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FORM 10-Q
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x
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2018
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¨
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
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JAMES RIVER GROUP HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
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Bermuda
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98-0585280
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging Growth Company
o
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Page
Number
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•
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the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves;
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•
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inaccurate estimates and judgments in our risk management may expose us to greater risks than intended;
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•
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the potential loss of key members of our management team or key employees and our ability to attract and retain personnel;
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•
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adverse economic factors resulting in the sale of fewer policies than expected or an increase in the frequency or severity of claims, or both;
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•
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a decline in our financial strength rating resulting in a reduction of new or renewal business;
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•
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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;
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•
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reliance on a select group of customers for a significant portion of our business and the impact of our potential failure to maintain such relationships;
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•
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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;
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•
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losses from catastrophic events which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events;
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•
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potential effects on our business of emerging claim and coverage issues;
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•
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exposure to credit risk, interest rate risk and other market risk in our investment portfolio;
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•
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changes in laws or government regulation, including tax or insurance law and regulations;
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•
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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;
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•
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losses resulting from reinsurance counterparties failing to pay us on reinsurance claims or insurance companies with whom we have a fronting arrangement failing to pay us for claims;
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•
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the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents;
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•
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our ability to manage our growth effectively;
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•
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inadequacy of premiums we charge to compensate us for our losses incurred;
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•
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the recently enacted Public Law No. 115-97, informally titled the Tax Cuts and Jobs Act, may have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as on our shareholders;
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•
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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;
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•
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the Company or any of its foreign subsidiaries becoming subject to U.S. federal income taxation;
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•
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failure to maintain effective internal controls in accordance with Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); and
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•
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changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends.
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(Unaudited)
March 31, 2018 |
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December 31,
2017 |
||||
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(in thousands)
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||||||
Assets
|
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Invested assets:
|
|
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Fixed maturity securities:
|
|
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Available-for-sale, at fair value (amortized cost: 2018 – $1,054,902; 2017 – $1,008,662)
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$
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1,043,251
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$
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1,016,098
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Trading, at fair value (amortized cost: 2018 – $3,800; 2017 – $3,801)
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3,805
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3,808
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Equity securities available-for-sale, at fair value (cost: 2018 – $80,464; 2017 – $75,318)
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85,957
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82,522
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Bank loan participations held-for-investment, at amortized cost, net of allowance
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257,426
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238,214
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Short-term investments
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26,235
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36,804
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Other invested assets
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74,974
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70,208
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Total invested assets
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1,491,648
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1,447,654
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||||
Cash and cash equivalents
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151,046
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163,495
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Accrued investment income
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8,713
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|
8,381
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Premiums receivable and agents’ balances, net
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391,456
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|
352,436
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Reinsurance recoverable on unpaid losses
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331,245
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|
302,524
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Reinsurance recoverable on paid losses
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16,501
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11,292
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Prepaid reinsurance premiums
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96,141
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91,979
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Deferred policy acquisition costs
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70,769
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72,365
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Intangible assets, net
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38,185
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38,334
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Goodwill
|
181,831
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181,831
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Other assets
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84,475
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86,404
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Total assets
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$
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2,862,010
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$
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2,756,695
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(Unaudited)
March 31, 2018 |
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December 31,
2017 |
||||
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(in thousands, except share amounts)
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||||||
Liabilities and Shareholders’ Equity
|
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Liabilities:
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Reserve for losses and loss adjustment expenses
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$
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1,369,548
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$
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1,292,349
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Unearned premiums
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432,248
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418,114
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Payables to reinsurers
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59,138
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56,268
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Senior debt
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98,300
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98,300
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Junior subordinated debt
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104,055
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104,055
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Accrued expenses
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35,138
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39,295
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Other liabilities
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77,813
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53,615
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Total liabilities
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2,176,240
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2,061,996
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Commitments and contingent liabilities
|
|
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Shareholders’ equity:
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Common Shares – 2018 and 2017: $0.0002 par value; 200,000,000 shares authorized; 29,866,705 and 29,696,682 shares issued and outstanding, respectively
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6
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6
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Preferred Shares – 2018 and 2017: $0.00125 par value; 20,000,000 shares authorized; no shares issued and outstanding
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—
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—
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Additional paid-in capital
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639,183
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636,149
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Retained earnings
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58,753
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48,198
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Accumulated other comprehensive (loss) income
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(12,172
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)
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10,346
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Total shareholders’ equity
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685,770
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694,699
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Total liabilities and shareholders’ equity
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$
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2,862,010
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$
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2,756,695
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Three Months Ended
March 31, |
||||||
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2018
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2017
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||||
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(in thousands, except share amounts)
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||||||
Revenues
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Gross written premiums
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$
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298,116
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$
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224,179
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Ceded written premiums
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(87,138
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)
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(66,269
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)
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Net written premiums
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210,978
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157,910
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|
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Change in net unearned premiums
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(10,036
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)
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(3,223
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)
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Net earned premiums
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200,942
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|
154,687
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|
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Net investment income
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13,256
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|
16,733
|
|
||
Net realized and unrealized (losses) gains on investments
|
(810
|
)
|
|
1,047
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|
||
Other income
|
4,956
|
|
|
3,935
|
|
||
Total revenues
|
218,344
|
|
|
176,402
|
|
||
Expenses
|
|
|
|
|
|||
Losses and loss adjustment expenses
|
143,772
|
|
|
105,369
|
|
||
Other operating expenses
|
54,783
|
|
|
48,893
|
|
||
Other expenses
|
4
|
|
|
(114
|
)
|
||
Interest expense
|
2,522
|
|
|
2,123
|
|
||
Amortization of intangible assets
|
149
|
|
|
149
|
|
||
Total expenses
|
201,230
|
|
|
156,420
|
|
||
Income before taxes
|
17,114
|
|
|
19,982
|
|
||
Income tax expense
|
1,481
|
|
|
1,532
|
|
||
Net income
|
15,633
|
|
|
18,450
|
|
||
Other comprehensive (loss) income:
|
|
|
|
|
|||
Net unrealized (losses) gains, net of taxes of $(544) in 2018 and $1,514 in 2017
|
(18,547
|
)
|
|
4,034
|
|
||
Total comprehensive (loss) income
|
$
|
(2,914
|
)
|
|
$
|
22,484
|
|
Per share data:
|
|
|
|
|
|||
Basic earnings per share
|
$
|
0.53
|
|
|
$
|
0.63
|
|
Diluted earnings per share
|
$
|
0.52
|
|
|
$
|
0.61
|
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Dividend declared per share
|
$
|
0.30
|
|
|
$
|
0.30
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|||
Basic
|
29,764,320
|
|
|
29,289,588
|
|
||
Diluted
|
30,193,303
|
|
|
30,327,423
|
|
|
Number of
Common Shares Outstanding |
|
Class A
Common Stock |
|
Additional
Paid-in Capital |
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income |
|
Total
|
|||||||||||
|
(in thousands, except share amounts)
|
|||||||||||||||||||||
Balances at December 31, 2016
|
29,257,566
|
|
|
$
|
6
|
|
|
$
|
636,856
|
|
|
$
|
55,232
|
|
|
$
|
1,127
|
|
|
$
|
693,221
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
18,450
|
|
|
—
|
|
|
18,450
|
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,034
|
|
|
4,034
|
|
|||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,810
|
)
|
|
—
|
|
|
(8,810
|
)
|
|||||
Exercise of stock options
|
63,467
|
|
|
—
|
|
|
198
|
|
|
—
|
|
|
—
|
|
|
198
|
|
|||||
Vesting of RSUs
|
23,294
|
|
|
—
|
|
|
(627
|
)
|
|
—
|
|
|
—
|
|
|
(627
|
)
|
|||||
Compensation expense under share incentive plans
|
—
|
|
|
—
|
|
|
1,794
|
|
|
—
|
|
|
—
|
|
|
1,794
|
|
|||||
Balances at March 31, 2017
|
29,344,327
|
|
|
$
|
6
|
|
|
$
|
638,221
|
|
|
$
|
64,872
|
|
|
$
|
5,161
|
|
|
$
|
708,260
|
|
Balances at December 31, 2017
|
29,696,682
|
|
|
$
|
6
|
|
|
$
|
636,149
|
|
|
$
|
48,198
|
|
|
$
|
10,346
|
|
|
$
|
694,699
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
15,633
|
|
|
—
|
|
|
15,633
|
|
|||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,547
|
)
|
|
(18,547
|
)
|
|||||
Dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,049
|
)
|
|
—
|
|
|
(9,049
|
)
|
|||||
Exercise of stock options
|
127,196
|
|
|
—
|
|
|
2,355
|
|
|
—
|
|
|
—
|
|
|
2,355
|
|
|||||
Vesting of RSUs
|
42,827
|
|
|
—
|
|
|
(776
|
)
|
|
—
|
|
|
—
|
|
|
(776
|
)
|
|||||
Compensation expense under share incentive plans
|
—
|
|
|
—
|
|
|
1,455
|
|
|
—
|
|
|
—
|
|
|
1,455
|
|
|||||
Cumulative effect of adoption of ASU No. 2016-01, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
4,682
|
|
|
(4,682
|
)
|
|
—
|
|
|||||
Cumulative effect of adoption of ASU No. 2018-02
|
—
|
|
|
—
|
|
|
—
|
|
|
(711
|
)
|
|
711
|
|
|
—
|
|
|||||
Balances at March 31, 2018
|
29,866,705
|
|
|
$
|
6
|
|
|
$
|
639,183
|
|
|
$
|
58,753
|
|
|
$
|
(12,172
|
)
|
|
$
|
685,770
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Operating activities
|
|
|
|
|
|
||
Net cash provided by operating activities
|
$
|
48,461
|
|
|
$
|
16,112
|
|
Investing activities
|
|
|
|
|
|
||
Securities available-for-sale:
|
|
|
|
|
|
||
Purchases – fixed maturity securities
|
(118,652
|
)
|
|
(46,276
|
)
|
||
Sales – fixed maturity securities
|
26,392
|
|
|
32,148
|
|
||
Maturities and calls – fixed maturity securities
|
45,245
|
|
|
15,406
|
|
||
Purchases – equity securities
|
(5,949
|
)
|
|
—
|
|
||
Sales – equity securities
|
766
|
|
|
409
|
|
||
Bank loan participations:
|
|
|
|
|
|
||
Purchases
|
(66,059
|
)
|
|
(75,983
|
)
|
||
Sales
|
35,708
|
|
|
37,462
|
|
||
Maturities
|
11,427
|
|
|
18,840
|
|
||
Other invested assets:
|
|
|
|
|
|
||
Purchases
|
(4,992
|
)
|
|
(250
|
)
|
||
Short-term investments, net
|
10,569
|
|
|
(2,517
|
)
|
||
Securities receivable or payable, net
|
12,576
|
|
|
(336
|
)
|
||
Purchases of property and equipment
|
(275
|
)
|
|
(970
|
)
|
||
Net cash used in investing activities
|
(53,244
|
)
|
|
(22,067
|
)
|
||
Financing activities
|
|
|
|
|
|
||
Dividends paid
|
(9,074
|
)
|
|
(8,885
|
)
|
||
Issuance of common shares under equity incentive plans
|
2,862
|
|
|
303
|
|
||
Common share repurchases
|
(1,283
|
)
|
|
(732
|
)
|
||
Repayments of financing obligations net of proceeds
|
(171
|
)
|
|
(291
|
)
|
||
Net cash used in financing activities
|
(7,666
|
)
|
|
(9,605
|
)
|
||
Change in cash and cash equivalents
|
(12,449
|
)
|
|
(15,560
|
)
|
||
Cash and cash equivalents at beginning of period
|
163,495
|
|
|
109,784
|
|
||
Cash and cash equivalents at end of period
|
$
|
151,046
|
|
|
$
|
94,224
|
|
Supplemental information
|
|
|
|
|
|
||
Interest paid
|
$
|
2,509
|
|
|
$
|
2,101
|
|
•
|
James River Group Holdings UK Limited (“James River UK”) is an insurance holding company formed in 2015 in the United Kingdom (“U.K.”). JRG Holdings contributed James River Group, Inc. (“James River Group”), a U.S. insurance holding company, to James River UK in 2015.
|
•
|
James River Group is a Delaware domiciled insurance holding company formed in 2002 which owns all of the Company’s U.S.-based subsidiaries, either directly or indirectly through one of its wholly-owned U.S. subsidiaries. James River Group oversees the Company’s U.S. insurance operations and maintains all of the outstanding debt in the U.S.
|
•
|
James River Insurance Company is an Ohio domiciled excess and surplus lines insurance company that, with its wholly-owned insurance subsidiary, James River Casualty Company, is authorized to write business in every state and the District of Columbia.
|
•
|
Falls Lake National Insurance Company (“Falls Lake National”) is an Ohio domiciled insurance company which wholly owns Stonewood Insurance Company (“Stonewood Insurance”), a North Carolina domiciled company, Falls Lake General Insurance Company, an Ohio domiciled company, and Falls Lake Fire and Casualty Company, a California domiciled company. Falls Lake National began writing specialty admitted fronting and program business in late 2013. Falls Lake Fire and Casualty began operations in 2016.
|
•
|
JRG Reinsurance Company Ltd. (“JRG Re”) was formed in 2007 and commenced operations in 2008. JRG Re, a Bermuda domiciled reinsurer, primarily provides non-catastrophe casualty reinsurance to U.S. third parties.
|
•
|
Carolina Re Ltd (“Carolina Re”) was formed in 2018 and provides reinsurance to the Company’s U.S.-based insurance subsidiaries. Carolina Re has entered into a stop loss reinsurance treaty with JRG Re.
|
|
Cost or
Amortized Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Fair
Value |
||||||||
|
(in thousands)
|
||||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
State and municipal
|
$
|
137,478
|
|
|
$
|
4,029
|
|
|
$
|
(1,782
|
)
|
|
$
|
139,725
|
|
Residential mortgage-backed
|
186,279
|
|
|
509
|
|
|
(5,690
|
)
|
|
181,098
|
|
||||
Corporate
|
445,058
|
|
|
3,054
|
|
|
(8,486
|
)
|
|
439,626
|
|
||||
Commercial mortgage and asset-backed
|
192,941
|
|
|
173
|
|
|
(2,310
|
)
|
|
190,804
|
|
||||
Obligations of U.S. government corporations and agencies
|
7,804
|
|
|
—
|
|
|
(29
|
)
|
|
7,775
|
|
||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
83,317
|
|
|
73
|
|
|
(1,171
|
)
|
|
82,219
|
|
||||
Redeemable preferred stock
|
2,025
|
|
|
—
|
|
|
(21
|
)
|
|
2,004
|
|
||||
Total fixed maturity securities
|
1,054,902
|
|
|
7,838
|
|
|
(19,489
|
)
|
|
1,043,251
|
|
||||
Equity securities
|
80,464
|
|
|
6,845
|
|
|
(1,352
|
)
|
|
85,957
|
|
||||
Total investments available-for-sale
|
$
|
1,135,366
|
|
|
$
|
14,683
|
|
|
$
|
(20,841
|
)
|
|
$
|
1,129,208
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
State and municipal
|
$
|
139,382
|
|
|
$
|
5,587
|
|
|
$
|
(603
|
)
|
|
$
|
144,366
|
|
Residential mortgage-backed
|
160,379
|
|
|
723
|
|
|
(2,441
|
)
|
|
158,661
|
|
||||
Corporate
|
408,857
|
|
|
7,503
|
|
|
(2,639
|
)
|
|
413,721
|
|
||||
Commercial mortgage and asset-backed
|
182,595
|
|
|
714
|
|
|
(698
|
)
|
|
182,611
|
|
||||
Obligations of U.S. government corporations and agencies
|
35,948
|
|
|
—
|
|
|
(101
|
)
|
|
35,847
|
|
||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
79,476
|
|
|
37
|
|
|
(639
|
)
|
|
78,874
|
|
||||
Redeemable preferred stock
|
2,025
|
|
|
—
|
|
|
(7
|
)
|
|
2,018
|
|
||||
Total fixed maturity securities
|
1,008,662
|
|
|
14,564
|
|
|
(7,128
|
)
|
|
1,016,098
|
|
||||
Equity securities
|
75,318
|
|
|
7,830
|
|
|
(626
|
)
|
|
82,522
|
|
||||
Total investments available-for-sale
|
$
|
1,083,980
|
|
|
$
|
22,394
|
|
|
$
|
(7,754
|
)
|
|
$
|
1,098,620
|
|
|
Cost or
Amortized Cost |
|
Fair
Value |
||||
|
(in thousands)
|
||||||
One year or less
|
$
|
33,850
|
|
|
$
|
33,743
|
|
After one year through five years
|
327,069
|
|
|
323,368
|
|
||
After five years through ten years
|
185,400
|
|
|
181,026
|
|
||
After ten years
|
127,338
|
|
|
131,208
|
|
||
Residential mortgage-backed
|
186,279
|
|
|
181,098
|
|
||
Commercial mortgage and asset-backed
|
192,941
|
|
|
190,804
|
|
||
Redeemable preferred stock
|
2,025
|
|
|
2,004
|
|
||
Total
|
$
|
1,054,902
|
|
|
$
|
1,043,251
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
|
Fair
Value |
|
Gross
Unrealized Losses |
||||||||||||
|
(in thousands)
|
||||||||||||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
State and municipal
|
$
|
61,275
|
|
|
$
|
(1,325
|
)
|
|
$
|
10,454
|
|
|
$
|
(457
|
)
|
|
$
|
71,729
|
|
|
$
|
(1,782
|
)
|
Residential mortgage-backed
|
90,188
|
|
|
(1,743
|
)
|
|
79,455
|
|
|
(3,947
|
)
|
|
169,643
|
|
|
(5,690
|
)
|
||||||
Corporate
|
260,523
|
|
|
(5,309
|
)
|
|
64,506
|
|
|
(3,177
|
)
|
|
325,029
|
|
|
(8,486
|
)
|
||||||
Commercial mortgage and asset-backed
|
94,429
|
|
|
(1,578
|
)
|
|
22,658
|
|
|
(732
|
)
|
|
117,087
|
|
|
(2,310
|
)
|
||||||
Obligations of U.S. government corporations and agencies
|
—
|
|
|
—
|
|
|
7,775
|
|
|
(29
|
)
|
|
7,775
|
|
|
(29
|
)
|
||||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
53,118
|
|
|
(913
|
)
|
|
18,080
|
|
|
(258
|
)
|
|
71,198
|
|
|
(1,171
|
)
|
||||||
Redeemable preferred stock
|
2,004
|
|
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
2,004
|
|
|
(21
|
)
|
||||||
Total fixed maturity securities
|
561,537
|
|
|
(10,889
|
)
|
|
202,928
|
|
|
(8,600
|
)
|
|
764,465
|
|
|
(19,489
|
)
|
||||||
Equity securities
|
17,816
|
|
|
(811
|
)
|
|
5,685
|
|
|
(541
|
)
|
|
23,501
|
|
|
(1,352
|
)
|
||||||
Total investments available-for-sale
|
$
|
579,353
|
|
|
$
|
(11,700
|
)
|
|
$
|
208,613
|
|
|
$
|
(9,141
|
)
|
|
$
|
787,966
|
|
|
$
|
(20,841
|
)
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
State and municipal
|
$
|
40,117
|
|
|
$
|
(318
|
)
|
|
$
|
10,662
|
|
|
$
|
(285
|
)
|
|
$
|
50,779
|
|
|
$
|
(603
|
)
|
Residential mortgage-backed
|
50,447
|
|
|
(261
|
)
|
|
84,193
|
|
|
(2,180
|
)
|
|
134,640
|
|
|
(2,441
|
)
|
||||||
Corporate
|
113,464
|
|
|
(846
|
)
|
|
66,954
|
|
|
(1,793
|
)
|
|
180,418
|
|
|
(2,639
|
)
|
||||||
Commercial mortgage and asset-backed
|
53,965
|
|
|
(244
|
)
|
|
25,299
|
|
|
(454
|
)
|
|
79,264
|
|
|
(698
|
)
|
||||||
Obligations of U.S. government corporations and agencies
|
3,024
|
|
|
(1
|
)
|
|
32,154
|
|
|
(100
|
)
|
|
35,178
|
|
|
(101
|
)
|
||||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
50,760
|
|
|
(430
|
)
|
|
26,707
|
|
|
(209
|
)
|
|
77,467
|
|
|
(639
|
)
|
||||||
Redeemable preferred stock
|
2,018
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
2,018
|
|
|
(7
|
)
|
||||||
Total fixed maturity securities
|
313,795
|
|
|
(2,107
|
)
|
|
245,969
|
|
|
(5,021
|
)
|
|
559,764
|
|
|
(7,128
|
)
|
||||||
Equity securities
|
5,859
|
|
|
(65
|
)
|
|
5,665
|
|
|
(561
|
)
|
|
11,524
|
|
|
(626
|
)
|
||||||
Total investments available-for-sale
|
$
|
319,654
|
|
|
$
|
(2,172
|
)
|
|
$
|
251,634
|
|
|
$
|
(5,582
|
)
|
|
$
|
571,288
|
|
|
$
|
(7,754
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Fixed maturity securities:
|
|
|
|
|
|
||
Gross realized gains
|
$
|
22
|
|
|
$
|
338
|
|
Gross realized losses
|
(223
|
)
|
|
(296
|
)
|
||
|
(201
|
)
|
|
42
|
|
||
Bank loan participations:
|
|
|
|
|
|
||
Gross realized gains
|
1,220
|
|
|
1,136
|
|
||
Gross realized losses
|
(100
|
)
|
|
(539
|
)
|
||
|
1,120
|
|
|
597
|
|
||
Equity securities:
|
|
|
|
|
|
||
Gross realized gains
|
—
|
|
|
409
|
|
||
Gross realized losses
|
(15
|
)
|
|
—
|
|
||
Changes in fair values of equity securities
|
(1,710
|
)
|
|
—
|
|
||
|
(1,725
|
)
|
|
409
|
|
||
Short-term investments and other:
|
|
|
|
|
|
||
Gross realized gains
|
—
|
|
|
—
|
|
||
Gross realized losses
|
(4
|
)
|
|
(1
|
)
|
||
|
(4
|
)
|
|
(1
|
)
|
||
Total
|
$
|
(810
|
)
|
|
$
|
1,047
|
|
|
Carrying Value
|
|
Investment Income
|
||||||||||||
|
March 31,
|
|
December 31,
|
|
Three Months Ended
March 31, |
||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Renewable energy LLCs
(a)
|
$
|
32,592
|
|
|
$
|
32,063
|
|
|
$
|
1,211
|
|
|
$
|
5,594
|
|
Renewable energy notes receivable (
b)
|
8,750
|
|
|
7,278
|
|
|
297
|
|
|
—
|
|
||||
Limited partnerships
(c)
|
29,132
|
|
|
26,367
|
|
|
226
|
|
|
382
|
|
||||
Bank holding companies
(d)
|
4,500
|
|
|
4,500
|
|
|
86
|
|
|
86
|
|
||||
Total other invested assets
|
$
|
74,974
|
|
|
$
|
70,208
|
|
|
$
|
1,820
|
|
|
$
|
6,062
|
|
(a)
|
The Company’s Corporate and Other segment owns equity interests ranging from
2.6%
to
32.8%
in various LLCs whose principal objective is capital appreciation and income generation from owning and operating renewable energy production facilities (wind and solar). The LLCs are managed by an affiliate of the Company’s largest shareholder and the Company’s Non-Exucitive Chairman has invested in certain of these LLCs. The equity method is used to account for the Company’s LLC investments. Income for the LLCs primarily reflects adjustments to the carrying values of investments in renewable energy projects to their determined fair values. The fair value adjustments are included in revenues for the LLCs. Expenses for the LLCs are not significant and are comprised of administrative and interest expenses. The Company received cash distributions from these investments totaling
$1.2 million
and
$1.6 million
in the
three months ended March 31, 2018
and
2017
, respectively.
|
(b)
|
The Company has invested in notes receivable for renewable energy projects. At
March 31, 2018
, the Company holds an
$8.8 million
note issued by an affiliate of the Company’s largest shareholder. Interest on the note, which matures in 2021, is fixed at
15.0%
. Interest income on the note was
$297,000
for the
three months ended March 31, 2018
.
|
(c)
|
The Company owns investments in limited partnerships that invest in concentrated portfolios including publicly-traded small cap equities, loans of middle market private equity sponsored companies, equity tranches of collateralized loan obligations (
“
CLOs
”
), and tranches of distressed home loans.
Income f
rom the partnerships is recognized under the equity method of accounting. The Company’s Corporate and Other segment held an investment in a limited partnership with a carrying value of
$2.9 million
at
March 31, 2018
. The Company recognized investment losses of
$125,000
and investment income of
$68,000
on the investment for the
three months ended March 31, 2018
and
2017
, respectively. The Company’s Excess and Surplus Lines segment holds investments in limited partnerships of
$26.3 million
at
March 31, 2018
. Investment income of
$351,000
and
$314,000
was recognized on the investments for the
three months ended March 31, 2018
and
2017
, respectively. At
March 31, 2018
, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another
$2.6 million
in these limited partnerships.
|
(d)
|
The Company holds
$4.5 million
of subordinated notes issued by a bank holding company. Interest on the notes, which mature on August 12, 2023, is fixed at
7.6%
per annum. Interest income on the notes was
$86,000
in both
three months ended March 31, 2018
and
2017
. The Company’s Chairman was previously the Lead Independent Director of the bank holding company and an investor in the bank holding company. Additionally,
one
of the Company’s directors was an investor in the bank holding company and is currently a lender to the bank holding company.
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Life
(Years) |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
|
Gross
Carrying Amount |
|
Accumulated
Amortization |
||||||||
|
|
|
($ in thousands)
|
||||||||||||||
Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trademarks
|
Indefinite
|
|
$
|
22,200
|
|
|
$
|
—
|
|
|
$
|
22,200
|
|
|
$
|
—
|
|
Insurance licenses and authorities
|
Indefinite
|
|
9,164
|
|
|
—
|
|
|
9,164
|
|
|
—
|
|
||||
Identifiable intangibles not subject to amortization
|
|
|
31,364
|
|
|
—
|
|
|
31,364
|
|
|
—
|
|
||||
Broker relationships
|
24.6
|
|
11,611
|
|
|
4,790
|
|
|
11,611
|
|
|
4,641
|
|
||||
Identifiable intangible assets subject to amortization
|
|
|
11,611
|
|
|
4,790
|
|
|
11,611
|
|
|
4,641
|
|
||||
|
|
|
$
|
42,975
|
|
|
$
|
4,790
|
|
|
$
|
42,975
|
|
|
$
|
4,641
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands, except share and per share amounts)
|
||||||
Net income to shareholders
|
$
|
15,633
|
|
|
$
|
18,450
|
|
|
|
|
|
||||
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
29,764,320
|
|
|
29,289,588
|
|
||
Common share equivalents
|
428,983
|
|
|
1,037,835
|
|
||
Diluted
|
30,193,303
|
|
|
30,327,423
|
|
||
|
|
|
|
||||
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.53
|
|
|
$
|
0.63
|
|
Common share equivalents
|
(0.01
|
)
|
|
(0.02
|
)
|
||
Diluted
|
$
|
0.52
|
|
|
$
|
0.61
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period
|
$
|
989,825
|
|
|
$
|
761,128
|
|
Add: Incurred losses and loss adjustment expenses net of reinsurance:
|
|
|
|
|
|
||
Current year
|
146,382
|
|
|
108,783
|
|
||
Prior years
|
(2,610
|
)
|
|
(3,414
|
)
|
||
Total incurred losses and loss and adjustment expenses
|
143,772
|
|
|
105,369
|
|
||
Deduct: Loss and loss adjustment expense payments net of reinsurance:
|
|
|
|
|
|||
Current year
|
12,177
|
|
|
3,698
|
|
||
Prior years
|
83,117
|
|
|
71,018
|
|
||
Total loss and loss adjustment expense payments
|
95,294
|
|
|
74,716
|
|
||
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at end of period
|
1,038,303
|
|
|
791,781
|
|
||
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period
|
331,245
|
|
|
188,782
|
|
||
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period
|
$
|
1,369,548
|
|
|
$
|
980,563
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Unrealized (losses) gains arising during the period, before U.S. income taxes
|
$
|
(19,292
|
)
|
|
$
|
5,998
|
|
U.S. income taxes
|
544
|
|
|
(1,636
|
)
|
||
Unrealized (losses) gains arising during the period, net of U.S. income taxes
|
(18,748
|
)
|
|
4,362
|
|
||
Less reclassification adjustment:
|
|
|
|
|
|||
Net realized investment (losses) gains
|
(201
|
)
|
|
450
|
|
||
U.S. income tax expenses
|
—
|
|
|
(122
|
)
|
||
Reclassification adjustment for investment (losses) gains realized in net income
|
(201
|
)
|
|
328
|
|
||
Other comprehensive (loss) income
|
$
|
(18,547
|
)
|
|
$
|
4,034
|
|
|
Excess and
Surplus Lines |
|
Specialty
Admitted Insurance |
|
Casualty
Reinsurance |
|
Corporate
and Other |
|
Total
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Three Months Ended March 31, 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross written premiums
|
$
|
167,486
|
|
|
$
|
87,401
|
|
|
$
|
43,229
|
|
|
$
|
—
|
|
|
$
|
298,116
|
|
Net earned premiums
|
129,971
|
|
|
13,340
|
|
|
57,631
|
|
|
—
|
|
|
200,942
|
|
|||||
Underwriting profit of insurance segments
|
11,299
|
|
|
1,623
|
|
|
1,744
|
|
|
—
|
|
|
14,666
|
|
|||||
Net investment income
|
3,042
|
|
|
711
|
|
|
8,017
|
|
|
1,486
|
|
|
13,256
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
2,522
|
|
|
2,522
|
|
|||||
Segment revenues
|
137,327
|
|
|
13,955
|
|
|
65,526
|
|
|
1,536
|
|
|
218,344
|
|
|||||
Segment goodwill
|
181,831
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181,831
|
|
|||||
Segment assets
|
909,963
|
|
|
495,096
|
|
|
1,368,872
|
|
|
88,079
|
|
|
2,862,010
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross written premiums
|
$
|
108,995
|
|
|
$
|
72,464
|
|
|
$
|
42,720
|
|
|
$
|
—
|
|
|
$
|
224,179
|
|
Net earned premiums
|
93,849
|
|
|
16,253
|
|
|
44,585
|
|
|
—
|
|
|
154,687
|
|
|||||
Underwriting profit of insurance segments
|
8,800
|
|
|
842
|
|
|
1,093
|
|
|
—
|
|
|
10,735
|
|
|||||
Net investment income
|
3,183
|
|
|
636
|
|
|
7,124
|
|
|
5,790
|
|
|
16,733
|
|
|||||
Interest expense
|
—
|
|
|
—
|
|
|
—
|
|
|
2,123
|
|
|
2,123
|
|
|||||
Segment revenues
|
101,090
|
|
|
16,924
|
|
|
52,146
|
|
|
6,242
|
|
|
176,402
|
|
|||||
Segment goodwill
|
181,831
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181,831
|
|
|||||
Segment assets
|
749,617
|
|
|
335,806
|
|
|
1,211,896
|
|
|
114,006
|
|
|
2,411,325
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Underwriting profit of the insurance segments:
|
|
|
|
|
|
||
Excess and Surplus Lines
|
$
|
11,299
|
|
|
$
|
8,800
|
|
Specialty Admitted Insurance
|
1,623
|
|
|
842
|
|
||
Casualty Reinsurance
|
1,744
|
|
|
1,093
|
|
||
Total underwriting profit of insurance segments
|
14,666
|
|
|
10,735
|
|
||
Other operating expenses of the Corporate and Other segment
|
(7,431
|
)
|
|
(6,461
|
)
|
||
Underwriting profit
|
7,235
|
|
|
4,274
|
|
||
Net investment income
|
13,256
|
|
|
16,733
|
|
||
Net realized investment (losses) gains
|
(810
|
)
|
|
1,047
|
|
||
Amortization of intangible assets
|
(149
|
)
|
|
(149
|
)
|
||
Other income and expenses
|
104
|
|
|
200
|
|
||
Interest expense
|
(2,522
|
)
|
|
(2,123
|
)
|
||
Income before taxes
|
$
|
17,114
|
|
|
$
|
19,982
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Amortization of policy acquisition costs
|
$
|
30,198
|
|
|
$
|
27,638
|
|
Other underwriting expenses of the operating segments
|
17,154
|
|
|
14,794
|
|
||
Other operating expenses of the Corporate and Other segment
|
7,431
|
|
|
6,461
|
|
||
Total
|
$
|
54,783
|
|
|
$
|
48,893
|
|
|
Fair Value Measurements Using
|
||||||||||||||
|
Quoted Prices
in Active Markets for Identical Assets Level 1 |
|
Significant
Other Observable Inputs Level 2 |
|
Significant
Unobservable Inputs Level 3 |
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
State and municipal
|
$
|
—
|
|
|
$
|
139,725
|
|
|
$
|
—
|
|
|
$
|
139,725
|
|
Residential mortgage-backed
|
—
|
|
|
181,098
|
|
|
—
|
|
|
181,098
|
|
||||
Corporate
|
—
|
|
|
439,626
|
|
|
—
|
|
|
439,626
|
|
||||
Commercial mortgage and asset-backed
|
—
|
|
|
186,124
|
|
|
4,680
|
|
|
190,804
|
|
||||
Obligations of U.S. government corporations and agencies
|
—
|
|
|
7,775
|
|
|
—
|
|
|
7,775
|
|
||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
81,640
|
|
|
579
|
|
|
—
|
|
|
82,219
|
|
||||
Redeemable preferred stock
|
—
|
|
|
2,004
|
|
|
—
|
|
|
2,004
|
|
||||
Total fixed maturity securities
|
81,640
|
|
|
956,931
|
|
|
4,680
|
|
|
1,043,251
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred stock
|
—
|
|
|
67,709
|
|
|
—
|
|
|
67,709
|
|
||||
Common stock
|
14,732
|
|
|
3,516
|
|
|
—
|
|
|
18,248
|
|
||||
Total equity securities
|
14,732
|
|
|
71,225
|
|
|
—
|
|
|
85,957
|
|
||||
Total available-for-sale securities
|
$
|
96,372
|
|
|
$
|
1,028,156
|
|
|
$
|
4,680
|
|
|
$
|
1,129,208
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
$
|
—
|
|
|
$
|
3,805
|
|
|
$
|
—
|
|
|
$
|
3,805
|
|
Short-term investments
|
$
|
1,000
|
|
|
$
|
25,235
|
|
|
$
|
—
|
|
|
$
|
26,235
|
|
|
Fair Value Measurements Using
|
||||||||||||||
|
Quoted Prices
in Active Markets for Identical Assets Level 1 |
|
Significant
Other Observable Inputs Level 2 |
|
Significant
Unobservable Inputs Level 3 |
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
State and municipal
|
$
|
—
|
|
|
$
|
144,366
|
|
|
$
|
—
|
|
|
$
|
144,366
|
|
Residential mortgage-backed
|
—
|
|
|
158,661
|
|
|
—
|
|
|
158,661
|
|
||||
Corporate
|
—
|
|
|
413,721
|
|
|
—
|
|
|
413,721
|
|
||||
Commercial mortgage and asset-backed
|
—
|
|
|
177,931
|
|
|
4,680
|
|
|
182,611
|
|
||||
Obligations of U.S. government corporations and agencies
|
—
|
|
|
35,847
|
|
|
—
|
|
|
35,847
|
|
||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
78,265
|
|
|
609
|
|
|
—
|
|
|
78,874
|
|
||||
Redeemable preferred stock
|
—
|
|
|
2,018
|
|
|
—
|
|
|
2,018
|
|
||||
Total fixed maturity securities
|
78,265
|
|
|
933,153
|
|
|
4,680
|
|
|
1,016,098
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred stock
|
—
|
|
|
66,281
|
|
|
—
|
|
|
66,281
|
|
||||
Common stock
|
15,507
|
|
|
734
|
|
|
—
|
|
|
16,241
|
|
||||
Total equity securities
|
15,507
|
|
|
67,015
|
|
|
—
|
|
|
82,522
|
|
||||
Total available-for-sale securities
|
$
|
93,772
|
|
|
$
|
1,000,168
|
|
|
$
|
4,680
|
|
|
$
|
1,098,620
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
$
|
—
|
|
|
$
|
3,808
|
|
|
$
|
—
|
|
|
$
|
3,808
|
|
Short-term investments
|
$
|
1,000
|
|
|
$
|
35,804
|
|
|
$
|
—
|
|
|
$
|
36,804
|
|
|
Fair Value Measurements Using
|
||||||||||||||
|
Quoted Prices
In Active Markets for Identical Assets Level 1 |
|
Significant
Other Observable Inputs Level 2 |
|
Significant
Unobservable Inputs Level 3 |
|
Total
|
||||||||
|
(in thousands)
|
||||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank loan participations held-for-investment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,741
|
|
|
$
|
1,741
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bank loan participations held-for-investment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,111
|
|
|
$
|
5,111
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying
Value |
|
Fair Value
|
|
Carrying
Value |
|
Fair Value
|
||||||||
|
(in thousands)
|
||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
$
|
1,043,251
|
|
|
$
|
1,043,251
|
|
|
$
|
1,016,098
|
|
|
$
|
1,016,098
|
|
Equity securities
|
85,957
|
|
|
85,957
|
|
|
82,522
|
|
|
82,522
|
|
||||
Trading:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities
|
3,805
|
|
|
3,805
|
|
|
3,808
|
|
|
3,808
|
|
||||
Bank loan participations held-for-investment
|
257,426
|
|
|
257,840
|
|
|
238,214
|
|
|
236,532
|
|
||||
Cash and cash equivalents
|
151,046
|
|
|
151,046
|
|
|
163,495
|
|
|
163,495
|
|
||||
Short-term investments
|
26,235
|
|
|
26,235
|
|
|
36,804
|
|
|
36,804
|
|
||||
Other invested assets – notes receivable
|
13,250
|
|
|
19,056
|
|
|
11,778
|
|
|
17,104
|
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
||||
Senior debt
|
98,300
|
|
|
98,871
|
|
|
98,300
|
|
|
97,884
|
|
||||
Junior subordinated debt
|
104,055
|
|
|
118,752
|
|
|
104,055
|
|
|
116,569
|
|
Date of Declaration
|
|
Dividend per Common Share
|
|
Payable to Shareholders of Record on
|
|
Payment Date
|
|
Total Amount
|
||||
|
|
|
|
|
|
|
|
|
||||
2018
|
|
|
|
|
|
|
|
|
||||
February 22, 2018
|
|
$
|
0.30
|
|
|
March 12, 2018
|
|
March 30, 2018
|
|
$
|
9.0
|
million
|
|
|
|
|
|
|
|
|
|
||||
2017
|
|
|
|
|
|
|
|
|
||||
February 14, 2017
|
|
$
|
0.30
|
|
|
March 13, 2017
|
|
March 31, 2017
|
|
$
|
8.9
|
million
|
|
Three Months Ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Shares
|
|
Weighted-
Average Exercise Price |
|
Shares
|
|
Weighted-
Average Exercise Price |
||||||
Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||
Beginning of period
|
1,479,236
|
|
|
$
|
27.81
|
|
|
2,234,699
|
|
|
$
|
22.84
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
195,509
|
|
|
$
|
42.17
|
|
Exercised
|
(142,129
|
)
|
|
$
|
20.14
|
|
|
(97,211
|
)
|
|
$
|
17.23
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
(50,062
|
)
|
|
$
|
27.97
|
|
End of period
|
1,337,107
|
|
|
$
|
28.63
|
|
|
2,282,935
|
|
|
$
|
24.62
|
|
Exercisable, end of period
|
983,508
|
|
|
$
|
26.06
|
|
|
1,334,756
|
|
|
$
|
20.47
|
|
|
Three Months Ended March 31,
|
||||||||||||
|
2018
|
|
2017
|
||||||||||
|
Shares
|
|
Weighted-
Average Grant Date Fair Value |
|
Shares
|
|
Weighted-
Average Grant Date Fair Value |
||||||
|
|
|
|
|
|
|
|
|
|
||||
Unvested, beginning of period
|
178,882
|
|
|
$
|
37.93
|
|
|
196,800
|
|
|
$
|
24.38
|
|
Granted
|
214,907
|
|
|
$
|
39.81
|
|
|
117,879
|
|
|
$
|
42.17
|
|
Vested
|
(62,714
|
)
|
|
$
|
40.90
|
|
|
(37,485
|
)
|
|
$
|
32.07
|
|
Forfeited
|
—
|
|
|
$
|
—
|
|
|
(19,743
|
)
|
|
$
|
24.06
|
|
Unvested, end of period
|
331,075
|
|
|
$
|
38.59
|
|
|
257,451
|
|
|
$
|
31.43
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
(in thousands)
|
||||||
Share based compensation expense
|
$
|
1,455
|
|
|
$
|
1,794
|
|
U.S. tax benefit on share based compensation expense
|
173
|
|
|
469
|
|
•
|
The Excess and Surplus Lines segment offers commercial excess and surplus lines liability and property insurance in every U.S. state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands through James River Insurance Company and its wholly-owned subsidiary, James River Casualty Company;
|
•
|
The Specialty Admitted Insurance segment focuses on niche classes within the standard insurance markets, such as workers’ compensation coverage for residential contractors, light manufacturing operations, transportation workers and healthcare workers and fronting business, where we retain a small percentage of the risk and seek to earn fee income by allowing other carriers and producers to use our licensure, ratings and infrastructure. This segment has admitted licenses in 49 states and the District of Columbia;
|
•
|
The Casualty Reinsurance segment primarily provides proportional and working layer casualty reinsurance to third parties (primarily through reinsurance intermediaries) and to our U.S.-based insurance subsidiaries (primarily through quota share reinsurance), through JRG Reinsurance Company Ltd. (“JRG Re”), a Bermuda-based reinsurance company. In addition, Carolina Re Ltd (“Carolina Re”) was formed in 2018 to provide reinsurance to the Company's U.S. based insurance subsidiaries; and
|
•
|
The Corporate and Other segment consists of the management and treasury activities of our holding companies, interest expense associated with our debt, and expenses of our holding companies, including public company expenses, that are not reimbursed by our insurance segments.
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|
|
|||||||
Gross written premiums
|
$
|
298,116
|
|
|
$
|
224,179
|
|
|
33.0
|
%
|
Net retention
(1)
|
70.8
|
%
|
|
70.4
|
%
|
|
|
|
||
Net written premiums
|
$
|
210,978
|
|
|
$
|
157,910
|
|
|
33.6
|
%
|
Net earned premiums
|
$
|
200,942
|
|
|
$
|
154,687
|
|
|
29.9
|
%
|
Losses and loss adjustment expenses
|
(143,772
|
)
|
|
(105,369
|
)
|
|
36.4
|
%
|
||
Other operating expenses
|
(49,935
|
)
|
|
(45,044
|
)
|
|
10.9
|
%
|
||
Underwriting profit
(2), (3)
|
7,235
|
|
|
4,274
|
|
|
69.3
|
%
|
||
Net investment income
|
13,256
|
|
|
16,733
|
|
|
(20.8
|
)%
|
||
Net realized investment gains (losses)
|
(810
|
)
|
|
1,047
|
|
|
‒
|
|
||
Other income and expense
|
104
|
|
|
200
|
|
|
(48.0
|
)%
|
||
Interest expense
|
(2,522
|
)
|
|
(2,123
|
)
|
|
18.8
|
%
|
||
Amortization of intangible assets
|
(149
|
)
|
|
(149
|
)
|
|
‒
|
|
||
Income before taxes
|
17,114
|
|
|
19,982
|
|
|
(14.4
|
)%
|
||
Income tax expense
|
1,481
|
|
|
1,532
|
|
|
(3.3
|
)%
|
||
Net income
|
$
|
15,633
|
|
|
$
|
18,450
|
|
|
(15.3
|
)%
|
Adjusted net operating income
(4)
|
$
|
16,569
|
|
|
$
|
17,719
|
|
|
(6.5
|
)%
|
Ratios:
|
|
|
|
|
|
|
|
|
||
Loss ratio
|
71.5
|
%
|
|
68.1
|
%
|
|
|
|
||
Expense ratio
|
24.9
|
%
|
|
29.1
|
%
|
|
|
|
||
Combined ratio
|
96.4
|
%
|
|
97.2
|
%
|
|
|
|
(1)
|
Net retention is defined as the ratio of net written premiums to gross written premiums.
|
(2)
|
Underwriting Profit is a non-GAAP measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation to income before tax and for additional information.
|
(3)
|
Included in underwriting results for the
three
months ended
March 31, 2018
and 2017 is gross fee income of
$8.2 million
and
$5.9 million
, respectively.
|
(4)
|
Adjusted net operating income is a non-GAAP measure. See “Reconciliation of Non-GAAP Measures” for reconciliation to net income and for additional information.
|
•
|
Net realized investment losses of
$810,000
and net realized investment gains of
$1.0 million
for the three months ended
March 31, 2018
and
2017
, respectively. See “— Investing Results" for more information on these realized investment losses and gains.
|
•
|
Interest expense of
$318,000
and
$312,000
for the three months ended
March 31, 2018
and
2017
, respectively, relating to finance expenses in connection with a minority interest in a real estate partnership pursuant to which we are deemed an owner for accounting purposes. The debt is nonrecourse to us and was not arranged by us.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
Income
Before Taxes |
|
Net
Income |
|
Income
Before Taxes |
|
Net
Income |
||||||||
|
($ in thousands)
|
||||||||||||||
Income as reported
|
$
|
17,114
|
|
|
$
|
15,633
|
|
|
$
|
19,982
|
|
|
$
|
18,450
|
|
Net realized investment losses (gains)
|
810
|
|
|
665
|
|
|
(1,047
|
)
|
|
(834
|
)
|
||||
Other expenses
|
4
|
|
|
20
|
|
|
(114
|
)
|
|
(100
|
)
|
||||
Interest expense on leased building the Company is deemed to own for accounting purposes
|
318
|
|
|
251
|
|
|
312
|
|
|
203
|
|
||||
Adjusted net operating income
|
$
|
18,246
|
|
|
$
|
16,569
|
|
|
$
|
19,133
|
|
|
$
|
17,719
|
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|
|
|||||||
Gross written premiums:
|
|
|
|
|
|
|
|
|
||
Excess and Surplus Lines
|
$
|
167,486
|
|
|
$
|
108,995
|
|
|
53.7
|
%
|
Specialty Admitted Insurance
|
87,401
|
|
|
72,464
|
|
|
20.6
|
%
|
||
Casualty Reinsurance
|
43,229
|
|
|
42,720
|
|
|
1.2
|
%
|
||
|
$
|
298,116
|
|
|
$
|
224,179
|
|
|
33.0
|
%
|
Net written premiums:
|
|
|
|
|
|
|
|
|
||
Excess and Surplus Lines
|
$
|
153,931
|
|
|
$
|
96,971
|
|
|
58.7
|
%
|
Specialty Admitted Insurance
|
13,818
|
|
|
18,059
|
|
|
(23.5
|
)%
|
||
Casualty Reinsurance
|
43,229
|
|
|
42,880
|
|
|
0.8
|
%
|
||
|
$
|
210,978
|
|
|
$
|
157,910
|
|
|
33.6
|
%
|
Net earned premiums:
|
|
|
|
|
|
|
|
|
||
Excess and Surplus Lines
|
$
|
129,971
|
|
|
$
|
93,849
|
|
|
38.5
|
%
|
Specialty Admitted Insurance
|
13,340
|
|
|
16,253
|
|
|
(17.9
|
)%
|
||
Casualty Reinsurance
|
57,631
|
|
|
44,585
|
|
|
29.3
|
%
|
||
|
$
|
200,942
|
|
|
$
|
154,687
|
|
|
29.9
|
%
|
•
|
Commercial Auto division (representing 46.1% of this segment’s business for the
three months ended March 31, 2018
), which increased $35.2 million (or 83.6%) for the
three months ended March 31, 2018
. This division is focused on underwriting the hired and non-owned auto liability exposures for a variety of industry segments with a particular niche for insuring organizations that operate networks connecting independent contractors with customers.
|
•
|
General Casualty division (representing 8.7% of this segment’s business for
three months ended March 31, 2018
) which increased $6.0 million (or 69.9%) for the
three months ended March 31, 2018
.
|
•
|
Allied Health division (representing 12.6% of this segment’s business for the
three months ended March 31, 2018
) which increased $14.3 million (or 208.0%) for the
three months ended March 31, 2018
.
|
•
|
Energy division (representing 6.9% of this segment’s business for the
three months ended March 31, 2018
) which increased $5.7 million (or 96.8%) for the
three months ended March 31, 2018
.
|
•
|
Manufacturers and Contractors division (representing 10.5% of this segment’s business for the
three months ended March 31, 2018
) which decreased $4.5 million (or 20.2%) for the
three months ended March 31, 2018
.
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|
|
|||||||
Total workers’ compensation premium
|
$
|
12,587
|
|
|
$
|
11,799
|
|
|
6.7
|
%
|
Fronting and program premium
|
74,814
|
|
|
60,665
|
|
|
23.3
|
%
|
||
Specialty Admitted gross written premium
|
$
|
87,401
|
|
|
$
|
72,464
|
|
|
20.6
|
%
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Excess and Surplus Lines
|
91.9
|
%
|
|
89.0
|
%
|
Specialty Admitted Insurance
|
15.8
|
%
|
|
24.9
|
%
|
Casualty Reinsurance
|
100.0
|
%
|
|
100.4
|
%
|
Total
|
70.8
|
%
|
|
70.4
|
%
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Excess and Surplus Lines
|
91.3
|
%
|
|
90.6
|
%
|
Specialty Admitted Insurance
|
87.8
|
%
|
|
94.8
|
%
|
Casualty Reinsurance
|
97.0
|
%
|
|
97.5
|
%
|
Total
|
96.4
|
%
|
|
97.2
|
%
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
167,486
|
|
|
$
|
108,995
|
|
|
53.7
|
%
|
Net written premiums
|
$
|
153,931
|
|
|
$
|
96,971
|
|
|
58.7
|
%
|
Net earned premiums
|
$
|
129,971
|
|
|
$
|
93,849
|
|
|
38.5
|
%
|
Losses and loss adjustment expenses
|
(100,619
|
)
|
|
(66,568
|
)
|
|
51.2
|
%
|
||
Underwriting expenses
|
(18,053
|
)
|
|
(18,481
|
)
|
|
(2.3
|
)%
|
||
Underwriting profit
(1), (2)
|
$
|
11,299
|
|
|
$
|
8,800
|
|
|
28.4
|
%
|
Ratios:
|
|
|
|
|
|
|
|
|
||
Loss ratio
|
77.4
|
%
|
|
70.9
|
%
|
|
|
|||
Expense ratio
|
13.9
|
%
|
|
19.7
|
%
|
|
|
|||
Combined ratio
|
91.3
|
%
|
|
90.6
|
%
|
|
|
(1)
|
Underwriting Profit is a non-GAAP Measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation to income before tax and for additional information.
|
(2)
|
Underwriting results include gross fee income of
$4.8 million
and
$3.8 million
for the
three months ended March 31, 2018
and 2017, respectively.
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
87,401
|
|
|
$
|
72,464
|
|
|
20.6
|
%
|
Net written premiums
|
$
|
13,818
|
|
|
$
|
18,059
|
|
|
(23.5
|
)%
|
Net earned premiums
|
$
|
13,340
|
|
|
$
|
16,253
|
|
|
(17.9
|
)%
|
Losses and loss adjustment expenses
|
(7,611
|
)
|
|
(9,981
|
)
|
|
(23.7
|
)%
|
||
Underwriting expenses
|
(4,106
|
)
|
|
(5,430
|
)
|
|
(24.4
|
)%
|
||
Underwriting profit
(1), (2)
|
$
|
1,623
|
|
|
$
|
842
|
|
|
92.8
|
%
|
Ratios:
|
|
|
|
|
|
|
|
|
||
Loss ratio
|
57.1
|
%
|
|
61.4
|
%
|
|
|
|||
Expense ratio
|
30.7
|
%
|
|
33.4
|
%
|
|
|
|||
Combined ratio
|
87.8
|
%
|
|
94.8
|
%
|
|
|
(1)
|
Underwriting Profit is a non-GAAP Measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation to income before tax and for additional information.
|
(2)
|
Underwriting results include gross fee income of
$3.3 million
and
$2.1 million
for the
three months ended March 31, 2018
and 2017, respectively.
|
|
Three Months Ended
March 31, |
|
%
|
|||||||
|
2018
|
|
2017
|
|
Change
|
|||||
|
($ in thousands)
|
|||||||||
Gross written premiums
|
$
|
43,229
|
|
|
$
|
42,720
|
|
|
1.2
|
%
|
Net written premiums
|
$
|
43,229
|
|
|
$
|
42,880
|
|
|
0.8
|
%
|
Net earned premiums
|
$
|
57,631
|
|
|
$
|
44,585
|
|
|
29.3
|
%
|
Losses and loss adjustment expenses
|
(35,542
|
)
|
|
(28,820
|
)
|
|
23.3
|
%
|
||
Underwriting expenses
|
(20,345
|
)
|
|
(14,672
|
)
|
|
38.7
|
%
|
||
Underwriting profit
(1)
|
$
|
1,744
|
|
|
$
|
1,093
|
|
|
59.6
|
%
|
Ratios:
|
|
|
|
|
|
|
|
|
||
Loss ratio
|
61.7
|
%
|
|
64.6
|
%
|
|
|
|||
Expense ratio
|
35.3
|
%
|
|
32.9
|
%
|
|
|
|||
Combined ratio
|
97.0
|
%
|
|
97.5
|
%
|
|
|
(1)
|
Underwriting Profit is a non-GAAP Measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation to income before tax and for additional information.
|
|
Gross Reserves at March 31, 2018
|
||||||||||
|
Case
|
|
IBNR
|
|
Total
|
||||||
|
($ in thousands)
|
||||||||||
Excess and Surplus Lines
|
$
|
246,521
|
|
|
$
|
558,736
|
|
|
$
|
805,257
|
|
Specialty Admitted Insurance
|
134,492
|
|
|
167,749
|
|
|
302,241
|
|
|||
Casualty Reinsurance
|
97,139
|
|
|
164,911
|
|
|
262,050
|
|
|||
Total
|
$
|
478,152
|
|
|
$
|
891,396
|
|
|
$
|
1,369,548
|
|
|
Net Reserves at March 31, 2018
|
||||||||||
|
Case
|
|
IBNR
|
|
Total
|
||||||
|
($ in thousands)
|
||||||||||
Excess and Surplus Lines
|
$
|
227,947
|
|
|
$
|
473,188
|
|
|
$
|
701,135
|
|
Specialty Admitted Insurance
|
36,049
|
|
|
45,310
|
|
|
81,359
|
|
|||
Casualty Reinsurance
|
92,754
|
|
|
163,055
|
|
|
255,809
|
|
|||
Total
|
$
|
356,750
|
|
|
$
|
681,553
|
|
|
$
|
1,038,303
|
|
|
Three Months Ended
March 31, |
|
|
|||||||
|
2018
|
|
2017
|
|
% Change
|
|||||
|
($ in thousands)
|
|
|
|||||||
Renewable energy LLCs
|
$
|
1,211
|
|
|
$
|
5,594
|
|
|
(78.4
|
)%
|
Other private investments
|
609
|
|
|
468
|
|
|
30.1
|
%
|
||
Other invested assets
|
1,820
|
|
|
6,062
|
|
|
(70.0
|
)%
|
||
All other net investment income
|
11,436
|
|
|
10,671
|
|
|
7.2
|
%
|
||
Total net investment income
|
$
|
13,256
|
|
|
$
|
16,733
|
|
|
(20.8
|
)%
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
($ in thousands)
|
||||||
Fixed maturity securities
|
$
|
8,030
|
|
|
$
|
6,578
|
|
Bank loan participations
|
3,117
|
|
|
3,612
|
|
||
Equity securities
|
667
|
|
|
1,228
|
|
||
Other invested assets
|
1,820
|
|
|
6,062
|
|
||
Cash, cash equivalents, and short-term investments
|
592
|
|
|
254
|
|
||
Trading (losses) gains
|
(3
|
)
|
|
3
|
|
||
Gross investment income
|
14,223
|
|
|
17,737
|
|
||
Investment expense
|
(967
|
)
|
|
(1,004
|
)
|
||
Net investment income
|
$
|
13,256
|
|
|
$
|
16,733
|
|
|
Three Months Ended
March 31, |
||||
|
2018
|
|
2017
|
||
Annualized gross investment yield on:
|
|
|
|
|
|
Average cash and invested assets
|
3.5
|
%
|
|
4.9
|
%
|
Average fixed maturity securities
|
3.4
|
%
|
|
3.4
|
%
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||||||||
|
Cost or
Amortized Cost |
|
Fair
Value |
|
% of
Total Fair Value |
|
Cost or
Amortized Cost |
|
Fair
Value |
|
% of
Total Fair Value |
||||||||||
|
($ in thousands)
|
||||||||||||||||||||
Fixed maturity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
State and municipal
|
$
|
137,478
|
|
|
$
|
139,725
|
|
|
12.4
|
%
|
|
$
|
139,382
|
|
|
$
|
144,366
|
|
|
13.1
|
%
|
Residential mortgage-backed
|
186,279
|
|
|
181,098
|
|
|
16.0
|
%
|
|
160,379
|
|
|
158,661
|
|
|
14.4
|
%
|
||||
Corporate
|
445,058
|
|
|
439,626
|
|
|
38.9
|
%
|
|
408,857
|
|
|
413,721
|
|
|
37.7
|
%
|
||||
Commercial mortgage and asset-backed
|
192,941
|
|
|
190,804
|
|
|
16.9
|
%
|
|
182,595
|
|
|
182,611
|
|
|
16.6
|
%
|
||||
Obligations of U.S. government corporations and agencies
|
7,804
|
|
|
7,775
|
|
|
0.7
|
%
|
|
35,948
|
|
|
35,847
|
|
|
3.3
|
%
|
||||
U.S. Treasury securities and obligations guaranteed by the U.S. government
|
83,317
|
|
|
82,219
|
|
|
7.3
|
%
|
|
79,476
|
|
|
78,874
|
|
|
7.2
|
%
|
||||
Redeemable preferred stock
|
2,025
|
|
|
2,004
|
|
|
0.2
|
%
|
|
2,025
|
|
|
2,018
|
|
|
0.2
|
%
|
||||
Total
|
1,054,902
|
|
|
1,043,251
|
|
|
92.4
|
%
|
|
1,008,662
|
|
|
1,016,098
|
|
|
92.5
|
%
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred stock
|
61,287
|
|
|
67,710
|
|
|
6.0
|
%
|
|
59,102
|
|
|
66,281
|
|
|
6.0
|
%
|
||||
Common stock
|
19,177
|
|
|
18,247
|
|
|
1.6
|
%
|
|
16,216
|
|
|
16,241
|
|
|
1.5
|
%
|
||||
Total
|
80,464
|
|
|
85,957
|
|
|
7.6
|
%
|
|
75,318
|
|
|
82,522
|
|
|
7.5
|
%
|
||||
Total investments
|
$
|
1,135,366
|
|
|
$
|
1,129,208
|
|
|
100.0
|
%
|
|
$
|
1,083,980
|
|
|
$
|
1,098,620
|
|
|
100.0
|
%
|
Standard & Poor’s or Equivalent Designation
|
Fair Value
|
|
% of Total
|
|||
|
($ in thousands)
|
|||||
AAA
|
$
|
193,381
|
|
|
18.5
|
%
|
AA
|
407,937
|
|
|
39.0
|
%
|
|
A
|
335,631
|
|
|
32.0
|
%
|
|
BBB
|
109,240
|
|
|
10.4
|
%
|
|
BB
|
—
|
|
|
—
|
|
|
Below BB and unrated
|
867
|
|
|
0.1
|
%
|
|
Total
|
$
|
1,047,056
|
|
|
100.0
|
%
|
Industry
|
Fair Value
|
|
% of Total
|
|||
|
($ in thousands)
|
|||||
Industrials and Other
|
$
|
170,025
|
|
|
38.7
|
%
|
Consumer Discretionary
|
76,510
|
|
|
17.4
|
%
|
|
Financial
|
73,696
|
|
|
16.8
|
%
|
|
Health Care
|
63,910
|
|
|
14.5
|
%
|
|
Utilities
|
55,485
|
|
|
12.6
|
%
|
|
Total
|
$
|
439,626
|
|
|
100.0
|
%
|
Public/Private
|
Fair Value
|
|
% of Total
|
|||
|
($ in thousands)
|
|||||
Publicly traded
|
$
|
407,739
|
|
|
92.7
|
%
|
Privately placed
|
31,887
|
|
|
7.3
|
%
|
|
Total
|
$
|
439,626
|
|
|
100.0
|
%
|
|
March 31, 2018
|
|||||||||
|
Amortized
Cost
|
|
Fair
Value
|
|
% of
Total Value
|
|||||
|
($ in thousands)
|
|||||||||
Due in:
|
|
|
|
|
|
|
|
|
||
One year or less
|
$
|
33,850
|
|
|
$
|
33,743
|
|
|
3.2
|
%
|
After one year through five years
|
327,069
|
|
|
323,368
|
|
|
31.0
|
%
|
||
After five years through ten years
|
185,400
|
|
|
181,026
|
|
|
17.3
|
%
|
||
After ten years
|
127,338
|
|
|
131,208
|
|
|
12.6
|
%
|
||
Residential mortgage-backed
|
186,279
|
|
|
181,098
|
|
|
17.4
|
%
|
||
Commercial mortgage and asset-backed
|
192,941
|
|
|
190,804
|
|
|
18.3
|
%
|
||
Redeemable preferred stock
|
2,025
|
|
|
2,004
|
|
|
0.2
|
%
|
||
Total
|
$
|
1,054,902
|
|
|
$
|
1,043,251
|
|
|
100.0
|
%
|
•
|
A
$102.5 million
secured revolving facility used by JRG Re to issue letters of credit for the benefit of third-party reinsureds. This portion of our credit facility is secured by our investment securities. At
March 31, 2018
, the Company had $98.6 million of letters of credit issued under the secured facility.
|
•
|
A $112.5 million unsecured revolving facility to meet the working capital needs of the Company. All unpaid principal on the revolver is due at maturity. Interest accrues quarterly and is payable in arrears at 3-month LIBOR plus a margin which is currently 1.5% and is subject to change according to terms in the credit agreement. At
March 31, 2018
, the Company had a drawn balance of
$73.3 million
outstanding on the unsecured revolver.
|
|
|
Company Retention
|
Casualty
|
|
|
Primary Specialty Casualty, including Professional Liability
|
|
Up to $1.0 million per occurrence, subject to a $1.0 million aggregate deductible.
|
Primary Casualty
|
|
Up to $2.0 million per occurrence.
(1)
|
Excess Casualty
|
|
Up to $1.0 million per occurrence.
(2)
|
Property
|
|
Up to $5.0 million per event.
(3)
|
(1)
|
Total exposure to any one claim is generally $1.0 million.
|
(2)
|
For policies with an occurrence limit of $1.0 million or higher, the excess casualty treaty is set such that our retention is $1.0 million or less. For policies where we also write an underlying primary casualty policy, the net excess casualty limit is added to the primary limit and the retention remains the same at $1.0 million.
|
(3)
|
The property catastrophe reinsurance treaty has a limit of $40.0 million with one reinstatement.
|
Line of Business
|
|
Coverage
|
Casualty
|
|
|
Workers’ Compensation
|
|
Excess of loss coverage for $29.4 million in excess of $600,000.
(1)
|
Workers’ Compensation – Program
|
|
Quota share coverage for 50% of the first $600,000 per occurrence.
(1)(2)
|
Commercial Auto – Program
|
|
Quota share coverage for 75% of $1.0 million per occurrence.
|
Commercial Auto – 3 Programs
|
|
Quota share coverage for 90% of $1.0 million per occurrence.
|
Professional Liability – Program
|
|
Quota share coverage for 77.5% of $1.0 million per occurrence.
|
General Liability – Program
|
|
Quota share coverage for 90% of the first $1.0 million per occurrence and excess of loss coverage for $1.0 million in excess of $1.0 million per occurrence.
|
Property
|
|
Excess of loss coverage for $44.0 million in excess of $1.0 million.
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
|
($ in thousands)
|
||||||
Cash and cash equivalents provided by (used in):
|
|
|
|
|
|
||
Operating activities
|
$
|
48,461
|
|
|
$
|
16,112
|
|
Investing activities
|
(53,244
|
)
|
|
(22,067
|
)
|
||
Financing activities
|
(7,666
|
)
|
|
(9,605
|
)
|
||
Change in cash and cash equivalents
|
$
|
(12,449
|
)
|
|
$
|
(15,560
|
)
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
|
($ in thousands)
|
||||||
Underwriting profit of the operating segments:
|
|
|
|
|
|
||
Excess and Surplus Lines
|
$
|
11,299
|
|
|
$
|
8,800
|
|
Specialty Admitted Insurance
|
1,623
|
|
|
842
|
|
||
Casualty Reinsurance
|
1,744
|
|
|
1,093
|
|
||
Total underwriting profit of operating segments
|
14,666
|
|
|
10,735
|
|
||
Other operating expenses of the Corporate and Other segment
|
(7,431
|
)
|
|
(6,461
|
)
|
||
Underwriting profit (1)
|
7,235
|
|
|
4,274
|
|
||
Net investment income
|
13,256
|
|
|
16,733
|
|
||
Net realized investment (losses) gains
|
(810
|
)
|
|
1,047
|
|
||
Amortization of intangible assets
|
(149
|
)
|
|
(149
|
)
|
||
Other income and expenses
|
104
|
|
|
200
|
|
||
Interest expense
|
(2,522
|
)
|
|
(2,123
|
)
|
||
Income before taxes
|
$
|
17,114
|
|
|
$
|
19,982
|
|
(1)
|
Included in underwriting results for the
three
months ended
March 31, 2018
and 2017 is gross fee income of
$8.2 million
and
$5.9 million
, respectively.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2018
|
|
2017
|
||||||||||||
|
Income
Before
Taxes
|
|
Net
Income
|
|
Income
Before
Taxes
|
|
Net
Income
|
||||||||
|
($ in thousands)
|
||||||||||||||
Income as reported
|
$
|
17,114
|
|
|
$
|
15,633
|
|
|
$
|
19,982
|
|
|
$
|
18,450
|
|
Net realized investment losses (gains)
|
810
|
|
|
665
|
|
|
(1,047
|
)
|
|
(834
|
)
|
||||
Other expenses
|
4
|
|
|
20
|
|
|
(114
|
)
|
|
(100
|
)
|
||||
Interest expense on leased building the Company is deemed to own for accounting purposes
|
318
|
|
|
251
|
|
|
312
|
|
|
203
|
|
||||
Adjusted net operating income
|
$
|
18,246
|
|
|
$
|
16,569
|
|
|
$
|
19,133
|
|
|
$
|
17,719
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Equity
|
|
Equity per
Share |
|
Equity
|
|
Equity per
Share |
||||||||
|
($ in thousands, except share amounts)
|
||||||||||||||
Shareholders’ equity
|
$
|
685,770
|
|
|
$
|
22.96
|
|
|
$
|
694,699
|
|
|
$
|
23.39
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill
|
181,831
|
|
|
6.09
|
|
|
181,831
|
|
|
6.12
|
|
||||
Intangible assets
|
38,185
|
|
|
1.28
|
|
|
38,334
|
|
|
1.29
|
|
||||
Tangible equity
|
$
|
465,754
|
|
|
$
|
15.59
|
|
|
$
|
474,534
|
|
|
$
|
15.98
|
|
Dividends to shareholders for the three months ended March 31, 2018
|
9,049
|
|
|
0.30
|
|
|
|
|
|
||||||
Pre-dividend tangible equity
|
$
|
474,803
|
|
|
$
|
15.89
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
3.3
|
|
|
|
|
|
3.4
|
|
|
|
|
|
3.5
|
|
|
|
|
|
3.6
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
James River Group Holdings, Ltd.
|
|
|
|
|
|
Date:
|
May 4, 2018
|
By:
|
/s/ Robert P. Myron
|
|
|
|
Robert P. Myron
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
Date:
|
May 4, 2018
|
By:
|
/s/ Sarah C. Doran
|
|
|
|
Sarah C. Doran
|
|
|
|
Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
i.
|
the purchase or other acquisition (other than from the Company), in a single transaction or series of related transactions, by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Exchange Act (excluding, for this purpose, the Company or its subsidiaries or any employee benefit plan of the Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 50% or more of either the then-outstanding Shares or the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors;
|
ii.
|
consummation of a reorganization, merger, amalgamation or consolidation involving the Company, in each case with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger, amalgamation or consolidation do not, immediately thereafter, own more than 50% of, respectively, the Shares and the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, amalgamated or consolidated corporation’s then-outstanding voting securities; or
|
iii.
|
a liquidation or dissolution of the Company, or the sale of all or substantially all of the assets of the Company; provided, however, an event described above shall be considered a Change in Control hereunder only if it also constitutes a “change in control event” under Section 409A of the Code, to the extent necessary to avoid the adverse tax consequences thereunder with respect to any payment subject to Section 409A of the Code.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of James River Group Holdings, Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Robert P. Myron
|
|
Robert P. Myron
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of James River Group Holdings, Ltd.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Sarah C. Doran
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Sarah C. Doran
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Chief Financial Officer
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(Principal Financial Officer)
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Robert P. Myron
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Robert P. Myron
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President and Chief Executive Officer
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(Principal Executive Officer)
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May 4, 2018
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/s/ Sarah C. Doran
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Sarah C. Doran
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Chief Financial Officer
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(Principal Financial Officer)
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May 4, 2018
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