James River (US:JRVR)2023-02-28 21:17Part I Business 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 market18 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 outlook26 - 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 businesses97 Risk Factors 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 years269271 - 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, 2022292 - 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 facilities275276 - 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 investments308309 - 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 operations319321354 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - Not applicable432 Properties 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, GA433 Legal Proceedings 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, 2021435 - 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 defending436 Mine Safety Disclosure The company reports that this item is not applicable - Not applicable437 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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 - 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 terms441442 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 This item is reserved - Item 6 is reserved447 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 2021527528 - 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 segment514517522 - 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 environment524557 - 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 conversion533643 Quantitative and Qualitative Disclosures About Market Risk 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 investments645 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 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-1657 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - Not applicable658 Controls and Procedures 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, 2022659 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework661 - Ernst & Young LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2022662 Other Information The company reports no other information under this item - None665 Disclosure Regarding Foreign Jurisdictions That Prevent Inspections The company reports that this item is not applicable - Not applicable666 Part III Directors, Executive Officers and Corporate Governance 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 Shareholders668 Executive Compensation 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 Shareholders669 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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 Shareholders670 Certain Relationships and Related Transactions, and Director Independence 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 Shareholders671 Principal Accountant Fees and Services 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 Shareholders672 Part IV Exhibit and Financial Statement Schedules 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 report674 - A detailed list of exhibits filed with the report is provided, including corporate governance documents, material contracts, and certifications676 Form 10-K Summary The company reports that this item is not applicable - Not applicable683