James River Group Holdings, Ltd. (NASDAQ:JRVR) Q3 2023 Earnings Conference Call November 8, 2023 8:30 AM ET Company Participants Brett Shirreffs – Head-Investor Relations Frank D’Orazio – Chief Executive Officer Sarah Doran – Chief Financial Officer Conference Call Participants Mark Hughes – Truist Matt Carletti – JMP Securities Tracy Benguigui – Barclays Brian Meredith – UBS Meyer Shields – KBW Casey Alexander – Compass Point Operator Welcome, everyone, to the James River Group Quarter Three 2023 Earnings ...

James River Group Holdings, Ltd. (NASDAQ:JRVR) Q2 2023 Earnings Conference Call August 8, 2023 8:30 AM ET Company Participants Frank D’Orazio - Chief Executive Officer Sarah Doran - Chief Financial Officer Brett Shirreffs - Investor Relations Conference Call Participants Mark Hughes - Truist Securities Meyer Shields - KBW Tracy Benguigui - Barclays Brian Meredith - UBS Operator Good morning, ladies and gentlemen, and welcome to the James River Group Q2, 2023 Earnings Call. I would now like to introduce you ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show an increase in total assets to $5.30 billion as of June 30, 2023, from $5.14 billion at year-end 2022, with total shareholders' equity also rising to $595.9 million from $553.8 million, while net income available to common shareholders significantly increased to $28.1 million from $14.4 million in the prior-year period, driven by higher net earned premiums and net investment income, though cash flow from operations decreased to $42.6 million from $139.3 million in the same period of 2022 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets increased to $5.30 billion from $5.14 billion at December 31, 2022, primarily driven by increases in reinsurance recoverables and premiums receivable, while total liabilities grew to $4.56 billion from $4.44 billion, mainly due to a higher reserve for losses and loss adjustment expenses, and total shareholders' equity increased to $595.9 million from $553.8 million over the same period Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$5,295,870** | **$5,137,075** | | Total Invested Assets | $2,187,116 | $2,192,294 | | Reinsurance recoverable on unpaid losses, net | $1,545,736 | $1,520,113 | | **Total Liabilities** | **$4,555,049** | **$4,438,411** | | Reserve for losses and loss adjustment expenses | $2,885,379 | $2,768,995 | | Senior debt | $222,300 | $222,300 | | **Total Shareholders' Equity** | **$595,923** | **$553,766** | [Condensed Consolidated Statements of Income and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income%20%28Loss%29) For the six months ended June 30, 2023, the company reported net income available to common shareholders of $28.1 million, a significant increase from $14.4 million in the same period of 2022, driven by an 11.1% increase in net earned premiums to $417.8 million and a 64.5% rise in net investment income to $50.9 million, resulting in total comprehensive income of $47.7 million, a substantial turnaround from a loss of $126.7 million in the prior-year period, which was heavily impacted by unrealized investment losses Financial Performance Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Gross Written Premiums | $791,634 | $759,650 | | Net Earned Premiums | $417,771 | $376,086 | | Net Investment Income | $50,947 | $30,972 | | **Net Income Available to Common Shareholders** | **$28,051** | **$14,369** | | Diluted EPS | $0.74 | $0.38 | | Total Comprehensive Income (Loss) | $47,746 | $(126,702) | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Shareholders' equity increased from $553.8 million at December 31, 2022, to $595.9 million at June 30, 2023, primarily due to net income of $33.3 million and other comprehensive income of $14.4 million from unrealized gains on investments, partially offset by dividends on common and preferred shares totaling $9.1 million - For the six months ended June 30, 2023, total shareholders' equity increased by **$42.2 million**[22](index=22&type=chunk) - Key drivers of the equity increase were net income (**$33.3M**) and other comprehensive income (**$14.4M**), offset by dividends on preferred shares (**$5.3M**) and common shares (**$3.8M**)[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash provided by operating activities was $42.6 million, a decrease from $139.3 million in the prior-year period, while net cash provided by investing activities was $27.1 million, a reversal from $75.1 million used in the same period of 2022, and net cash used in financing activities was $13.3 million, compared to $96.5 million provided in the prior-year period, which had included proceeds from the issuance of Series A preferred shares Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,621 | $139,321 | | Net cash provided by (used in) investing activities | $27,070 | $(75,060) | | Net cash (used in) provided by financing activities | $(13,329) | $96,450 | | **Change in cash, cash equivalents, and restricted cash** | **$56,362** | **$160,711** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, investment portfolio composition, loss reserve development, segment performance, and capital structure, highlighting the significant impact of two loss portfolio transfers (LPTs) on reserves and earnings, the issuance of Series A Preferred Shares, and ongoing legal proceedings, with the investment portfolio primarily composed of investment-grade fixed maturity securities, and the company having suspended underwriting in its Casualty Reinsurance segment [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting a **24.3%** increase in adjusted net operating income to **$42.1 million** for the first six months of 2023, driven by strong investment income growth, with gross written premiums growing **4.2%** to **$791.6 million**, led by the Excess and Surplus Lines segment, and the company suspending underwriting in its Casualty Reinsurance segment to focus on higher-returning U.S. businesses, while detailing the significant accounting impacts of two large Loss Portfolio Transfers (LPTs) and discussing liquidity, capital resources, and ceded reinsurance programs - For the six months ended June 30, 2023, adjusted net operating income increased **24.3%** to **$42.1 million**, compared to **$33.9 million** in the prior year period[176](index=176&type=chunk)[179](index=179&type=chunk) - The company has suspended writing new business in its Casualty Reinsurance segment to focus on its more profitable U.S. insurance businesses[168](index=168&type=chunk) - The company's performance was significantly affected by two Loss Portfolio Transfers (LPTs), the Commercial Auto LPT and the Casualty Re LPT, which required retroactive reinsurance accounting and resulted in a net impact of **$17.5 million** to losses and loss adjustment expenses for the six months ended June 30, 2023[184](index=184&type=chunk)[186](index=186&type=chunk) [Results of Operations](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) For the six months ended June 30, 2023, net income available to common shareholders was $28.1 million, up from $14.4 million year-over-year, with the consolidated combined ratio at 94.7%, slightly higher than 94.2% in the prior year, and the improvement in net income largely driven by a 64.5% increase in net investment income to $50.9 million, which offset higher interest expenses and a slight decrease in underwriting profit, with results also impacted by retroactive reinsurance accounting related to two loss portfolio transfers Consolidated Results Summary (Six Months Ended June 30) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Gross Written Premiums | $791.6M | $759.7M | | Net Earned Premiums | $417.8M | $376.1M | | Underwriting Profit | $21.9M | $21.7M | | Net Investment Income | $50.9M | $31.0M | | Net Income Available to Common Shareholders | $28.1M | $14.4M | | Combined Ratio | 94.7% | 94.2% | [Segment Results](index=42&type=section&id=Segment%20Results) For the first six months of 2023, the Excess and Surplus Lines segment's underwriting profit was $39.4 million with a combined ratio of 87.3%, while the Specialty Admitted Insurance segment posted a small underwriting loss of $85,000 with a combined ratio of 100.2%, impacted by higher net commissions, and the Casualty Reinsurance segment, which has suspended new underwriting, recorded an underwriting profit of $434,000 and a combined ratio of 99.3% as it runs off existing business Combined Ratios by Segment (Six Months Ended June 30) | Segment | 2023 Combined Ratio | 2022 Combined Ratio | | :--- | :--- | :--- | | Excess and Surplus Lines | 87.3% | 83.7% | | Specialty Admitted Insurance | 100.2% | 96.1% | | Casualty Reinsurance | 99.3% | 109.8% | - The Excess and Surplus Lines segment's gross written premiums grew **9.4%** to **$515.0 million** in the first half of 2023, driven by attractive market conditions and renewal rate increases of **10.2%**[188](index=188&type=chunk)[195](index=195&type=chunk) - The Specialty Admitted Insurance segment's expense ratio increased from **19.6%** to **25.6%** year-over-year, mainly due to the termination of a workers' compensation quota share treaty, which increased net commission expense[199](index=199&type=chunk) [Investing Results](index=45&type=section&id=Investing%20Results) Net investment income for the six months ended June 30, 2023, increased by 64.5% to $50.9 million from $31.0 million in the prior-year period, driven by higher yields on fixed maturities, bank loans, and cash equivalents, with the annualized gross investment yield on the total portfolio rising to 4.3% from 2.7%, and the company also recognized net realized and unrealized investment gains of $2.6 million, a significant turnaround from a $22.1 million loss in the same period of 2022 Net Investment Income by Category (Six Months Ended June 30, in thousands) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Fixed maturity securities | $33,360 | $22,611 | | Bank loan participations | $8,686 | $5,062 | | Cash, cash equivalents, and short term investments | $5,811 | $380 | | **Total Net Investment Income** | **$50,947** | **$30,972** | - At June 30, 2023, **99.9%** of the Company's fixed maturity security portfolio was rated investment grade (**'BBB-' or better**)[210](index=210&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains liquidity through operating cash flows, investment income, and credit facilities, with the holding company having **$22.5 million** in cash and invested assets not subject to regulatory restrictions as of June 30, 2023, and a **$315.0 million** senior revolving credit facility and other debt instruments, with a leverage ratio of **22.3%**, well below the **35.0%** covenant maximum, while dividend capacity from subsidiaries is subject to regulatory limits, and the company utilizes extensive ceded reinsurance to manage risk, with all material recoverables from reinsurers rated **'A-' or better** or fully collateralized - Cash provided by operating activities was **$40.3 million** for the first six months of 2023, down from **$139.2 million** in the prior year, primarily due to the suspension of underwriting in the Casualty Reinsurance segment[220](index=220&type=chunk) - The company's leverage ratio was **22.3%** at June 30, 2023, comfortably below the **35.0%** maximum permitted by its credit agreements[240](index=240&type=chunk) - The company has significant reinsurance recoverables of **$1.55 billion** on unpaid losses and **$182.0 million** on paid losses, with credit risk mitigated by high ratings or collateralization[254](index=254&type=chunk) [Reconciliation of Non-GAAP Measures](index=57&type=section&id=RECONCILIATION%20OF%20NON-GAAP%20MEASURES) This section provides reconciliations for key non-GAAP financial measures used by management to evaluate performance, including Underwriting Profit, Adjusted Net Operating Income, and Tangible Equity, bridging these non-GAAP figures to their most directly comparable GAAP measures, such as income before taxes and shareholders' equity, to provide transparency into the adjustments made Reconciliation to Adjusted Net Operating Income (Six Months Ended June 30, 2023, in thousands) | Description | Amount | | :--- | :--- | | **Income available to common shareholders (GAAP)** | **$28,051** | | Losses and loss adjustment expenses - retroactive reinsurance | $15,497 | | Net realized and unrealized investment (gains) losses | $(2,179) | | Other expenses | $773 | | **Adjusted net operating income (Non-GAAP)** | **$42,142** | Reconciliation to Tangible Equity (as of June 30, 2023, in thousands) | Description | Amount | | :--- | :--- | | **Shareholders' equity (GAAP)** | **$595,923** | | Add: Series A redeemable preferred shares | $144,898 | | Add: Deferred reinsurance gain | $37,572 | | Less: Goodwill | $(181,831) | | Less: Intangible assets, net | $(35,494) | | **Tangible equity (Non-GAAP)** | **$561,068** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that its primary market risks are interest rate risk from its fixed maturity investments and equity price risk from its equity security investments, with no material changes in these market risks since the disclosures in its Annual Report on Form 10-K for the year ended December 31, 2022 - The company's primary market risks are interest rate risk and equity price risk[276](index=276&type=chunk) - There were no material changes in market risk exposure during the quarter ended June 30, 2023[277](index=277&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2023, with no changes in its internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[278](index=278&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[279](index=279&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a purported class action lawsuit filed in July 2021, alleging failure to make appropriate disclosures concerning the adequacy of reserves for policies covering a subsidiary of Uber Technologies, Inc., with the company believing the claims are without merit and intending to defend the lawsuit vigorously, and management not believing the outcome of this or other ordinary course legal proceedings will have a material adverse effect on the company's financial position - A purported class action lawsuit filed in July 2021 alleges inadequate disclosures regarding reserves for policies covering Rasier LLC, a subsidiary of Uber[282](index=282&type=chunk) - The company believes the claims are without merit and is vigorously defending the lawsuit[282](index=282&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) The company reports that there have been no material changes in its risk factors during the quarter ended June 30, 2023, from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the company's risk factors from the most recent Form 10-K[283](index=283&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[284](index=284&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to employment agreements, an amended and restated credit agreement, CEO/CFO certifications, and Inline XBRL data files - Key exhibits include a Third Amended and Restated Credit Agreement dated July 7, 2023, and various CEO/CFO certifications[286](index=286&type=chunk)

Financial Data and Key Metrics Changes - Tangible common equity per share increased by 15% from year-end 2022 [3] - Adjusted net operating income was reported at $0.56 per share, an increase of over 50% compared to the prior year quarter [8] - Adjusted net operating return on tangible common equity was 16.3%, an increase of over 60 basis points from the previous quarter [8] - The company reported $21.6 million of adjusted net operating income, the highest quarterly total in over three years [18] Business Line Data and Key Metrics Changes - In the Excess & Surplus (E&S) segment, gross premium written increased by 12.1%, while net premium increased by 17.3% [4] - The combined ratio in E&S was 86.8%, with an underwriting profit of $20 million for the period [4] - Workers' compensation rates stabilized with a 1% increase in the individual risk unit, while California's program faced more pressure [5] - Specialty Admitted segment saw gross premiums written down less than 1%, but net premium increased by 32% [20] Market Data and Key Metrics Changes - Renewal rate increases in the E&S segment were 8.9%, nearly 250 basis points higher than Q4 2022 [19] - The excess property book experienced renewal rate increases of 45% [19] - Policy count in the E&S segment grew by 13%, with significant growth in excess casualty and general casualty [11] Company Strategy and Development Direction - The company is focused on producing consistent earnings and returns for shareholders while diversifying E&S product offerings [3] - There is a strong emphasis on underwriting profitability and managing collateral and security requirements in the fronting business [5] - The company aims to deploy capital where there is confidence in generating consistent profitability and attractive returns for shareholders [22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for James River, citing strong market conditions and a focus on core business strengths [3] - The company is excited about market opportunities and plans to continue scaling its operations [24] - Management acknowledged challenges in the workers' compensation market but remains confident in long-term profitability [13] Other Important Information - The company maintained a conservative investment approach, with an average credit quality of A+ in its portfolio [9] - The tax rate for the quarter was reported at 24.6%, with expectations for a modestly lower effective tax rate for the full year [41] Q&A Session Summary Question: What are the growth opportunities in the E&S business? - Management noted healthy growth opportunities across most underwriting divisions, with renewal submissions up 8% and policy count increasing nearly 13% [11] Question: How is the company managing its expense ratio? - The expense ratio for the quarter was 28.4%, higher than the previous year due to increased retention in the excess casualty line and changes in reinsurance structure [40] Question: What is the outlook for the Specialty Admitted segment? - Management indicated that the Specialty Admitted segment is expected to continue generating earned premium, but gross written premium is expected to grade down as underwriting activities are suspended [35]

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2023, providing a comprehensive overview of the company's financial position and performance [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on critical accounting policies, investment portfolio valuation, loss reserve reconciliations, segment performance, debt structure, and equity details, including significant loss portfolio transfers and preferred shares - The company has entered into two significant loss portfolio transfers (LPTs): the Commercial Auto LPT with Aleka and the Casualty Re LPT with Fortitude Re. Both are in **gain positions**, requiring **retroactive reinsurance accounting**, which defers gains and impacts reported losses and loss adjustment expenses[68](index=68&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - For Q1 2023, the company recognized adverse prior year development of **$48.9 million** on reserves subject to the LPTs ($41.0M for Commercial Auto, $7.8M for Casualty Re). This resulted in a retroactive reinsurance benefit of **$32.0 million** being recorded in losses and loss adjustment expenses[73](index=73&type=chunk)[75](index=75&type=chunk) - On March 1, 2022, the company issued **150,000 shares** of 7% Series A Perpetual Cumulative Convertible Preferred Shares for an aggregate price of **$150.0 million**. These shares are classified as **mezzanine equity** due to a holder repurchase option upon certain change of control events[119](index=119&type=chunk)[129](index=129&type=chunk) Condensed Consolidated Balance Sheet Highlights (as of March 31, 2023) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total Invested Assets | $2,213,862 | $2,192,294 | | Total Assets | $5,205,087 | $5,137,075 | | Reserve for Losses | $2,841,993 | $2,768,995 | | Total Liabilities | $4,469,274 | $4,438,411 | | Total Shareholders' Equity | $590,915 | $553,766 | Condensed Consolidated Statement of Income Highlights (Three Months Ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Gross Written Premiums | $363,893 | $359,936 | | Net Earned Premiums | $208,113 | $189,824 | | Total Revenues | $235,601 | $201,948 | | Net Income | $9,608 | $10,205 | | Net Income Available to Common Shareholders | $6,983 | $9,330 | | Diluted EPS | $0.18 | $0.25 | Condensed Consolidated Statement of Cash Flows Highlights (Three Months Ended March 31) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $19,452 | $65,355 | | Net Cash Provided by (Used in) Investing Activities | $17,126 | $(87,134) | | Net Cash (Used in) Provided by Financing Activities | $(8,805) | $101,855 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's Q1 2023 financial performance, focusing on underwriting profit, adjusted net operating income, segment results, investment income, strategic actions, and liquidity and capital resources - The company has **suspended writing new business** in the **Casualty Reinsurance segment** to focus on growing its higher-returning U.S. insurance businesses. The segment will continue to earn premiums from existing business in run-off[166](index=166&type=chunk) - Net investment income increased by **58.4%** to **$25.8 million** in Q1 2023 from **$16.3 million** in Q1 2022, primarily driven by higher yields on fixed maturities, bank loans, and cash equivalents[177](index=177&type=chunk)[198](index=198&type=chunk) Key Performance Metrics (Three Months Ended March 31, in millions) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Underwriting Profit (Non-GAAP) | 10.6 | 5.0 | | Adjusted Net Operating Income (Non-GAAP) | 21.6 | 13.9 | | Combined Ratio | 94.9% | 97.4% | | Loss Ratio | 66.5% | 71.4% | [Segment Results](index=39&type=section&id=Segment%20Results) This section details segment performance, highlighting strong growth and profitability in Excess and Surplus Lines, an underwriting loss in Specialty Admitted Insurance, and improved results in the run-off Casualty Reinsurance segment Combined Ratio by Segment (Three Months Ended March 31) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Excess and Surplus Lines | 86.8% | 83.7% | | Specialty Admitted Insurance | 102.3% | 98.9% | | Casualty Reinsurance | 99.2% | 122.5% | - Excess and Surplus Lines segment GWP increased **12.1%** to **$228.9 million**, driven by favorable market conditions and an **8.9%** increase in renewal rates[181](index=181&type=chunk)[190](index=190&type=chunk) - Casualty Reinsurance GWP decreased **65.1%** to **$10.4 million**, reflecting the **suspension of underwriting activities**. The current period's written premiums are adjustments to prior year treaties[181](index=181&type=chunk)[184](index=184&type=chunk)[195](index=195&type=chunk) [Investing Results](index=41&type=section&id=Investing%20Results) Net investment income significantly increased in Q1 2023 due to higher yields, with the portfolio primarily comprising investment-grade fixed maturity securities Net Investment Income Breakdown (Three Months Ended March 31, 2023) | Category | Income (in thousands) | | :--- | :--- | | Fixed maturity securities | $16,427 | | Bank loan participations | $4,312 | | Equity securities | $1,665 | | Other invested assets | $1,591 | | Cash and short-term investments | $2,862 | | **Gross Investment Income** | **$26,857** | - The annualized gross investment yield on fixed maturity securities increased to **4.1%** in Q1 2023 from **2.7%** in Q1 2022[199](index=199&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily driven by premiums and investment income, with operating cash flow decreasing due to strategic changes, while maintaining a strong leverage ratio and extensive reinsurance programs - The company's leverage ratio was **22.8%** as of March 31, 2023, comfortably below the maximum **35.0%** permitted by its senior credit agreements[230](index=230&type=chunk) - The company's insurance subsidiaries have an A.M. Best financial strength rating of **"A-" (Excellent)** with a stable outlook[255](index=255&type=chunk) - The company details its collateral arrangements for the legacy Rasier commercial auto book, with a total of **$245.0 million** securing Rasier's indemnity obligations and **$108.7 million** securing Aleka's obligations under the Commercial Auto LPT as of March 31, 2023[250](index=250&type=chunk)[251](index=251&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risk profile from the prior year, with primary risks remaining interest rate and equity price fluctuations - There have been **no material changes** in market risk from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2022[273](index=273&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2023[274](index=274&type=chunk) - **No material changes** to internal control over financial reporting were identified during the quarter ended March 31, 2023[275](index=275&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a class action lawsuit alleging inadequate disclosures regarding reserves for Rasier LLC policies, which it intends to vigorously defend - A purported class action lawsuit alleges **inadequate disclosures** regarding reserves for policies covering Rasier LLC (Uber) for the period between February 22, 2019, and October 25, 2021[278](index=278&type=chunk)[279](index=279&type=chunk) - The company believes the plaintiffs' claims are **without merit** and is **actively defending** against the lawsuit[279](index=279&type=chunk) [Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported for the quarter ended March 31, 2023, compared to the prior annual report - **No material changes** in risk factors were reported for the quarter ended March 31, 2023[280](index=280&type=chunk) [Other Information](index=57&type=section&id=Item%205.%20Other%20Information) This section provides administrative details, including the scheduled date for the 2023 annual general meeting of shareholders and related deadlines - The 2023 annual general meeting of shareholders is scheduled for **July 27, 2023**[283](index=283&type=chunk)

Financial Data and Key Metrics Changes - The company reported an adjusted net operating income of $0.53 per share for Q4 2022, with an annualized net operating return on tangible common equity of 23.5% [36] - For the full year 2022, the adjusted net operating return on tangible common equity was 17.4%, marking the highest in the company's history [37] - The tangible book value per common share increased by 8.5% in Q4 to $9.51, indicating strong momentum heading into 2023 [36] Business Line Data and Key Metrics Changes - In the E&S segment, gross premiums increased by 11.3% and net premiums by 20.5% in Q4 2022, with a combined ratio of 85.1% for the full year [5][15] - The Casualty Reinsurance segment saw a significant decline in gross written premiums by 76.8% in Q4 and 53.2% for the full year, aligning with the company's strategy to reduce top-line writings [7][16] - The Specialty Admitted segment achieved an 86.8% combined ratio and modest premium growth despite a reduction in individual risk workers' compensation business [15] Market Data and Key Metrics Changes - Renewal rates increased by 6.5% in Q4 2022 and nearly 10% for the full year, indicating a robust market environment [32] - The company experienced a strong growth in renewal submissions, up 8% in Q4, reflecting healthy market conditions [43] Company Strategy and Development Direction - The company is focused on repositioning around its core strengths and has suspended underwriting activities in the Casualty Reinsurance segment to allocate capital more effectively [35] - The strategic actions taken over the past two years are expected to lead to stronger future profitability and reduced volatility [16][17] - The company aims to drive a mid-teen return on tangible common equity in 2023, benefiting from favorable conditions in the E&S market [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the E&S market and the opportunities presented by the fronting marketplace [17] - The company anticipates continued favorable underwriting conditions throughout 2023, with a slight increase in loss cost trends due to inflationary pressures [32][58] - The management highlighted the importance of prudent portfolio management and the expectation of a stable expense ratio despite changes in business mix [24][71] Other Important Information - The company reported a combined ratio of 94.3% for the full year, with fee income growth of 4.3% [33] - Investment income for Q4 was $22.8 million, growing 32% sequentially and 88% year-over-year, supported by strong cash flow and rising interest rates [19][20] Q&A Session Summary Question: Guidance on mid-teen return on tangible common equity - Management indicated that the mid-teen guidance reflects a conservative view of the market, with expectations for continued growth in the E&S segment [42][43] Question: Impact of Casualty Re underwriting cessation - Management confirmed that they expect to earn about half the premium from the Casualty Re segment in 2023, focusing on servicing the in-force portfolio [22][49] Question: Pricing relative to loss trends in E&S business - Management noted that while there are pressures in some areas, overall pricing remains favorable compared to loss trends, with a cautious view on loss cost trends for the upcoming year [56][58]

Part I [Business](index=5&type=section&id=Item%201.%20BUSINESS) James River Group Holdings, Ltd. is a Bermuda-based specialty insurance and reinsurance holding company primarily focused on the U.S. excess and surplus lines market - The company is a Bermuda-based holding company for specialty insurance and reinsurance, primarily focused on the **U.S. excess and surplus (E&S) lines market**[18](index=18&type=chunk) Gross Written Premiums by Segment (FY 2022) | Segment | Gross Written Premiums (Millions) | % of Total | | :--- | :--- | :--- | | Excess and Surplus Lines | $921.2M | 61.5% | | Specialty Admitted Insurance | $490.2M | 32.8% | | Casualty Reinsurance | $85.2M | 5.7% | | **Total** | **$1,496.6M** | **100.0%** | - The company's regulated insurance and reinsurance subsidiaries hold an **'A-' (Excellent) financial strength rating** from A.M. Best with a stable outlook[26](index=26&type=chunk) - A strategic decision was made to suspend writing new business in the **Casualty Reinsurance segment** to focus on growing higher-returning U.S. insurance and fronting businesses[97](index=97&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20RISK%20FACTORS) The company faces significant risks including uncertain loss reserves, credit risk from reinsurers, potential rating downgrades, investment portfolio volatility, and extensive regulatory changes - Reserving for losses is inherently uncertain, and actual incurred losses may exceed established reserves, which could materially harm financial condition, with significant adverse reserve development in **Casualty Reinsurance** and **Excess and Surplus Lines** (commercial auto) segments in recent years[269](index=269&type=chunk)[271](index=271&type=chunk) - The company is subject to **credit risk from reinsurance counterparties**, with reinsurance recoverables from the three largest reinsurers totaling **$717.1 million** as of December 31, 2022[292](index=292&type=chunk) - A decline in the company's **'A-' financial strength rating** from A.M. Best could reduce new or renewal business and trigger adverse conditions under credit facilities[275](index=275&type=chunk)[276](index=276&type=chunk) - The investment portfolio is subject to significant **market and credit risks**, with rising interest rates in 2022 leading to **$193.0 million unrealized losses** on fixed maturity investments[308](index=308&type=chunk)[309](index=309&type=chunk) - The company is subject to **extensive regulation** in the U.S. and Bermuda, where changes in laws like the 2017 Tax Act or new cybersecurity regulations could increase compliance costs and adversely affect operations[319](index=319&type=chunk)[321](index=321&type=chunk)[354](index=354&type=chunk) [Unresolved Staff Comments](index=65&type=section&id=Item%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - Not applicable[432](index=432&type=chunk) [Properties](index=65&type=section&id=Item%202.%20PROPERTIES) The company leases all its office spaces, including its principal executive office in Bermuda and operational offices in North Carolina, Virginia, Arizona, and Georgia - The company leases office space in **Bermuda** (principal executive office), **Chapel Hill, NC**, **Raleigh, NC**, **Richmond, VA**, **Scottsdale, AZ**, and **Atlanta, GA**[433](index=433&type=chunk) [Legal Proceedings](index=65&type=section&id=Item%203.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, including a purported class action lawsuit alleging inadequate disclosures concerning reserves for policies covering Rasier LLC - A purported class action lawsuit was filed on **July 9, 2021**, alleging claims under the Securities Exchange Act of 1934 for stock purchasers between **February 22, 2019, and October 25, 2021**[435](index=435&type=chunk) - The lawsuit alleges inadequate disclosures regarding reserves for policies covering **Rasier LLC**, a subsidiary of Uber Technologies, Inc., which the company believes are without merit and is defending[436](index=436&type=chunk) [Mine Safety Disclosure](index=66&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURE) The company reports that this item is not applicable - Not applicable[437](index=437&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=67&type=section&id=Item%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common shares trade on NASDAQ under 'JRVR', with quarterly dividends reduced to $0.05 in 2022, and its 5-year cumulative total shareholder return underperformed benchmarks - Common shares trade on the **NASDAQ Global Select Market** under the symbol **'JRVR'**[440](index=440&type=chunk) - Quarterly dividends were reduced to **$0.05 per common share** in 2022, down from **$0.30 per share** in 2021, with future dividends restricted by **Series A Preferred Shares** terms[441](index=441&type=chunk)[442](index=442&type=chunk) 5-Year Cumulative Total Shareholder Return Comparison | Index | 12/17 | 12/18 | 12/19 | 12/20 | 12/21 | 12/22 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | James River Group Holdings, Ltd. | 100.00 | 94.24 | 109.21 | 134.01 | 81.37 | 59.57 | | Russell 2000 | 100.00 | 88.99 | 111.70 | 134.00 | 153.85 | 122.41 | | Peer Group | 100.00 | 101.66 | 127.68 | 128.75 | 157.48 | 183.25 | [Reserved](index=68&type=section&id=Item%206.%20%5BRESERVED%5D) This item is reserved - Item 6 is reserved[447](index=447&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=69&type=section&id=Item%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In fiscal year 2022, the company's financial performance significantly improved with an underwriting profit of $49.6 million and a combined ratio of 93.5%, driven by reduced adverse prior year reserve development and strategic actions Financial Results Summary (2022 vs. 2021) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Gross Written Premiums | $1,496.6M | $1,507.3M | | Net Earned Premiums | $766.2M | $695.6M | | Underwriting Profit (Loss) | $49.6M | ($256.9M) | | Net Income (Loss) Available to Common Shareholders | $22.2M | ($172.8M) | | Combined Ratio | 93.5% | 136.9% | | Loss Ratio | 68.5% | 113.9% | - The significant improvement in underwriting results was driven by a decrease in net adverse prior year reserve development to **$9.1 million** in 2022 from **$325.8 million** in 2021[527](index=527&type=chunk)[528](index=528&type=chunk) - Strategic actions in 2022 included issuing **$150 million in Series A Preferred Shares**, a **Loss Portfolio Transfer (LPT)** for the Casualty Reinsurance segment, and suspending new underwriting in that segment[514](index=514&type=chunk)[517](index=517&type=chunk)[522](index=522&type=chunk) - Net investment income increased **25.1% to $71.1 million** in 2022, primarily due to higher yields on fixed maturities and other investments in a rising interest rate environment[524](index=524&type=chunk)[557](index=557&type=chunk) - Tangible equity per share decreased by **14.4%** during 2022, reflecting a **$193.0 million unrealized loss** on fixed maturity investments and an increased share count from Series A Preferred Shares conversion[533](index=533&type=chunk)[643](index=643&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=103&type=section&id=Item%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are interest rate and equity price risks, with a hypothetical 100 basis point interest rate increase estimated to decrease fixed maturity fair value by 4.7% - The company's main market risks are **interest rate risk** from fixed maturity investments and **equity price risk** from stock investments[645](index=645&type=chunk) Interest Rate Sensitivity Analysis (as of Dec 31, 2022) | Financial Instrument | Estimated Fair Value (Millions) | Hypothetical Change | Estimated Fair Value after Change (Millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Fixed maturity & preferred stock | $1,854.2M | +100 bps | $1,766.7M | (4.7)% | | Fixed maturity & preferred stock | $1,854.2M | -100 bps | $1,941.9M | 4.7% | Equity Price Risk Sensitivity Analysis (as of Dec 31, 2022) | Financial Instrument | Estimated Fair Value (Millions) | Hypothetical Price Change | Estimated Fair Value after Change (Millions) | | :--- | :--- | :--- | :--- | | Equity securities - common stock | $47.8M | +35% | $64.5M | | Equity securities - common stock | $47.8M | -35% | $31.1M | [Financial Statements and Supplementary Data](index=104&type=section&id=Item%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section contains the report of the independent registered public accounting firm and the company's consolidated financial statements and schedules - The report includes the **Consolidated Financial Statements** and required **Financial Statement Schedules**, indexed on page F-1[657](index=657&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=104&type=section&id=Item%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - Not applicable[658](index=658&type=chunk) [Controls and Procedures](index=105&type=section&id=Item%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified opinion from Ernst & Young LLP - Management, including the CEO and CFO, concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2022[659](index=659&type=chunk) - Management concluded that the company's **internal control over financial reporting was effective** as of December 31, 2022, based on the COSO framework[661](index=661&type=chunk) - Ernst & Young LLP issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2022[662](index=662&type=chunk) [Other Information](index=105&type=section&id=Item%209B.%20OTHER%20INFORMATION) The company reports no other information under this item - None[665](index=665&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspections](index=105&type=section&id=Item%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) The company reports that this item is not applicable - Not applicable[666](index=666&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=106&type=section&id=Item%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information for this item will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual General Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement for the 2023 Annual General Meeting of Shareholders**[668](index=668&type=chunk) [Executive Compensation](index=106&type=section&id=Item%2011.%20EXECUTIVE%20COMPENSATION) Information for this item will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual General Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement for the 2023 Annual General Meeting of Shareholders**[669](index=669&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=106&type=section&id=Item%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information for this item will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual General Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement for the 2023 Annual General Meeting of Shareholders**[670](index=670&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=106&type=section&id=Item%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information for this item will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual General Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement for the 2023 Annual General Meeting of Shareholders**[671](index=671&type=chunk) [Principal Accountant Fees and Services](index=106&type=section&id=Item%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information for this item will be incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual General Meeting of Shareholders - Information is incorporated by reference from the **Proxy Statement for the 2023 Annual General Meeting of Shareholders**[672](index=672&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=106&type=section&id=Item%2015.%20EXHIBIT%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section contains the index to the financial statements and schedules, along with a list of all exhibits filed with the Form 10-K - This item includes the **index to Financial Statements and Schedules**, found on page F-1 of the report[674](index=674&type=chunk) - A detailed list of **exhibits filed** with the report is provided, including corporate governance documents, material contracts, and certifications[676](index=676&type=chunk) [Form 10-K Summary](index=111&type=section&id=Item%2016.%20FORM%2010-K%20SUMMARY) The company reports that this item is not applicable - Not applicable[683](index=683&type=chunk)

Financial Data and Key Metrics Changes - The company reported a third quarter group combined ratio of 94.1%, and 91.5% excluding catastrophe losses, with an adjusted net operating return on tangible common equity of 17.5% for the quarter and 16% year-to-date [6][17] - The expense ratio for the quarter was 24.6%, reflecting strong cost management [6][20] - Net investment income grew 18% from the sequential quarter, totaling $17.3 million [20] Business Line Data and Key Metrics Changes - The E&S segment saw a gross premium decline of 5.9% year-over-year, but net written premium increased by 10.2% due to a midyear decision to increase net retention [9][10] - The combined ratio in the E&S segment was 88.2% for the third quarter, or 84.6% excluding catastrophes [11] - Specialty Admitted reported 1.8% growth in gross premium with a combined ratio of 98.4%, affected by a competitive workers' compensation market [14] - Casualty Reinsurance reported a combined ratio of 90.9% with $3 million of underwriting income [16] Market Data and Key Metrics Changes - E&S renewal rates increased by 8.4%, consistent with the previous year's positive rate change [7] - Year-to-date rate increases in the E&S segment exceeded 10%, with renewal rate increases compounding to 61.5% over the last 23 quarters [7][8] Company Strategy and Development Direction - The company is focused on underwriting profitability and disciplined risk management, with a strong emphasis on maintaining margins [6][17] - New underwriting directives and pricing strategies were introduced, particularly in large trucking and transportation risks [9] - The company aims to optimize its portfolio while significantly reducing its size in the Casualty Reinsurance segment [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate market conditions and maintain strong margins despite recent underwriting actions [30][32] - The outlook for James River is considered strong, with ample capital to operate in the current environment and attractive investment opportunities [26][17] Other Important Information - The company executed a legacy commercial auto loss portfolio transfer transaction, which is expected to mitigate economic impacts from adverse claims trends [12][23] - The company ended the quarter with tangible common equity of $330 million and intangible equity of $475 million [22] Q&A Session Summary Question: Impact of non-renewing certain businesses on future quarters - Management indicated that the decision was based on maintaining strong margins and that the impact on future growth would be limited, with a good start in October [30][34] Question: Basis for non-renewal decisions - The decision was based on internal evaluations of loss trends and market conditions, with tactical adjustments made in response to identified loss drivers [35] Question: Current accident year loss ratio in E&S - Management clarified that the increase was due to mix rather than a change in loss picks [36] Question: Erosion in core loss ratios - The erosion in core loss ratios was attributed to mix and specific lines within the E&S and Specialty Admitted segments [38] Question: Elevated tax rate explanation - The elevated tax rate was explained as a result of losses in Bermuda and the complexity of income earned across different jurisdictions [47][49] Question: Opportunities for additional fronting arrangements - Management expressed confidence in growth opportunities through new programs and partnerships, despite a slowdown in growth rates [51]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) The first part presents the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended September 30, 2022, show increased total assets to **$5.21 billion** and liabilities to **$4.53 billion**, with net income of **$13.2 million** and decreased shareholders' equity to **$526.8 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$5,205,491** | **$4,948,550** | | Total Invested Assets | $2,176,033 | $2,130,485 | | Reinsurance recoverable on unpaid losses | $1,584,836 | $1,348,628 | | **Total Liabilities** | **$4,533,789** | **$4,223,188** | | Reserve for losses and loss adjustment expenses | $2,786,700 | $2,748,473 | | **Total Shareholders' Equity** | **$526,804** | **$725,362** | Condensed Consolidated Statement of Income (Loss) Highlights (in thousands) | Account | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Total Revenues | $587,983 | $565,540 | | Losses and loss adjustment expenses | $409,985 | $549,578 | | Total Expenses | $568,807 | $695,187 | | **Net (Loss) Income** | **$13,248** | **($106,506)** | | Net (Loss) Income available to common shareholders | $7,123 | ($106,506) | - Shareholders' equity decreased from **$725.4 million** at the end of 2021 to **$526.8 million** as of September 30, 2022, primarily due to a significant other comprehensive loss of **$205.2 million**, reflecting unrealized losses on investments[22](index=22&type=chunk) - Net cash provided by operating activities was **$168.1 million** for the nine months ended September 30, 2022, a stark contrast to the **$1.06 billion** used in the same period of 2021, heavily impacted by restricted cash and a loss portfolio transfer reinsurance transaction[26](index=26&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports a significant turnaround in underwriting performance with a **$33.0 million** profit, driven by lower adverse reserve development, despite negative impacts on the investment portfolio from rising interest rates Consolidated Results Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Gross Written Premiums | $1,118,155 | $1,100,000 | | Net Earned Premiums | $566,275 | $503,906 | | Underwriting Profit (Loss) | $32,996 | ($179,183) | | Net (Loss) Income | $13,248 | ($106,506) | | Adjusted Net Operating Income (Loss) | $49,391 | ($116,780) | | **Combined Ratio** | **94.2%** | **135.6%** | - The company executed two significant loss portfolio transfers (LPTs): a Retrocession Agreement with Fortitude Re for the Casualty Reinsurance segment's reserves and a Commercial Auto LPT with Aleka Insurance for a legacy commercial auto portfolio[168](index=168&type=chunk)[169](index=169&type=chunk) - On March 1, 2022, the company issued **$150 million** of 7% Series A Perpetual Cumulative Convertible Preferred Shares to an affiliate of Gallatin Point Capital, strengthening its capital position[117](index=117&type=chunk)[164](index=164&type=chunk) - Rising interest rates and macroeconomic events negatively impacted the investment portfolio, resulting in a **$205.2 million** other comprehensive loss from unrealized losses on fixed maturity investments and **$29.9 million** in net realized and unrealized investment losses for the nine months ended September 30, 2022[163](index=163&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2022, the company achieved an underwriting profit of **$33.0 million** and a combined ratio of **94.2%**, a significant improvement from the prior-year period due to reduced adverse prior-year reserve development - The loss ratio for the nine months ended September 30, 2022, improved dramatically to **68.7%** from **109.1%** in the prior year, with the 2021 period including **$210.8 million** (41.8 percentage points) of net adverse reserve development primarily from a canceled commercial auto account[171](index=171&type=chunk)[183](index=183&type=chunk) - The company experienced **$5.0 million** of net catastrophe losses related to Hurricane Ian in Q3 2022, comparable to the **$5.0 million** from Hurricane Ida in Q3 2021[172](index=172&type=chunk)[176](index=176&type=chunk) - Due to adverse loss trends on the legacy Rasier business, the company recognized **$46.7 million** of adverse development subject to the Commercial Auto LPT in Q3 2022, triggering retroactive reinsurance accounting and resulting in a net impact of a **$20.8 million** charge to losses and loss adjustment expenses for the quarter[76](index=76&type=chunk)[178](index=178&type=chunk) [Segment Results](index=42&type=section&id=Segment%20Results) For the first nine months of 2022, the Excess and Surplus Lines segment's combined ratio significantly improved to **85.3%**, while Specialty Admitted Insurance increased to **96.8%**, and Casualty Reinsurance improved to **103.6%** Combined Ratios by Segment (Nine Months Ended Sep 30) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | Excess and Surplus Lines | 85.3% | 141.4% | | Specialty Admitted Insurance | 96.8% | 88.1% | | Casualty Reinsurance | 103.6% | 117.2% | | **Total** | **94.2%** | **135.6%** | - The Excess and Surplus Lines segment's nine-month 2021 results included **$190.7 million** of net adverse reserve development, primarily from a terminated commercial auto account, which did not recur in 2022[200](index=200&type=chunk) - The Casualty Reinsurance segment's 2022 results include an **$11.5 million** charge (11.2 points on the loss ratio) associated with the Loss Portfolio Transfer Retrocession Agreement[210](index=210&type=chunk) [Investing Results](index=45&type=section&id=Investing%20Results) Net investment income rose to **$48.3 million** for the nine months ended September 30, 2022, but overall investment results were negative due to **$29.9 million** in net realized and unrealized losses and a **$205.2 million** reduction in accumulated other comprehensive income from rising interest rates Net Investment Income by Source (Nine Months Ended, in thousands) | Source | 2022 | 2021 | | :--- | :--- | :--- | | Fixed maturity securities | $34,878 | $32,683 | | Bank loan participations | $8,432 | $8,230 | | Equity securities | $3,939 | $3,636 | | Other | $4,053 | $3,160 | | **Total Net Investment Income** | **$48,278** | **$44,726** | - The fair value of the fixed maturity securities portfolio was negatively impacted by rising interest rates, leading to unrealized losses recognized in other comprehensive income of **$205.2 million** for the nine months ended September 30, 2022[217](index=217&type=chunk) - The company recognized net realized and unrealized investment losses of **$29.9 million** in its income statement for the first nine months of 2022, compared to gains of **$13.7 million** in the same period of 2021[220](index=220&type=chunk)[221](index=221&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains solid liquidity with **$167.6 million** cash from operations and **$92.0 million** from financing activities, improving its leverage ratio to **22.8%** and maintaining an 'A-' (Excellent) A.M. Best rating - Cash provided by financing activities for the nine months ended September 30, 2022, was **$92.0 million**, primarily reflecting **$144.9 million** in net proceeds from the Series A Preferred Share issuance, offset by **$40.0 million** in debt repayments and **$12.0 million** in common and preferred dividends[234](index=234&type=chunk) - The company's leverage ratio decreased to **22.8%** at September 30, 2022, from **31.1%** at December 31, 2021, remaining comfortably below the maximum permitted ratio of **35.0%**[249](index=249&type=chunk) - The company's regulated insurance subsidiaries have a financial strength rating of **'A-' (Excellent)** with a stable outlook from A.M. Best[273](index=273&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and equity price risks, with higher interest rates in 2022 leading to **$205.2 million** in unrealized losses on fixed maturity securities - The company's main market risks are interest rate risk for its fixed maturity investments and equity price risk for its equity securities[291](index=291&type=chunk) - For the nine months ended September 30, 2022, higher interest rates led to **$205.2 million** in unrealized losses on fixed maturity securities, which were recorded in other comprehensive loss[292](index=292&type=chunk) [Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2022, the company's CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[293](index=293&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2022[294](index=294&type=chunk) [PART II. OTHER INFORMATION](index=60&type=section&id=PART%20II.%20OTHER%20INFORMATION) The second part covers legal proceedings and risk factors [Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a class action lawsuit alleging inadequate disclosures regarding reserves for policies covering Rasier LLC, which the company intends to vigorously defend - A class action lawsuit alleges the company made inadequate disclosures concerning reserves for policies related to Rasier LLC (an Uber subsidiary)[297](index=297&type=chunk)[298](index=298&type=chunk) - The company believes the claims lack merit and is actively defending against the lawsuit, having filed a motion to dismiss the second amended complaint on October 24, 2022[297](index=297&type=chunk)[298](index=298&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) No material changes in the company's risk factors were reported for the quarter ended September 30, 2022 - No material changes to risk factors were reported for the quarter ended September 30, 2022[299](index=299&type=chunk)

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, 2022 or 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 othe ...