James River Group Holdings, Ltd. ("James River" or the "Company")
(NASDAQ: JRVR) today reported second quarter 2022 net income
available to common shareholders of $5.0 million ($0.13 per diluted
share), compared to $20.8 million ($0.60 per diluted share) for the
second quarter of 2021. Adjusted net operating income1 for the
second quarter of 2022 was $20.0 million ($0.52 per diluted share),
compared to $18.8 million ($0.54 per diluted share) for the same
period in 2021.
____________________1 Adjusted net operating
income 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.
Earnings Per Diluted
Share |
Three Months EndedJune 30, |
|
|
2022 |
|
|
2021 |
|
|
|
|
Net Income |
$ |
0.13 |
|
$ |
0.60 |
Adjusted Net Operating
Income1 |
$ |
0.52 |
|
$ |
0.54 |
|
|
|
|
1 See
"Reconciliation of Non-GAAP Measures" below. |
|
Frank D'Orazio, the Company’s Chief Executive
Officer, commented, “Our strong start to 2022 continued in the
second quarter, as our results reflect an acute focus on
underwriting profitability and risk management, as well as our
leadership position in the E&S market. Robust performance
across our underwriting segments, and investments, contributed to
an adjusted net operating return on tangible common equity of 19.9%
this quarter. Our E&S segment results were particularly strong
with accelerating premium growth supported by renewal rate
increases, and continued attractive underwriting margins. We remain
disciplined in managing the business, as premium in our workers'
compensation unit and Casualty Reinsurance segment declined in
accordance with our stated plan, given more attractive relative
opportunities in the portfolio.”
Second Quarter 2022 Operating
Results
- Gross written premium of $399.7 million, consisting of the
following:
|
|
Three Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
266,635 |
|
$ |
214,014 |
|
25 |
% |
|
Specialty Admitted
Insurance |
|
124,967 |
|
|
129,189 |
|
(3 |
)% |
|
Casualty Reinsurance |
|
8,112 |
|
|
36,943 |
|
(78 |
)% |
|
|
$ |
399,714 |
|
$ |
380,146 |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
- Net written premium of $194.7 million, consisting of the
following:
|
|
Three Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
166,004 |
|
$ |
135,163 |
|
23 |
% |
|
Specialty Admitted
Insurance |
|
18,390 |
|
|
21,498 |
|
(14 |
)% |
|
Casualty Reinsurance |
|
10,297 |
|
|
36,943 |
|
(72 |
)% |
|
|
$ |
194,691 |
|
$ |
193,604 |
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
- Net earned premium of $186.3 million, consisting of the
following:
|
|
Three Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
|
Excess and Surplus Lines |
$ |
137,884 |
|
$ |
117,945 |
|
17 |
% |
|
Specialty Admitted
Insurance |
|
18,141 |
|
|
18,595 |
|
(2 |
)% |
|
Casualty Reinsurance |
|
30,237 |
|
|
36,165 |
|
(16 |
)% |
|
|
$ |
186,262 |
|
$ |
172,705 |
|
8 |
% |
|
|
|
|
|
|
|
|
|
|
- E&S gross
written premium increased 24.6% compared to the prior year quarter,
with eleven out of thirteen underwriting divisions experiencing
growth and ten of the underwriting divisions reporting double-digit
growth for the second consecutive quarter. Renewal rate increases
were 14.1% during the second quarter of 2022, representing the
twenty-second consecutive quarter of renewal rate increases
compounding to 58.1%.
- Gross written
premium for the Specialty Admitted Insurance segment declined 3.3%
from the prior year quarter. The driver of the decline was a
combined 13.7% reduction to premium from our individual risk
workers' compensation business and our large workers' compensation
fronted program. The remaining segment premium increased 2.2%
despite the loss of a fronting partner that was acquired at the end
of 2021. The segment added additional fronted programs during the
quarter.
- Gross written
premium in the Casualty Reinsurance segment decreased 78.0% from
the prior year quarter primarily driven by the non-renewal of
several treaties and lower participation on certain ongoing
treaties. The decline in gross written premium is consistent with
our previously announced strategy for this segment. Since the
earning patterns of the business can extend over multiple years,
changes in net earned premium for this segment will lag the
expected decline in gross and net written premium.
- Pre-tax
favorable (unfavorable) reserve development by segment was as
follows:
|
|
Three Months EndedJune 30, |
|
($ in thousands) |
|
2022 |
|
|
2021 |
|
|
Excess and Surplus Lines |
$ |
32 |
|
$ |
7,459 |
|
|
Specialty Admitted
Insurance |
|
1,545 |
|
|
1,000 |
|
|
Casualty Reinsurance |
|
0 |
|
|
(5,009 |
) |
|
|
$ |
1,577 |
|
$ |
3,450 |
|
-
Prior year reserve development during the second quarter of 2022
totaled $1.6 million and was primarily from the Specialty Admitted
segment.
-
Gross fee income was as follows:
|
|
Three Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
2021 |
|
% Change |
|
Specialty Admitted Insurance |
$ |
5,875 |
|
$ |
5,434 |
|
8 |
% |
-
The consolidated expense ratio was 25.8% for the second quarter of
2022, down slightly from 26.0% in the prior year second quarter.
The expense ratio benefited from 7.8% growth in net earned premium
and 8.1% growth in fee income, while underwriting expenses
increased at a slightly lower rate.
Investment Results
Net investment income for the second quarter of
2022 was $14.7 million, an increase of 2.5% compared to $14.3
million for the same period in 2021. Income from fixed maturities
and equities increased due to higher yields, while income from
renewable energy and other private investments declined from the
prior year period primarily due to market volatility.
The Company’s net investment income consisted of
the following:
|
Three Months EndedJune 30, |
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
% Change |
Renewable Energy Investments |
$ |
253 |
|
|
$ |
399 |
|
(37 |
)% |
Other Private Investments |
|
(743 |
) |
|
|
435 |
|
NM |
|
All Other Net Investment
Income |
|
15,195 |
|
|
|
13,514 |
|
12 |
% |
Total Net Investment
Income |
$ |
14,705 |
|
|
$ |
14,348 |
|
2 |
% |
The Company’s annualized gross investment yield
on average fixed maturity, bank loan and equity securities for the
three months ended June 30, 2022 was 3.4% (versus 2.8% for the
three months ended June 30, 2021). The investment yield increased
primarily as a result of higher market yields on fixed maturity
securities and bank loans.
Net realized and unrealized losses on
investments of $17.1 million for the three months ended June 30,
2022 compares to net realized and unrealized gains on investments
of $3.5 million in the prior year quarter. The majority of the
realized and unrealized losses during the second quarter of 2022
were related to changes in fair values of our secured bank loan
portfolio and, to a lesser extent, preferred stock holdings.
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 June
30, 2022 was 25.3%. The rate is impacted by the geographic mix of
income.
Tangible Equity
Tangible equity2 of $521.6 million at
June 30, 2022 declined 9.3% compared to tangible equity of
$574.8 million at March 31, 2022, as net income available to common
shareholders was offset by an increase in unrealized losses in the
Company's fixed maturity portfolio. Accumulated other comprehensive
(loss) income declined by $58.6 million during the second quarter
of 2022, with higher interest rates and credit spreads driving a
decline in the value of the Company's fixed maturity
securities.
Capital Management
The Company announced that its Board of
Directors declared a cash dividend of $0.05 per common share. This
dividend is payable on Friday, September 30, 2022 to all
shareholders of record on Monday, September 12, 2022.
____________________2 Tangible equity is a
non-GAAP financial measure. See “Non-GAAP Financial Measures” and
“Reconciliation of Non-GAAP Financial Measures” at the end of this
press release.
Conference Call
James River will hold a conference call to
discuss its second quarter results tomorrow, August 2, 2022 at 8:30
a.m. Eastern Time. Investors may access the conference call by
dialing (866) 374-5140, Conference ID 28028506, or via the internet
by visiting www.jrgh.net and clicking on the “Investor Relations”
link. A webcast replay of the call will be available 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, should, 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
uncertainties, 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 downgrade in the financial strength rating of our regulated
insurance subsidiaries announced on May 7, 2021, or further
downgrades, impacting our ability to attract and retain insurance
and reinsurance business that our subsidiaries write, our
competitive position, and our financial condition; 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; the
impact of a persistent high inflationary environment on our
reserves, the values of our investment returns, and on our
compensation expenses; exposure to credit risk, interest rate risk
and other market risk in our investment portfolio; 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 its 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 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; 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 most recently filed
Annual Report on Form 10-K. 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 (loss), adjusted net
operating income (loss), tangible equity, tangible common equity,
adjusted net operating return on tangible equity (which is
calculated as annualized adjusted net operating income (loss)
divided by the average quarterly tangible equity balances in the
respective period), and adjusted net operating return on tangible
common equity (which is calculated as annualized adjusted net
operating income (loss) divided by the average quarterly tangible
common equity balances in the respective period), 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 that 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:
Brett ShirreffsSVP, Finance, Investments and
Investor RelationsInvestorRelations@jrgh.net
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated Balance Sheet
Data(Unaudited)
($ in thousands,
except for share data) |
June 30, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
Invested assets: |
|
|
|
Fixed maturity securities, available-for-sale, at fair value |
$ |
1,597,695 |
|
$ |
1,677,561 |
Equity securities, at fair
value |
|
98,653 |
|
|
108,410 |
Bank loan participations, at
fair value |
|
159,885 |
|
|
156,043 |
Short-term investments |
|
130,435 |
|
|
136,563 |
Other invested assets |
|
51,348 |
|
|
51,908 |
Total invested assets |
|
2,038,016 |
|
|
2,130,485 |
|
|
|
|
Cash and cash equivalents |
|
350,740 |
|
|
190,123 |
Restricted cash equivalents
(a) |
|
102,099 |
|
|
102,005 |
Accrued investment income |
|
11,834 |
|
|
11,037 |
Premiums receivable and
agents’ balances, net |
|
374,465 |
|
|
393,967 |
Reinsurance recoverable on
unpaid losses, net |
|
1,570,885 |
|
|
1,348,628 |
Reinsurance recoverable on
paid losses |
|
106,509 |
|
|
82,235 |
Deferred policy acquisition
costs |
|
60,651 |
|
|
68,526 |
Goodwill and intangible
assets |
|
217,688 |
|
|
217,870 |
Other assets |
|
432,388 |
|
|
403,674 |
Total assets |
$ |
5,265,275 |
|
$ |
4,948,550 |
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Reserve for losses and loss
adjustment expenses |
$ |
2,730,631 |
|
$ |
2,748,473 |
Unearned premiums |
|
723,062 |
|
|
727,552 |
Funds held (a) |
|
353,685 |
|
|
97,360 |
Senior debt |
|
222,300 |
|
|
262,300 |
Junior subordinated debt |
|
104,055 |
|
|
104,055 |
Accrued expenses |
|
55,047 |
|
|
57,920 |
Other liabilities |
|
337,211 |
|
|
225,528 |
Total liabilities |
|
4,525,991 |
|
|
4,223,188 |
|
|
|
|
Series A redeemable preferred
shares |
|
144,898 |
|
|
0 |
Total shareholders’
equity |
|
594,386 |
|
|
725,362 |
Total liabilities, Series A
redeemable preferred shares, and shareholders’ equity |
$ |
5,265,275 |
|
$ |
4,948,550 |
|
|
|
|
Tangible equity (b) |
$ |
521,596 |
|
$ |
507,492 |
Tangible equity per share outstanding (b) |
$ |
12.10 |
|
$ |
13.58 |
Shareholders' equity per share
outstanding |
$ |
15.87 |
|
$ |
19.41 |
Common shares outstanding |
|
37,450,264 |
|
|
37,373,066 |
|
|
|
|
(a) Restricted cash equivalents and the funds held liability
includes funds posted by the Company to a trust account for the
benefit of a third party administrator handling the claims on the
Rasier commercial auto policies in run-off. Such funds held in
trust secure the Company's obligations to reimburse the
administrator for claims payments, and are primarily sourced from
the collateral posted to the Company by Rasier and its affiliates
to support their obligations under the indemnity agreements and the
loss portfolio transfer reinsurance agreement with the Company. The
funds held liability also includes a notional funds withheld
account balance related to the loss portfolio transfer retrocession
transaction that our Casualty Reinsurance segment entered into in
the first quarter of 2022, which will be reduced on a quarterly
basis by paid losses on the subject business. |
(b) See “Reconciliation of
Non-GAAP Measures” |
|
|
|
|
|
|
|
James River Group Holdings, Ltd. and
SubsidiariesCondensed Consolidated (Loss) Income
Statement Data(Unaudited)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
($ in thousands, except for share data) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
REVENUES |
|
|
|
|
|
|
|
Gross written premiums |
$ |
399,714 |
|
|
$ |
380,146 |
|
|
$ |
759,650 |
|
|
$ |
753,401 |
|
Net written premiums |
|
194,691 |
|
|
|
193,604 |
|
|
|
370,550 |
|
|
|
368,203 |
|
|
|
|
|
|
|
|
|
Net earned premiums |
|
186,262 |
|
|
|
172,705 |
|
|
|
376,086 |
|
|
|
333,298 |
|
Net investment income |
|
14,705 |
|
|
|
14,348 |
|
|
|
30,972 |
|
|
|
29,437 |
|
Net realized and unrealized
(losses) gains on investments |
|
(17,110 |
) |
|
|
3,483 |
|
|
|
(22,120 |
) |
|
|
9,755 |
|
Other income |
|
949 |
|
|
|
1,031 |
|
|
|
1,816 |
|
|
|
2,057 |
|
Total revenues |
|
184,806 |
|
|
|
191,567 |
|
|
|
386,754 |
|
|
|
374,547 |
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
Losses and loss adjustment
expenses |
|
121,369 |
|
|
|
110,000 |
|
|
|
256,977 |
|
|
|
383,500 |
|
Other operating expenses |
|
49,036 |
|
|
|
45,840 |
|
|
|
99,097 |
|
|
|
93,221 |
|
Other expenses |
|
— |
|
|
|
904 |
|
|
|
368 |
|
|
|
1,525 |
|
Interest expense |
|
4,049 |
|
|
|
2,249 |
|
|
|
6,341 |
|
|
|
4,465 |
|
Amortization of intangible
assets |
|
91 |
|
|
|
91 |
|
|
|
182 |
|
|
|
182 |
|
Total expenses |
|
174,545 |
|
|
|
159,084 |
|
|
|
362,965 |
|
|
|
482,893 |
|
Income (loss) before
taxes |
|
10,261 |
|
|
|
32,483 |
|
|
|
23,789 |
|
|
|
(108,346 |
) |
Income tax expense
(benefit) |
|
2,597 |
|
|
|
11,640 |
|
|
|
5,920 |
|
|
|
(25,729 |
) |
NET INCOME
(LOSS) |
$ |
7,664 |
|
|
$ |
20,843 |
|
|
$ |
17,869 |
|
|
$ |
(82,617 |
) |
Dividends on Series A
preferred shares |
|
(2,625 |
) |
|
|
0 |
|
|
|
(3,500 |
) |
|
|
0 |
|
NET INCOME (LOSS)
AVAILABLE TO COMMON SHAREHOLDERS |
$ |
5,039 |
|
|
$ |
20,843 |
|
|
$ |
14,369 |
|
|
$ |
(82,617 |
) |
ADJUSTED NET OPERATING
INCOME (LOSS) (a) |
$ |
20,025 |
|
|
$ |
18,829 |
|
|
$ |
33,892 |
|
|
$ |
(89,966 |
) |
|
|
|
|
|
|
|
|
INCOME (LOSS) PER
COMMON SHARE |
|
|
|
|
|
|
|
Basic |
$ |
0.13 |
|
|
$ |
0.61 |
|
|
$ |
0.38 |
|
|
$ |
(2.54 |
) |
Diluted |
$ |
0.13 |
|
|
$ |
0.60 |
|
|
$ |
0.38 |
|
|
$ |
(2.54 |
) |
|
|
|
|
|
|
|
|
ADJUSTED
NET OPERATING INCOME (LOSS) PER COMMON SHARE |
|
|
|
|
Basic |
$ |
0.53 |
|
|
$ |
0.55 |
|
|
$ |
0.91 |
|
|
$ |
(2.76 |
) |
Diluted (b) |
$ |
0.52 |
|
|
$ |
0.54 |
|
|
$ |
0.90 |
|
|
$ |
(2.76 |
) |
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
37,449,621 |
|
|
|
34,418,472 |
|
|
|
37,428,385 |
|
|
|
32,576,463 |
|
Diluted |
|
37,732,371 |
|
|
|
34,586,997 |
|
|
|
37,643,634 |
|
|
|
32,576,463 |
|
Cash dividends declared per
common share |
$ |
0.05 |
|
|
$ |
0.30 |
|
|
$ |
0.10 |
|
|
$ |
0.60 |
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
Loss ratio |
|
65.2 |
% |
|
|
63.7 |
% |
|
|
68.3 |
% |
|
|
115.1 |
% |
Expense ratio (c) |
|
25.8 |
% |
|
|
26.0 |
% |
|
|
25.9 |
% |
|
|
27.4 |
% |
Combined ratio |
|
91.0 |
% |
|
|
89.7 |
% |
|
|
94.2 |
% |
|
|
142.5 |
% |
Accident year loss ratio |
|
66.0 |
% |
|
|
65.7 |
% |
|
|
66.9 |
% |
|
|
65.1 |
% |
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
(b) The
outstanding Series A preferred shares were dilutive for the three
months ended June 30, 2022. Dividends on the Series A
preferred shares were added back to the numerator in the
calculation and 5,640,158 common shares from an assumed conversion
of the Series A preferred shares were included in the
denominator. |
(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 $900,000 and $1,700,000
for the three and six months ended June 30, 2022, respectively
($954,000 and $1.9 million in the respective prior year periods),
and a denominator of net earned premiums. |
James River Group Holdings, Ltd. and
SubsidiariesSegment Results
EXCESS AND SURPLUS LINES
|
Three Months EndedJune 30, |
|
|
|
Six Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
%Change |
|
|
2022 |
|
|
|
2021 |
|
|
%Change |
Gross written premiums |
$ |
266,635 |
|
|
$ |
214,014 |
|
|
24.6 |
% |
|
$ |
470,917 |
|
|
$ |
395,372 |
|
|
19.1 |
% |
Net written premiums |
$ |
166,004 |
|
|
$ |
135,163 |
|
|
22.8 |
% |
|
$ |
291,714 |
|
|
$ |
243,596 |
|
|
19.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
137,884 |
|
|
$ |
117,945 |
|
|
16.9 |
% |
|
$ |
269,185 |
|
|
$ |
231,653 |
|
|
16.2 |
% |
Losses and loss adjustment
expenses |
|
(89,184 |
) |
|
|
(69,594 |
) |
|
28.1 |
% |
|
|
(174,109 |
) |
|
|
(311,336 |
) |
|
(44.1 |
)% |
Underwriting expenses |
|
(26,366 |
) |
|
|
(21,434 |
) |
|
23.0 |
% |
|
|
(51,285 |
) |
|
|
(44,346 |
) |
|
15.6 |
% |
Underwriting profit (loss)
(a) |
$ |
22,334 |
|
|
$ |
26,917 |
|
|
(17.0 |
)% |
|
$ |
43,791 |
|
|
$ |
(124,029 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
64.7 |
% |
|
|
59.0 |
% |
|
|
|
|
64.7 |
% |
|
|
134.4 |
% |
|
|
Expense ratio |
|
19.1 |
% |
|
|
18.2 |
% |
|
|
|
|
19.0 |
% |
|
|
19.1 |
% |
|
|
Combined ratio |
|
83.8 |
% |
|
|
77.2 |
% |
|
|
|
|
83.7 |
% |
|
|
153.5 |
% |
|
|
Accident year loss ratio |
|
64.7 |
% |
|
|
65.3 |
% |
|
|
|
|
64.7 |
% |
|
|
64.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
SPECIALTY ADMITTED INSURANCE
|
Three Months EndedJune 30, |
|
|
|
Six Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
%Change |
|
|
2022 |
|
|
|
2021 |
|
|
%Change |
Gross written premiums |
$ |
124,967 |
|
|
$ |
129,189 |
|
|
(3.3 |
)% |
|
$ |
250,677 |
|
|
$ |
256,225 |
|
|
(2.2 |
)% |
Net written premiums |
$ |
18,390 |
|
|
$ |
21,498 |
|
|
(14.5 |
)% |
|
$ |
38,595 |
|
|
$ |
43,503 |
|
|
(11.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
18,141 |
|
|
$ |
18,595 |
|
|
(2.4 |
)% |
|
$ |
37,459 |
|
|
$ |
34,952 |
|
|
7.2 |
% |
Losses and loss adjustment
expenses |
|
(13,217 |
) |
|
|
(13,366 |
) |
|
(1.1 |
)% |
|
|
(28,652 |
) |
|
|
(24,108 |
) |
|
18.8 |
% |
Underwriting expenses |
|
(3,672 |
) |
|
|
(3,091 |
) |
|
18.8 |
% |
|
|
(7,346 |
) |
|
|
(7,440 |
) |
|
(1.3 |
)% |
Underwriting profit (a),
(b) |
$ |
1,252 |
|
|
$ |
2,138 |
|
|
(41.4 |
)% |
|
$ |
1,461 |
|
|
$ |
3,404 |
|
|
(57.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
72.9 |
% |
|
|
71.9 |
% |
|
|
|
|
76.5 |
% |
|
|
69.0 |
% |
|
|
Expense ratio |
|
20.2 |
% |
|
|
16.6 |
% |
|
|
|
|
19.6 |
% |
|
|
21.3 |
% |
|
|
Combined ratio |
|
93.1 |
% |
|
|
88.5 |
% |
|
|
|
|
96.1 |
% |
|
|
90.3 |
% |
|
|
Accident year loss ratio |
|
81.4 |
% |
|
|
77.3 |
% |
|
|
|
|
80.4 |
% |
|
|
74.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
|
|
|
|
|
|
|
|
|
|
(b) Underwriting results for the three and six months ended
June 30, 2022 include gross fee income of $5.9 million and
$11.4 million, respectively ($5.4 million and $10.6 million in the
respective prior year periods). |
CASUALTY REINSURANCE
|
Three Months EndedJune 30, |
|
|
|
|
Six Months EndedJune 30, |
|
|
($ in
thousands) |
|
2022 |
|
|
|
2021 |
|
|
%Change |
|
|
|
2022 |
|
|
|
2021 |
|
|
%Change |
Gross written premiums |
$ |
8,112 |
|
|
$ |
36,943 |
|
|
(78.0 |
)% |
|
$ |
38,056 |
|
|
$ |
101,804 |
|
|
(62.6 |
)% |
Net written premiums |
$ |
10,297 |
|
|
$ |
36,943 |
|
|
(72.1 |
)% |
|
$ |
40,241 |
|
|
$ |
81,104 |
|
|
(50.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums |
$ |
30,237 |
|
|
$ |
36,165 |
|
|
(16.4 |
)% |
|
$ |
69,442 |
|
|
$ |
66,693 |
|
|
4.1 |
% |
Losses and loss adjustment
expenses |
|
(18,968 |
) |
|
|
(27,040 |
) |
|
(29.9 |
)% |
|
|
(54,216 |
) |
|
|
(48,056 |
) |
|
12.8 |
% |
Underwriting expenses |
|
(9,210 |
) |
|
|
(12,446 |
) |
|
(26.0 |
)% |
|
|
(22,004 |
) |
|
|
(23,583 |
) |
|
(6.7 |
)% |
Underwriting profit (loss)
(a) |
$ |
2,059 |
|
|
$ |
(3,321 |
) |
|
— |
|
|
$ |
(6,778 |
) |
|
$ |
(4,946 |
) |
|
37.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio |
|
62.7 |
% |
|
|
74.8 |
% |
|
|
|
|
|
78.1 |
% |
|
|
72.1 |
% |
|
|
Expense ratio |
|
30.5 |
% |
|
|
34.4 |
% |
|
|
|
|
|
31.7 |
% |
|
|
35.3 |
% |
|
|
Combined ratio |
|
93.2 |
% |
|
|
109.2 |
% |
|
|
|
|
|
109.8 |
% |
|
|
107.4 |
% |
|
|
Accident year loss ratio |
|
62.7 |
% |
|
|
60.9 |
% |
|
|
|
|
|
68.3 |
% |
|
|
60.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See
"Reconciliation of Non-GAAP Measures". |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
the disclosure of underwriting profit (loss) by individual segment
and of the Company as a whole is useful to investors, analysts,
rating agencies and other users of our financial information in
evaluating our performance because our objective is to consistently
earn underwriting profits. We evaluate the performance of our
segments and allocate resources based primarily on underwriting
profit. We define underwriting profit (loss) as net earned premiums
and gross fee income (in specific instances when the Company is not
retaining insurance risk) less losses and loss adjustment expenses
and other operating expenses. Other operating expenses include the
underwriting, acquisition, and insurance expenses of the operating
segments and, for consolidated underwriting profit (loss), the
expenses of the Corporate and Other segment. Our definition of
underwriting profit (loss) may not be comparable to that of other
companies.
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
($ in thousands) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Underwriting profit (loss) of the operating segments: |
|
|
|
|
|
|
|
Excess and Surplus Lines |
$ |
22,334 |
|
|
$ |
26,917 |
|
|
$ |
43,791 |
|
|
$ |
(124,029 |
) |
Specialty Admitted Insurance |
|
1,252 |
|
|
|
2,138 |
|
|
|
1,461 |
|
|
|
3,404 |
|
Casualty Reinsurance |
|
2,059 |
|
|
|
(3,321 |
) |
|
|
(6,778 |
) |
|
|
(4,946 |
) |
Total underwriting profit
(loss) of operating segments |
|
25,645 |
|
|
|
25,734 |
|
|
|
38,474 |
|
|
|
(125,571 |
) |
Other operating expenses of
the Corporate and Other segment |
|
(8,888 |
) |
|
|
(7,915 |
) |
|
|
(16,762 |
) |
|
|
(15,971 |
) |
Underwriting profit (loss)
(a) |
|
16,757 |
|
|
|
17,819 |
|
|
|
21,712 |
|
|
|
(141,542 |
) |
Net investment income |
|
14,705 |
|
|
|
14,348 |
|
|
|
30,972 |
|
|
|
29,437 |
|
Net realized and unrealized
(losses) gains on investments |
|
(17,110 |
) |
|
|
3,483 |
|
|
|
(22,120 |
) |
|
|
9,755 |
|
Other expense |
|
49 |
|
|
|
(827 |
) |
|
|
(252 |
) |
|
|
(1,349 |
) |
Interest expense |
|
(4,049 |
) |
|
|
(2,249 |
) |
|
|
(6,341 |
) |
|
|
(4,465 |
) |
Amortization of intangible
assets |
|
(91 |
) |
|
|
(91 |
) |
|
|
(182 |
) |
|
|
(182 |
) |
Consolidated income (loss)
before taxes |
$ |
10,261 |
|
|
$ |
32,483 |
|
|
$ |
23,789 |
|
|
$ |
(108,346 |
) |
|
|
|
|
|
|
|
|
(a) Included in underwriting results for the three and six months
ended June 30, 2022 is gross fee income of $5.9 million and
$11.4 million, respectively ($5.4 million and $10.6 million in the
respective prior year periods). |
Adjusted Net Operating Income
(Loss)
We define adjusted net operating income (loss)
as net income (loss) available to common shareholders excluding net
realized and unrealized (losses) gains on investments, and certain
non-operating expenses such as professional service fees related to
a purported class action lawsuit, various strategic initiatives,
and the filing of registration statements for the offering of
securities, and severance costs associated with terminated
employees. We use adjusted net operating income (loss) as an
internal performance measure in the management of our operations
because we believe it gives our management and other users of our
financial information useful insight into our results of operations
and our underlying business performance. Adjusted net operating
income (loss) should not be viewed as a substitute for net income
(loss) calculated in accordance with GAAP, and our definition of
adjusted net operating income (loss) may not be comparable to that
of other companies.
Our income (loss) available to common
shareholders reconciles to our adjusted net operating income (loss)
as follows:
|
Three Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
IncomeBeforeTaxes |
|
NetIncome |
Income available to common shareholders |
$ |
7,636 |
|
$ |
5,039 |
|
$ |
32,483 |
|
|
$ |
20,843 |
|
Net realized and unrealized
investment losses (gains) |
|
17,110 |
|
|
14,986 |
|
|
(3,483 |
) |
|
|
(2,741 |
) |
Other expenses |
|
— |
|
|
— |
|
|
811 |
|
|
|
727 |
|
Adjusted net operating
income |
$ |
24,746 |
|
$ |
20,025 |
|
$ |
29,811 |
|
|
$ |
18,829 |
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2022 |
|
|
2021 |
|
($ in
thousands) |
IncomeBeforeTaxes |
|
NetIncome |
|
LossBeforeTaxes |
|
NetLoss |
Income (loss) available to
common shareholders |
$ |
20,289 |
|
$ |
14,369 |
|
$ |
(108,346 |
) |
|
$ |
(82,617 |
) |
Net realized and unrealized
investment losses (gains) |
|
22,120 |
|
|
19,176 |
|
|
(9,755 |
) |
|
|
(8,492 |
) |
Other expenses |
|
347 |
|
|
347 |
|
|
1,338 |
|
|
|
1,143 |
|
Adjusted net operating income
(loss) |
$ |
42,756 |
|
$ |
33,892 |
|
$ |
(116,763 |
) |
|
$ |
(89,966 |
) |
Tangible Equity (per Share) and Tangible
Common Equity (per Share)
We define tangible equity as shareholders'
equity plus mezzanine Series A preferred shares less goodwill and
intangible assets (net of amortization). We define tangible common
equity as tangible equity less mezzanine Series A preferred shares.
Our definition of tangible equity and tangible common 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 and tangible common
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 and tangible
common equity for June 30, 2022, March 31, 2022, and
December 31, 2021.
|
June 30, 2022 |
|
March 31, 2022 |
|
December 31, 2021 |
($ in thousands,
except for share data) |
Equity |
|
Equity per share |
|
Equity |
|
Equity per share |
|
Equity |
|
Equity per share |
Shareholders' equity |
$ |
594,386 |
|
$ |
15.87 |
|
$ |
647,677 |
|
$ |
17.30 |
|
$ |
725,362 |
|
$ |
19.41 |
Plus: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
144,898 |
|
|
|
|
— |
|
|
Less: Goodwill and intangible
assets |
|
217,688 |
|
|
|
|
217,779 |
|
|
|
|
217,870 |
|
|
Tangible equity |
$ |
521,596 |
|
$ |
12.10 |
|
$ |
574,796 |
|
$ |
13.34 |
|
$ |
507,492 |
|
$ |
13.58 |
Less: Series A redeemable
preferred shares |
|
144,898 |
|
|
|
|
144,898 |
|
|
|
|
— |
|
|
Tangible common equity |
$ |
376,698 |
|
$ |
10.06 |
|
$ |
429,898 |
|
$ |
11.48 |
|
$ |
507,492 |
|
$ |
13.58 |
|
|
|
|
|
|
|
|
|
|
|
|
Common shares outstanding |
|
37,450,264 |
|
|
|
|
37,448,314 |
|
|
|
|
37,373,066 |
|
|
Common shares from assumed
conversion of Series A preferred shares |
|
5,640,158 |
|
|
|
|
5,640,158 |
|
|
|
|
— |
|
|
Common shares outstanding
after assumed conversion of Series A preferred shares |
|
43,090,422 |
|
|
|
|
43,088,472 |
|
|
|
|
37,373,066 |
|
|
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