UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported): | |||||
(Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices)
(Zip Code)
(441 ) 278-4580
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report.) | ||
Check the appropriate box below if the Form 8‑K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. | ||||
On February 17, 2021, James River Group Holdings, Ltd. (the “Company”) issued a press release announcing certain preliminary financial results for the fourth quarter and year ended December 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Form 8-K”).
The information in this Item 2.02 and in Exhibit 99.1 furnished herewith shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act unless specifically stated by the Company.
| Item 9.01 | Financial Statements and Exhibits. | ||||
(d) Exhibits
The following Exhibit is furnished as a part of this Form 8-K:
Exhibit No. | Description | |||||||
| 99.1 | ||||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| JAMES RIVER GROUP HOLDINGS, LTD. | |||||
| Dated: February 17, 2021 | By: /s/ Sarah C. Doran | ||||
| Sarah C. Doran | |||||
| Chief Financial Officer | |||||
Exhibit 99.1
James River (NASDAQ: “JRVR”) Provides Preliminary Information on Fourth Quarter and Full Year 2020 Results
Pembroke, Bermuda, February 17, 2021 – James River Group Holdings, Ltd. (the "Company") (NASDAQ: “JRVR”) today announced preliminary financial results in advance of its full quarterly and full year earnings to be released on February 25, 2021.
The Company expects to report full year 2020 Net Income of between $4 million and $5 million, and full year 2020 Adjusted Net Operating Income of between $18 million and $22 million. The Combined Ratio for the full year is expected to be between 105-107%. Growth in Core (Non-Commercial Auto) Excess and Surplus Lines (“E&S”) Gross Premium Written is 29% as compared to the prior year. Tangible Book Value per Share increased 9% from December 31, 2019, before the deduction of dividends.
The above results are inclusive of unfavorable development of prior year loss reserves of between $85 million and $90 million during the fourth quarter. The unfavorable development is concentrated in the Company’s Commercial Auto division within its E&S segment and its Casualty Re segment, with an offset of positive development in its Core E&S and Specialty Admitted Insurance segment.
“We experienced a significant increase in reported losses in two areas of our Company – one large Commercial Auto account in runoff, and in our Casualty Reinsurance segment – and have meaningfully strengthened reserves in response”, said James River CEO Frank D’Orazio. “With this strengthening of prior year reserves, I believe our franchise is extremely well positioned to continue to take advantage of compelling market conditions across our business. Our Core E&S business, where we have earned attractive returns for many years, and our fronting business within our Specialty Admitted Insurance segment, present us with very attractive opportunities to put capital to work, driven by a continued attractive rate environment.”
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 adjusted net operating income, 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.
Exhibit 99.1
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; our ability to obtain reinsurance coverage at prices and on terms that allow us to transfer risk and adequately protect our company against financial loss; losses resulting from reinsurance counterparties failing to pay us on reinsurance claims, insurance companies with whom we have a fronting arrangement failing to pay us for claims, or a former customer with whom we have an indemnification arrangement failing to perform their reimbursement obligations; inadequacy of premiums we charge to compensate us for our losses incurred; changes in laws or government regulation, including tax or insurance law and regulations; the ongoing effect of Public Law No. 115-97, informally titled the Tax Cuts and Jobs Act, which may have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as 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; the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents; our ability to manage our growth effectively; failure to maintain effective internal controls in accordance with Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); and changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those in the forward-looking statements, is contained in 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 October
Exhibit 99.1
29, 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.
RECONCILIATION OF NON-GAAP MEASURES
Adjusted Net Operating Income
We define adjusted net operating income as net income excluding net realized and unrealized gains (losses) on investments, 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.
Our net income for the year ended December 31, 2020 reconciles to our adjusted net operating income as follows (in thousands):
| Range | ||||||||
| Low | High | |||||||
| Net income as reported | $ | 4,000 | $ | 5,000 | ||||
| Net realized and unrealized losses on investments | 13,000 | 15,000 | ||||||
| Other expenses | 1,000 | 2,000 | ||||||
| Adjusted Net Operating Income | $ | 18,000 | $ | 22,000 | ||||
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 December 31, 2020 and December 31, 2019 and reconciles tangible equity to tangible equity before dividends for December 31, 2020.
Exhibit 99.1
| Range | |||||||||||||||||
| Low 12/31/2020 | High 12/31/2020 | ||||||||||||||||
| ($ in thousands, except for share data) | Equity | Equity per share | Equity | Equity per share | |||||||||||||
| Shareholders’ equity | $ | 794,784 | $ | 25.93 | $ | 795,784 | $ | 25.96 | |||||||||
| Goodwill and intangible assets | 218,233 | 7.12 | 218,233 | 7.12 | |||||||||||||
| Tangible equity | $ | 576,551 | $ | 18.81 | $ | 577,551 | $ | 18.84 | |||||||||
| Dividends to shareholders for the twelve months ended December 31, 2020 | 37,091 | 1.20 | 37,091 | 1.20 | |||||||||||||
| Pre-dividend tangible equity | $ | 613,642 | $ | 20.01 | $ | 614,642 | $ | 20.04 | |||||||||
| 12/31/2019 | |||||||||||||||||
| ($ in thousands, except for share data) | Equity | Equity per share | |||||||||||||||
| Shareholders’ equity | $ | 778,581 | $ | 25.59 | |||||||||||||
| Goodwill and intangible assets | 218,771 | 7.19 | |||||||||||||||
| Tangible equity | $ | 559,810 | $ | 18.40 | |||||||||||||
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. The Company tends to focus on accounts associated with small or medium-sized businesses in each of its segments. Each of the Company's regulated insurance subsidiaries are rated "A" (Excellent) by A.M. Best Company.
Visit James River Group Holdings, Ltd. on the web at www.jrgh.net.
For more information contact:
Kevin Copeland
SVP Finance & Chief Investment Officer
InvestorRelations@jrgh.net
441-278-4573