PEMBROKE, Bermuda, Nov. 11, 2024 (GLOBE NEWSWIRE) -- James River Group Holdings, Ltd. ("James River" or the "Company") (NASDAQ: JRVR) today reported the following results for the third quarter 2024 as compared to the same period in 20231:
Three Months Ended
September 30, Three Months Ended
September 30,($ in thousands, except for share data) 2024 per diluted share 2023 per diluted shareNet (loss) income from continuing operations available to common shareholders$(40,702) $(1.07) $21,097 $0.55 Net loss from discontinued operations (1,304) $(0.03) (4,171) $(0.10)Net (loss) income available to common shareholders (42,006) $(1.10) 16,926 $0.45 Adjusted net operating (loss) income2 (28,196) $(0.74) 18,859 $0.49 Net loss from continuing operations available to common shareholders was $40.7 million ($1.07 per diluted share). Adjusted net operating loss2 of $28.2 million ($0.74 per diluted share) for the third quarter of 2024 was largely attributable to the previously announced $52.2 million of excess consideration paid over reserves ceded in connection with the Excess and Surplus Lines ("E&S") combined loss portfolio transfer adverse development reinsurance contract ("E&S ADC") that closed on July 2, 2024, as well as $19.2 million of additional adverse development ceded to the E&S ADC and recorded as a deferred reinsurance gain on the Company's balance sheet, and $4.8 million of adverse development retained by the Company. These were partially offset by strong investment income and underwriting profit from our Specialty Admitted segment.
Unless specified otherwise, all underwriting performance ratios presented herein are for our continuing operations and business not subject to retroactive reinsurance accounting for loss portfolio transfers ("LPTs").
Third Quarter 2024 Highlights:
E&S segment gross written premium growth was 6% and positive renewal rate change of 8.6%. While the segment reported a 136.1% combined ratio, the current accident year combined ratio for the segment was 92.6%.Specialty Admitted Insurance segment combined ratio of 91.3%, with fronting and program gross written premium growth of 8.7% excluding the non-renewed workers' compensation programs.Net investment income increased 8.1% compared to the prior year quarter, with all asset classes reporting higher income.Shareholders' equity per share of $14.02 decreased 2.1% sequentially from June 30, 2024, due to the net loss from continuing operations, while tangible common equity per share3 increased 1.9% sequentially. Strategic Actions:
The Company is commencing a multi-pronged strategic partnership with Enstar Group Limited ("Enstar"), a leader in P&C industry risk and liability management, under which: Cavello Bay Reinsurance Limited ("Cavello Bay”), a wholly owned subsidiary of Enstar, has agreed to purchase $12.5 million of newly issued common shares at a per share price of $6.40 (subject to certain closing conditions), in addition to 637,640 common shares it already owns through purchases in the open market; andSubsidiaries of the Company have entered into an adverse development reinsurance agreement with Cavello Bay, directly above the existing E&S ADC, with a limit of $75 million and no co-participation4; andEnstar will also have an informal consulting relationship and best practices dialogue with the Company's claims leadership. The Company amended the convertible preferred shares held by Gallatin Point Capital LLC ("Gallatin Point") to convert $37.5 million liquidation preference of the outstanding preferred shares to common shares at a per share price of $6.40. The quarterly preferred dividend of the remaining $112.5 million liquidation preference will remain at 7% for five years subsequent to September 30, 2024 and will be capped at 8% thereafter. In addition, the voluntary and mandatory conversion prices of the remaining $112.5 million of outstanding preferred shares were amended to increase the conversion premiums to 130% and 200% of the new conversion price of $6.40 per share, respectively.Through these actions, alongside the reduction to the Company's quarterly common dividend, the Company will meaningfully reduce its fixed charges given the opportunity it has to put capital to work at attractive returns, in its E&S segment especially.The Company intends to pursue a plan to redomicile to the United States during 2025 and expects to reduce its effective tax rate closer to the US statutory rate thereafter.See the 2024 Strategic Actions Frequently Asked Questions slides being made available on the Investor Relations page of our website simultaneously with this press release for further information on these Strategic Actions. With these announcements, the Board of Directors have concluded the strategic review process announced in November of 2023. While the strategic review process has been completed, in the ordinary course of business the Company expects to consider beneficial opportunities. _______________
1 The Company closed the sale of JRG Reinsurance Company Ltd. on April 16, 2024. The full financials for our former Casualty Reinsurance segment have been classified to discontinued operations for all periods.
2 Adjusted net operating (loss) income, tangible common equity per share and adjusted net operating return on tangible common equity are non-GAAP financial measures. See "Non-GAAP Financial Measures” and "Reconciliation of Non-GAAP Financial Measures” at the end of this press release.
3 Percent change before $0.05 common dividends paid per share during the third quarter of 2024.
4 The Enstar transactions are subject to closing conditions, including receipt by Cavello Bay of regulatory approval of the adverse development cover.
Frank D'Orazio, the Company's Chief Executive Officer, commented on the third quarter, "With the strategic actions we are announcing - notably the addition of Enstar as both a significant shareholder and strategic partner and the continued commitment of Gallatin Point - our highly regarded E&S franchise is significantly de-risked and well positioned to take advantage of strong market support amid a robust E&S environment. Momentum in our Core E&S franchise has continued to build each quarter during 2024 as we continue to balance attractive market conditions with underwriting discipline.”
David Ni, Chief Strategy Officer of Enstar Group, commented, "In conjunction with these transactions, Enstar has had the opportunity to become well-versed with the Company's business and we are pleased to make a $12.5 million common equity investment, underscoring our support of James River and its E&S franchise.”
Matthew Botein, Co-Founder and Managing Partner of Gallatin Point Capital, commented, "I have seen the team at James River make deep and meaningful improvements to the Company over the last several years. These transactions are the culmination of those efforts and Gallatin Point is very supportive of James River as it enters a new phase, where it is poised to capitalize on the market opportunity for its flagship E&S operation.”
Third Quarter 2024 Operating Results
Gross written premium of $330.4 million, consisting of the following:
Three Months Ended
September 30, ($ in thousands) 2024 2023 % ChangeExcess and Surplus Lines$230,215 $217,151 6%Specialty Admitted Insurance 100,208 125,700 (20)% $330,423 $342,851 (4 Net written premium of $147.3 million, consisting of the following:
Three Months Ended
September 30, ($ in thousands) 2024 2023 % ChangeExcess and Surplus Lines$129,735 $123,046 5%Specialty Admitted Insurance 17,603 22,936 (23)% $147,338 $145,982 1% Net earned premium of $159.7 million, consisting of the following:
Three Months Ended
September 30, ($ in thousands) 2024 2023 % Change Excess and Surplus Lines$138,892 $157,600 (12)%Specialty Admitted Insurance 20,834 26,073 (20)% $159,726 $183,673 (13)% E&S Segment Highlights: For the third quarter of 2024, the segment grew 6%, and its casualty underwriting divisions grew 6.7% as compared to the prior year quarter.Renewal rate increases across the segment were 8.6% during the quarter.The segment experienced its strongest submission growth in over four years, with double digit growth in both new and renewal submissions. Specialty Admitted Insurance Segment Highlights: Gross written premium for fronting and program business increased 8.7% compared to the prior year quarter, excluding the impact of our large workers' compensation program and Individual Risk Workers' Compensation book.Gross written premium for the Specialty Admitted Insurance segment declined 20.3% compared to the third quarter of 2023, with the reduction due to the impact of the non-renewed workers' compensation program during the second quarter of 2023 and the sale of the renewal rights of the individual risk workers' compensation business during the third quarter of 2023. Pre-tax favorable (unfavorable) reserve development by segment on business not subject to retroactive reinsurance accounting for loss portfolio transfers was as follows: Three Months Ended
September 30,($ in thousands) 2024 2023 Excess and Surplus Lines$(57,041) $(7,809)Specialty Admitted Insurance 165 - $(56,876) $(7,809) The third quarter of 2024 reflected $57.0 million of net unfavorable reserve development in the E&S segment and $0.2 million of favorable reserve development in the Specialty Admitted Insurance segment. The Company ceded $71.4 million of year-to-date unfavorable reserve development on business subject to the E&S ADC. This consists of a $52.2 million reserve charge upon execution of the E&S ADC equal to the excess consideration paid over reserves ceded and additional adverse development of $19.2 million that was ceded to the E&S ADC. The deferred retroactive reinsurance gain on the balance sheet associated with the E&S ADC is $19.2 million as of September 30, 2024. Additionally, the Company recognized unfavorable gross reserve development of $0.9 million ($0.0 net) on the reserves subject to the Commercial Auto LPT, which provides unlimited coverage.Retroactive benefits of $2.2 million were recorded in loss and loss adjustment expenses during the third quarter and the total deferred retroactive reinsurance gain on the Balance Sheet is $31.0 million as of September 30, 2024.Gross fee income was as follows: Three Months Ended
September 30, ($ in thousands) 2024 2023 % Change Specialty Admitted Insurance$5,239 $6,833 (23)% The consolidated expense ratio was 31.4% for the third quarter of 2024, which was an increase from 26.4% in the prior year quarter. The expense ratio increase was primarily driven by higher compensation and bad debt expense, and lower net earned premium in the E&S segment. Investment Results
Net investment income for the third quarter of 2024 was $23.6 million, an increase of 8.1% compared to $21.8 million in the prior year quarter. Growth in income was broad-based across the portfolio, as cash flow was deployed at higher yields.
The Company's net investment income consisted of the following:
Three Months Ended
September 30, ($ in thousands) 2024 2023 % ChangePrivate Investments 1,757 27 NM All Other Investments 21,807 21,772 0%Total Net Investment Income$23,564 $21,799 8% The Company's annualized gross investment yield on average fixed maturity, bank loan and equity securities for the three months ended September 30, 2024 was 4.8% (versus 4.8% for the three months ended September 30, 2023).
Net realized and unrealized gains on investments of $4.2 million for the t
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