James River Group Holdings, Ltd. [JRVR] Filings

10-Q 1 jrvr-20240630.htm 10-Q jrvr-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2024


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______

Commission File Number: 001-36777


JAMES RIVER GROUP HOLDINGS, LTD.

(Exact name of registrant as specified in its charter)


Bermuda						98-0585280
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Clarendon House, 2 Church Street, Hamilton, Pembroke HM11, Bermuda

(Address of principal executive offices)

(Zip Code)

(441) 295-1422

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Names of each exchange on which registered

Common Shares, par value $0.0002 per share

JRVR

NASDAQ

Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

Number of shares of the registrant's common shares outstanding at August 5, 2024: 37,825,767

James River Group Holdings, Ltd.

Form 10-Q

Index


		Page Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets —June 30, 2024 and December 31, 2023	5

	Condensed Consolidated Statements of Income and Comprehensive Income (Loss)—Three and Six Months Ended June 30, 2024 and 2023	7

	Condensed Consolidated Statements of Changes in Shareholders’ Equity—Three and Six Months Ended June 30, 2024 and 2023	8

	Condensed Consolidated Statements of Cash Flows—Six Months Ended June 30, 2024 and 2023	10

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38

	Critical Accounting Policies and Estimates	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	64

Item 4.	Controls and Procedures	64

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67

Signatures		68

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the fact that they do not relate strictly to historical or current facts. You may identify forward-looking statements in this Quarterly Report by the use of words such as “anticipates,” “estimates,” “expects,” “intends,” “plans”, “seeks” and “believes,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could.” These forward-looking statements include, among others, all statements relating to our future financial performance, our business prospects and strategy, anticipated financial position and financial strength ratings, liquidity and capital needs and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.

Our actual results may differ materially from those expressed in, or implied by, the forward-looking statements included in this Quarterly Report as a result of various factors, many of which are beyond our control, including, among others:

•the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves;

•inaccurate estimates and judgments in our risk management may expose us to greater risks than intended;

•downgrades in the financial strength rating or outlook of our regulated insurance subsidiaries impacting our ability to attract and retain insurance business that our subsidiaries write, our competitive position, and our financial condition;

•uncertainty regarding the outcome and timing of our exploration of strategic alternatives, and the impacts that it may have on our business;

•the amount of the final post-closing adjustment to the purchase price received in connection with the sale of our casualty reinsurance business;

•the potential loss of key members of our management team or key employees, and our ability to attract and retain personnel;

•adverse economic factors resulting in the sale of fewer policies than expected or an increase in the frequency or severity of claims, or both;

•the impact of a persistent high inflationary environment on our reserves, the values of our investments and investment returns, and our compensation expenses;

•exposure to credit risk, interest rate risk and other market risk in our investment portfolio;

•reliance on a select group of brokers and agents for a significant portion of our business and the impact of our potential failure to maintain such relationships;

•reliance on a select group of customers for a significant portion of our business and the impact of our potential failure to maintain, or decision to terminate, such relationships;

•our ability to obtain insurance and reinsurance coverage at prices and on terms that allow us to transfer risk, adequately protect our Company against financial loss and that supports our growth plans;

•losses resulting from reinsurance counterparties failing to pay us on reinsurance claims, insurance companies with whom we have a fronting arrangement failing to pay us for claims, or a former customer with whom we have an indemnification arrangement failing to perform its reimbursement obligations, and our potential inability to demand or maintain adequate collateral to mitigate such risks;

•inadequacy of premiums we charge to compensate us for our losses incurred;

•changes in laws or government regulation, including tax or insurance law and regulations;

•changes in U.S. tax laws (including associated regulations) and the interpretation of certain provisions applicable to insurance/reinsurance businesses with U.S. and non-U.S. operations, which may be retroactive and could have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as on our shareholders;

•in the event we do not qualify for the insurance company exception to the passive foreign investment company (“PFIC”) rules and are therefore considered a PFIC, there could be material adverse tax consequences to an investor that is subject to U.S. federal income taxation;

•the Company or its foreign subsidiary becoming subject to U.S. federal income taxation;

•a failure of any of the loss limitations or exclusions we utilize to shield us from unanticipated financial losses or legal exposures, or other liabilities;

•losses from catastrophic events, such as natural disasters and terrorist acts, which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events;

•potential effects on our business of emerging claim and coverage issues;

•the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents;

•our ability to manage our growth effectively;

•failure to maintain effective internal controls in accordance with the Sarbanes-Oxley Act of 2002, as amended;

•changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends;

•an adverse result in any litigation or legal proceedings we are or may become subject to; and

•other risks and uncertainties discussed under “Risk Factors” and elsewhere in this Quarterly Report.

Accordingly, you should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from information contained in forward-looking statements.

Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those in the forward-looking statements, is contained in Part II, Item 1A "Risk Factors" in this Quarterly Report, and our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.

Forward-looking statements speak only as of the date of this Quarterly Report. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Quarterly Report, whether as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this Quarterly Report or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets


	(Unaudited) June 30, 2024		December 31, 2023
	(in thousands)
Assets
Invested assets:

Fixed maturity securities, available-for-sale, at fair value (amortized cost: 2024 – $1,207,960; 2023 – $1,405,136)	$	1,114,475	$	1,324,476

Equity securities, at fair value (cost: 2024 – $120,749; 2023 – $114,107)	128,564		119,945
Bank loan participations, at fair value	165,280		156,169
Short-term investments	45,977		72,137
Other invested assets	35,834		33,134
Total invested assets	1,490,130		1,705,861
Cash and cash equivalents	672,523		274,298
Restricted cash equivalents	27,963		72,449
Accrued investment income	9,850		12,106
Premiums receivable and agents’ balances, net	248,995		249,490
Reinsurance recoverable on unpaid losses, net	1,417,791		1,358,474
Reinsurance recoverable on paid losses	160,555		157,991
Prepaid reinsurance premiums	321,142		293,108
Deferred policy acquisition costs	27,150		31,497
Intangible assets, net	32,631		32,813
Goodwill	181,831		181,831
Other assets	147,645		163,939
Assets held-for-sale (Note 2 - discontinued operations)	—		783,393
Total assets	$	4,738,206	$	5,317,250

See accompanying notes.

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (continued)


	(Unaudited) June 30, 2024		December 31, 2023
	(in thousands, except share amounts)
Liabilities and Shareholders’ Equity
Liabilities:
Reserve for losses and loss adjustment expenses	$	2,720,198	$	2,606,107
Unearned premiums	600,603		587,899
Payables to reinsurers	157,006		158,670
Funds held	25,157		65,235
Deferred reinsurance gain	13,047		20,733
Senior debt	200,800		222,300
Junior subordinated debt	104,055		104,055
Accrued expenses	47,769		56,722
Other liabilities	182,882		174,513
Liabilities held-for-sale (Note 2 - discontinued operations)	—		641,497
Total liabilities	4,051,517		4,637,731
Commitments and contingent liabilities (Note 8)
Series A redeemable preferred shares – 2024 and 2023: $0.00125 par value; 20,000,000 shares authorized; 150,000 shares issued and outstanding	144,898		144,898
Shareholders’ equity:
Common shares – 2024 and 2023: $0.0002 par value; 200,000,000 shares authorized; 37,825,767 and 37,641,563 shares issued and outstanding, respectively	7		7
Additional paid-in capital	879,631		876,240
Retained deficit	(263,994)		(277,905)
Accumulated other comprehensive loss	(73,853)		(63,721)
Total shareholders’ equity	541,791		534,621
Total liabilities, Series A redeemable preferred shares, and shareholders’ equity	$	4,738,206	$	5,317,250

See accompanying notes.

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands, except share amounts)
Revenues
Gross written premiums	$	412,247	$	423,050	$	743,057	$	776,504
Ceded written premiums	(230,894)		(218,557)		(423,532)		(400,786)
Net written premiums	181,353		204,493		319,525		375,718
Change in net unearned premiums	(18,160)		(31,024)		15,359		(33,339)
Net earned premiums	163,193		173,469		334,884		342,379
Net investment income	24,931		18,234		47,563		36,659
Net realized and unrealized (losses) gains on investments	(2,305)		1,615		2,278		1,775
Other income	2,470		1,464		4,691		2,773
Total revenues	188,289		194,782		389,416		383,586
Expenses
Losses and loss adjustment expenses	115,471		120,440		225,520		246,821
Other operating expenses	44,096		50,193		94,906		98,229
Other expenses	2,098		223		2,830		826
Interest expense	6,344		5,997		12,829		11,580
Amortization of intangible assets	91		91		182		182

Total expenses	168,100		176,944		336,267		357,638
Income from continuing operations before income taxes	20,189		17,838		53,149		25,948
Income tax expense on continuing operations	5,711		5,709		15,163		8,517
Net income from continuing operations	14,478		12,129		37,986		17,431
Discontinued operations (Note 2):
(Loss) income from discontinued operations	(5,650)		3,785		(13,583)		5,489
Loss on disposal of discontinued operations	(1,203)		—		(1,375)		—
Total (loss) income from discontinued operations	(6,853)		3,785		(14,958)		5,489
Net income	7,625		15,914		23,028		22,920
Dividends on Series A preferred shares	(2,625)		(2,625)		(5,250)		(5,250)
Net income available to common shareholders	$	5,000	$	13,289	$	17,778	$	17,670

Other comprehensive (loss) income:
Net unrealized (losses) gains, net of taxes of $(627) and $(2,693) in 2024 and $(3,633) and $1,369 in 2023	(2,359)		(16,457)		(10,132)		14,445
Total comprehensive income (loss)	$	5,266	$	(543)	$	12,896	$	37,365

Net income (loss) per common share:
Basic
Continuing operations	$	0.31	$	0.25	$	0.87	$	0.32
Discontinued operations	$	(0.18)	$	0.10	$	(0.40)	$	0.15
	$	0.13	$	0.35	$	0.47	$	0.47
Diluted
Continuing operations	$	0.31	$	0.25	$	0.85	$	0.32
Discontinued operations	$	(0.18)	$	0.10	$	(0.33)	$	0.15
	$	0.13	$	0.35	$	0.52	$	0.47
Dividend declared per common share	$	0.05	$	0.05	$	0.10	$	0.10
Weighted-average common shares outstanding:
Basic	37,869,322		37,642,289		37,801,516		37,587,359
Diluted	38,037,393		37,858,747		44,762,563		37,822,405

See accompanying notes.

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)


	Number of Common Shares Outstanding	Common Shares (Par)		Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Total
	(in thousands, except share amounts)
Balances at March 31, 2024	37,822,340	$	7	$	878,091	$	(267,067)	$	(71,494)	$	539,537
Net income	—	—		—		7,625		—		7,625
Other comprehensive loss	—	—		—		—		(2,359)		(2,359)

Vesting of RSUs	3,427	—		(13)		—		—		(13)
Compensation expense under share incentive plans	—	—		1,553		—		—		1,553
Dividends on Series A preferred shares	—	—		—		(2,625)		—		(2,625)
Dividends on common shares	—	—		—		(1,927)		—		(1,927)
Balances at June 30, 2024	37,825,767	$	7	$	879,631	$	(263,994)	$	(73,853)	$	541,791

Balances at December 31, 2023	37,641,563	$	7	$	876,240	$	(277,905)	$	(63,721)	$	534,621
Net income	—	—		—		23,028		—		23,028
Other comprehensive loss	—	—		—		—		(10,132)		(10,132)

Vesting of RSUs	184,204	—		(837)		—		—		(837)
Compensation expense under share incentive plans	—	—		4,228		—		—		4,228
Dividends on Series A preferred shares	—	—		—		(5,250)		—		(5,250)
Dividends on common shares	—	—		—		(3,867)		—		(3,867)
Balances at June 30, 2024	37,825,767	$	7	$	879,631	$	(263,994)	$	(73,853)	$	541,791

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)


	Number of Common Shares Outstanding	Common Shares (Par)		Additional Paid-in Capital		Retained Deficit		Accumulated Other Comprehensive Loss		Total
	(in thousands, except share amounts)
Balances at March 31, 2023	37,619,226	$	7	$	870,043	$	(149,595)	$	(132,142)	$	588,313
Net income	—	—		—		15,914		—		15,914
Other comprehensive loss	—	—		—		—		(16,457)		(16,457)



Compensation expense under share incentive plans	—	—		2,316		—		—		2,316
Dividends on Series A preferred shares	—	—		—		(2,625)		—		(2,625)
Dividends on common shares	—	—		—		(1,919)		—		(1,919)
Balances at June 30, 2023	37,619,226	$	7	$	872,359	$	(138,225)	$	(148,599)	$	585,542

Balances at December 31, 2022	37,470,237	$	7	$	868,858	$	(152,055)	$	(163,044)	$	553,766
Net income	—	—		—		22,920		—		22,920
Other comprehensive income	—	—		—		—		14,445		14,445


Vesting of RSUs	148,989	—		(1,507)		—		—		(1,507)
Compensation expense under share incentive plans	—	—		5,008		—		—		5,008
Dividends on Series A preferred shares	—	—		—		(5,250)		—		(5,250)
Dividends on common shares	—	—		—		(3,840)		—		(3,840)
Balances at June 30, 2023	37,619,226	$	7	$	872,359	$	(138,225)	$	(148,599)	$	585,542

See accompanying notes.

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Six Months Ended June 30,
	2024		2023
	(in thousands)
Operating activities
Net cash provided by operating activities (a)	$	15,397	$	42,621
Investing activities
Sale of JRG Re	96,412		—
Securities available-for-sale:
Purchases – fixed maturity securities	(28,727)		(142,680)
Sales – fixed maturity securities	198,046		10,092
Maturities and calls – fixed maturity securities	84,596		55,520
Purchases – equity securities	(7,311)		(8,557)
Sales – equity securities	6,190		8,548
Bank loan participations:
Purchases	(80,700)		(17,119)
Sales	51,913		20,020
Maturities	19,252		12,650
Other invested assets:
Purchases	(4,725)		(375)
Return of capital	472		682
Proceeds from sales	2,763		1,153
Short-term investments, net	26,160		85,684
Securities receivable or payable, net	(6,386)		3,625
Purchases of property and equipment	(1,327)		(2,173)
Net cash provided by investing activities	356,628		27,070
Financing activities

Senior debt repayments	(21,500)		—



Payroll taxes withheld and remitted on net settlement of RSUs	(837)		(1,507)
Dividends on Series A preferred shares	(5,250)		(7,875)
Dividends on common shares	(3,901)		(3,931)
Payment of debt issuance costs	—		(16)
Net cash used in financing activities	(31,488)		(13,329)
Change in cash, cash equivalents, and restricted cash equivalents	340,537		56,362
Cash, cash equivalents, and restricted cash equivalents at beginning of period	359,949		276,379
Cash, cash equivalents, and restricted cash equivalents at end of period	$	700,486	$	332,741
Supplemental information
Interest paid	$	15,628	$	14,877

Restricted cash equivalents at beginning of period	$	72,449	$	103,215
Restricted cash equivalents at end of period	$	27,963	$	105,502
Change in restricted cash equivalents	$	(44,486)	$	2,287

(a) Cash provided by operating activities for the six months ended June 30, 2024 and 2023 includes the restricted cash activity above related to a former insured, per the terms of a collateral trust. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book”. Excluding the restricted cash activity, cash provided by operating activities was $59.9 million and $40.3 million for the six months ended June 30, 2024 and 2023, respectively.

See accompanying notes.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1. Accounting Policies

Organization

James River Group Holdings, Ltd. (referred to as “JRG Holdings” or, with its subsidiaries, the “Company”) is an exempted holding company registered in Bermuda, organized for the purpose of acquiring and managing insurance entities.

The Company owns five insurance companies based in the United States (“U.S.”) focused on specialty insurance niches as described below:

•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, an Ohio domiciled 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, an Ohio domiciled company, and Falls Lake Fire and Casualty Company, a California domiciled company. Falls Lake National and its subsidiaries primarily write specialty admitted fronting and program business.

The Company previously owned JRG Reinsurance Company Ltd. (“JRG Re”), a Bermuda domiciled reinsurer, which comprised the former Casualty Reinsurance segment, and which, prior to the suspension of its underwriting activities in 2023, primarily provided non-catastrophe casualty reinsurance to U.S. third parties. On November 8, 2023, the Company entered into an agreement to sell JRG Re. The sale closed on April 16, 2024 and resulted in the Company’s disposition of its casualty reinsurance business and related assets. See Held-for-Sale and Discontinued Operations below and Note 2 for additional disclosure.

Basis of Presentation

The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements include the results of the Company and its subsidiaries from their respective dates of inception or acquisition, as applicable. Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a more complete description of the Company’s business and accounting policies. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results of operations for the full year. The consolidated balance sheet as of December 31, 2023 was derived from the Company’s audited annual consolidated financial statements.

Intercompany transactions and balances have been eliminated.

Held-for-Sale and Discontinued Operations

The results of operations of a component of the Company are reported in discontinued operations when certain criteria are met as of the date of disposal, or earlier if classified as held-for-sale. The Company determined that the definitive agreement to sell JRG Re met the criteria for JRG Re to be classified as held for sale at December 31, 2023 and that the sale represented a strategic shift that will have a major effect on the Company's operations. Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held-for-sale and segregated for all periods presented in this interim report on Form 10-Q. See Note 2 for additional disclosure.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Estimates and Assumptions

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.

Variable Interest Entities

Entities that do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (“VIE”). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose, and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

The Company holds interests in VIEs through certain equity method investments included in “other invested assets” in the accompanying condensed consolidated balance sheets. The Company has determined that it should not consolidate any of the VIEs as it is not the primary beneficiary in any of the relationships. Although the investments resulted in the Company holding variable interests in the entities, they did not empower the Company to direct the activities that most significantly impact the economic performance of the entities. The Company’s investments related to these VIEs totaled $8.0 million at June 30, 2024 and $8.4 million at December 31, 2023, representing the Company’s maximum exposure to loss.

Income Tax Expense

Our effective tax rate fluctuates from period to period based on the relative mix of income from continuing operations reported by country and the respective tax rates imposed by each tax jurisdiction. Statutory tax rates are 0% and 21% for Bermuda and the U.S. For the three and six months ended June 30, 2024, our effective tax rate on income from continuing operations was 28.3% and 28.5%, respectively (32.0% and 32.8% in the respective prior year periods). The Company does not receive a U.S. tax deduction for losses in our Bermuda entities. Bermuda had losses in both periods primarily due to Bermuda holding company expenses and interest expense. For U.S.-sourced income, the Company’s U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities, dividends received income, and excess tax benefits and expenses on share based compensation.

Adopted Accounting Standards

There were no new accounting standards adopted in 2024 that materially impacted the Company's financial statements.

Prospective Accounting Standards

The guidance in ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures was designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and are not expected to have a material impact on our financial statements.

The guidance in ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures was designed to increase transparency about income tax information through improvements to the rate reconciliation and disclosure of income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and are not expected to have a material impact on our financial statements.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

2. Discontinued Operations

On November 8, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Fleming Intermediate Holdings LLC, a Cayman Islands limited liability company (the “Buyer”). Pursuant to the Stock Purchase Agreement, and on the terms and subject to the conditions therein, the Buyer agreed to purchase from the Company all of the common shares of JRG Re. JRG Re comprised the remaining operations of the former Casualty Reinsurance segment, and the sale of JRG Re, which closed on April 16, 2024, resulted in the Company’s disposition of its casualty reinsurance business and related assets.

Pursuant to the terms of the Stock Purchase Agreement, the aggregate purchase price received by the Company, after giving effect to estimated adjustments based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing, totaled approximately $291.4 million (the “Closing Date Purchase Price”). The aggregate Closing Date Purchase Price was comprised of (i) $152.4 million paid in cash by the Buyer and (ii) an aggregate $139.0 million dividend and distribution from contributed surplus by JRG Re to the Company. In accordance with the Stock Purchase Agreement, the cash portion of the purchase price was calculated based on an estimated balance sheet of JRG Re as of the date of closing. The estimated balance sheet is subject to final post-closing adjustments, which could result in adjustments to the purchase price. Additionally, the Buyer may pay an additional $2.5 million to the Company in the event that certain conditions outlined in the Stock Purchase Agreement are met on the date that is nine months following the date of closing.

The Buyer delivered a closing statement to the Company, and pursuant to the procedures in the Stock Purchase Agreement, the Company has given its notice of disagreement with the Buyer’s closing statement. In its notice of disagreement, the Company (i) agreed with an $11.4 million downward adjustment to the Closing Date Purchase Price due to losses from JRG Re’s operations between the date of the balance sheet used to produce the estimated closing statement and the Closing Date, which downward adjustment is included in “Other Liabilities” on the Company’s Balance Sheet at June 30, 2024, and (ii) disputed $54.1 million in aggregate downward adjustments to the Closing Date Purchase Price claimed by the Buyer, which the Company believes are unsupported by the facts known to the Company and the terms of the Stock Purchase Agreement. The Stock Purchase Agreement provides procedures for resolving disputes between the parties regarding the closing statement and it is possible that the resolution of these disputes could result in a significant reduction to the amount of the purchase price.

The Company determined that the sale of JRG Re met the criteria to be classified as held for sale at December 31, 2023 and that the sale represented a strategic shift that will have a major effect on its operations. Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held for sale and segregated for all periods presented in this interim report on Form 10-Q.

The $139.0 million pre-closing dividend was completed in the first quarter of 2024. It included the forgiveness of $133.2 million owed from JRG Holdings to JRG Re and $5.8 million paid in cash to JRG Holdings. In the fourth quarter of 2023, after giving effect to the pre-closing dividend, we recorded an estimated loss on sale of $80.4 million to write down the carrying value of JRG Re to its estimated fair value based upon the estimated sales price of the transaction less costs to sell and other adjustments in accordance with the Stock Purchase Agreement. In the six months ended June 30, 2024, the estimated loss on the sale was revised to $78.0 million. The loss on disposal for the six months ended June 30, 2024 of $1.4 million includes the $2.4 million gain for the change in the estimated loss on sale and selling costs incurred of $3.8 million. The $5.8 million cash portion of the pre-closing dividend was included in other liabilities at December 31, 2023.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

JRG Re's assets and liabilities held for sale at December 31, 2023 were comprised of the following:


	December 31, 2023
	(in thousands)
Assets
Invested assets:
Fixed maturity securities, at fair value	$	532,242
Equity securities, at fair value	2,779


Total invested assets	535,021
Cash and cash equivalents	13,202
Accrued investment income	3,589
Premiums receivable and agents’ balances, net	68,441
Reinsurance recoverable on unpaid and paid losses, net	234,615

Deferred policy acquisition costs	4,986
Write down of JRG Re to fair value less cost to sell	(80,400)
Other assets	3,939
Assets held for sale	$	783,393

Liabilities
Reserve for losses and loss adjustment expenses	$	441,666
Unearned premiums	17,223
Funds held	137,796
Deferred reinsurance gain	33,167
Accrued expenses	1,955
Other liabilities	9,690
Liabilities held for sale	$	641,497

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The operating results of JRG Re reported in discontinued operations were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Revenues:
Gross written premiums	$	780	$	4,691	$	1,137	$	15,130
Ceded written premiums	—		(396)		877		(1,770)
Net written premiums	780		4,295		2,014		13,360
Change in net unearned premiums	940		22,503		8,371		49,711
Net earned premiums	1,720		26,798		10,385		63,071
Net investment income	580		6,941		4,432		14,288
Net realized and unrealized (losses) gains on investments	(7,229)		530		(9,472)		777

Total revenues	(4,929)		34,269		5,345		78,136
Expenses:
Losses and loss adjustment expenses	(281)		20,868		13,157		49,775
Other operating expenses	913		8,672		5,039		20,895

Interest expense	89		944		732		1,977
Total expenses	721		30,484		18,928		72,647
(Loss) income from discontinued operations	(5,650)		3,785		(13,583)		5,489
Loss on disposal of discontinued operations	(1,203)		—		(1,375)		—
Total (loss) income from discontinued operations	(6,853)		3,785		(14,958)		5,489

Cash flows from discontinued operations included in the consolidated statements of cash flows were as follows:


	Six Months Ended June 30,
	2024		2023
	(in thousands)

Net cash used in operating activities of discontinued operations	$	(25,115)	$	(48,878)
Net cash provided by investing activities of discontinued operations	63,104		59,555
Net cash provided by (used in) discontinued operations	$	37,989	$	10,677
Interest paid by discontinued operations	$	1,388	$	2,162

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

3. Investments

The Company’s available-for-sale fixed maturity securities are summarized as follows:


	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
June 30, 2024
Fixed maturity securities:
State and municipal	$	229,975	$	632	$	(27,682)	$	202,925
Residential mortgage-backed	310,235		56		(25,008)		285,283
Corporate	435,227		721		(30,632)		405,316
Commercial mortgage and asset-backed	209,115		48		(10,859)		198,304

U.S. Treasury securities and obligations guaranteed by the U.S. government	23,408		—		(761)		22,647

Total fixed maturity securities, available-for-sale	$	1,207,960	$	1,457	$	(94,942)	$	1,114,475
December 31, 2023
Fixed maturity securities:
State and municipal	$	273,462	$	1,834	$	(26,459)	$	248,837
Residential mortgage-backed	336,064		1,243		(19,379)		317,928
Corporate	530,408		4,167		(28,847)		505,728
Commercial mortgage and asset-backed	235,302		78		(12,527)		222,853

U.S. Treasury securities and obligations guaranteed by the U.S. government	29,900		8		(778)		29,130

Total fixed maturity securities, available-for-sale	$	1,405,136	$	7,330	$	(87,990)	$	1,324,476

The amortized cost and fair value of available-for-sale investments in fixed maturity securities at June 30, 2024 are summarized, by contractual maturity, as follows:


	Cost or Amortized Cost		Fair Value
	(in thousands)
One year or less	$	19,661	$	19,434
After one year through five years	308,786		299,268
After five years through ten years	230,535		204,929
After ten years	129,628		107,257
Residential mortgage-backed	310,235		285,283
Commercial mortgage and asset-backed	209,115		198,304

Total	$	1,207,960	$	1,114,475

Actual maturities may differ for some securities because borrowers have the right to call or prepay obligations with or without penalties.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The following table shows the Company’s gross unrealized losses and fair value for available-for-sale securities aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:


	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)
June 30, 2024
Fixed maturity securities:
State and municipal	$	24,864	$	(604)	$	157,731	$	(27,078)	$	182,595	$	(27,682)
Residential mortgage-backed	74,310		(1,177)		200,429		(23,831)		274,739		(25,008)
Corporate	70,309		(802)		274,982		(29,830)		345,291		(30,632)
Commercial mortgage and asset-backed	14,119		(95)		142,399		(10,764)		156,518		(10,859)

U.S. Treasury securities and obligations guaranteed by the U.S. government	1,497		(22)		21,151		(739)		22,648		(761)

Total fixed maturity securities, available-for-sale	$	185,099	$	(2,700)	$	796,692	$	(92,242)	$	981,791	$	(94,942)
December 31, 2023
Fixed maturity securities:
State and municipal	$	30,196	$	(287)	$	168,517	$	(26,172)	$	198,713	$	(26,459)
Residential mortgage-backed	68,497		(1,256)		145,954		(18,123)		214,451		(19,379)
Corporate	55,970		(532)		290,308		(28,315)		346,278		(28,847)
Commercial mortgage and asset-backed	24,048		(151)		182,295		(12,376)		206,343		(12,527)

U.S. Treasury securities and obligations guaranteed by the U.S. government	7,961		(71)		19,889		(707)		27,850		(778)

Total fixed maturity securities, available-for-sale	$	186,672	$	(2,297)	$	806,963	$	(85,693)	$	993,635	$	(87,990)

At June 30, 2024, the Company held fixed maturity securities of 422 issuers that were in an unrealized loss position with a total fair value of $981.8 million and gross unrealized losses of $94.9 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on a scheduled principal or interest payment. At June 30, 2024, 100.0% of the Company’s fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or received an equivalent rating from another nationally recognized rating agency.

The Company reviews its available-for-sale fixed maturities to determine whether unrealized losses are due to credit-related factors. An allowance for credit losses is established for any credit-related impairments, limited to the amount by which fair value is below amortized cost. Changes in the allowance for credit losses are recognized in earnings and included in net realized and unrealized gains (losses) on investments. Unrealized losses that are not credit-related are recognized in other comprehensive income.

The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at June 30, 2024, December 31, 2023, or June 30, 2023. During the three months ended June 30, 2024, management recognized an impairment loss of $207,000 for one fixed maturity security due to the Company’s inability to hold the security until a recovery in its value to the amortized cost basis. For the remainder of securities in an unrealized loss position, management does not intend to sell the securities, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company elected the fair value option to account for bank loan participations. Under the fair value option, bank loan participations are measured at fair value, and changes in unrealized gains and losses in bank loan participations are reported in the income statement as net realized and unrealized gains (losses) on investments. Applying the fair value option to the bank loan portfolio increases volatility in the Company's financial statements, but management believes it is less subjective and less burdensome to implement and maintain than ASU 2016-13, which would have otherwise been required.

At June 30, 2024, the Company's bank loan portfolio had an aggregate fair value of $165.3 million and unpaid principal of $173.4 million. Investment income on bank loan participations included in net investment income was $4.6 million and $9.1 million for the three and six months ended June 30, 2024, respectively ($2.0 million and $3.5 million for the three and six months ended June 30, 2023, respectively). Net realized and unrealized losses on bank loan participations were $843,000 and $1.1 million for the three and six months ended June 30, 2024, respectively (gains of $1.6 million and $2.1 million for the three and six months ended June 30, 2023, respectively). For the three and six months ended June 30, 2024, management concluded that $1.4 million and $2.6 million of the unrealized losses were due to credit-related impairments. For the three and six months ended June 30, 2023, management concluded that $497,000 and $1.0 million of the unrealized losses were due to credit-related impairments. Losses due to credit-related impairments are determined based upon consultations and advice from the Company's specialized investment manager and consideration of any adverse situations that could affect the borrower's ability to repay, the estimated value of underlying collateral, and other relevant factors.

Bank loan participations generally provide a higher yield than our portfolio of fixed maturities and have a credit rating that is below investment grade (i.e. below “BBB-” for Standard & Poor’s) at the date of purchase. These bank loans are primarily senior, secured floating-rate debt rated “BB”, “B”, or “CCC” by Standard & Poor’s or an equivalent rating from another nationally recognized rating agency. These bank loans include assignments of, and participations in, performing and non-performing senior corporate debt generally acquired through primary bank syndications and in secondary markets. Bank loans consist of, but are not limited to, term loans, the funded and unfunded portions of revolving credit loans, and other similar loans and investments. Management believed that it was probable at the time that these loans were acquired that the Company would be able to collect all contractually required payments receivable.

Interest income on bank loan participations is accrued on the unpaid principal balance, and discounts and premiums on bank loan participations are amortized to income using the interest method. Generally, the accrual of interest on a bank loan participation is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest. A bank loan participation may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Generally, bank loan participations are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Interest received on nonaccrual loans generally is reported as investment income. There were no bank loans on nonaccrual status at June 30, 2024 or December 31, 2023.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company’s net realized and unrealized gains and losses on investments are summarized as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Fixed maturity securities:
Gross realized gains	$	1,543	$	—	$	1,543	$	—
Gross realized losses	(2,341)		(20)		(2,652)		(27)
	(798)		(20)		(1,109)		(27)
Bank loan participations:
Gross realized gains	223		22		531		42
Gross realized losses	(313)		(2,286)		(1,261)		(2,709)
Changes in fair values of bank loan participations	(753)		3,823		(394)		4,733
	(843)		1,559		(1,124)		2,066
Equity securities:
Gross realized gains	423		350		1,547		931
Gross realized losses	—		—		(177)		(267)
Changes in fair values of equity securities	(1,087)		(269)		3,141		(912)
	(664)		81		4,511		(248)
Short-term investments and other:
Gross realized gains	—		—		—		2
Gross realized losses	—		(5)		—		(18)
Changes in fair values of short-term investments and other	—		—		—		—
	—		(5)		—		(16)
Total	$	(2,305)	$	1,615	$	2,278	$	1,775

Realized investment gains or losses are determined on a specific identification basis.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company invests selectively in private debt and equity opportunities. These investments, which together comprise the Company’s other invested assets, are primarily focused in renewable energy, limited partnerships, and private debt.


	Carrying Value				Investment Income
	June 30,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023		2024		2023
	(in thousands)
Renewable energy LLCs (a)
Excess and Surplus Lines	$	8,003	$	8,382	$	948	$	(305)	$	662	$	698
Corporate & Other	—		—		293		—		293		170
	8,003		8,382		1,241		(305)		955		868
Renewable energy notes receivable (b)
Excess and Surplus Lines	—		608		—		36		61		72
Corporate & Other	—		761		—		45		77		90
	—		1,369		—		81		138		162
Limited partnerships (c)
Excess and Surplus Lines	12,987		11,914		517		370		402		621
Corporate & Other	664		664		—		—		—		—
	13,651		12,578		517		370		402		621
Private Debt (d)
Excess and Surplus Lines	14,180		10,805		151		86		269		172
Corporate & Other	—		—		—		—		—		—
	14,180		10,805		151		86		269		172
Total other invested assets
Excess and Surplus Lines	35,170		31,709		1,616		187		1,394		1,563
Corporate & Other	664		1,425		293		45		370		260
	$	35,834	$	33,134	$	1,909

James River Group Holdings, Ltd. [JRVR] Filings
10-Q	[2024-08-06]
10-Q	[2024-05-09]
10-K	[2024-02-29]
10-Q	[2023-11-14]
10-Q	[2023-08-08]
10-Q	[2023-05-03]
10-K	[2023-02-28]
10-Q	[2022-11-02]
10-Q	[2022-08-02]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-03]
10-Q	[2021-08-05]
10-Q	[2021-05-05]
10-K	[2021-02-26]
10-Q	[2020-10-29]
10-Q	[2020-07-31]
10-Q	[2020-04-30]
10-K	[2020-02-27]
10-Q	[2019-11-07]
10-Q	[2019-08-02]
10-Q	[2019-05-03]
10-K	[2019-02-27]
10-Q	[2018-11-08]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-K	[2018-03-01]
10-Q	[2017-11-03]
10-Q	[2017-08-04]
10-Q	[2017-05-05]
10-K	[2017-03-10]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-03-10]
10-Q	[2015-11-10]
10-Q	[2015-08-10]
10-Q	[2015-05-12]
10-K	[2015-03-12]
S-1	[2014-11-07]