JAMES RIVER GROUP HOLDINGS, LTD.
|
(Exact name of registrant as specified in its charter)
|
Bermuda
|
001-36777
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98-0585280
|
(State or other jurisdiction of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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Wellesley House, 2nd Floor, 90 Pitts Bay Road, Pembroke Bermuda
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HM 08
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(Address of principal executive offices)
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(Zip Code)
|
|
(Former name or former address, if changed since last report.)
|
o
|
Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
o
|
Soliciting material pursuant to Rule 14a‑12 under the Exchange Act (17 CFR 240.14a‑12)
|
o
|
Pre‑commencement communications pursuant to Rule 14d‑2(b) under the Exchange Act (17 CFR 240.14d‑2(b))
|
o
|
Pre‑commencement communications pursuant to Rule 13e‑4(c) under the Exchange Act (17 CFR 240.13e‑4(c))
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Item 2.02
|
Results of Operations and Financial Condition.
|
Item 5.02
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
|
Item 5.07
|
Submission of Matters to a Vote of Security Holders.
|
For
|
Against
|
Abstain
|
Broker Non-Votes
|
28,350,431
|
157,797
|
2,764
|
0
|
For
|
Against
|
Abstain
|
Broker Non-Votes
|
22,259,059
|
5,293,202
|
4,555
|
954,176
|
For
|
Against
|
Abstain
|
Broker Non-Votes
|
26,077,202
|
1,388,787
|
90,827
|
954,176
|
Item 8.01
|
Other Events.
|
Exhibit No.
|
|
Description
|
10.1
|
|
|
99.1
|
|
Exhibit No.
|
|
Description
|
10.1
|
|
|
99.1
|
|
▪
|
First Quarter 2019 Net Income of $22.7 million -- $0.75 per diluted share -- a 45% increase over the first quarter of 2018, and Adjusted Net Operating Income of $21.7 million -- $0.71 per diluted share -- a 31% increase over the first quarter of 2018
|
▪
|
Annualized Adjusted Net Operating Return on Average Tangible Equity of 16.9%
|
▪
|
Tangible Book Value per Share of $17.74, an increase of 10.4% from year-end 2018, inclusive of dividends
|
▪
|
Expense Ratio of 22.6%, an improvement of 2.3 percentage points over the prior year quarter
|
▪
|
Net Investment Income of $19.4 million, an increase of 47%, or $6.2 million, over the prior year quarter
|
•
|
Gross written premium of $327.3 million, consisting of the following:
|
|
Three Months Ended
March 31, |
|
||||||||
($ in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Excess and Surplus Lines
|
$
|
186,549
|
|
|
$
|
167,486
|
|
|
11
|
%
|
Specialty Admitted Insurance
|
102,953
|
|
|
87,401
|
|
|
18
|
%
|
||
Casualty Reinsurance
|
37,832
|
|
|
43,229
|
|
|
-12
|
%
|
||
|
$
|
327,334
|
|
|
$
|
298,116
|
|
|
10
|
%
|
•
|
Net written premium of $207.7 million, consisting of the following:
|
|
Three Months Ended
March 31, |
|
||||||||
($ in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Excess and Surplus Lines
|
$
|
154,861
|
|
|
$
|
153,931
|
|
|
1
|
%
|
Specialty Admitted Insurance
|
15,021
|
|
|
13,818
|
|
|
9
|
%
|
||
Casualty Reinsurance
|
37,859
|
|
|
43,229
|
|
|
-12
|
%
|
||
|
$
|
207,741
|
|
|
$
|
210,978
|
|
|
-2
|
%
|
•
|
Net earned premium of $190.2 million, consisting of the following:
|
|
Three Months Ended
March 31, |
|
||||||||
($ in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Excess and Surplus Lines
|
$
|
141,672
|
|
|
$
|
129,971
|
|
|
9
|
%
|
Specialty Admitted Insurance
|
12,360
|
|
|
13,340
|
|
|
-7
|
%
|
||
Casualty Reinsurance
|
36,120
|
|
|
57,631
|
|
|
-37
|
%
|
||
|
$
|
190,152
|
|
|
$
|
200,942
|
|
|
-5
|
%
|
•
|
The Excess and Surplus Lines segment gross written premium increased due to growth in its Commercial Auto division amid a rate increase on the March 1, 2018 renewal of the Company's largest contract, as well as 5% growth in core (non-commercial auto) lines gross written premium, as seven out of twelve underwriting divisions grew. Excluding the Allied Health division, which had an exceptional first quarter of 2018, core gross written premium grew 23%;
|
•
|
The Specialty Admitted Insurance segment gross written premium and net written premium increased due to growth in both its fronting business and its individual risk Workers’ Compensation business, while net earned premium decreased for the quarter as our net retention on our fronting business declined as planned;
|
•
|
Gross written premium, net written premium and net earned premium in the Casualty Reinsurance segment decreased from that of the prior year quarter, which was in line with our expectations and is consistent with our planned reductions for the segment begun during 2018;
|
•
|
There was unfavorable reserve development of $1.0 million compared to favorable reserve development of $2.6 million in the prior year quarter (representing a 0.5 percentage point increase and 1.3 percentage point decrease to the Company’s loss ratio in each period, respectively);
|
•
|
Pre-tax (unfavorable) favorable reserve development by segment was as follows:
|
|
Three Months Ended
March 31, |
||||||
($ in thousands)
|
2019
|
|
2018
|
||||
Excess and Surplus Lines
|
$
|
10
|
|
|
$
|
1,112
|
|
Specialty Admitted Insurance
|
2,004
|
|
|
1,322
|
|
||
Casualty Reinsurance
|
(2,982
|
)
|
|
176
|
|
||
|
$
|
(968
|
)
|
|
$
|
2,610
|
|
•
|
The unfavorable reserve development in the Casualty Reinsurance segment largely related to treaties the Company no longer writes. This unfavorable development was partially offset by a reduction to commission expense on these treaties;
|
•
|
Group accident year loss ratio of 73.1% increased from 72.8% in the prior year quarter;
|
•
|
Group combined ratio of 96.2% improved from 96.4% in the prior year quarter;
|
•
|
Group expense ratio of 22.6% improved from 24.9% in the prior year quarter, driven by a larger portion of our consolidated net earned premium coming from the Excess and Surplus Lines segment, which has significant scale and a lower expense ratio than our other segments, and lower net commissions in the Casualty Reinsurance segment;
|
•
|
Gross fee income by segment was as follows:
|
|
Three Months Ended
March 31, |
|
||||||||
($ in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Excess and Surplus Lines
|
$
|
2,673
|
|
|
$
|
4,848
|
|
|
(45
|
)%
|
Specialty Admitted Insurance
|
3,772
|
|
|
3,329
|
|
|
13
|
%
|
||
|
$
|
6,445
|
|
|
$
|
8,177
|
|
|
(21
|
)%
|
•
|
Fee income in the Excess & Surplus Lines segment decreased from its level in the prior year quarter as a portion of the segment’s fee for services revenue is now recorded as gross written premium. Fee income in the Specialty Admitted Insurance segment increased as a result of the continued growth of its fronting business;
|
•
|
Net investment income was $19.4 million, an increase of 47% from the prior year quarter. Further details can be found in the "Investment Results" section below.
|
|
Three Months Ended
March 31, |
|
||||||||
($ in thousands)
|
2019
|
|
2018
|
|
% Change
|
|||||
Renewable Energy Investments
|
$
|
921
|
|
|
$
|
1,211
|
|
|
(24
|
)%
|
Other Private Investments
|
2,483
|
|
|
609
|
|
|
308
|
%
|
||
All Other Net Investment Income
|
16,027
|
|
|
11,436
|
|
|
40
|
%
|
||
Total Net Investment Income
|
$
|
19,431
|
|
|
$
|
13,256
|
|
|
47
|
%
|
|
March 31, 2019
|
|
December 31, 2018
|
||||
|
($ in thousands, except for share data)
|
||||||
ASSETS
|
|
|
|
||||
Invested assets:
|
|
|
|
||||
Fixed maturity securities, available-for-sale
|
$
|
1,250,926
|
|
|
$
|
1,184,202
|
|
Equity securities, at fair value
|
84,405
|
|
|
78,385
|
|
||
Bank loan participations, held-for-investment
|
263,318
|
|
|
260,972
|
|
||
Short-term investments
|
92,134
|
|
|
81,966
|
|
||
Other invested assets
|
74,465
|
|
|
72,321
|
|
||
Total invested assets
|
1,765,248
|
|
|
1,677,846
|
|
||
|
|
|
|
||||
Cash and cash equivalents
|
132,552
|
|
|
172,457
|
|
||
Accrued investment income
|
11,836
|
|
|
11,110
|
|
||
Premiums receivable and agents’ balances
|
351,724
|
|
|
307,899
|
|
||
Reinsurance recoverable on unpaid losses
|
508,655
|
|
|
467,371
|
|
||
Reinsurance recoverable on paid losses
|
34,372
|
|
|
18,344
|
|
||
Deferred policy acquisition costs
|
56,318
|
|
|
54,450
|
|
||
Goodwill and intangible assets
|
219,219
|
|
|
219,368
|
|
||
Other assets
|
219,327
|
|
|
207,931
|
|
||
Total assets
|
$
|
3,299,251
|
|
|
$
|
3,136,776
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
Reserve for losses and loss adjustment expenses
|
$
|
1,730,307
|
|
|
$
|
1,661,459
|
|
Unearned premiums
|
420,601
|
|
|
386,473
|
|
||
Senior debt
|
98,300
|
|
|
118,300
|
|
||
Junior subordinated debt
|
104,055
|
|
|
104,055
|
|
||
Accrued expenses
|
48,903
|
|
|
51,792
|
|
||
Other liabilities
|
142,788
|
|
|
105,456
|
|
||
Total liabilities
|
2,544,954
|
|
|
2,427,535
|
|
||
|
|
|
|
||||
Total shareholders’ equity
|
754,297
|
|
|
709,241
|
|
||
Total liabilities and shareholders’ equity
|
$
|
3,299,251
|
|
|
$
|
3,136,776
|
|
|
|
|
|
||||
Tangible equity (a)
|
$
|
535,078
|
|
|
$
|
489,873
|
|
Tangible equity per common share outstanding (a)
|
$
|
17.74
|
|
|
$
|
16.34
|
|
Total shareholders’ equity per common share
outstanding
|
$
|
25.01
|
|
|
$
|
23.65
|
|
Common shares outstanding
|
30,162,045
|
|
|
29,988,460
|
|
||
Debt (b) to total capitalization ratio
|
21.2
|
%
|
|
23.9
|
%
|
||
(a)
See “Reconciliation of Non-GAAP Measures”.
(b)
Includes senior debt and junior subordinated debt.
|
|
|
|
|
Three Months Ended
March 31, |
||||||
|
2019
|
|
2018
|
||||
|
($ in thousands, except for share data)
|
||||||
REVENUES
|
|
|
|
||||
Gross written premiums
|
$
|
327,334
|
|
|
$
|
298,116
|
|
Net written premiums
|
207,741
|
|
|
210,978
|
|
||
|
|
|
|
||||
Net earned premiums
|
190,152
|
|
|
200,942
|
|
||
Net investment income
|
19,431
|
|
|
13,256
|
|
||
Net realized and unrealized gains (losses) on investments (a)
|
1,625
|
|
|
(810
|
)
|
||
Other income
|
2,919
|
|
|
4,956
|
|
||
Total revenues
|
214,127
|
|
|
218,344
|
|
||
|
|
|
|
||||
EXPENSES
|
|
|
|
||||
Losses and loss adjustment expenses
|
139,927
|
|
|
143,772
|
|
||
Other operating expenses
|
45,752
|
|
|
54,783
|
|
||
Other expenses
|
—
|
|
|
4
|
|
||
Interest expense
|
2,808
|
|
|
2,522
|
|
||
Amortization of intangible assets
|
149
|
|
|
149
|
|
||
Total expenses
|
188,636
|
|
|
201,230
|
|
||
Income before taxes
|
25,491
|
|
|
17,114
|
|
||
Income tax expense
|
2,763
|
|
|
1,481
|
|
||
NET INCOME
|
$
|
22,728
|
|
|
$
|
15,633
|
|
ADJUSTED NET OPERATING INCOME (b)
|
$
|
21,713
|
|
|
$
|
16,569
|
|
|
|
|
|
||||
EARNINGS PER SHARE
|
|
|
|
||||
Basic
|
$
|
0.76
|
|
|
$
|
0.53
|
|
Diluted
|
$
|
0.75
|
|
|
$
|
0.52
|
|
|
|
|
|
||||
ADJUSTED NET OPERATING INCOME PER SHARE
|
|
|
|
||||
Basic
|
$
|
0.72
|
|
|
$
|
0.56
|
|
Diluted
|
$
|
0.71
|
|
|
$
|
0.55
|
|
|
|
|
|
||||
Weighted-average common shares outstanding:
|
|
|
|
||||
Basic
|
30,059,398
|
|
|
29,764,320
|
|
||
Diluted
|
30,472,304
|
|
|
30,193,303
|
|
||
Cash dividends declared per common share
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
|
|
|
||||
Ratios:
|
|
|
|
||||
Loss ratio
|
73.6
|
%
|
|
71.5
|
%
|
||
Expense ratio (c)
|
22.6
|
%
|
|
24.9
|
%
|
||
Combined ratio
|
96.2
|
%
|
|
96.4
|
%
|
||
Accident year loss ratio
|
73.1
|
%
|
|
72.8
|
%
|
||
(a) Includes net realized gains of $3.5 million and net realized losses of $1.7 million for the change in net unrealized gains/losses on equity securities in the three months ended March 31, 2019 and 2018, respectively, in accordance with ASU 2016-01 (adopted on January 1, 2018).
|
|||||||
(b) See "Reconciliation of Non-GAAP Measures".
|
|||||||
(c) Calculated with a numerator comprising other operating expenses less gross fee income of the Excess and Surplus Lines segment and a denominator of net earned premiums.
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
186,549
|
|
|
$
|
167,486
|
|
|
11.4
|
%
|
Net written premiums
|
$
|
154,861
|
|
|
$
|
153,931
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|||||
Net earned premiums
|
$
|
141,672
|
|
|
$
|
129,971
|
|
|
9.0
|
%
|
Losses and loss adjustment expenses
|
(108,205
|
)
|
|
(100,619
|
)
|
|
7.5
|
%
|
||
Underwriting expenses
|
(20,365
|
)
|
|
(18,053
|
)
|
|
12.8
|
%
|
||
Underwriting profit (a), (b)
|
$
|
13,102
|
|
|
$
|
11,299
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|||||
Ratios:
|
|
|
|
|
|
|||||
Loss ratio
|
76.4
|
%
|
|
77.4
|
%
|
|
|
|||
Expense ratio
|
14.4
|
%
|
|
13.9
|
%
|
|
|
|||
Combined ratio
|
90.8
|
%
|
|
91.3
|
%
|
|
|
|||
Accident year loss ratio
|
76.4
|
%
|
|
78.3
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
(a) See "Reconciliation of Non-GAAP Measures".
|
|
|
|
|
|
|||||
(b) Underwriting results include fee income of $2.7 million and $4.8 million for the three months ended March 31, 2019 and 2018, respectively. These amounts are included in “Other income” in our Condensed Consolidated Income Statements.
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
102,953
|
|
|
$
|
87,401
|
|
|
17.8
|
%
|
Net written premiums
|
$
|
15,021
|
|
|
$
|
13,818
|
|
|
8.7
|
%
|
|
|
|
|
|
|
|||||
Net earned premiums
|
$
|
12,360
|
|
|
$
|
13,340
|
|
|
(7.3
|
)%
|
Losses and loss adjustment expenses
|
(7,202
|
)
|
|
(7,611
|
)
|
|
(5.4
|
)%
|
||
Underwriting expenses
|
(3,535
|
)
|
|
(4,106
|
)
|
|
(13.9
|
)%
|
||
Underwriting profit (a), (b)
|
$
|
1,623
|
|
|
$
|
1,623
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|||||
Ratios:
|
|
|
|
|
|
|||||
Loss ratio
|
58.3
|
%
|
|
57.1
|
%
|
|
|
|||
Expense ratio
|
28.6
|
%
|
|
30.7
|
%
|
|
|
|||
Combined ratio
|
86.9
|
%
|
|
87.8
|
%
|
|
|
|||
Accident year loss ratio
|
74.5
|
%
|
|
67.0
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
(a) See "Reconciliation of Non-GAAP Measures".
|
|
|
|
|
|
|||||
(b) Underwriting results include fee income of $3.8 million and $3.3 million for the three months ended March 31, 2019 and 2018, respectively.
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2019
|
|
2018
|
|
% Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
37,832
|
|
|
$
|
43,229
|
|
|
(12.5
|
)%
|
Net written premiums
|
$
|
37,859
|
|
|
$
|
43,229
|
|
|
(12.4
|
)%
|
|
|
|
|
|
|
|||||
Net earned premiums
|
$
|
36,120
|
|
|
$
|
57,631
|
|
|
(37.3
|
)%
|
Losses and loss adjustment expenses
|
(24,520
|
)
|
|
(35,542
|
)
|
|
(31.0
|
)%
|
||
Underwriting expenses
|
(11,273
|
)
|
|
(20,345
|
)
|
|
(44.6
|
)%
|
||
Underwriting profit (a)
|
$
|
327
|
|
|
$
|
1,744
|
|
|
(81.3
|
)%
|
|
|
|
|
|
|
|||||
Ratios:
|
|
|
|
|
|
|||||
Loss ratio
|
67.9
|
%
|
|
61.7
|
%
|
|
|
|||
Expense ratio
|
31.2
|
%
|
|
35.3
|
%
|
|
|
|||
Combined ratio
|
99.1
|
%
|
|
97.0
|
%
|
|
|
|||
Accident year loss ratio
|
59.6
|
%
|
|
62.0
|
%
|
|
|
|||
|
|
|
|
|
|
|||||
(a) See "Reconciliation of Non-GAAP Measures".
|
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
|
Income Before Taxes
|
|
Net Income
|
|
Income Before Taxes
|
|
Net Income
|
||||||||
|
(in thousands)
|
||||||||||||||
Income as reported
|
$
|
25,491
|
|
|
$
|
22,728
|
|
|
$
|
17,114
|
|
|
$
|
15,633
|
|
Net realized and unrealized losses (gains) on investments (a)
|
(1,625
|
)
|
|
(1,015
|
)
|
|
810
|
|
|
665
|
|
||||
Other expenses
|
—
|
|
|
—
|
|
|
4
|
|
|
20
|
|
||||
Interest expense on leased building the Company was previously deemed to own for accounting purposes
|
—
|
|
|
—
|
|
|
318
|
|
|
251
|
|
||||
Adjusted net operating income
|
$
|
23,866
|
|
|
$
|
21,713
|
|
|
$
|
18,246
|
|
|
$
|
16,569
|
|
|
|
|
|
|
|
|
|
||||||||
(a) Includes net realized gains of $3.5 million and net realized losses of $1.7 million for the change in net unrealized gains/losses on equity securities in the three months ended March 31, 2019 and 2018, respectively, in accordance with ASU 2016-01 (adopted on January 1, 2018).
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
||||||||||||||||||
($ in thousands, except for share data)
|
Equity
|
|
Equity per share
|
|
Equity
|
|
Equity per share
|
|
Equity
|
|
Equity per share
|
||||||||||||
Shareholders' equity
|
$
|
754,297
|
|
|
$
|
25.01
|
|
|
$
|
709,241
|
|
|
$
|
23.65
|
|
|
$
|
685,770
|
|
|
$
|
22.96
|
|
Goodwill and intangible assets
|
219,219
|
|
|
7.27
|
|
|
219,368
|
|
|
7.31
|
|
|
220,016
|
|
|
7.37
|
|
||||||
Tangible equity
|
$
|
535,078
|
|
|
$
|
17.74
|
|
|
$
|
489,873
|
|
|
$
|
16.34
|
|
|
$
|
465,754
|
|
|
$
|
15.59
|
|
Dividends to shareholders for the three months ended March 31, 2019
|
9,144
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
||||||||||
Pre-dividend tangible equity
|
$
|
544,222
|
|
|
$
|
18.04
|
|
|
|
|
|
|
|
|
|