | )% | ||||||||||||
| Underwriting expenses | (8,261 | ) | (10,212 | ) | (19.1 | )% | (30,962 | ) | (33,678 | ) | (8.1 | )% | ||||||||||||
| Underwriting loss (a) | $ | (689 | ) | $ | (4,288 | ) | (83.9 | )% | $ | (3,119 | ) | $ | (4,061 | ) | (23.2 | )% | ||||||||
| Ratios: | ||||||||||||||||||||||||
| Loss ratio | 77.1 | % | 82.8 | % | 72.0 | % | 72.0 | % | ||||||||||||||||
| Expense ratio | 25.0 | % | 29.7 | % | 31.1 | % | 31.8 | % | ||||||||||||||||
| Combined ratio | 102.1 | % | 112.5 | % | 103.1 | % | 103.8 | % | ||||||||||||||||
| Accident year loss ratio | 58.3 | % | 59.7 | % | 58.9 | % | 59.4 | % | ||||||||||||||||
| (a) | See "Reconciliation of Non-GAAP Measures". |
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JRVR Announces Third Quarter Results
Page 12
October 28, 2020
RECONCILIATION OF NON-GAAP MEASURES
Underwriting Profit (Loss)
The following table reconciles the underwriting profit (loss) by individual operating segment and for the entire Company to consolidated income (loss) 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 | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Underwriting profit (loss) of the operating segments: | ||||||||||||||||
| Excess and Surplus Lines | $ | 15,581 | $ | (29,351 | ) | $ | 39,788 | $ | (439 | ) | ||||||
| Specialty Admitted Insurance | 1,859 | 837 | 2,301 | 3,758 | ||||||||||||
| Casualty Reinsurance | (689 | ) | (4,288 | ) | (3,119 | ) | (4,061 | ) | ||||||||
| Total underwriting profit (loss) of operating segments | 16,751 | (32,802 | ) | 38,970 | (742 | ) | ||||||||||
| Other operating expenses of the Corporate and Other segment | (7,805 | ) | (7,302 | ) | (23,556 | ) | (22,641 | ) | ||||||||
| Underwriting profit (loss) (a) | 8,946 | (40,104 | ) | 15,414 | (23,383 | ) | ||||||||||
| Net investment income | 14,959 | 17,878 | 51,145 | 54,844 | ||||||||||||
| Net realized and unrealized gains (losses) on investments (b) | 8,929 | (2,357 | ) | (27,885 | ) | 331 | ||||||||||
| Other income | 192 | (91 | ) | (967 | ) | (223 | ) | |||||||||
| Interest expense | (2,129 | ) | (2,594 | ) | (7,970 | ) | (8,086 | ) | ||||||||
| Amortization of intangible assets | (149 | ) | (149 | ) | (447 | ) | (447 | ) | ||||||||
| Consolidated income (loss) before taxes | $ | 30,748 | $ | (27,417 | ) | $ | 29,290 | $ | 23,036 | |||||||
| (a) | Included in underwriting results for the three and nine months ended September 30, 2020 is fee income of $4.6 million and $15.8 million, respectively ($6.1 million and $18.7 million for the respective prior year periods). |
| (b) | Includes gains of $2.4 million and losses of $6.9 million for the change in net unrealized gains/losses on equity securities in the three and nine months ended September 30, 2020, respectively (gains of $3.3 million and $8.7 million for the respective prior year periods), and gains of $9.7 million and losses of $7.6 million for the change in net unrealized losses on bank loan participations in the three and nine months ended September 30, 2020, respectively, following the Company's election of the fair value option for bank loans effective January 1, 2020. |
Adjusted Net Operating Income (Loss)
We define adjusted net operating income (loss) as net income (loss) 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 (loss) 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 (loss) should not be viewed as a substitute for net income (loss) calculated in accordance with GAAP, and our definition of adjusted net operating income (loss) may not be comparable to that of other companies.
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JRVR Announces Third Quarter Results
Page 13
October 28, 2020
Our income (loss) before taxes and net income (loss) reconciles to our adjusted net operating income (loss) as follows:
| Three Months Ended September 30, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Income | (Loss) Income | Net (Loss) | ||||||||||||||
| Before Taxes | Net Income | Before Taxes | Income | |||||||||||||
| (in thousands) | ||||||||||||||||
| Income (loss) as reported | $ | 30,748 | $ | 26,283 | $ | (27,417 | ) | $ | (25,167 | ) | ||||||
| Net realized and unrealized (gains) losses on investments (a) | (8,929 | ) | (8,824 | ) | 2,357 | 2,665 | ||||||||||
| Other expenses | (21 | ) | (77 | ) | 372 | 294 | ||||||||||
| Adjusted net operating income (loss) | $ | 21,798 | $ | 17,382 | $ | (24,688 | ) | $ | (22,208 | ) | ||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Income | Income | |||||||||||||||
| Before Taxes | Net Income | Before Taxes | Net Income | |||||||||||||
| (in thousands) | ||||||||||||||||
| Income as reported | $ | 29,290 | $ | 25,082 | $ | 23,036 | $ | 17,868 | ||||||||
| Net realized and unrealized losses (gains) on investments (a) | 27,885 | 23,646 | (331 | ) | 980 | |||||||||||
| Other expenses | 1,711 | 1,451 | 1,055 | 834 | ||||||||||||
| Adjusted net operating income | $ | 58,886 | $ | 50,179 | $ | 23,760 | $ | 19,682 | ||||||||
| (a) | Includes gains of $2.4 million and losses of $6.9 million for the change in net unrealized gains/losses on equity securities in the three and nine months ended September 30, 2020, respectively (gains of $3.3 million and $8.7 million for the respective prior year periods), and gains of $9.7 million and losses of $7.6 million for the change in net unrealized losses on bank loan participations in the three and nine months ended September 30, 2020, respectively, following the Company's election of the fair value option for bank loans effective January 1, 2020. |
Tangible Equity (per Share) and Pre-Dividend Tangible Equity (per Share)
We define tangible equity as shareholders’ equity less goodwill and intangible assets (net of amortization). Our definition of tangible equity may not be comparable to that of other companies, and it should not be viewed as a substitute for shareholders’ equity calculated in accordance with GAAP. We use tangible equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure. The following table reconciles shareholders’ equity to tangible equity for September 30, 2020, December 31, 2019, and September 30, 2019 and reconciles tangible equity to tangible equity before dividends for September 30, 2020.
| September 30, 2020 | December 31, 2019 | September 30, 2019 | ||||||||||||||||||||||
| Equity per | Equity per | Equity per | ||||||||||||||||||||||
| ($ in thousands, except for share data) | Equity | share | Equity | share | Equity | share | ||||||||||||||||||
| Shareholders' equity | $ | 821,406 | $ | 26.83 | $ | 778,581 | $ | 25.59 | $ | 768,969 | $ | 25.29 | ||||||||||||
| Goodwill and intangible assets | 218,324 | 7.13 | 218,771 | 7.19 | 218,921 | 7.20 | ||||||||||||||||||
| Tangible equity | $ | 603,082 | $ | 19.70 | $ | 559,810 | $ | 18.40 | $ | 550,048 | $ | 18.09 | ||||||||||||
| Dividends to shareholders for the nine months ended September 30, 2020 | 27,815 | 0.90 | ||||||||||||||||||||||
| Pre-dividend tangible equity | $ | 630,897 | $ | 20.60 | ||||||||||||||||||||
-END-
Exhibit 99.2
JAMES RIVER ANNOUNCES MANAGEMENT CHANGES
Pembroke, Bermuda, October 28, 2020---James River Group Holdings, Ltd. (“James River” or the “Company”) (NASDAQ: JRVR) announced today that Frank D’Orazio has been named Chief Executive Officer of the Company, effective November 2, 2020. J. Adam Abram, the Company’s founder and current CEO will retire on November 1, 2020. Mr. Abram will remain with the Company as non-executive Chair of the Board of Directors. Mr. D’Orazio has also been named to the Board of Directors.
Mr. Abram commented, “Frank is a highly experienced and successful senior executive and profitable business builder with many years of experience in the areas where James River has concentrated. Throughout his thirty year career in the insurance industry, Frank has proven to be an excellent leader who has developed a deep understanding of underwriting, finance, enterprise risk management and strategic thinking by leading significant initiatives in each of these areas. Our Board is pleased and confident that James River will have the benefit of his experience and vision for the future. The Company is in a strong position now, with great momentum, and this is a good moment for me to transition back to retirement.”
Mr. D’Orazio commented, “I am excited to join James River. The company has a very strong franchise, great leadership and talented employees in each of its Segments. I am looking forward to working with the Board and with Adam to continue to create value for our shareholders.”
Mr. D’Orazio most recently served as Chief Operating Officer and Chief of Staff at Allied World Assurance Company, Ltd. He also had prior responsibilities at the same firm as President, Underwriting and Global Risk and President, International Insurance. Mr. D’Orazio began his career as a casualty underwriter at Chubb and also served in a number of underwriting manager roles at Munich Re America.
The Company also announced today that Robert Myron, President and Chief Operating Officer of the Company has decided to step down from the Board of Directors, effective November 2, 2020. Mr. Myron will remain with the company in his current role as President and Chief Operating Officer. Mr. Abram commented, “Bob is an integral part of our senior management team and has been a very effective member of our Board, having served on it since 2011. His decision to leave the Board was based on his judgement that our Shareholders would be better served if we reduced the number of inside directors on the Board. I speak for our entire Board in thanking Bob for his service on the Board and in saying the Company is fortunate that it will continue to have the benefit of his skillful leadership as a continuing member of the senior leadership team.”
Mr. Abram will discuss Mr. D’Orazio’s appointment as Chief Executive Officer and Mr. Abram’s retirement on the Company’s earnings call tomorrow, October 29, 2020, at 8:00 a.m. Eastern Time. Investors may access the conference call by dialing (877) 930-8055, Conference ID# 1166528, 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 register and download any necessary audio software. A replay of the call will be available until 10:00 a.m. (Eastern Time) on November 28, 2020 and can be accessed by dialing (855) 859-2056 or by vising the company website.
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JRVR Announces Management Changes
Page 2
October 28, 2020
Forward-Looking Statements
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding the intent, belief or current expectations of James River and its management team. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Important information regarding such risks and uncertainties can be found 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 and our Quarterly Report on Form 10-Q filed with the SEC on July 31, 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.
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