James River (JRVR) - 2025 Q1 - Quarterly Results

Q1 2025 Financial Performance Overview This section provides an overview of James River's financial performance for the first quarter of 2025, including key results, highlights, and management commentary Key Financial Results For the first quarter of 2025, James River reported a net income from continuing operations of $9.0 million ($0.18 per diluted share) and an adjusted net operating income of $9.1 million ($0.19 per diluted share), both significantly lower than Q1 2024 | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income from continuing operations | $9.0 million ($0.18/share) | $20.9 million ($0.53/share) | | Adjusted net operating income | $9.1 million ($0.19/share) | $14.8 million ($0.39/share) | | Net loss from discontinued operations | ($1.4 million) | ($8.1 million) | | Net income available to common shareholders | $7.6 million ($0.16/share) | $12.8 million ($0.35/share) | Q1 2025 Highlights The first quarter of 2025 was marked by an annualized adjusted net operating return on tangible common equity of 11.5% and a 7.1% growth in tangible common equity, alongside strong E&S segment performance and a favorable resolution of the JRG Reinsurance purchase price dispute - Achieved an annualized adjusted net operating return on tangible common equity of 11.5% and a 7.1% growth in tangible common equity year to date[3] - The Excess & Surplus (E&S) segment reported a combined ratio of 91.5% and renewal rate increases of 7.8%[3] - The Specialty Admitted Insurance segment's combined ratio was 102.1%, with fronting and program gross written premium declining by 21.3%[3] - The company received a favorable final determination in the purchase price adjustment dispute for the sale of JRG Reinsurance Company Ltd., with a minimal downward adjustment of $0.5 million on a $54.1 million dispute[3] Management Commentary CEO Frank D'Orazio highlighted that Q1 results demonstrate progress in strengthening underwriting performance and positioning the company for long-term profitability, emphasizing disciplined risk selection and reserve bolstering actions - Management sees Q1 results as progress in strengthening underwriting performance for long-term profitability[4] - The company's strategy involves a disciplined approach to risk selection and leveraging actions taken in the past year to strengthen its reserve position[4] - Future focus is on taking advantage of the attractive E&S underwriting environment while closely managing expenses[4] Segment Performance This section details the financial performance of James River's key insurance segments, including Excess and Surplus Lines (E&S) and Specialty Admitted Insurance Excess and Surplus Lines (E&S) Segment The E&S segment's gross written premium remained flat year-over-year at $213.2 million, achieving a solid underwriting profit of $11.7 million despite a 37% decrease from the prior year, with the combined ratio increasing to 91.5% due to a higher expense ratio - Gross written premium was largely flat compared to Q1 2024, with renewal rate increases of 7.8% and a 6% growth in renewal submissions[4] E&S Segment Financials | Metric ($ in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross written premiums | $213,243 | $213,691 | (0.2)% | | Net written premiums | $115,079 | $117,425 | (2.0)% | | Net earned premiums | $137,028 | $145,623 | (5.9)% | | Underwriting profit | $11,658 | $18,491 | (37.0)% | | Loss ratio | 64.8% | 64.3% | | | Expense ratio | 26.7% | 23.0% | | | Combined ratio | 91.5% | 87.3% | | Specialty Admitted Insurance Segment The Specialty Admitted Insurance segment experienced a significant contraction, with gross written premium declining 30.7% to $81.1 million, primarily in the fronting and program business, resulting in an underwriting loss of $0.3 million and a combined ratio deteriorating to 102.1% - Gross written premium for the fronting and program business fell 21.3% year-over-year as the company aims to retain minimal risk in this segment[4] Specialty Admitted Insurance Segment Financials | Metric ($ in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross written premiums | $81,118 | $117,119 | (30.7)% | | Net written premiums | $12,877 | $20,747 | (37.9)% | | Net earned premiums | $14,874 | $26,068 | (42.9)% | | Underwriting (loss) profit | ($306) | $786 | N/A | | Loss ratio | 85.0% | 78.4% | | | Expense ratio | 17.1% | 18.6% | | | Combined ratio | 102.1% | 97.0% | | Detailed Financial Analysis This section provides a detailed analysis of James River's underwriting, operating, and investment results, along with information on discontinued operations Underwriting and Operating Results Consolidated gross written premiums decreased by 11% to $294.4 million in Q1 2025, driven by the decline in the Specialty Admitted segment, with net earned premiums also falling by 12% to $151.9 million, and the consolidated expense ratio increasing to 32.7% due to higher compensation expenses on lower net earned premiums Premium Overview | Premium ($ in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Gross Written Premium | $294,361 | $330,810 | (11)% | | Net Written Premium | $127,956 | $138,172 | (7)% | | Net Earned Premium | $151,902 | $171,691 | (12)% | - The consolidated expense ratio rose to 32.7% in Q1 2025 from 28.9% in Q1 2024, mainly due to higher compensation expenses relative to lower net earned premium[9] - There was de minimis favorable reserve development in both the E&S and Specialty Admitted insurance segments during the quarter[8] Investment Results Net investment income for Q1 2025 was $20.0 million, an 11.6% decrease from $22.6 million in the prior-year quarter, attributed to a smaller asset base following the funding of retroactive reinsurance structures, with the company also recording net realized and unrealized investment losses of $1.4 million Net Investment Income | Investment Income ($ in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Private Investments | $200 | ($145) | NM | | All Other Investments | $19,808 | $22,777 | (13)% | | Total Net Investment Income | $20,008 | $22,632 | (12)% | - The decline in investment income was primarily due to a smaller asset base after funding retroactive reinsurance structures for the E&S segment in late 2024[10] - The company reported net realized and unrealized losses on investments of ($1.4 million) a shift from a $4.6 million gain in the prior year quarter, mainly due to realized losses on bank loan sales[11] Discontinued Operations The company has finalized the purchase price adjustment dispute related to the sale of JRG Reinsurance Company Ltd., with an independent accounting firm resolving the $54.1 million claim by the buyer, resulting in only a minor $0.5 million downward adjustment to the closing purchase price - The dispute over a $54.1 million downward adjustment to the JRG Re sale price was resolved by an independent accounting firm[12] - The final determination resulted in a small downward adjustment of only $0.5 million, which is final and binding[13] Capital Management and Shareholder Equity This section outlines James River's capital management strategies, including dividend declarations and changes in shareholder equity Capital Management The Board of Directors declared a quarterly cash dividend of $0.01 per common share, payable on June 30, 2025, to shareholders of record as of June 9, 2025 - The Board of Directors declared a cash dividend of $0.01 per common share[14] Shareholders' Equity Shareholders' equity increased by 5.1% to $484.5 million at the end of Q1 2025 from $460.9 million at year-end 2024, with tangible common equity per share rising 6.6% to $7.11, driven by net income from continuing operations and a $14.3 million improvement in other comprehensive income Shareholders' Equity Overview | Metric | March 31, 2025 | December 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Shareholders' equity | $484.5 million | $460.9 million | 5.1% | | Tangible common equity per share | $7.11 | $6.67 | 6.6% | - The increase in equity was primarily due to net income from continuing operations and a $14.3 million benefit to other comprehensive income from a decline in interest rates[15] Financial Statements and Reconciliations This section presents James River's unaudited condensed consolidated financial statements and detailed reconciliations of non-GAAP financial measures to comparable GAAP figures Condensed Consolidated Financial Statements The report includes unaudited condensed consolidated balance sheets as of March 31, 2025, and December 31, 2024, and condensed consolidated income statements for the three months ended March 31, 2025, and 2024, showing total assets decreased slightly to $4.95 billion while total shareholders' equity grew to $484.5 million Condensed Consolidated Balance Sheets | Balance Sheet ($ in thousands) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total invested assets | $1,623,246 | $1,552,396 | | Total assets | $4,949,015 | $5,007,076 | | Total liabilities | $4,331,420 | $4,413,046 | | Total shareholders' equity | $484,480 | $460,915 | Condensed Consolidated Income Statements | Income Statement ($ in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $172,289 | $201,127 | | Total expenses | $156,280 | $168,167 | | Net income from continuing operations | $10,988 | $23,508 | | Net income | $9,574 | $15,403 | Reconciliation of Non-GAAP Measures The company provides detailed reconciliations for its non-GAAP financial measures, including Underwriting Profit, Adjusted Net Operating Income, and Tangible Equity, to comparable GAAP figures, which management believes are useful for evaluating performance by excluding certain non-operating items - Underwriting Profit is a key performance metric defined as net earned premiums and gross fee income less losses and operating expenses, excluding results from retroactive reinsurance[39] - Adjusted Net Operating Income excludes items such as income from discontinued operations, retroactive reinsurance impacts, realized/unrealized investment gains/losses, and certain non-operating expenses[42] - Tangible Equity and Tangible Common Equity are used to evaluate balance sheet strength and are calculated by adjusting shareholders' equity for goodwill, intangible assets, and other items[44]