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What changed in James River Group Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of James River Group Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+784 added−763 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in James River Group Holdings, Inc.'s 2023 10-K

784 paragraphs added · 763 removed · 574 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

192 edited+41 added−55 removed260 unchanged
Biggest changeThe table also shows the percentage of each states’ gross written premium to total gross written premium in the Excess and Surplus Lines segment for the years ended December 31, 2022, 2021 and 2020. 11 TABLE OF CONTENTS 2022 2021 2020 2019 2018 State Gross Written Premiums % of Total Gross Written Premiums % of Total Gross Written Premiums % of Total Gross Written Premiums Gross Written Premiums Florida $ 161,679 17.5 % $ 137,880 16.5 % $ 104,120 14.9 % $ 67,700 $ 47,918 California 157,519 17.1 % 147,677 17.7 % 136,532 19.5 % 368,488 213,729 Texas 146,737 15.9 % 128,312 15.4 % 79,338 11.4 % 51,978 31,604 New York 112,189 12.2 % 101,820 12.2 % 108,778 15.6 % 89,680 54,417 Pennsylvania 23,548 2.5 % 22,055 2.6 % 19,008 2.7 % 16,206 8,562 New Jersey 23,383 2.5 % 22,131 2.7 % 17,621 2.5 % 13,425 12,147 Washington 22,618 2.5 % 22,778 2.7 % 16,407 2.4 % 16,573 17,329 Arizona 20,972 2.3 % 16,544 2.0 % 12,782 1.8 % 9,023 5,160 Georgia 18,636 2.0 % 15,522 1.9 % 11,934 1.7 % 10,936 9,120 Illinois 17,526 1.9 % 19,010 2.3 % 16,243 2.3 % 14,491 20,893 Louisiana 17,161 1.9 % 15,723 1.9 % 13,968 2.0 % 16,001 12,654 Massachusetts 13,458 1.5 % 16,682 2.0 % 13,762 2.0 % 34,494 19,758 Missouri 12,446 1.4 % 11,967 1.4 % 10,080 1.4 % 14,628 9,424 Virginia 11,125 1.2 % 8,663 1.0 % 8,932 1.3 % 23,563 15,532 Ohio 11,091 1.2 % 13,156 1.6 % 9,210 1.3 % 10,537 13,043 All other states 151,076 16.4 % 133,737 16.1 % 120,428 17.2 % 164,597 165,248 Total $ 921,164 100.0 % $ 833,657 100.0 % $ 699,143 100.0 % $ 922,320 $ 656,538 Marketing and Distribution The Excess and Surplus Lines segment distributes its products through a select group of authorized E&S lines brokers we believe can consistently produce reasonable volumes of quality business.
Biggest changeThe table also shows the percentage of each states’ gross written premium to total gross written premium in the Excess and Surplus Lines segment for the years ended December 31, 2023, 2022 and 2021. 2023 2022 2021 2020 2019 State Gross Written Premiums % of Total Gross Written Premiums % of Total Gross Written Premiums % of Total Gross Written Premiums Gross Written Premiums Florida $ 176,730 17.5 % $ 161,679 17.5 % $ 137,880 16.5 % $ 104,120 $ 67,700 California 172,114 17.1 % 157,519 17.1 % 147,677 17.7 % 136,532 368,488 Texas 169,919 16.9 % 146,737 15.9 % 128,312 15.4 % 79,338 51,978 New York 126,326 12.5 % 112,189 12.2 % 101,820 12.2 % 108,778 89,680 New Jersey 25,871 2.6 % 23,383 2.5 % 22,131 2.7 % 17,621 13,425 Washington 23,104 2.3 % 22,618 2.5 % 22,778 2.7 % 16,407 16,573 Arizona 22,434 2.2 % 20,972 2.3 % 16,544 2.0 % 12,782 9,023 Georgia 22,205 2.2 % 18,636 2.0 % 15,522 1.9 % 11,934 10,936 Illinois 21,399 2.1 % 17,526 1.9 % 19,010 2.3 % 16,243 14,491 Pennsylvania 17,794 1.8 % 23,548 2.5 % 22,055 2.6 % 19,008 16,206 Louisiana 16,054 1.6 % 17,161 1.9 % 15,723 1.9 % 13,968 16,001 Ohio 14,415 1.4 % 11,091 1.2 % 13,156 1.6 % 9,210 10,537 Virginia 12,141 1.2 % 11,125 1.2 % 8,663 1.0 % 8,932 23,563 Missouri 11,812 1.2 % 12,446 1.4 % 11,967 1.4 % 10,080 14,628 Oregon 11,533 1.1 % 10,041 1.1 % 7,501 0.9 % 6,583 6,063 All other states 163,500 16.3 % 154,493 16.8 % 142,918 17.2 % 127,607 193,028 Total $ 1,007,351 100.0 % $ 921,164 100.0 % $ 833,657 100.0 % $ 699,143 $ 922,320 Marketing and Distribution The Excess and Surplus Lines segment distributes its products through a select group of authorized E&S lines brokers we believe can consistently produce reasonable volumes of quality business.
Fronting & Program Business In our fronting business, we issue insurance policies for another insurance company which may not have the licensure, product suite or rating to serve its desired market, or for a program supported by reinsurance or alternative capital provider(s).
In our fronting business, we issue insurance policies for another insurance company which may not have the licensure, product suite or rating to serve its desired market, or for a program supported by reinsurance or alternative capital provider(s).
The prescribed form of capital and solvency return comprises the insurer’s Bermuda Solvency Capital Requirement (“BSCR”) model or an approved internal capital model in lieu thereof, together with such schedules as prescribed by the Insurance (Prudential Standards) (Class 4 and 3B Solvency Requirement) Rules 2008 for Class 3B insurers, as amended from time to time.
The prescribed form of capital and solvency return comprises the insurer’s Bermuda Solvency Capital Requirement (“BSCR”) model or an approved internal capital model in lieu thereof, together with such schedules as prescribed by the Insurance (Prudential Standards) (Class 4 and Class 3B Solvency Requirement) Rules 2008 for Class 3B insurers, as amended from time to time.
Before issuing a notice of objection, the BMA is required to serve upon the person concerned a preliminary written notice stating the BMA’s intention to issue a formal notice of objection.
Before issuing a notice of objection, the BMA is required to serve upon the person concerned a preliminary written notice stating the BMA’s intention to issue a formal notice of objection.
Upon receipt of the preliminary written notice, the person served may, within 28 days, file written representations with the BMA which shall be taken into account by the BMA in making their final determination.
Upon receipt of the preliminary written notice, the person served may, within 28 days, file written representations with the BMA which shall be taken into account by the BMA in making their final determination.
In Ohio, the domiciliary state of James River Insurance and Falls Lake National Insurance Company (“Falls Lake National”), the limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of the earned surplus of each of the companies without obtaining regulatory approvals.
In Ohio, the domiciliary state of James River Insurance, James River Casualty and Falls Lake National Insurance Company (“Falls Lake National”), the limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of the earned surplus of each of the companies without obtaining regulatory approvals.
The NAIC Amendments must be adopted by a state legislature and such state’s insurance regulator in order to be effective in that state. Each of California, North Carolina, Ohio, and Virginia, the states in which our U.S. insurance subsidiaries are domiciled, include this enterprise risk report.
The NAIC Amendments must be adopted by a state legislature and such state’s insurance regulator in order to be effective in that state. Each of California, North Carolina, and Ohio, the states in which our U.S. insurance subsidiaries are domiciled, include this enterprise risk report.
Corporate and Other Segment Our Chief Executive Officer and Chief Financial Officer and other holding company employees are part of the Corporate and Other segment. This is where we set and direct strategy for the group as a whole as well as high level objectives for each of the three operating segments.
Corporate and Other Segment Our Chief Executive Officer and Chief Financial Officer and other holding company employees are part of the Corporate and Other segment. This is where we set and direct strategy for the group as a whole as well as high level objectives for each of the operating segments.
Each of James River Group Holdings, Ltd., Carolina Re and JRG Re is incorporated in Bermuda as an “exempted company.” Under Bermuda law, exempted companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda.
Each of James River Group Holdings, Ltd. and JRG Re is incorporated in Bermuda as an “exempted company.” Under Bermuda law, exempted companies are companies formed for the purpose of conducting business outside Bermuda from a principal place of business in Bermuda.
The ORSA Model Act must be adopted by a state legislature in order to be effective in that state. Each of California, North Carolina, Ohio, and Virginia, the states in which our U.S. insurance subsidiaries are domiciled, adopted and require an ORSA filing.
The ORSA Model Act must be adopted by a state legislature in order to be effective in that state. Each of California, North Carolina, and Ohio, the states in which our U.S. insurance subsidiaries are domiciled, adopted and require an ORSA filing.
(“Aleka”), a captive insurance company affiliate of Rasier LLC, to reinsure substantially all of the Excess and Surplus Lines segment’s legacy portfolio of commercial auto policies previously issued to Rasier for which James River is not otherwise indemnified by Rasier.
(“Aleka”), a captive insurance company affiliate of Rasier, to reinsure substantially all of the Excess and Surplus Lines segment’s legacy portfolio of commercial auto policies previously issued to Rasier for which James River is not otherwise indemnified by Rasier.
(3) Includes $57.4 million of adverse development in the commercial auto line of business that was primarily related to the 2016 and 2017 contract years with Rasier, partially offset by $6.2 million of favorable development from other divisions.
(4) Includes $57.4 million of adverse development in the commercial auto line of business that was primarily related to the 2016 and 2017 contract years with Rasier, partially offset by $6.2 million of favorable development from other divisions.
(4) Includes $20.7 million of adverse development in the commercial auto line of business that was primarily related to the 2016 contract year with Rasier, partially offset by $5.7 million of favorable development from other divisions.
(5) Includes $20.7 million of adverse development in the commercial auto line of business that was primarily related to the 2016 contract year with Rasier, partially offset by $5.7 million of favorable development from other divisions.
Copies are also available, without charge, by writing to us at James River Group Holdings, Ltd., Wellesley House, 2 nd Floor, 90 Pitts Bay Road, Pembroke, HM 08, Bermuda. The information on our web site is not a part of this Annual Report. 37 TABLE OF CONTENTS
Copies are also available, without charge, by writing to us at James River Group Holdings, Ltd., Wellesley House, 2 nd Floor, 90 Pitts Bay Road, Pembroke, HM 08, Bermuda. The information on our web site is not a part of this Annual Report. 36 TABLE OF CONTENTS
The Excess and Surplus Lines segment may retain up to $5.0 million per risk on our excess property book; however, the average retained amount per risk is approximately $862,000. In our Specialty Admitted Insurance segment, we focus on casualty business, but we do write a limited amount of property insurance, principally through our fronting and programs business.
The Excess and Surplus Lines segment may retain up to $5.0 million per risk on our excess property book; however, the average retained amount per risk is approximately $775,000. In our Specialty Admitted Insurance segment, we focus on casualty business, but we do write a limited amount of property insurance, principally through our fronting and programs business.
Additionally, the presidents, chief financial officers and segment actuaries of each of our three insurance segments participate in the Reserve Committee meetings for their respective segments.
Additionally, the presidents, chief financial officers and segment actuaries of each of our insurance segments participate in the Reserve Committee meetings for their respective segments.
Competitors in this segment include ACE Westchester Specialty Group (Chubb), AmRisc Insurance Company (Truist), Apollo Syndicate, Alleghany Corporation (Berkshire Hathaway), Arrowhead General Insurance Agency, Inc., Ategrity Specialty Insurance Company, Axis Insurance Company (Axis Capital Holdings Limited), Beazley Group (Lloyd’s), Brit Insurance (Lloyd’s), Colony Specialty Insurance Company (Argo Group International Holdings, Ltd.), Fairfax Financial Holdings, Ltd., Hiscox Insurance Company (Lloyd’s), Houston Casualty Company (a subsidiary of Tokio Marine HCC), Kinsale Capital Group, Inc., Lexington Insurance Company (American International Group, Inc.), Markel Corporation, 23 TABLE OF CONTENTS Navigators Insurance Company (Hartford), OneBeacon (Intact Financial Corporation), QBE Insurance Group Ltd., RLI Corp., E&S/Specialty (Nationwide Mutual Group), Starr Insurance Company (C.V.
Competitors in this segment include ACE Westchester Specialty Group (Chubb), AmRisc Insurance Company (Truist), Apollo Syndicate, Alleghany Corporation (Berkshire Hathaway), Arrowhead General Insurance Agency, Inc., Ategrity Specialty Insurance Company, Axis Insurance Company (Axis Capital Holdings Limited), Beazley Group (Lloyd’s), Brit Insurance (Lloyd’s), Colony Specialty Insurance Company (Argo Group International Holdings, Ltd.), Fairfax Financial Holdings, Ltd., Hiscox Insurance Company (Lloyd’s), Houston Casualty Company (a subsidiary of Tokio Marine HCC), Kinsale Capital Group, Inc., Lexington Insurance Company (American International Group, Inc.), Markel Corporation, Navigators Insurance Company (Hartford), OneBeacon (Intact Financial Corporation), QBE Insurance Group Ltd., RLI Corp., E&S/Specialty (Nationwide Mutual Group), Starr Insurance Company (C.V.
Over 60 claims professionals with significant experience in the property-casualty industry support our Excess and Surplus Lines segment as of December 31, 2022. Our excess and surplus lines business generally results in claims from premises/operations liability, professional liability, hired and non-owned auto liability, auto physical damage, first party property losses and products liability.
Over 60 claims professionals with significant experience in the property-casualty industry support our Excess and Surplus Lines segment as of December 31, 2023. Our excess and surplus lines business generally results in claims from premises/operations liability, professional liability, hired and non-owned auto liability, auto physical damage, first party property losses and products liability.
All of our reserving actuaries are credentialed and our Chief Actuary has 38 years of industry experience. We engage independent actuarial consultants to perform independent valuations to corroborate our decisions regarding reserves. Anticipated inflation is reflected implicitly in the reserving process through analysis of cost trends and the review of historical development.
All of our reserving actuaries are credentialed and our Chief Actuary has 39 years of industry experience. We engage independent actuarial consultants to perform independent valuations to corroborate our decisions regarding reserves. Anticipated inflation is reflected implicitly in the reserving process through analysis of cost trends and the review of historical development.
While we are willing to make investments in non-traditional types of investments, we seek to avoid asset classes and investments that we do not understand. The weighted average credit rating of our portfolio of fixed maturity securities, bank loans and preferred stocks as of December 31, 2022 was “A”.
While we are willing to make investments in non-traditional types of investments, we seek to avoid asset classes and investments that we do not understand. The weighted average credit rating of our portfolio of fixed maturity securities, bank loans and preferred stocks as of December 31, 2023 was “A”.
These brokers procure policies for their clients from us as well as from other insurance companies. At December 31, 2022, the segment had authorized close to 100 broker groups to submit applications to us. The Excess and Surplus Lines segment generally makes broker authorizations by brokerage office and underwriting division.
These brokers procure policies for their clients from us as well as from other insurance companies. At December 31, 2023, the segment had authorized close to 100 broker groups to submit applications to us. The Excess and Surplus Lines segment generally makes broker authorizations by brokerage office and underwriting division.
If the position for which the standard work permit is being applied is that of a Chief Executive Officer or other chief officer post, the Minister of Economy and Labour allows an automatic waiver from the requirement to advertise the position and on occasion may waive the requirement to advertise for other senior executive positions upon request.
If the position for which the standard work permit is being applied is that of a Chief Executive Officer or other chief officer post, the Minister of Economy and Labour allows an automatic waiver from the requirement to advertise the position and on occasion, after consideration, may waive the requirement to advertise for other senior executive positions upon request.
Common stock investments primarily consist of dividend yield focused equity holdings and are 2.0% of total invested assets and cash. Our objective with fixed maturity, preferred stock and common stock investments is to earn attractive risk-adjusted returns with a low risk of loss of principal, while earning attractive income.
Common stock investments primarily consist of dividend yield focused equity holdings and are 2.6% of total invested assets and cash. Our objective with fixed maturity, preferred stock and common stock investments is to earn attractive risk-adjusted returns with a low risk of loss of principal, while earning attractive income.
In addition, a person who is a shareholder controller of JRG Re must serve on the BMA a notice in writing that he or she has reduced or disposed of his or her holding in the insurer where the proportion of voting rights in the insurer 29 TABLE OF CONTENTS held by him or her will have reached or has fallen below 10%, 20%, 33% or 50% as the case may be, not later than 45 days after such disposal.
In addition, a person who is a shareholder controller of JRG Re must serve on the BMA a notice in writing that he or she has reduced or disposed of his or her holding in the insurer where the proportion of voting rights in the insurer held by him or her will have reached or has fallen below 10%, 20%, 33% or 50% as the case may be, not later than 45 days after such disposal.
The BMA may also enter any premises for the purposes of carrying out its investigation and may petition the court for a warrant if it believes a person has failed to comply with a notice served on him, there are reasonable grounds for suspecting the completeness of any information or documentation produced in response to such notice, or that its directions will not be complied with or that any relevant documents would be removed, tampered with or destroyed.
The BMA may also enter any premises for the purposes 29 TABLE OF CONTENTS of carrying out its investigation and may petition the court for a warrant if it believes a person has failed to comply with a notice served on him, there are reasonable grounds for suspecting the completeness of any information or documentation produced in response to such notice, or that its directions will not be complied with or that any relevant documents would be removed, tampered with or destroyed.
The following table sets forth our ten most significant reinsurers by amount of reinsurance recoverables on unpaid losses and the amount of reinsurance recoverables pertaining to each such reinsurer as well as its A.M. Best rating as of December 31, 2022: Reinsurer Reinsurance Recoverable as of December 31, 2022 A.M.
The following table sets forth our ten most significant reinsurers by amount of reinsurance recoverables on unpaid losses and the amount of reinsurance recoverables pertaining to each such reinsurer as well as its A.M. Best rating as of December 31, 2023: Reinsurer Reinsurance Recoverable as of December 31, 2023 A.M.
(2) Includes $91.4 million of adverse development in the commercial auto line of business that was primarily related to the 2018 and prior contract years with Rasier, partially offset by $32.0 million of favorable development from other divisions.
(3) Includes $91.4 million of adverse development in the commercial auto line of business that was primarily related to the 2018 and prior contract years with Rasier, partially offset by $32.0 million of favorable development from other divisions.
Members of our Claims team participate on our forms committee, which reviews and develops all policy forms and exclusions, and are also members of the underwriting review committee. Approximately 93% of all claims received are closed within five years in the Excess and Surplus Lines segment.
Members of our Claims team participate on our forms committee, which reviews and develops all policy forms and exclusions, and are also members of the underwriting review committee. Approximately 94% of all claims received are closed within five years in the Excess and Surplus Lines segment.
An officer in relation to a registered insurer means a director, chief executive or senior executive performing duties of underwriting, actuarial, risk management, compliance, internal audit, finance or investment matters. Notification of Material Changes All registered insurers are required to give notice to the BMA of their intention to effect a material change within the meaning of the Insurance Act.
An officer in relation to a registered insurer means a director, chief executive or senior executive performing duties of underwriting, actuarial, risk management, compliance, internal audit, finance or investment matters. 28 TABLE OF CONTENTS Notification of Material Changes All registered insurers are required to give notice to the BMA of their intention to effect a material change within the meaning of the Insurance Act.
Geographic Information For each of the years ended December 31, 2022, 2021 and 2020, 100% of our gross written premiums and net earned premiums were generated from policies issued to U.S.-based insureds.
Geographic Information For each of the years ended December 31, 2023, 2022 and 2021, 100% of our gross written premiums and net earned premiums were generated from policies issued to U.S.-based insureds.
The loss ratios for 2022 and 2021 also include net catastrophe losses in the Excess Property line of business of $5.0 million related to Hurricane Ian in 2022 and $5.0 million related to Hurricane Ida in 2021. 13 TABLE OF CONTENTS On September 27, 2021, James River entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc.
The loss ratios for 2022 and 2021 also include net catastrophe losses in the Excess Property line of business of $5.0 million related to Hurricane Ian in 2022 and $5.0 million related to Hurricane Ida in 2021. On September 27, 2021, James River entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc.
These changes are sometimes referred to as "prior year loss development" or " reserve development" and are included in current operations. 18 TABLE OF CONTENTS We continually monitor reserves using the most recent information on reported claims and a variety of statistical techniques and we adjust our estimates as experience develops or new information becomes known.
These changes are sometimes referred to as "prior year loss development" or " reserve development" and are included in current operations. We continually monitor reserves using the most recent information on reported claims and a variety of statistical techniques, and we adjust our estimates as experience develops or new information becomes known.
The following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws: Alabama, Alaska, California, Connecticut, Delaware, Hawaii, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, New Hampshire, New York, 35 TABLE OF CONTENTS North Dakota, Ohio, South Carolina, Tennessee, Vermont, Virginia and Wisconsin.
The following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws: Alabama, Alaska, California, Connecticut, Delaware, Hawaii, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, New Hampshire, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Vermont, Virginia and Wisconsin.
Failure to comply with the requirements of the Cyber Risk Code will be taken into account by the BMA in determining whether a registrant is 28 TABLE OF CONTENTS conducting its business in a sound and prudent manner as prescribed by the Insurance Act and may result in the BMA exercising its powers of intervention and investigation (see below).
Failure to comply with the requirements of the Cyber Risk Code will be taken into account by the BMA in determining whether a registrant is conducting its business in a sound and prudent manner as prescribed by the Insurance Act and may result in the BMA exercising its powers of intervention and investigation (see below).
Code of Conduct The Insurance Code of Conduct (the “Insurance Code”) prescribes the duties, standards, procedures and sound business principles with which all insurers registered under the Insurance Act must comply. The BMA will assess an insurer’s compliance with the Insurance Code in a proportional manner relative to the nature, scale and complexity of its business.
Code of Conduct The Insurance Code of Conduct (the “Insurance Code”) prescribes the duties, standards, procedures and sound business principles with which all insurers registered under the Insurance Act must comply. The BMA will assess an insurer’s 26 TABLE OF CONTENTS compliance with the Insurance Code in a proportional manner relative to the nature, scale and complexity of its business.
Under the Terrorism Acts, commercial property and casualty insurers, in exchange for making terrorism insurance available, may be entitled to be reimbursed by the federal government for a portion of their aggregate losses. As required by the Terrorism Acts, we offer policyholders in specific lines of commercial insurance the option to elect terrorism coverage.
Under the Terrorism Acts, commercial property and casualty insurers, in exchange for making terrorism insurance available, may be 34 TABLE OF CONTENTS entitled to be reimbursed by the federal government for a portion of their aggregate losses. As required by the Terrorism Acts, we offer policyholders in specific lines of commercial insurance the option to elect terrorism coverage.
Among the 98% of our employees who chose to disclose their race and ethnicity, approximately 12% identified as Black or African American, 4% as Hispanic or Latino, 6% as Asian, 2% as two or more races, less than 1% as Native Hawaiian or other Pacific Islander, and less than 1% as American Indian or Alaska Native.
Among the 97% of our employees who chose to disclose their race and ethnicity, approximately 12% identified as Black or African American, 4% as Hispanic or Latino, 6% as Asian, 1% as two or more races, less than 1% as Native Hawaiian or other Pacific Islander, and less than 1% as American Indian or Alaska Native.
We attempt to balance the preservation of assets, liquidity needs and mitigation of volatility with returns across our portfolio. We believe our diversified portfolio and ability to source investment opportunities positions us well to generate returns while balancing the importance of maintaining a strong balance sheet. Manage Capital Actively.
We attempt to balance the preservation of assets, liquidity needs and mitigation of volatility with returns across our portfolio. We believe our diversified portfolio and ability to source investment opportunities positions us well to generate returns while balancing the importance of maintaining a strong balance sheet. 8 TABLE OF CONTENTS Manage Capital Actively.
James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River.
James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to 16 TABLE OF CONTENTS reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River.
In 2022, the average account in this segment (excluding commercial auto policies) generated annual gross written premiums of approximately $24,000. The Excess and Surplus Lines segment distributes primarily through wholesale insurance brokers. Members of our management team have participated in this market for over three decades and have long-standing relationships with the wholesale brokers who place E&S lines accounts.
In 2023, the average account in this segment (excluding commercial auto policies) generated annual gross written premiums of approximately $26,000. The Excess and Surplus Lines segment distributes primarily through wholesale insurance brokers. Members of our management team have participated in this market for over three decades and have long-standing relationships with the wholesale brokers who place E&S lines accounts.
Because of the more limited capital allocation required to support it, we believe the fronting business represents an efficient use of capital, and we continued to expand this business in 2022.
Because of the more limited capital allocation required to support it, we believe the fronting business represents an efficient use of capital, and we continued to expand this business in 2023.
(5) Includes $38.7 million of adverse development in the commercial auto line of business that was primarily related to the 2016 contract year with Rasier, partially offset by $18.6 million of favorable development from other divisions primarily from the 2014 through 2016 accident years. (6) Includes adverse development primarily related to underwriting years 2014 through 2018.
(6) Includes $38.7 million of adverse development in the commercial auto line of business that was primarily related to the 2016 contract year with Rasier, partially offset by $18.6 million of favorable development from other divisions primarily from the 2014 through 2016 accident years.
The Insurance Act prescribes rules for the preparation and substance of statutory financial statements (which include, in statutory form, a balance sheet, an income statement, a statement of capital and surplus and notes thereto). The statutory 25 TABLE OF CONTENTS financial statements include detailed information and analysis regarding premiums, claims, reinsurance and investments of the insurer.
The Insurance Act prescribes rules for the preparation and substance of statutory financial statements (which include, in statutory form, a balance sheet, an income statement, a statement of capital and surplus and notes thereto). The statutory financial statements include detailed information and analysis regarding premiums, claims, reinsurance and investments of the insurer.
In making its determination, the BMA may also have regard to (a) the location where management of the insurer meets to effect policy decisions of the insurer; (b) the residence of the officers, insurance managers or employees of the insurer; and (c) the residence of one or more directors of the insurer in Bermuda.
In making its determination, the BMA may also have regard to (a) the location where management of the insurer meets to effect policy decisions of the insurer; (b) the residence of the officers, insurance managers 23 TABLE OF CONTENTS or employees of the insurer; and (c) the residence of one or more directors of the insurer in Bermuda.
We also consider various factors such as: • The product line and volume of business; • Loss emergence and insured reporting patterns; • Underlying policy terms and conditions; • Business and exposure mix; • Trends in claim frequency and severity; • Changes in operations; • Emerging economic and social trends; • Inflation; • Changes in the regulatory and litigation environments; and • Discussions with third-party actuarial consultants.
We also consider various factors such as: • The product line and volume of business; • Loss emergence and insured reporting patterns; • Underlying policy terms and conditions; • Business and exposure mix; • Trends in claim frequency and severity; • Changes in operations and claims practices; • Emerging economic and social trends; • Inflation; • Changes in the regulatory and litigation environments • Discussions with third-party actuarial consultants; and • Reinsurance structures.
When fixed income yields are low, insurance companies may need to raise insurance prices to improve underwriting results in order to offset loss of investment income. 22 TABLE OF CONTENTS We are currently in a growth phase for our U.S. primary operations.
When fixed income yields are low, insurance companies may need to raise insurance prices to improve underwriting results in order to offset loss of investment income. We are currently in a growth phase for our U.S. primary operations.
Such registrations protect our intellectual property from confusingly similar use. We monitor our trademarks and service marks and protect them from unauthorized use. We use licensed and proprietary systems and technologies in our underwriting. The licenses have terms that expire at various times.
Patent and Trademark Office. Such registrations protect our intellectual property from confusingly similar use. We monitor our trademarks and service marks and protect them from unauthorized use. We use licensed and proprietary systems and technologies in our underwriting. The licenses have terms that expire at various times.
Bank Loans The Bank Loan portfolio primarily consists of investments in participations in syndicated bank loans, but may also include a small allocation of bonds. Bank loans in our portfolio are generally senior secured loans with an average credit quality of “B” as of December 31, 2022 and floating interest rates based on spreads over LIBOR or SOFR.
Bank Loans The Bank Loan portfolio primarily consists of investments in participations in syndicated bank loans, but may also include a small allocation of bonds. Bank loans in our portfolio are generally senior secured loans with an average credit quality of “B” as of December 31, 2023 and floating interest rates based on spreads over SOFR.
Within that context, we seek to improve risk-adjusted returns in our investment portfolio by allocating a portion of our portfolio to investments where we take measured risks based upon detailed knowledge of certain niche asset classes.
Within that context, we seek to improve risk-adjusted returns in our investment portfolio by allocating a portion of our portfolio to investments 7 TABLE OF CONTENTS where we take measured risks based upon detailed knowledge of certain niche asset classes.
The calendar year net loss ratios for the Excess and Surplus Lines segment for the last ten years were: 2013 40.4 % 2014 55.2 % 2015 54.5 % 2016 62.6 % 2017 80.2 % 2018 78.8 % 2019 84.4 % 2020 76.7 % 2021 106.2 % 2022 65.9 % The calendar year loss ratios for 2017 through 2021 were impacted by adverse reserve development of $38.7 million, $20.7 million, $57.4 million, $91.4 million and $200.1 million, respectively, in the commercial auto line of business that was primarily related to a former insured, Rasier LLC and its affiliates (“Rasier”).
The calendar year net loss ratios for the Excess and Surplus Lines segment for the last ten years were: 2014 55.2 % 2015 54.5 % 2016 62.6 % 2017 80.2 % 2018 78.8 % 2019 84.4 % 2020 76.7 % 2021 106.2 % 2022 65.9 % 2023 68.9 % 13 TABLE OF CONTENTS The calendar year loss ratios for 2017 through 2021 were impacted by adverse reserve development of $38.7 million, $20.7 million, $57.4 million, $91.4 million and $200.1 million, respectively, in the commercial auto line of business that was primarily related to a former insured, Rasier LLC and its affiliates (“Rasier”).
Additionally, the claims staff also contributes to our underwriting operations through its communication of claims information to our underwriters. 8 TABLE OF CONTENTS Earn a Meaningful Contribution from Investments. We seek to earn a meaningful contribution to our overall returns from our investment portfolio activities each year.
Additionally, the claims staff also contributes to our underwriting operations through its communication of claims information to our underwriters. Earn a Meaningful Contribution from Investments. We seek to earn a meaningful contribution to our overall returns from our investment portfolio activities each year.
Examples of classes underwritten by this division include oil and gas 10 TABLE OF CONTENTS exploration companies, oil or gas well drillers, oilfield consultants, oil or gas lease operators, oil well servicing companies, oil or gas pipeline construction companies, fireworks manufacturing, mining-related risks, utilities, and utility contractors.
Examples of classes underwritten by this division include oil and gas exploration companies, oil or gas well drillers, oilfield consultants, oil or gas lease operators, oil well servicing companies, oil or gas pipeline construction companies, fireworks manufacturing, mining-related risks, utilities, and utility contractors.
We believe our pre-tax group-wide PML from a 1 in 1,000 year catastrophic event would not exceed 2.5% of shareholders’ equity, inclusive of reinstatement premiums payable and net retentions.
We believe our pre-tax group- 15 TABLE OF CONTENTS wide PML from a 1 in 1,000 year catastrophic event would not exceed 2.5% of shareholders’ equity, inclusive of reinstatement premiums payable and net retentions.
In addition, it may 30 TABLE OF CONTENTS require such person’s auditor, underwriter, accountant or any other person with relevant professional skill of such registered person or designated insurer to prepare a report on any aspect pertaining thereto.
In addition, it may require such person’s auditor, underwriter, accountant or any other person with relevant professional skill of such registered person or designated insurer to prepare a report on any aspect pertaining thereto.
While we have been growing this business and achieving increasing or stable rates for several periods through December 31, 2022, there will likely be periods in the future where our growth moderates, stagnates or turns negative. The market for most lines of commercial insurance, other than workers' compensation, are currently in a hardening phase.
While we have been growing this business and achieving increasing or stable rates for several 21 TABLE OF CONTENTS periods through December 31, 2023, there will likely be periods in the future where our growth moderates, stagnates or turns negative. The market for most lines of commercial insurance, other than workers' compensation, are currently in a hardening phase.
The rating for our operating insurance and reinsurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. The financial strength ratings assigned by A.M.
The rating for our U.S. operating companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. The financial strength ratings assigned by A.M.
We invest in this asset class by owning individual loan participations that are carried at fair market value. As of December 31, 2022, bank loans totaled 6.6% of total invested assets and cash. Other Invested Assets We make selective investments in private debt or equity securities in areas where we see opportunity or attractive risk and return characteristics.
We invest in this asset class by owning individual loan participations that are carried at fair market value. As of December 31, 2023, bank loans totaled 7.9% of total invested assets and cash. Other Invested Assets We make selective investments in private debt or equity securities in areas where we see opportunity or attractive risk and return characteristics.
Over the last year, our Diversity, Equity and Inclusion (DEI) committee has made significant progress in bringing additional awareness and focus to DEI topics throughout the company and in the locations where we operate. The committee is both diverse and made up of employees from all segments, levels and office locations.
Over the last year, our Diversity, Equity and Inclusion (DEI) committee continued to make progress in bringing additional awareness and focus to DEI topics throughout the company and in the locations where we operate. The committee is both diverse and made up of employees from all segments, levels and office locations.
Our Structure The chart below displays our corporate structure as of December 31, 2022 as it pertains to our holding and operating subsidiaries.
Our Structure The chart below displays our corporate structure as of December 31, 2023 as it pertains to our holding and operating subsidiaries.
In addition to the formal surveys and feedback meetings, we collect valuable input through our Employee Suggestion Program where employees may express their feedback regarding any aspect of their employment with our company. Intellectual Property We hold U.S. federal service mark registration of our corporate logo and several other company trademark registrations with the U.S. Patent and Trademark Office.
In addition to the formal surveys and feedback meetings, we collect valuable input through our Employee Suggestion Program where employees may express their feedback regarding any aspect of their employment with our company. 35 TABLE OF CONTENTS Intellectual Property We hold U.S. federal service mark registration of our corporate logo and several other company trademark registrations with the U.S.
Our other invested asset strategy has significant risk and not all investments are successful. As a result, we intentionally keep this portfolio as a small portion of the overall investment portfolio. As of December 31, 2022, other invested assets totaled 1.2% of total invested assets and cash.
Our other invested asset strategy has significant risk and not all investments are successful. As a result, we intentionally keep this portfolio as a small portion of the overall investment portfolio. As of December 31, 2023, other invested assets totaled 1.7% of total invested assets and cash.
Where such persons apply, employers must complete a Recruitment Disclosure Form, within the Standard Work Permit Application Form, and provide a summary of all applicants that are Bermudian, the spouse of the Bermudian or the holder of a permanent resident's certificate, including their qualifications.
Where such persons apply, employers must complete a Recruitment Disclosure Form, within the Standard Work Permit Application Form, and provide a summary of all applicants that are Bermudian, the spouse of the Bermudian or the holder of a permanent resident's certificate, including their qualifications and the reason they were unsuccessful.
As of December 31, 2022, we have no material, ongoing disputes with any reinsurer or retrocessionaire, and we are not aware of any credit quality issues with any of our reinsurers or retrocessionaires. Purchased Property Reinsurance Our focus on return on tangible equity leads us to avoid lines of business that we know are exposed to high degrees of volatility.
As of December 31, 2023, we have no material, ongoing disputes with any reinsurer, and we are not aware of any credit quality issues with any of our reinsurers. Purchased Property Reinsurance Our focus on return on tangible equity leads us to avoid lines of business that we know are exposed to high degrees of volatility.
At December 31, 2022, the average duration of our total invested assets and cash, excluding restricted cash, was 4.1 years. Our Strategy We believe our approach to our business will help us achieve our goal of generating compelling returns on tangible equity while limiting volatility in our financial results. This approach involves the following: Generate Consistent Underwriting Profits.
At December 31, 2023, the average duration of our total invested assets and cash, excluding restricted cash, was 3.6 years. Our Strategy We believe our approach to our business will help us achieve our goal of generating compelling returns on tangible equity while limiting volatility in our financial results. This approach involves the following: Generate Consistent Underwriting Profits.
We do not discount our reserves for losses and loss adjustment expenses to reflect estimated present value. All of our methods to calculate net reserves include assumptions about estimated reinsurance recoveries and their collectability . Reinsurance collectability is evaluated independently of the reserving process and appropriate allowances for uncollectible reinsurance are established.
We do not discount our reserves for losses and loss 17 TABLE OF CONTENTS adjustment expenses to reflect estimated present value. All of our methods to calculate net reserves include assumptions about estimated reinsurance recoveries and their collectability . Reinsurance collectability is evaluated independently of the reserving process and appropriate allowances for credit losses are established.
We utilize a network of authorized wholesale brokers and general agents throughout the United States. Gross written premiums for our Excess and Surplus Lines segment grew by 10.5% and 19.2% in 2022 and 2021, respectively. Net written premiums grew by 17.5% and 11.3% in 2022 and 2021, respectively.
We utilize a network of authorized wholesale brokers and general agents throughout the United States. Gross written premiums for our Excess and Surplus Lines segment grew by 9.4%, 10.5%, and 19.2% in 2023, 2022, and 2021, respectively. Net written premiums grew by 0.1%, 17.5%, and 11.3% in 2023, 2022, and 2021, respectively.
The NAIC Amendments, when adopted by the various states, are designed to 34 TABLE OF CONTENTS respond to perceived gaps in the regulation of insurance holding company systems in the United States.
The NAIC Amendments, when adopted by the various states, are designed to respond to perceived gaps in the regulation of insurance holding company systems in the United States.
We make all capital management, capital allocation, treasury functions, information technology and group wide risk management decisions in this segment. Our decisions at this level also include reinsurance purchasing. Purchase of Reinsurance We routinely purchase reinsurance for our Excess and Surplus Lines and Specialty Admitted Insurance segments and, less frequently purchase retrocessional coverage for our Casualty Reinsurance segment.
We make all capital management, capital allocation, treasury functions, information technology and group wide risk management decisions in this segment. Our decisions at this level also include reinsurance purchasing. Purchase of Reinsurance We routinely purchase reinsurance for our Excess and Surplus Lines and Specialty Admitted Insurance segments.
For the year ended December 31, 2022, gross written premiums for the Excess and Surplus Lines segment increased by 10.5% over the same period in 2021. We seek to grow our business by taking advantage of opportunities in markets in which we believe we can use our expertise to generate consistent underwriting profits.
For the year ended December 31, 2023, gross written premiums for the Excess and Surplus Lines segment increased by 9.4% over the same period in 2022. We seek to grow our business by taking advantage of opportunities in markets in which we believe we can use our expertise to generate consistent underwriting profits.
Employees and Human Capital Resources We believe that by understanding and leveraging the different dimensions of diversity in our workforce, we drive empowerment, collaboration and innovation needed to be a leader in our industry. As of December 31, 2022, we had 639 employees located in the United States and Bermuda, all classified as full-time.
Employees and Human Capital Resources We believe that by understanding and leveraging the different dimensions of diversity in our workforce, we drive empowerment, collaboration and innovation needed to be a leader in our industry. As of December 31, 2023, we had 649 employees located in the United States and Bermuda, all but two classified as full-time.
If an employer wishes to change an employee’s job title, provided that the job description, duties, remuneration and benefits remain unchanged, the employer does not need to advertise or obtain the permission of the Minister of Economy and Labour to do this, but it must inform the Department of Immigration and pay the necessary fee after the change has occurred.
If an employer wishes to change an employee’s job title, provided that the job description, duties, remuneration and benefits remain unchanged, the employer does not need to advertise or obtain the permission of the Minister of Economy and Labour to do this, but it must inform the Department of Immigration by letter, including the new Statement of Employment, and pay the necessary fee before or after the change has occurred.
We generally write $1.0 million per occurrence limits and retain the entire amount. Allied Health underwrites casualty insurance for allied health and social service types of risks, such as long-term care facilities, independent living apartments, group homes, half-way houses and shelters, drug rehabilitation, home health care and medical staffing enterprises.
We generally write $1.0 million per occurrence limits, of which we retain $690,000 net per occurrence. Allied Health underwrites casualty insurance for allied health and social service types of risks, such as long-term care facilities, independent living apartments, group homes, half-way houses and shelters, drug rehabilitation, home health care and medical staffing enterprises.
Pursuant to applicable laws and regulations, “control” over an insurer is generally presumed to exist if any person, directly or indirectly, owns, controls, holds the power to vote or holds proxies representing, 10 percent or more of the voting securities of that insurer. Indirect ownership includes ownership of the Company’s common shares.
Pursuant to applicable laws and regulations, “control” over an insurer is generally presumed to exist if any person, directly or indirectly, owns, controls, holds the power to vote or holds proxies representing 10 percent or more of the voting securities of that insurer.
Non-traditional investments represented 7.8% of our total cash and invested assets (excluding restricted cash equivalents) at December 31, 2022, consisting of syndicated bank loans (6.6%) and other invested assets (1.2%) that include interests in limited liability companies that invest in renewable energy opportunities, limited partnerships that invest in debt or equity securities, notes receivable for renewable energy projects, and a private debt security.
Non-traditional investments represented 9.6% of our total cash and invested assets (excluding restricted cash equivalents) at December 31, 2023, consisting of syndicated bank loans (7.9%) and other invested assets (1.7%) that include interests in limited liability companies that invest in renewable energy opportunities, limited partnerships that invest in debt or equity securities, and notes receivable for renewable energy projects.
At December 31, 2022, the balance in the Indemnity Trust was $267.0 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $336.2 million. • Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in our statutory financial statements.
At December 31, 2023, the balance in the Indemnity Trust was $138.4 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $183.6 million. • Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in our statutory financial statements.
Our Excess and Surplus Lines segment binds approximately 4% of new submissions and one out of every five new quotes. If our underwriters cannot reasonably expect to bind coverage at the combination of premiums and coverage that meet our standards, they are encouraged to quickly move on 12 TABLE OF CONTENTS to another prospective opportunity.
Our Excess and Surplus Lines segment binds approximately 3% of new submissions and one out of every four new quotes. If our underwriters cannot reasonably expect to bind coverage at the combination of premiums and coverage that meet our standards, they are encouraged to quickly move on to another prospective opportunity.
Best Company (“A.M. Best”) financial strength rating for our group’s regulated insurance and reinsurance subsidiaries is “A-” (Excellent) with a stable outlook. This rating reflects A.M. Best’s evaluation of our insurance and reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
Best Company (“A.M. Best”) financial strength rating for our group’s regulated U.S. subsidiaries is “A-” (Excellent). This rating reflects A.M. Best’s evaluation of our U.S. subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
Based on the current duration of 4.1 years, a 1.0% increase in interest rates would result in a pre-tax decline in the market value of our portfolio, excluding other invested assets and cash, of approximately $88.8 million. Insurance Cycle Management and Growth The insurance and reinsurance business is cyclical in nature, with “hard” and “soft” cycles.
Based on the current duration of 3.6 years, a 1.0% increase in interest rates would result in a pre-tax decline in the market value of our portfolio, excluding other invested assets and cash, of approximately $60.2 million. Insurance Cycle Management and Growth The insurance business is cyclical in nature, with “hard” and “soft” cycles.
In 2022, our growth was primarily focused in our Excess Casualty, General Casualty, Manufacturers & Contractors, Excess Property, Sports and Entertainment and Small Business divisions within our Excess and Surplus Lines segment. This very specific evaluation of each risk or class of risks is a hallmark of our underwriting.
In 2023, our growth was primarily focused in our Excess Casualty, General Casualty, Manufacturers & Contractors, and Excess Property divisions within our Excess and Surplus Lines segment. This very specific evaluation of each risk or class of risks is a hallmark of our underwriting.
Manufacturers and Contractors writes primary general liability coverage for a variety of classes, including manufacturers of consumer, commercial, and industrial products and general and trade contractors. Typically, we issue a $1.0 million per occurrence limit in this division, and we retain the entire $1.0 million limit.
Manufacturers and Contractors writes primary general liability coverage for a variety of classes, including manufacturers of consumer, commercial, and industrial products and general and trade contractors. Typically, we issue a $1.0 million per occurrence limit in this division, of which we retain $690,000 net per occurrence.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Ownership of Our Common Shares • The amount of dividends that we may pay to our common shareholders is subject to restriction pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future. • The conversion of the Series A Preferred Shares into common shares would dilute the ownership of common shareholders and may adversely affect the market price of our common shares. • Dividends paid by our U.S. subsidiaries to James River UK may not be eligible for benefits under the U.S.-U.K. income tax treaty, reducing the amount of funds that would be available for the payment of dividends. • Our bye-laws and provisions of Bermuda law may impede or discourage a change of control transaction, which could deprive our investors of the opportunity to receive a premium for their shares. • Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our shares. • There are regulatory limitations on the ownership and transfer of our common shares.
Biggest changeRisks Related to Ownership of Our Common Shares • Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations. • There is no guarantee that our evaluation of strategic alternatives will result in any particular outcome, and the perceived uncertainties related to the Company could adversely affect our business and our shareholders. • The sale of JRG Re is subject to closing conditions and there can be no assurance that these conditions will be satisfied on the timeline we expect or at all, the sale of JRG may be terminated in certain circumstances, including the failure of the buyer to obtain required financing, and a portion of the consideration for the sale of JRG Re is a pre-closing dividend that is subject to the availability of unencumbered assets of JRG Re on the closing date. • The identification of material weaknesses or the failure to otherwise maintain effective internal controls may result in material misstatements in our financial reporting and/or cause us to fail to meet our periodic reporting obligations. • The amount of dividends that we may pay to our common shareholders is subject to restriction pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future. • The conversion of the Series A Preferred Shares into common shares would dilute the ownership of common shareholders and may adversely affect the market price of our common shares. • Dividends paid by our U.S. subsidiaries to James River UK may not be eligible for benefits under the U.S.-U.K. income tax treaty, reducing the amount of funds that would be available for the payment of dividends. • Our bye-laws and provisions of Bermuda law may impede or discourage a change of control transaction, which could deprive our investors of the opportunity to receive a premium for their shares. • Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our shares. • There are regulatory limitations on the ownership and transfer of our common shares.
A decline in our financial strength rating may result in a reduction of new or renewal business. Companies, insurers and reinsurance brokers use ratings from independent ratings agencies as an important means of assessing the financial strength and quality of reinsurers. A.M.
A decline in our financial strength rating may result in a reduction of new or renewal business. Companies, insurers and reinsurance brokers use ratings from independent ratings agencies as an important means of assessing the financial strength and quality of insurers and reinsurers. A.M.
It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations. A downgrade below “A-” or withdrawal of any rating could severely limit or prevent us from writing new and renewal insurance or reinsurance contracts. See also “Item 7.
It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations. A downgrade below “A-” or withdrawal of any rating could severely limit or prevent us from writing new and renewal insurance contracts. See also “Item 7.
Approximately 94% of our Excess and Surplus Lines net casualty loss reserves are associated with “occurrence form” policies at December 31, 2022. • Even when a claim is received (irrespective of whether the policy is a “claims made” or “occurrence” basis form), it may take considerable time to fully appreciate the extent of the covered loss suffered by the insured and, consequently, estimates of loss associated with specific claims can increase over time. • New theories of liability are enforced retroactively from time to time by courts.
Approximately 94% of our Excess and Surplus Lines net casualty loss reserves are associated with “occurrence form” policies at December 31, 2023. • Even when a claim is received (irrespective of whether the policy is a “claims made” or “occurrence” basis form), it may take considerable time to fully appreciate the extent of the covered loss suffered by the insured and, consequently, estimates of loss associated with specific claims can increase over time. • New theories of liability are enforced retroactively from time to time by courts.
Although we have employment agreements with the members of our senior management team, which include certain post-employment restrictions on engaging in businesses competitive with the Company, we do not have employment agreements with our senior underwriters or claims personnel.
Although we have employment agreements with most members of our senior management team, which include certain post-employment restrictions on engaging in businesses competitive with the Company, we do not have employment agreements with our senior underwriters or claims personnel.
Summary Risks Related to Our Business and Industry • Reserving for losses is an inherently uncertain process, and our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations. • Our risk management is based on estimates and judgments that are subject to significant uncertainties. • A decline in our financial strength rating may result in a reduction of new or renewal business. • We may not be able to retain key management and employees or recruit other qualified personnel, and as a result we may not be able to grow our business and may also be materially adversely affected. • Adverse economic factors could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability. • We distribute products through a select group of brokers and agents, several of which account for a significant portion of our business, and such relationships may not continue, or if they do continue, the relationship may not be on favorable terms to us. • Brokers or agents that produce our business may not forward premiums to us that they collect from our policyholders, and as a result, we may not receive compensation for coverage set forth in the underlying policy. • We rely on a select group of customers for a significant portion of our business, and the loss or termination of our relationship with any such customers, or a material reduction in their business, could materially adversely affect our rate of growth, results of operations and financial condition. • We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection. • We have primary liability on our insurance policies for losses, even if reinsurance counterparties or insurance companies with which we have a fronting arrangement fail to make any contractually obligated payments with respect to such loss, or if we do not receive indemnification payments pursuant to an arrangement we have with a former customer. • If we are unable to underwrite risks accurately and charge and collect competitive yet profitable rates to our policyholders, our business, financial condition and results of operations will be materially adversely affected. • The failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, could result in higher than anticipated losses. • We have exposure to losses arising from unpredictable natural disasters, terrorist acts, and other catastrophic events, the occurrence of which could result in an increase in the number or value of claims and could exceed the amount of reinsurance we purchased to protect us from such claims. • The global coronavirus outbreak could harm business and results of operations of the Company. • The effect of emerging claim and coverage issues on our business is uncertain and may result in coverage of risks that we did not factor in our policy prices. • Our investment portfolio is subject to significant market and credit risks, which could result in a material adverse impact on our financial condition or results of operations. • We are subject to extensive regulation, and the cost of compliance with such regulation or new regulation, or the results of non-compliance, may materially adversely affect our ability to achieve our business objectives and additionally may materially adversely affect our financial condition and results of operations. • We, or agents we have appointed, may act based on inaccurate or incomplete information regarding the accounts we underwrite, the result of which may be to cause us to misprice our policies. • Agents may exceed their authority or commit fraud when binding policies on our behalf, causing us to make underwriting decisions on inadequate or inaccurate information. • Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control that are binding upon us, which could materially adversely affect our performance. • We could be forced to sell investments to meet our liquidity requirements, causing us to incur losses on the investments. • We may require additional capital in the future, which may not be available or available only on unfavorable terms. • Our credit agreements contain a number of financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facilities. 38 TABLE OF CONTENTS • If we are unable to keep pace with the technological advancements in the insurance industry, our ability to compete effectively could be impaired. • If actual renewals of our existing contracts do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected. • If California, North Carolina, Ohio or Virginia significantly increase the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer. • Our use of third-party claims administrators in certain lines of business may achieve less desirable results which could cause us to incur higher losses and loss adjustment expenses.
Summary Risks Related to Our Business and Industry • Reserving for losses is an inherently uncertain process, and our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations. • Our risk management is based on estimates and judgments that are subject to significant uncertainties. • A decline in our financial strength rating may result in a reduction of new or renewal business. • We may not be able to retain key management and employees or recruit other qualified personnel, and as a result we may not be able to grow our business and may also be materially adversely affected. • Adverse economic factors could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability. • We distribute products through a select group of brokers and agents, several of which account for a significant portion of our business, and such relationships may not continue, or if they do continue, the relationship may not be on favorable terms to us. • Brokers or agents that produce our business may not forward premiums to us that they collect from our policyholders, and as a result, we may not receive compensation for coverage set forth in the underlying policy. • We rely on a select group of customers for a significant portion of our business, and the loss or termination of our relationship with any such customers, or a material reduction in their business, could materially adversely affect our rate of growth, results of operations and financial condition. • We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection. • We have primary liability on our insurance policies for losses, even if reinsurance counterparties or insurance companies with which we have a fronting arrangement fail to make any contractually obligated payments with respect to such loss, or if we do not receive indemnification payments pursuant to an arrangement we have with a former customer. • If we are unable to underwrite risks accurately and charge and collect competitive yet profitable rates to our policyholders, our business, financial condition and results of operations will be materially adversely affected. • The failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, could result in higher than anticipated losses. • We have exposure to losses arising from unpredictable natural disasters, terrorist acts, and other catastrophic events, the occurrence of which could result in an increase in the number or value of claims and could exceed the amount of reinsurance we purchased to protect us from such claims. • The effect of emerging claim and coverage issues on our business is uncertain and may result in coverage of risks that we did not factor in our policy prices. • Our investment portfolio is subject to significant market and credit risks, which could result in a material adverse impact on our financial condition or results of operations. • We are subject to extensive regulation, and the cost of compliance with such regulation or new regulation, or the results of non-compliance, may materially adversely affect our ability to achieve our business objectives and additionally may materially adversely affect our financial condition and results of operations. • We, or agents we have appointed, may act based on inaccurate or incomplete information regarding the accounts we underwrite, the result of which may be to cause us to misprice our policies. • Agents may exceed their authority or commit fraud when binding policies on our behalf, causing us to make underwriting decisions on inadequate or inaccurate information. • Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control that are binding upon us, which could materially adversely affect our performance. • We could be forced to sell investments to meet our liquidity requirements, causing us to incur losses on the investments. • We may require additional capital in the future, which may not be available or available only on unfavorable terms. • Our credit agreements contain a number of financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facilities. • If we are unable to keep pace with the technological advancements in the insurance industry, our ability to compete effectively could be impaired. 37 TABLE OF CONTENTS • If actual renewals of our existing contracts do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected. • If California, North Carolina, Ohio or any other state in which our insurance companies are admitted significantly increase the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer. • Our use of third-party claims administrators in certain lines of business may achieve less desirable results which could cause us to incur higher losses and loss adjustment expenses.
See the Risk Factor “Our credit agreements contain a number of financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities.” In addition, in view of the earnings and capital pressures experienced by many financial institutions, including insurance companies, i t is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate and may increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels.
See the Risk Factor “Our credit agreements contain a number of financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities.” 40 TABLE OF CONTENTS In addition, in view of the earnings and capital pressures experienced by many financial institutions, including insurance companies, i t is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate and may increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels.
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations. In some instances, these changes may not become apparent until sometime after we have issued insurance policies that are affected by the changes.
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations. In some instances, these changes may not become 44 TABLE OF CONTENTS apparent until sometime after we have issued insurance policies that are affected by the changes.
These estimates, models, data and scenarios may not produce accurate predictions and consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio. 40 TABLE OF CONTENTS Small changes in assumptions, which depend heavily on our judgment and foresight, can have a significant impact on the modeled outputs.
These estimates, models, data and scenarios may not produce accurate predictions and consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio. Small changes in assumptions, which depend heavily on our judgment and foresight, can have a significant impact on the modeled outputs.
Additionally, the transition to remote work by employees has allowed competitors that are located in different states or parts of the country to solicit our employees without requiring their relocation.
Further, the transition to remote work by employees has allowed competitors that are located in different states or parts of the country to solicit our employees without requiring their relocation.
Although failures by brokers and agents to remit premiums have not been 42 TABLE OF CONTENTS material to date, there may be instances where brokers and agents collect premiums but do not remit them to us and we may be required under applicable law to provide the coverage set forth in the policy despite the absence of premiums.
Although failures by brokers and agents to remit premiums have not been material to date, there may be instances where brokers and agents collect premiums but do not remit them to us and we may be required under applicable law to provide the coverage set forth in the policy despite the absence of premiums.
If any of our insurance or reinsurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the period in which the deficiency is identified.
If any of our insurance or reinsurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the 39 TABLE OF CONTENTS period in which the deficiency is identified.
Risks Related to Taxation • Changes in U.S. tax laws and the interpretation of certain provisions of the 2017 Tax Act (including associated regulations), which may be retroactive, could have a significant impact on the Company and persons who own our shares. • The Company, JRG Re and James River Group Holdings UK Limited may be subject to U.S. federal income taxation and our non-U.K. companies may be subject to U.K. taxation, which may have a material adverse effect on our operating results. • Persons who own our shares may be subject to U.S. federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of shares; non-corporate persons who own our shares may not qualify for the reduced tax rate for qualified dividend income on the dividends paid by us in the future, and tax-exempt organizations who own our shares may recognize unrelated business taxable income.
Risks Related to Taxation • 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, could have a significant impact on the Company and persons who own our shares. • The Company, JRG Re and James River Group Holdings UK Limited may be subject to U.S. federal income taxation and our non-U.K. companies may be subject to U.K. taxation, which may have a material adverse effect on our operating results. • Persons who own our shares may be subject to U.S. federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of shares; non-corporate persons who own our shares may not qualify for the reduced tax rate for qualified dividend income on the dividends paid by us in the future, and tax-exempt organizations who own our shares may recognize unrelated business taxable income.
In addition, for the commercial auto business in our Excess and Surplus Lines segment, we experienced adverse development on the reserves for losses and loss adjustment expenses of: $8.9 million for the calendar year ended December 31, 2022 principally relating to the 2020 and prior accident years; $200.1 million for the calendar year ended December 31, 2021 principally relating to the 2019 and prior accident years for Rasier and its affiliates; and $91.4 million in 2020 principally relating to the 2018 and prior accident years for Rasier and its affiliates.
In addition, for the commercial auto business in our Excess and Surplus Lines segment, we experienced adverse development on the reserves for losses and loss adjustment expenses of: $8.7 million for the calendar year ended December 31, 2023 principally relating to 2021 and prior accident years; $8.9 million for the calendar year ended December 31, 2022 principally relating to the 2020 and prior accident years; and $200.1 million for the calendar year ended December 31, 2021 principally relating to the 2019 and prior accident years for Rasier and its affiliates.
These estimates are based on our assessment of facts and circumstances then known, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors.
These estimates are 38 TABLE OF CONTENTS based on our assessment of facts and circumstances then known, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors.
Our inability to attract and 41 TABLE OF CONTENTS retain qualified personnel and the loss of services of key personnel could have a material adverse effect on our financial condition and results of operations.
Our inability to attract and retain qualified personnel and the loss of services of key personnel could have a material adverse effect on our financial condition and results of operations.
Best has assigned a financial strength rating of “A-” (Excellent), which is the fourth highest of 13 ratings that A.M. Best issues, to each of James River Insurance, James River Casualty, Falls Lake Fire and Casualty, Falls Lake National, Stonewood Insurance, and JRG Re . A.M.
Best has assigned a financial strength rating of “A-” (Excellent), which is the fourth highest of 13 ratings that A.M. Best issues, to each of James River Insurance, James River Casualty, Falls Lake Fire and Casualty, Falls Lake National and Stonewood Insurance . On December 20, 2023, A.M.
In order to accurately price our policies, we: • collect and properly analyze a substantial volume of data from our insureds; • develop, test and apply appropriate actuarial projections and rating formulas; • closely monitor and timely recognize changes in trends; and • project both frequency and severity of our insureds’ losses with reasonable accuracy. 44 TABLE OF CONTENTS We seek to implement our pricing accurately in accordance with our assumptions.
In order to accurately price our policies, we: • collect and properly analyze a substantial volume of data from our insureds; • develop, test and apply appropriate actuarial projections and rating formulas; • closely monitor and timely recognize changes in trends; and • project both frequency and severity of our insureds’ losses with reasonable accuracy.
In addition to reinsurance purchased to manage our ongoing business, we have entered into two retroactive reinsurance transactions on legacy books of business: the first, a loss portfolio transfer reinsurance transaction on our legacy commercial auto lines business in our Excess & Surplus Lines segment (the “Commercial Auto LPT”), and the second, the Casualty Re LPT.
In addition to reinsurance purchased to manage our ongoing business, we have two retroactive reinsurance arrangements on a legacy books of business: the first, a loss portfolio transfer reinsurance transaction on our legacy commercial auto lines business in our Excess & Surplus Lines segment (the “Commercial Auto LPT”), and the second, a loss portfolio transfer retrocession agreement entered into by JRG Re on February 23, 2022 (the "Casualty Re LPT").
Although reinsurance makes the assuming reinsurer liable to us to the extent of the risk ceded, we are not relieved of our primary liability to our insureds as the direct insurer. At December 31, 2022, reinsurance recoverables on unpaid losses from our three largest reinsurers was $717.1 million in the aggregate and represented 47.2% of the total balance.
Although reinsurance makes the assuming reinsurer liable to us to the extent of the risk ceded, we are not relieved of our primary liability to our insureds as the direct insurer. At December 31, 2023, reinsurance recoverables on unpaid losses from our three largest reinsurers was $606.3 million in the aggregate and represented 44.6% of the total balance.
General Risk Factors • We rely on our systems and employees, and those of certain third-party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber-security incidents, could materially adversely affect our operations. • Our operating results have in the past varied from quarter to quarter and may not be indicative of our long-term prospects. • Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.
General Risk Factors • We rely on our systems and employees, and those of certain third-party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber-security incidents, could materially adversely affect our operations. • Our operating results have in the past varied from quarter to quarter and may not be indicative of our long-term prospects.
A downgrade of this rating could also increase the cost or reduce the availability of reinsurance to us, increase collateral required for our assumed reinsurance business, trigger termination of assumed and/or ceded reinsurance contracts, trigger termination rights in certain of our agreements with MGAs in our Specialty Admitted segment, or result in a default under our credit facilities.
A downgrade of this rating could also increase the cost or reduce the availability of reinsurance to us, increase collateral required for our assumed reinsurance business, trigger termination of assumed and/or ceded reinsurance contracts, trigger termination rights in certain of our agreements with MGAs in our Specialty Admitted segment, or, as occurred upon the downgrade by A.M.
We underwrite a significant portion of our insurance in (i) the Excess and Surplus Lines segment in Florida, California, Texas and New York, (ii) the fronting and program business of the Specialty Admitted Insurance segment in California, Michigan, New York, Texas, and Georgia, and (iii) individual risk workers’ compensation business of the Specialty Admitted Insurance segment in North Carolina, Georgia, Missouri, and Virginia.
We underwrite a significant portion of our insurance in (i) the Excess and Surplus Lines segment in Florida, California, Texas and New York, and (ii) the fronting and program business of the Specialty Admitted Insurance segment in California, Texas, North Carolina, Florida, and New York.
For example, in our Casualty Reinsurance segment, we experienced adverse development on the reserves for losses and loss adjustment expenses of: $13.4 million for the calendar year ended December 31, 2022; $137.6 million for the calendar year ended December 31, 2021 primarily in underwriting years 2014 through 2018; and $37.8 million in 2020 primarily in accident years 2014 through 2018.
For example, in our subsidiary JRG Re, we experienced adverse development on the reserves for losses and loss adjustment expenses of: $35.5 million for the calendar year ended December 31, 2023; $13.4 million for the calendar year ended December 31, 2022; and $137.6 million for the calendar year ended December 31, 2021 primarily in underwriting years 2014 through 2018.
For example, for the third quarter ending September 30, 2022, we incurred $5.0 million in net catastrophe losses related to Hurricane Ian. 45 TABLE OF CONTENTS A large-scale pandemic, the continued threat or occurrence of terrorism, within the United States and abroad, or military and other actions, and heightened security measures in response to these types of threats may cause significant volatility and losses in our investment portfolio from declines in the equity markets and from interest rate changes in the United States, Europe and elsewhere, and result in loss of life, property damage, disruptions to commerce and reduced economic activity.
A large-scale pandemic, the continued threat or occurrence of terrorism, within the United States and abroad, or military and other actions, and heightened security measures in response to these types of threats may cause significant volatility and losses in our investment portfolio from declines in the equity markets and from interest rate changes in the United States, Europe and elsewhere, and result in loss of life, property damage, disruptions to commerce and reduced economic activity.
Additionally, prepaid reinsurance premiums ceded to three reinsurers at December 31, 2022 was $119.7 million in the aggregate, or 43.7% of the total balance of prepaid reinsurance premiums.
Additionally, prepaid reinsurance premiums ceded to three reinsurers at December 31, 2023 was $100.2 million in the aggregate, or 34.2% of the total balance of prepaid reinsurance premiums.
Like other insurance companies, we rely on estimates and assumptions in setting our premium rates. Establishing adequate premium rates is necessary, together with investment income, to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting costs and to earn a profit.
Establishing adequate premium rates is necessary, together with investment income, to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting costs and to earn a profit.
The availability of reasonably affordable reinsurance is a critical element of our business plan. One important way we utilize reinsurance is to reduce volatility in claims payments by limiting our exposure to losses from large risks. Another way we use reinsurance is to purchase substantial protection against concentrated losses when we enter new markets.
One important way we utilize reinsurance is to reduce volatility in claims payments by limiting our exposure to losses from large risks. Another way we use reinsurance is to purchase substantial protection against concentrated losses when we enter new markets. In addition, the ability to obtain reinsurance is critical to our objective to grow our fee-based fronting business.
We seek to hold a diversified portfolio of investments that is managed by professional investment advisory management firms in accordance with our investment policy and periodically reviewed by our Investment Committee.
We seek to hold a diversified portfolio of investments that is managed by professional investment advisory management firms in accordance with our investment policy and periodically reviewed by our Investment Committee. However, our investments are subject to general economic conditions and market risks as well as risks inherent to particular securities.
Business — Business Segments—Purchase of Reinsurance.” We are subject to credit risk with regard to our reinsurance counterparties, insurance companies with which we have a fronting arrangement and an indemnification arrangement we have with a former customer.
We may, therefore, be exposed to potential losses as a result of terrorist acts. See also “Item 1. Business — Business Segments—Purchase of Reinsurance.” We are subject to credit risk with regard to our reinsurance counterparties, insurance companies with which we have a fronting arrangement and an indemnification arrangement we have with a former customer.
In addition, the ability to obtain reinsurance is critical to our objective to grow our fee-based fronting business. As a result, our ability to manage volatility and avoid significant losses, expand into new markets, grow by offering insurance to new kinds of enterprises, or grow our fronting business may be limited by the unavailability of reasonably priced reinsurance.
As a result, our ability to manage volatility and avoid significant losses, expand into new markets, grow by offering insurance to new kinds of enterprises, or grow our fronting business may be limited by the unavailability of reasonably priced reinsurance. We may not be able to obtain reinsurance on acceptable terms or from entities with satisfactory creditworthiness.
In the insurance and reinsurance industry, there is always the risk that reserves may prove inadequate, and actual results always differ from our reserve estimates. It is possible for insurance and reinsurance companies to underestimate the cost of 39 TABLE OF CONTENTS claims.
In the insurance and reinsurance industry, there is always the risk that reserves may prove inadequate, and actual results always differ from our reserve estimates. It is possible for insurance and reinsurance companies to underestimate the cost of claims. Our estimates could prove to be low, and this underestimation could have a material adverse effect on our financial strength.
If the current high inflationary environment persists over an extended period of time, it could adversely affect the adequacy of our reserves by increasing average loss costs over time, negatively impact the values of our investments and our investment returns, and may increase our compensation expenses.
Higher than expected inflation could adversely affect the adequacy of our reserves by increasing average loss costs over time, negatively impact the values of our investments and our investment returns, and may increase our compensation expenses.
At December 31, 2022, reinsurance recoverables on the Commercial Auto 43 TABLE OF CONTENTS LPT were $145.2 million (including $132.0 million of unpaid recoverables and $13.2 million of paid recoverables), and reinsurance recoverables on the Casualty Re LPT were $244.7 million. At December 31, 2022, all of our material reinsurance recoverable amounts are from companies with A.M.
At December 31, 2023, reinsurance recoverables on the Commercial Auto LPT were $84.5 million (including $78.1 million of unpaid recoverables and $6.4 million of paid recoverables), and reinsurance recoverables on the Casualty Re LPT were $221.7 million. At December 31, 2023, all of our material reinsurance recoverable amounts are from companies with A.M.
Our two largest customers accounted for approximately $120.9 million (8.1%) and $110.9 million (7.4%) of our consolidated gross written premium in 2022. No insured generated 10.0% or more of consolidated gross written premiums for 2022. Our largest customer in 2021 accounted for approximately $124.1 million of our gross written premium, representing 8.2% of our gross written premiums in 2021.
Our two largest customers in 2022, both agents for the Specialty Admitted Insurance segment, accounted for approximately $120.9 million (8.6%) and $110.9 million (7.9%) of our consolidated gross written premium from continuing operations in 2022. No insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2022.
The termination of a relationship with one or more significant brokers or agents could result in lower direct written premiums and could have a material adverse effect on our results of operations or business prospects. There is a continuing trend toward consolidation among retail and wholesale brokers and agents.
Even if the relationships do continue, they may not be on terms that are profitable for us. The termination of a relationship with one or more significant brokers or agents could result in lower direct written premiums and could have a material adverse effect on our results of operations or business prospects.
In that event, we would be contractually entitled to recovery from our reinsurer or the entity for which we are fronting, but, for a variety of reasons, the other party could default in its obligations.
In that event, we would be contractually entitled to recovery from our reinsurer or the entity for which we are fronting, but, for a variety of reasons, the other party could default in its obligations. 43 TABLE OF CONTENTS If we are unable to underwrite risks accurately and charge and collect competitive yet profitable rates to our policyholders, our business, financial condition and results of operations will be materially adversely affected .
As a result, we, like other direct insurance companies, write insurance policies which to some extent do not have the benefit of reinsurance protection. These gaps in reinsurance protection expose us to greater risk and greater potential losses. For example, certain reinsurers have excluded coverage for terrorist acts or priced such coverage at unreasonably high rates.
These gaps in reinsurance protection expose us to greater risk and greater potential losses. For example, certain reinsurers have excluded coverage for terrorist acts or priced such coverage at unreasonably high rates. Many direct insurers, including us, have written policies without terrorist act exclusions and in many cases we cannot exclude terrorist acts because of regulatory constraints.
In 2022: • the Excess and Surplus Lines segment conducted business with three brokers that produced an aggregate of $643.3 million in gross written premiums, or 69.8% of that segment’s gross written premiums for the year; • the Specialty Admitted Insurance segment conducted business with two agencies that produced $231.8 million in gross written premiums, representing 47.3% of that segment’s gross written premiums for the year; and • the Casualty Reinsurance segment conducted business with three brokers that generated $62.5 million of gross written premiums, or 73.4% of that segment’s gross written premiums for the year.
In 2023: • the Excess and Surplus Lines segment conducted business with three brokers that produced an aggregate of $716.3 million in gross written premiums, or 71.1% of that segment’s gross written premiums for the year; and • the Specialty Admitted Insurance segment conducted business with two agencies that produced $259.6 million in gross written premiums, representing 51.8% of that segment’s gross written premiums for the year. 41 TABLE OF CONTENTS The relationship with any of these brokers or agents may not continue.
As brokers and agents consolidate and competition among them declines, they may seek and receive higher commissions. Increases in commission expense could reduce our underwriting profit. Certain premiums from policyholders, where the business is produced by brokers or agents, are collected directly by the brokers or agents and forwarded to our insurance subsidiaries.
Certain premiums from policyholders, where the business is produced by brokers or agents, are collected directly by the brokers or agents and forwarded to our insurance subsidiaries.
No insured generated 10.0% or more of consolidated gross written premiums for 2021. The loss or termination of our relationship with these customers, or another significant customer, or a material reduction in business with any such party, could materially adversely affect our rate of growth, results of operations and financial condition.
The loss or termination of our relationship with these customers, or another significant customer, or a material reduction in business with any such party, could materially adversely affect our rate of growth, results of operations and financial condition. We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection.
In addition, JRG Re has managed its risk through retrocession arrangements with third-party reinsurers. A retrocession is a practice whereby a reinsurer cedes risk to one or more other reinsurers. The availability and cost of reinsurance are subject to prevailing market conditions, both in terms of price and available capacity, each of which can affect our business volume and profitability.
The availability and cost of reinsurance are subject to prevailing market conditions, both in terms of price and available capacity, each of which can affect our business volume and profitability. The availability of reasonably affordable reinsurance is a critical element of our business plan.
However, our investments are subject to general economic conditions and market risks as well as risks inherent to particular securities. 46 TABLE OF CONTENTS Our primary market risk exposures are to changes in interest rates and equity prices. See “
Our primary market risk exposures are to changes in interest rates and equity prices. See “
Some exclusions relate to risks that we cannot in turn exclude from the policies we write due to business or regulatory constraints. In addition, reinsurers are imposing terms, such as lower per occurrence and aggregate limits, and more exclusions, limiting the protection provided under the reinsurance contract.
In addition, reinsurers are imposing terms, such as lower per occurrence and aggregate limits, and 42 TABLE OF CONTENTS more exclusions, limiting the protection provided under the reinsurance contract. As a result, we, like other direct insurance companies, write insurance policies which to some extent do not have the benefit of reinsurance protection.
We may not be able to obtain reinsurance on acceptable terms or from entities with satisfactory creditworthiness. In such event, if we are unwilling to accept the terms or credit risk of potential reinsurers, we would have to reduce the level of our underwriting commitments, which would reduce our revenues.
In such event, if we are unwilling to accept the terms or credit risk of potential reinsurers, we would have to reduce the level of our underwriting commitments, which would reduce our revenues. Reinsurance capacity has become more restricted making reinsurance placements more challenging during 2021, 2022 and 2023 than in prior years.
If we are unable to underwrite risks accurately and charge and collect competitive yet profitable rates to our policyholders, our business, financial condition and results of operations will be materially adversely affected . In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known.
In general, the premiums for our insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known. Like other insurance companies, we rely on estimates and assumptions in setting our premium rates.
Reinsurance capacity has become more restricted making reinsurance placements more challenging during 2021 and 2022 than in prior years. Many reinsurance companies have begun to exclude certain coverages from, or alter terms in, the reinsurance contracts we enter into with them.
Many reinsurance companies have begun to exclude certain coverages from, or alter terms in, the reinsurance contracts we enter into with them. Some exclusions relate to risks that we cannot in turn exclude from the policies we write due to business or regulatory constraints.
We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection. We purchase reinsurance in many of our lines of business to help manage our exposure to insurance and reinsurance risks that we underwrite and to reduce volatility in our results.
We purchase reinsurance in many of our lines of business to help manage our exposure to insurance and reinsurance risks that we underwrite and to reduce volatility in our results. In addition, JRG Re has managed its risk through retrocession arrangements with third-party reinsurers. A retrocession is a practice whereby a reinsurer cedes risk to one or more other reinsurers.
Removed
Our estimates could prove to be low, and this underestimation could have a material adverse effect on our financial strength.
Added
Our Core E&S business (excluding commercial auto) in the Excess and Surplus Lines segment experienced adverse development on the reserves for losses and loss adjustment expenses of $23.9 million for the calendar year ended December 31, 2023 principally relating to the 2020 and prior accident years.
Removed
Additionally, if members of management or a significant number of our employees should become unavailable due to an outbreak of COVID-19 or other illness among them, whether due to work in an office environment or otherwise, our operations could be disrupted, which may have a detrimental impact on our business.
Added
Best announced that it revised the outlook on our financial strength rating from stable to negative on such entities. Also, on December 20, 2023, A.M. Best announced that it downgraded the financial strength rating of JRG Re from “A-” (Excellent) with a stable outlook to "B++" (good) with a negative outlook. A.M.
Removed
The relationship with any of these brokers or agents may not continue. Even if the relationships do continue, they may not be on terms that are profitable for us.
Added
Best announced that the ratings actions follow our announcements in November 2023 that we identified a material weakness in our internal control over financial reporting, that we entered into an agreement to sell JRG Re, and that we are exploring strategic alternatives for the Company. A.M.
Removed
Many direct insurers, including us, have written policies without terrorist act exclusions and in many cases we cannot exclude terrorist acts because of regulatory constraints. We may, therefore, be exposed to potential losses as a result of terrorist acts. See also “Item 1.
Added
Best indicated that the negative outlook reflects the uncertainty that the actions will have on our organization, and reflects the execution risk associated with some of these initiatives. A.M. Best further announced that the ratings actions on JRG Re was based upon A.M.
Removed
For example, in response to the COVID-19 pandemic, there have been proposals by federal and state lawmakers to retroactively amend business interruption insurance policies to cover claims related to COVID-19 when such insurance policies otherwise would exclude such risks.
Added
Best's view that JRG Re is less integral to our strategic, operational and financial objectives, as a result of our determination to suspend underwriting in our former casualty reinsurance segment, and our agreement to sell JRG Re at 75% of the book value, valued at September 30, 2023. A.M.
Removed
Further, a number of states have instituted, and other states are considering instituting, changes designed to effectively expand workers’ compensation coverage by creating presumptions of compensability of claims for certain types of workers.
Added
Best of JRG Re described above, result in a default under our credit facilities.
Removed
See “ The global coronavirus outbreak could harm business and results of operations of the Company ” risk factor herein. The global coronavirus outbreak could harm business and results of operations of the Company. In December 2019, a coronavirus (COVID-19) outbreak was reported in China, and, in March 2020, the World Health Organization declared it a pandemic.
Added
The November 2023 announcement that we are evaluating strategic alternatives caused uncertainty among our employees regarding our future operations or employment needs, which may limit our ability to retain or hire qualified personnel, and may contribute to the unplanned loss of highly skilled employees through attrition.
Removed
COVID-19 variants continue to spread throughout the United States and Bermuda, the countries in which the Company operates.
Added
There is a continuing trend toward consolidation among retail and wholesale brokers and agents. As brokers and agents consolidate and competition among them declines, they may seek and receive higher commissions. Increases in commission expense could reduce our underwriting profit.
Removed
In response, many governments, including Bermuda, the state and local governments of the States of Virginia and North Carolina, and governments in many other states in which our policyholders are located, instituted emergency restrictions that substantially limited the operation of non-essential businesses and the activities of individuals.
Added
Our largest customer, an agent for the Specialty Admitted Insurance segment, accounted for approximately $163.1 million (10.8%) of our consolidated gross written premium from continuing operations in 2023. No other insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2023.
Removed
Many jurisdictions imposed, eased, and reinstated emergency restrictions at various points during the pandemic in response to the spread of COVID-19 variants.
Added
Our largest customer in 2021, an agent for the Specialty Admitted Insurance segment, accounted for approximately $124.1 million of our gross written premium, representing 9.4% of our consolidated gross written premium from continuing operations in 2021. No insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2021.
Removed
These restrictions may have resulted in significant adverse effects on our policyholders and many different types of small and mid-sized businesses within the Company’s client base, particularly those in the retail, hospitality and food and beverage industries, among many others. Our workers' compensation line of business includes claimants experiencing "long-COVID", the ultimate cost of which is difficult to predict.
Added
We seek to implement our pricing accurately in accordance with our assumptions.
Removed
In addition, we have observed indirect impacts of COVID-19 in our workers' compensation line of business, such as greater frequency and severity of workplace injuries resulting from inexperienced workers or distracted driving. The ultimate effect and severity of COVID-19 on the economy, our policyholders and our claimants is not known.
Added
For example, for the third quarter ending September 30, 2022, we incurred $5.0 million in net catastrophe losses related to Hurricane Ian.
Removed
The effect of COVID-19 and related events, including those described above and those not yet known, could have a negative effect on the stock price, business prospects, financial condition and results of operations of the Company, including as a result of quarantines, market volatility, market downturns, actions of lawmakers and regulators, changes in consumer behavior, business closures, deterioration in the credit quality of policyholders or the inability of policyholders to pay their premium and deductible obligations to the Company, and deterioration in the credit quality of reinsurers or insurance entities with which we have a fronting arrangement or the inability of reinsurers or the insurance entities for which we are fronting to pay their obligations to the Company .
Added
For example, the COVID-19 pandemic presented, and other future pandemics could present, inflation, supply chain disruptions, labor shortages, backlogs in the court system, responsive regulatory actions and mandates, financial market disruptions, and economic downturn, among other things. The effect of emerging claim and coverage issues on our business is uncertain.
Removed
The impact of the pandemic may also exacerbate the other risks described in this “Risk Factors” section. The occurrence of any of the events described in these risk factors could have a material adverse effect on the Company’s financial condition and results of operations. The effect of emerging claim and coverage issues on our business is uncertain.
Added
In addition, the passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to deem by statute the existence of a covered occurrence, to extend or eliminate the statutes of limitations or otherwise to repeal or weaken tort reforms could have a material and adverse effect on our results of operations and/or financial position.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeItem 2. PROPERTIES We lease office space in Bermuda, where our principal executive office is located and our Casualty Reinsurance segment is based.
Biggest changeItem 2. PROPERTIES We lease office space in Bermuda, where our principal executive office is located and JRG Re is based.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

7 edited+6 added−0 removed3 unchanged
Biggest changeOn August 25, 2022, Plaintiffs filed a motion for leave to file a second amended class 65 TABLE OF CONTENTS action complaint (the "Second Amended Complaint"). On September 8, 2022, the Defendants consented to the Plaintiffs’ motion to file the Second Amended Complaint, and filed a motion to dismiss the Second Amended Complaint on October 24, 2022 (the "Second MTD").
Biggest changeOn September 8 , 2022, the Defendants consented to the Plaintiffs’ motion to file the Second Amended Complaint, and filed a motion to dismiss the Second Amended Complaint on October 24, 2022 (the “Second MTD”).
In addition, the Company is involved from time to time in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in handling of insurance claims.
In addition, the Company is involved from time to time in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in the handling of insurance claims.
The First Amended Complaint and Second Amended Complaint assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of persons and entities that purchased the Company's stock between February 22, 2019 and October 25, 2021, allege that Defendants failed to make appropriate disclosures concerning the adequacy of reserves for policies that covered Rasier LLC, a subsidiary of Uber Technologies, Inc., and seek unspecified damages, costs, attorneys’ fees and such other relief as the court may deem proper.
The Second Amended Complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of persons and entities that purchased the Company’s stock between February 22, 2019 and October 25, 2021, alleges that Defendants failed to make appropriate disclosures concerning the adequacy of reserves for policies that covered Rasier LLC, a subsidiary of Uber Technologies, Inc., and seeks unspecified damages, costs, attorneys’ fees and such other relief as the court may deem proper.
We believe that the Plaintiffs’ claims are without merit, and we intend to vigorously defend this lawsuit. Item 4. MINE SAFETY DISCLOSURE Not applicable. 66 TABLE OF CONTENTS PART II
We believe that the claims are without merit and intend to vigorously defend this lawsuit. Item 4. MINE SAFETY DISCLOSURE Not applicable. 68 TABLE OF CONTENTS PART II
Item 3. LEGAL PROCEEDINGS We are involved in various legal proceedings, including commercial matters and litigation regarding insurance claims which arise in the ordinary course of business, as well as an alleged class action lawsuit.
Item 3. LEGAL PROCEEDINGS We are involved in various legal proceedings, including commercial matters and litigation regarding insurance claims which arise in the ordinary course of business, as well as two alleged class action lawsuits.
The Plaintiffs’ opposition to the Second MTD was filed on November 7, 2022, and the Defendant's reply to the Plaintiffs’ opposition was filed on November 14, 2022.
The Plaintiffs’ opposition to the Second MTD was filed on November 7, 2022, and the Defendant’s reply to the Plaintiffs’ opposition was filed on November 14, 2022. On August 28, 2023, the Court denied the Second MTD.
The Defendants filed a motion to dismiss the First Amended Complaint on January 18, 2022, Plaintiffs’ opposition thereto was filed on March 4, 2022, and the Defendants’ reply to the Plaintiffs’ opposition was filed on April 4, 2022.
The Defendants filed a motion to dismiss the First Amended Complaint on January 18, 2022, Plaintiffs’ opposition thereto was filed on March 4, 2022, and the Defendants’ reply to the Plaintiffs’ opposition was filed on April 4, 2022. On August 25, 2022, Plaintiffs filed a motion for leave to file a second amended class action complaint (the “Second Amended Complaint”).
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We engaged in mediation in the fourth quarter of 2023 and on December 7, 2023, in connection with the mediation, we reached an agreement in principle to settle the action. On December 22, 2023, the parties submitted the stipulation of settlement to the Court for approval.
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The settlement provides for a full release of all defendants in connection with the allegations made and a settlement payment to the class of $30 million, inclusive of all Plaintiffs’ attorneys fees and expenses and settlement costs, all of which will be paid by the Company’s insurance carriers.
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On January 26, 2024 the Court issued an order granting preliminary approval of the settlement and scheduled a final settlement hearing for May 24, 2024. On November 13, 2023, a purported class action lawsuit was filed in the U.S.
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District Court, Southern District of New York, on behalf of Paul Glantz against James River Group Holdings, Ltd. and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Mr.
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Glantz alleges that he purchased James River common stock between August 7, 2023 and November 7, 2023, inclusive, that the Company failed to disclose that it lacked effective internal controls regarding the recognition of reinstatement premiums for reinsurance and as a result the Company overstated its net income, and that, as a result, Mr. Glantz suffered unspecified damages.
Added
On January 12, 2024, both Mr. Glantz and Madhav Ghimire, another individual shareholder, filed an application with the court for appointment as Lead Plaintiff, and on January 26, 2024 Mr. Glantz filed a notice of non-opposition to Mr. Ghimire's competing motion for appointment as Lead Plaintiff. The court's appointment of Lead Plaintiff is pending.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur board of directors may take into account a variety of factors when determining whether to declare any future dividends, including (1) our financial condition, liquidity, results of operations (including our ability to generate cash flow in excess of expenses and our expected or actual net income), retained earnings and collateral and capital requirements, (2) general business conditions, (3) legal, tax and regulatory limitations, (4) contractual prohibitions and other restrictions, in addition to those relating to our Series A Preferred Shares (5) the effect of a dividend or dividends upon our financial strength ratings and (6) any other factors that our board of directors deems relevant. 67 TABLE OF CONTENTS Performance Graph The graph below compares the cumulative 5-Year total shareholder return of our common shares relative to the cumulative total returns of the Russell 2000 index and a selected peer group of six companies that includes Amerisafe, Inc., Argo Group International Holdings, Ltd, Kinsale Capital Group, Inc., Markel Corporation, RLI Corp. and W.
Biggest changeOur board of directors may take into account a variety of factors when determining whether to declare any future dividends, including (1) our financial condition, liquidity, results of operations (including our ability to generate cash flow in excess of expenses and our expected or actual net income), retained earnings and collateral and capital requirements, (2) general business conditions, (3) legal, tax and regulatory limitations, (4) contractual prohibitions and other restrictions, in addition to those relating to our Series A Preferred Shares (5) the effect of a dividend or dividends upon our financial strength ratings and (6) any other factors that our board of directors deems relevant.
The dividend is payable on March 31, 2023 to shareholders of record on March 13, 2023. As described below, the amount of dividends that we may pay on our common shares is restricted by the terms of our Series A Preferred Shares. We closed on the issuance and sale of 150,000 Series A Preferred Shares on March 1, 2022.
As described below, the amount of dividends that we may pay on our common shares is restricted by the terms of our Series A Preferred Shares. We closed on the issuance and sale of 150,000 Series A Preferred Shares on March 1, 2022.
As a result of such regulations, or a change in applicable tax law, we may not be able to pay our operating expenses as they become due and our payment of future dividends to shareholders may be limited.
Under U.K. domestic law, no withholding tax is applied to dividends paid by U.K. tax resident companies. As a result of such regulations, or a change in applicable tax law, we may not be able to pay our operating expenses as they become due and our payment of future dividends to shareholders may be limited.
On the five-year anniversary of the Closing Date, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S. treasury rate plus 5.2%. Dividends accrue and are payable quarterly. During 2022, cash dividends of $8.8 million were declared, of which $2.6 million was payable at December 31, 2022.
On the five-year anniversary of the Closing Date, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S. treasury rate plus 5.2%. Dividends accrue and are payable quarterly.
As of February 24, 2023, there were 7 holders of record of our common shares. Dividends We paid quarterly dividends of $0.05 per common share in 2022, and $0.30 per common share from 2017 to the fourth quarter of 2021. On February 16, 2023, the Board of Directors declared a cash dividend of $0.05 per common share.
Dividends We paid quarterly dividends of $0.05 per common share in 2023 and 2022, and $0.30 per common share from 2017 to the fourth quarter of 2021. On February 15, 2024, the Board of Directors declared a cash dividend of $0.05 per common share. The dividend is payable on March 29, 2024 to shareholders of record on March 11, 2024.
All rights reserved. 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 The performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
All rights reserved. 12/18 12/19 12/20 12/21 12/22 12/23 James River Group Holdings, Ltd. 100.00 115.88 142.20 86.34 63.21 28.32 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 S&P Property & Casualty Insurance 100.00 125.87 134.63 160.58 190.89 211.53 Peer Group 100.00 123.05 127.17 151.85 176.72 188.64 The performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any future filing under the Securities 70 TABLE OF CONTENTS Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Share dividends payable on the common shares to our shareholders also trigger a reduction of the conversion price applicable to the Series A Preferred Shares. We are a holding company that has no substantial operations of our own, and we rely primarily on cash dividends or distributions from our subsidiaries to pay our operating expenses and dividends to shareholders.
We are a holding company that has no substantial operations of our own, and we rely primarily on cash dividends or distributions from our subsidiaries to pay our operating expenses and dividends to shareholders. The payment of dividends by our insurance and reinsurance subsidiaries is limited under the laws and regulations of their respective domicile.
The Certificate of Designations setting forth the terms of the Series A Preferred Shares limits our ability to pay dividends to our common shareholders.
The dividend of $2.6 million will be payable in cash on April 1, 2024 to shareholders of record on March 15, 2024. The Certificate of Designations setting forth the terms of the Series A Preferred Shares limits our ability to pay dividends to our common shareholders.
The payment of dividends by our insurance and reinsurance subsidiaries is limited under the laws and regulations of their respective domicile. These regulations stipulate the maximum amount of annual dividends or other distributions available to shareholders without prior approval of the relevant regulatory authorities.
These regulations stipulate the maximum amount of annual dividends or other distributions available to shareholders without prior approval of the relevant regulatory authorities. Additionally, dividends from our U.S. subsidiaries to our U.K. intermediate holding company are generally subject to a 5% withholding tax by the IRS.
On February 16, 2023, the Board of Directors declared a quarterly dividend on the Series A Preferred Shares. The dividend of $2.6 million will be payable in cash on March 31, 2023 to shareholders of record on March 15, 2023.
For the years ended December 31, 2023 and 2022, cash dividends of $10.5 million and $8.8 million were declared, respectively, of which $2.6 million was payable at December 31 of both years. On February 15, 2024, the Board of Directors declared a quarterly dividend on the Series A Preferred Shares.
R. Berkley Corporation. The companies in the peer group are weighted by market capitalization. The calculation of cumulative total shareholder return assumes an initial investment of $100 and the reinvestment of all dividends, if any, for the period from December 31, 2017 through December 31, 2022.
The calculation of cumulative total shareholder return assumes an initial investment of $100 and the reinvestment of all dividends, if any, for the period from December 31, 2018 through December 31, 2023. Such returns are based on historical results and are not intended to suggest future performance. Copyright© 2024 Standard & Poor's, a division of S&P Global. All rights reserved.
Removed
Additionally, dividends from our U.S. subsidiaries to our U.K. intermediate holding company are generally subject to a 5% withholding tax by the IRS. Under U.K. domestic law, no withholding tax is applied to dividends paid by U.K. tax resident companies.
Added
As of February 26, 2024, there were 4 holders of record of our common shares. A substantially greater number of holders of common shares are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Removed
Such returns are based on historical results and are not intended to suggest future performance. Copyright© 2023 Russell Investment Group.
Added
Performance Graph The graph below compares the cumulative 5-Year total shareholder return of our common shares relative to the cumulative total returns of the Russell 2000 index, the S&P 500 Property and Casualty Insurance index, and a selected peer group of six 69 TABLE OF CONTENTS companies that includes Amerisafe, Inc., Argo Group International Holdings, Ltd, Kinsale Capital Group, Inc., Markel Corporation, RLI Corp. and W.
Added
R. Berkley Corporation. We have elected to replace our selected peer group with the S&P P&C Index to be more consistent with the index used by many of our industry peers in preparing the performance graph in their Annual Report on Form 10-K. The companies in the peer group are weighted by market capitalization.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAside from the suspension of underwriting activities, we plan for the Casualty Reinsurance segment to maintain its normal day-to-day operations, with a staff to continue servicing the business on its books and to facilitate compliance with its regulatory requirements. 79 TABLE OF CONTENTS Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table summarizes our results for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 % Change ($ in thousands) Gross written premiums $ 1,496,580 $ 1,507,299 (0.7) % Net retention 50.0 % 49.4 % Net written premiums $ 748,479 $ 744,380 0.6 % Net earned premiums $ 766,161 $ 695,594 10.1 % Losses and loss adjustment expenses excluding retroactive reinsurance (524,723) (792,352) (33.8) % Other operating expenses (191,796) (160,188) 19.7 % Underwriting profit (loss) (1), (2) 49,642 (256,946) — Losses and loss adjustment expenses - retroactive reinsurance (20,091) — — Net investment income 71,111 56,865 25.1 % Net realized and unrealized investment (losses) gains (28,318) 15,564 — Other income and expense (5,016) (2,232) 124.7 % Interest expense (17,578) (8,922) 97.0 % Amortization of intangible assets (363) (363) — Income (loss) before taxes 49,387 (196,034) — Income tax expense (benefit) 18,414 (23,235) — Net income (loss) $ 30,973 $ (172,799) — Dividends on Series A Preferred Shares (8,750) — — Net income (loss) available to common shareholders $ 22,223 $ (172,799) — Adjusted net operating income (loss) (1) $ 69,542 $ (184,245) — Ratios: Loss ratio 68.5 % 113.9 % Expense ratio 25.0 % 23.0 % Combined ratio 93.5 % 136.9 % Accident year loss ratio 67.3 % 67.1 % Accident year loss ratio ex-cat (3) 66.7 % 66.4 % (1) Underwriting profit (loss) and adjusted net operating income (loss) are non-GAAP measures.
Biggest changeThe Company also recognized an impairment charge of $2.5 million related to the trademark intangible asset associated with the IRWC business. 80 TABLE OF CONTENTS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table summarizes our results for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 % Change ($ in thousands) Gross written premiums $ 1,508,660 $ 1,411,372 6.9 % Net retention 46.0 % 47.1 % Net written premiums $ 693,901 $ 665,446 4.3 % Net earned premiums $ 708,005 $ 629,734 12.4 % Losses and loss adjustment expenses excluding retroactive reinsurance (495,166) (424,900) 16.5 % Other operating expenses (188,355) (148,809) 26.6 % Underwriting profit (1), (2) 24,484 56,025 (56.3) % Losses and loss adjustment expenses - retroactive reinsurance (4,991) (15,742) (68.3) % Net investment income 84,046 43,188 94.6 % Net realized and unrealized investment gains (losses) 10,441 (15,720) — Other income (expense) 424 (244) — Interest expense (24,627) (13,872) 77.5 % Amortization of intangible assets (363) (363) — Impairment of intangible assets (2,500) — — Income from continuing operations before taxes 86,914 53,272 63.2 % Income tax expense on continuing operations 25,705 18,414 39.6 % Net income from continuing operations 61,209 34,858 75.6 % Net loss from discontinued operations (168,893) (3,885) — Net (loss) income (107,684) 30,973 — Dividends on Series A Preferred Shares (10,500) (8,750) 20.0 % Net (loss) income available to common shareholders $ (118,184) $ 22,223 — Adjusted net operating income (1) $ 50,317 $ 51,710 (2.7) % Ratios: Loss ratio 69.9 % 67.5 % Expense ratio 26.6 % 23.6 % Combined ratio 96.5 % 91.1 % Accident year loss ratio 64.0 % 68.2 % Accident year loss ratio ex-cat (3) 64.0 % 67.4 % (1) Underwriting profit and adjusted net operating income are non-GAAP measures.
This independent actuarial consulting firm prepares its own estimate of our reserve for loss and loss adjustment expenses, and we compare their estimate to the reserve for losses and loss adjustment expenses reviewed and approved by the Reserve Committee in order to corroborate the adequacy of our reserves.
This independent actuarial consulting firm prepares its own estimate of our reserve for losses and loss adjustment expenses, and we compare their estimate to the reserve for losses and loss adjustment expenses reviewed and approved by the Reserve Committee in order to corroborate the adequacy of our reserves.
The effect of the deferred retroactive reinsurance benefit is recorded in losses and loss adjustment expenses on the Consolidated Statements of Income (Loss) and Comprehensive (Loss) Income.
The effect of the deferred retroactive reinsurance benefit is recorded in losses and loss adjustment expenses on the Consolidated Statements of (Loss) Income and Comprehensive Loss.
In applying these methods to develop an estimate of the reserve for losses and loss adjustment expenses, our actuaries use judgment to determine three key parameters for each accident year and line of business: the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the five actuarial methods to be used for each accident year and line of business.
In applying these methods to develop an estimate of the reserve for losses and loss adjustment expenses, our actuaries use judgment to determine three key parameters for each accident year and line of business: the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the actuarial methods to be used for each accident year and line of business.
Ceded Reinsurance Our insurance segments enter into reinsurance contracts to limit our exposure to potential losses arising from large risks, to protect against the aggregation of several risks in a common loss occurrence, and to provide additional capacity for growth. Our reinsurance is contracted under excess of loss and quota share reinsurance contracts.
Ceded Reinsurance Our insurance segments enter into reinsurance contracts to limit our exposure to potential losses arising from large risks, to protect against the aggregation of several risks in a common loss occurrence, and to provide additional capacity for growth. Our reinsurance is contracted under excess of loss and proportional quota share reinsurance contracts.
Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, are considered by our internal actuaries in estimating the initial expected loss ratios. Our actuaries generally utilize five actuarial methods in their estimation process for the reserve for losses and loss adjustment expenses.
Input from our underwriting and claims departments, including premium pricing assumptions and historical experience, are considered by our internal actuaries in estimating the initial expected loss ratios. Our actuaries generally utilize five primary actuarial methods in their estimation process for the reserve for losses and loss adjustment expenses.
For the Excess and Surplus Lines segment, the segment actuary performs a study on each of these parameters at least annually and makes recommendations for the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the five actuarial methods by accident year and line of business.
For the Excess and Surplus Lines segment, the segment actuary performs a study on each of these parameters at least annually and makes recommendations for the initial expected loss ratios, the incurred and paid loss development factors and the weighting of the actuarial methods by accident year and line of business.
Members of the Reserve Committee review and approve the parameter review actuarial recommendations, and absent any developments requiring an earlier review, these approved parameters are used in the reserve estimation process for the next four quarters at which time a new parameter study is performed.
Members of the Reserve Committee review and approve the parameter review actuarial recommendations, and absent any developments requiring an earlier review, these approved parameters are generally used in the reserve estimation process for the next four quarters at which time a new parameter study is performed.
The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established a loss fund trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations.
The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established the Loss Fund Trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations.
RSUs granted to non-employee directors have a one year vesting period. 98 TABLE OF CONTENTS Material Cash Requirements We believe the cash generating capability of our operations, together with our revolving credit facilities, and ability to raise capital through future equity offerings, will be adequate to meet our short and long-term cash requirements and provide the financial strength necessary to support our business growth.
RSUs granted to non-employee directors have a one year vesting period. 99 TABLE OF CONTENTS Material Cash Requirements We believe the cash generating capability of our operations, together with our revolving credit facilities, and ability to raise capital through future equity offerings, will be adequate to meet our short and long-term cash requirements and provide the financial strength necessary to support our business growth.
In quota share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class of business in exchange for a corresponding percentage of premiums.
In proportional quota share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class of business in exchange for a corresponding percentage of premiums.
We believe that the use of judgment is necessary to arrive at a best estimate for the reserve for losses and loss adjustment expenses given the long-tailed nature of the business generally written by the Company and the limited operating experience of the Casualty Reinsurance segment, the fronting and program business in the Specialty Admitted Insurance segment and the commercial auto business in the Excess and Surplus Lines segment.
We believe that the use of judgment is necessary to arrive at a best estimate for the reserve for losses and loss adjustment expenses given the long-tailed nature of the business generally written by the Company and the limited operating experience of the fronting and program business in the Specialty Admitted Insurance segment and the commercial auto business in the Excess and Surplus Lines segment.
The five actuarial methods that we use in our reserve estimation process are: Expected Loss Method The Expected Loss method multiplies earned premiums by an initial expected loss ratio.
The five primary actuarial methods that we use in our reserve estimation process are: Expected Loss Method The Expected Loss method multiplies earned premiums by an initial expected loss ratio.
The amounts in the above table represent our gross estimates of known liabilities as of December 31, 2022 and do not include any allowance for claims for future events within the time period specified. Accordingly, it is highly likely that the total amounts paid out in the time periods shown will be greater than those indicated in the table.
The amounts in the above table represent our gross estimates of known liabilities as of December 31, 2023 and do not include any allowance for claims for future events within the time period specified. Accordingly, it is highly likely that the total amounts paid out in the time periods shown will be greater than those indicated in the table.
Additionally, the presidents, chief financial officers and segment actuaries of each of our three insurance segments participate in the Reserve Committee meetings for their respective segments.
Additionally, the presidents, chief financial officers and segment actuaries of each of our insurance segments participate in the Reserve Committee meetings for their respective segments.
In conjunction with its outside investment managers, the Company performs quarterly reviews of all securities within its investment portfolio to determine whether any impairment has occurred. Management concluded that none of the fixed maturity securities with an unrealized loss at December 31, 2022 or 2021 experienced an other-than-temporary impairment.
In conjunction with its outside investment managers, the Company performs quarterly reviews of all securities within its investment portfolio to determine whether any impairment has occurred. Management concluded that none of the fixed maturity securities with an unrealized loss at December 31, 2023 or 2022 experienced an other-than-temporary impairment.
The terms of the senior debt contain certain covenants, with which we are in compliance at December 31, 2022, and which, among other things, restrict our ability to assume senior indebtedness secured by our U.S. holding company's common stock or its subsidiaries' capital stock or to issue shares of its subsidiaries' capital stock.
The terms of the senior debt contain certain covenants, with which we are in compliance at December 31, 2023, and which, among other things, restrict our ability to assume senior indebtedness secured by our U.S. holding company's common stock or its subsidiaries' capital stock or to issue shares of its subsidiaries' capital stock.
See Note 2 to the Notes to the Audited Consolidated Financial Statements for disclosure of contractual maturity dates of our fixed maturity portfolio. The changes in the estimated fair value of the fixed maturity portfolio classified as available-for-sale are presented as a component of shareholders’ equity in accumulated other comprehensive (loss) income, net of taxes.
See Note 3 to the Notes to the Audited Consolidated Financial Statements for disclosure of contractual maturity dates of our fixed maturity portfolio. The changes in the estimated fair value of the fixed maturity portfolio classified as available-for-sale are presented as a component of shareholders’ equity in accumulated other comprehensive (loss) income, net of taxes.
There were no bank loan participations for which external sources were unavailable to determine fair value at December 31, 2022 or 2021. We review fair value prices provided by our outside investment accounting service provider or our investment managers for reasonableness by comparing the fair values provided to those provided by our investment custodian.
There were no bank loan participations for which external sources were unavailable to determine fair value at December 31, 2023 or 2022. We review fair value prices provided by our outside investment accounting service provider or our investment managers for reasonableness by comparing the fair values provided to those provided by our investment custodian.
The changes in the estimated fair value of the common stocks in our equity securities portfolio are recognized in net income . At December 31, 2022, our common stock investments were concentrated in terms of the number of issuers and industries. Such concentrations can lead to higher levels of price volatility.
The changes in the estimated fair value of the common stocks in our equity securities portfolio are recognized in net income . At December 31, 2023, our common stock investments were concentrated in terms of the number of issuers and industries. Such concentrations can lead to higher levels of price volatility.
These five methods utilize, to varying degrees, the initial expected loss ratio, detailed statistical analysis of past claims reporting and payment patterns, claims frequency and severity, paid loss experience, industry loss experience, and changes in market conditions, policy forms, exclusions, and exposures.
The five primary methods utilize, to varying degrees, the initial expected loss ratio, detailed statistical analysis of past claims reporting and payment patterns, claims frequency and severity, paid loss experience, industry loss experience, and changes in market conditions, policy forms, exclusions, and exposures.
The following table summarizes the equity price risk related to common stock and shows the effect of a hypothetical 35% increase or decrease in the fair value of the common stocks in our equity securities portfolio as of December 31, 2022.
The following table summarizes the equity price risk related to common stock and shows the effect of a hypothetical 35% increase or decrease in the fair value of the common stocks in our equity securities portfolio as of December 31, 2023.
Incurred Loss Development Method The Incurred Loss Development method uses historical loss reporting patterns by accident year or treaty year to estimate future loss reporting patterns. In this method, our actuaries review historical loss reporting patterns to develop incurred loss development factors that are applied to current reported losses to calculate ultimate losses.
Incurred Loss Development Method The Incurred Loss Development method uses historical loss reporting patterns by accident year to estimate future loss reporting patterns. In this method, our actuaries review historical loss reporting patterns to develop incurred loss development factors that are applied to current reported losses to calculate ultimate losses.
The total premium, initial Funds Withheld Account credit, and aggregate limit was adjusted for claims paid from October 1, 2021 to the Retrocession Closing Date. The Casualty Reinsurance segment incurred $6.8 million of net adverse reserve development in the three months ended March 31, 2022 associated with the Casualty Re LPT.
The total premium, initial Funds Withheld Account credit, and aggregate limit was adjusted for claims paid from October 1, 2021 to the Retrocession Closing Date. JRG Re incurred $6.8 million of net adverse reserve development in the three months ended March 31, 2022 associated with the Casualty Re LPT.
While it is not possible to predict the impact of changes in the litigation environment, if new mass torts or expanded legal theories of liability emerge, our cost of claims may differ substantially from 74 TABLE OF CONTENTS our reserves. Our reserve estimates assume that there will not be significant changes in the regulatory and legislative environment.
While it is not possible to predict the impact of changes in the litigation environment, if new mass torts or expanded legal theories of liability emerge, our cost of claims may differ substantially from our reserves. Our reserve estimates assume that there will not be significant changes in the regulatory and legislative environment.
Reconciliation of Underwriting Profit We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business not subject to retroactive reinsurance accounting for loss portfolio transfers and other operating expenses.
Reconciliation of Underwriting Profit We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for loss portfolio transfers and other operating expenses.
Changes in the allowance for credit losses are recognized in earnings and included in n et realized and unrealized gains (losses) on investments . Unrealized losses that are not credit-related continue to be recognized in other comprehensive income (loss). The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists.
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 continue to be 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.
In the event of a catastrophe loss exhausting our $60.0 million property catastrophe reinsurance, we estimate our pre-tax cost would not exceed 2.5% of shareholders’ equity, including reinstatement premiums payable and net retentions. In addition to this retention, we would retain any losses in excess of our reinsurance coverage limits.
In the event of a catastrophe loss exhausting our $20.0 million property catastrophe reinsurance, we estimate our pre-tax cost would not exceed 2.5% of shareholders’ equity, including reinstatement premiums and net retentions. In addition to this retention, we would retain any losses in excess of our reinsurance coverage limits.
As a result, the Company has concluded that no valuation allowance is required for the deferred tax asset associated with unrealized losses on its investments at December 31, 2022.
As a result, the Company has concluded that no valuation allowance is required for the deferred tax asset associated with unrealized losses on its investments at December 31, 2023.
The rating for our operating insurance and reinsurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. The financial strength ratings assigned by A.M.
The rating for our U.S. operating insurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. The financial strength ratings assigned by A.M.
The following table reconciles the underwriting profit (loss) of the operating segments by individual segment to consolidated income (loss) before income taxes for the years ended December 31, 2022, 2021 and 2020.
The following table reconciles the underwriting profit (loss) of the operating segments by individual segment to consolidated income (loss) before income taxes for the years ended December 31, 2023, 2022 and 2021.
Best have an impact on the ability of our regulated subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.
Best have an impact on the ability of our regulated U.S. subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.
Through Falls Lake National and its subsidiaries, this segment has admitted licenses and the authority to write excess and surplus lines insurance in 50 states and the District of Columbia and distributes through a variety of sources, including program administrators, MGAs, and independent retail agents.
Through Falls Lake National and its subsidiaries, this segment has admitted licenses and the authority to write excess and surplus lines insurance in 50 states and the District of Columbia and distributes through a variety of sources, including program administrators and MGAs.
Based on that calculation, the maximum amount of dividends available to us from JRG Re without regulatory approval in 2023 is calculated to be approximately $93.9 million. However, any dividend payment is contingent upon continued compliance with Bermuda regulatory requirements, including but not limited to the enhanced solvency requirement calculations.
Based on that calculation, the maximum amount of dividends available to us from JRG Re without regulatory approval in 2023 is calculated to be approximately $90.3 million. However, any dividend payment is contingent upon continued compliance with Bermuda regulatory requirements, including but not limited to the enhanced solvency requirement calculations.
See Item 1— “Regulation—U.S. Insurance Regulation—State Regulation” for additional information. The maximum amount of dividends available to the U.S. holding company from our U.S. insurance subsidiaries during 2023 without regulatory approval is $53.7 million.
See Item 1— “Regulation—U.S. Insurance Regulation—State Regulation” for additional information. The maximum amount of dividends available to the U.S. holding company from our U.S. insurance subsidiaries during 2023 without regulatory approval is $107.1 million.
The majority of the portfolio, or $1,783.4 million, is comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income or loss.
The majority of the portfolio, or $1,324.5 million, is comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income or loss.
In applying this judgment, we may establish reserves that differ from our internal 71 TABLE OF CONTENTS actuaries’ estimate. We seek to establish reserves that will ultimately prove to be adequate. If we have indications that claims frequency or severity exceeds our initial expectations, we generally increase our reserves for losses and loss adjustment expenses.
In applying this judgment, we may establish reserves that differ from our internal actuaries’ estimate. We seek to establish reserves that will ultimately prove to be adequate. If we have indications that claims frequency or severity exceeds our initial expectations, we generally increase our reserves for losses and loss adjustment expenses.
We obtain an understanding of the methods, models, and inputs used by our investment managers and independent pricing services, and controls are in place to validate that 76 TABLE OF CONTENTS prices provided represent fair values.
We obtain an understanding of the methods, models, and inputs used by our investment managers and independent pricing services, and controls are in place to validate that prices provided represent fair values.
The Company’s insurance segments remain liable to policyholders if its reinsurers are unable to meet their contractual obligations under applicable reinsurance agreements. We establish an allowance for credit losses for our current estimate of uncollectible reinsurance recoverables. At December 31, 2022, the allowance for credit losses on reinsurance recoverables was $612,000.
The Company’s insurance segments remain liable to policyholders if its reinsurers are unable to meet their contractual obligations under applicable reinsurance agreements. We establish an allowance for credit losses for our current estimate of uncollectible reinsurance recoverables. At December 31, 2023, the allowance for credit losses on reinsurance recoverables was $660,000.
Expense ratio , expressed as a percentage, is the ratio of other operating expenses net of gross fee income included in other income to net earned premiums. 70 TABLE OF CONTENTS Combined ratio is a measure of underwriting performance calculated as the sum of the loss ratio and the expense ratio.
Expense ratio , expressed as a percentage, is the ratio of other operating expenses net of gross fee income included in other income to net earned premiums. Combined ratio is a measure of underwriting performance calculated as the sum of the loss ratio and the expense ratio.
Adjusted net operating income is defined as income available to common shareholders excluding a) the impact of retroactive reinsurance accounting for loss portfolio transfers, b) net realized and unrealized gains (losses) on investments, c) certain non-operating expenses such as professional service fees related to a purported class action lawsuit, various strategic initiatives, and the filing of registration statements for the offering of securities, and d) severance costs associated with terminated employees.
Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations b) the impact of retroactive reinsurance accounting for a loss portfolio transfer, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to a purported class action lawsuit, various strategic initiatives, and the filing of registration statements for the offering of securities, and e) severance costs associated with terminated employees.
The usefulness of a single point-in-time model is limited, as it is unable to accurately incorporate the full complexity of market interactions. 103 TABLE OF CONTENTS The following table summarizes our interest rate risk and shows the effect of hypothetical changes in interest rates as of December 31, 2022.
The usefulness of a single point-in-time model is limited, as it is unable to accurately incorporate the full complexity of market interactions. The following table summarizes our interest rate risk and shows the effect of hypothetical changes in interest rates as of December 31, 2023.
Loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses on business not subject to retroactive reinsurance accounting for loss portfolio transfers to net earned premiums. Our definition of loss ratio may not be comparable to that of other companies. See “Underwriting Performance Ratios” for a reconciliation of underwriting ratios.
Loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for a loss portfolio transfer to net earned premiums. Our definition of loss ratio may not be comparable to that of other companies. See “Underwriting Performance Ratios” for a reconciliation of underwriting ratios.
Best financial strength rating for our group’s regulated insurance and reinsurance subsidiaries is “A-” (Excellent) with a stable outlook. This rating reflects A.M. Best’s opinion of our insurance and reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
Best financial strength rating for our group’s regulated U.S. insurance subsidiaries is “A-” (Excellent) with a negative outlook. This rating reflects A.M. Best’s opinion of our U.S. insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
Best”) financial strength rating for our group’s regulated insurance and reinsurance subsidiaries is “A-” (Excellent) with a stable outlook. This rating reflects A.M. Best’s evaluation of our insurance and reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
Best”) financial strength rating for our group’s regulated U.S. insurance subsidiaries is “A-” (Excellent) with a negative outlook. This rating reflects A.M. Best’s evaluation of our U.S. insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.
In 2022, the average account in this segment (excluding commercial auto policies) generated annual gross written premiums of approximately $24,000. The Excess and Surplus Lines segment distributes its products primarily through wholesale insurance brokers.
In 2023, the average account in this segment (excluding commercial auto policies) generated annual gross written premiums of approximately $26,000. The Excess and Surplus Lines segment distributes its products primarily through wholesale insurance brokers.
Reconciliation of Adjusted Net Operating Income (Loss) Adjusted net operating income is defined as income available to common shareholders excluding a) the impact of loss portfolio transfers accounted for as retroactive reinsurance, b) net realized and unrealized gains (losses) on investments, c) certain non-operating expenses such as professional service fees related to a purported class action lawsuit, various strategic initiatives, and the filing of registration statements for the offering of securities, and d) severance costs associated with terminated employees.
Reconciliation of Adjusted Net Operating Income (Loss) Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations b) the impact of retroactive reinsurance accounting for a loss portfolio transfer, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to a purported class action lawsuit, various strategic initiatives, and the filing of registration statements for the offering of securities, and e) severance costs associated with terminated employees.
Share Based Compensation Expense For the years ended December 31, 2022, 2021, and 2020, the Company recognized $8.1 million, $6.7 million and $7.6 million, respectively, of share based compensation expense. As of December 31, 2022, the Company had $11.2 million of unrecognized share based compensation expense expected to be charged to earnings over a weighted-average period of 1.8 years.
Share Based Compensation Expense For the years ended December 31, 2023, 2022, and 2021, the Company recognized $9.1 million, $8.1 million and $6.7 million, respectively, of share based compensation expense. As of December 31, 2023, the Company had $10.2 million of unrecognized share based compensation expense expected to be charged to earnings over a weighted-average period of 1.7 years.
We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business not subject to retroactive reinsurance accounting for loss portfolio transfers (see Loss Portfolio Transfers in Strategic Actions below) and other operating expenses.
We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for a loss portfolio transfer (see Loss Portfolio Transfer in Strategic Actions below) and other operating expenses.
In our Programs business within the Specialty Admitted Insurance segment and in our Casualty Reinsurance segment, the expected loss ratio is based on the actuarial pricing of the individual account. Alternatively, when company experience lacks historical depth, initial expected loss ratios can be determined using loss ratios implied by industry loss costs for the class or reported industry loss ratios.
In our Programs business within the Specialty Admitted Insurance segment, the expected loss ratio is based on the actuarial pricing of the individual 75 TABLE OF CONTENTS account. Alternatively, when company experience lacks historical depth, initial expected loss ratios can be determined using loss ratios implied by industry loss costs for the class or reported industry loss ratios.
The Company has a deferred tax asset of $23.3 million at December 31, 2022 associated with unrealized losses in the Company’s available-for-sale fixed maturity securities portfolio. The unrealized losses are attributable to rising market interest rates and other economic factors rather than credit-related factors of the issuers.
The Company has a deferred tax asset of $16.6 million at December 31, 2023 associated with unrealized losses in the Company’s available-for-sale fixed maturity securities portfolio. The unrealized losses are attributable to rising market interest rates and other economic factors rather than credit-related factors of the issuers.
In 2022 and 2020, cash used in investing activities of $328.2 million and $176.0 million reflects our efforts to enhance the yield in our investment portfolio by investing available cash and cash equivalents into higher yielding investments.
Cash used in investing activities for 2022 of $328.2 million reflects our efforts to enhance the yield in our investment portfolio by investing available cash and cash equivalents into higher yielding investments.
We report our business in four segments: Excess and Surplus Lines, Specialty Admitted Insurance, Casualty Reinsurance and Corporate and Other. The Excess and Surplus Lines segment offers E&S commercial lines liability and property insurance in every U.S. state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands through James River Insurance and its wholly-owned subsidiary, James River Casualty.
We report our continuing operations in three segments: Excess and Surplus Lines, Specialty Admitted Insurance, and Corporate and Other. The Excess and Surplus Lines segment offers E&S commercial lines liability and property insurance in every U.S. state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands through James River Insurance and its wholly-owned subsidiary, James River Casualty.
Unless specified otherwise, all references to our defined metrics above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are for our business that is not subject to retroactive reinsurance accounting for loss portfolio transfers.
Unless specified otherwise, all references to our defined metrics above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are for our business from continuing operations that is not subject to retroactive reinsurance accounting for a loss portfolio transfer.
At December 31, 2022, our available-for-sale fixed maturity securities had net unrealized losses of $186.4 million representing 9.5% of the amortized cost of the portfolio. Additionally, at December 31, 2022, 99.8% of our fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or had an equivalent rating from another nationally recognized statistical rating organization.
At December 31, 2023, our available-for-sale fixed maturity securities had net unrealized losses of $80.7 million representing 5.7% of the amortized cost of the portfolio. Additionally, at December 31, 2023, 99.9% of our fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or had an equivalent rating from another nationally recognized statistical rating organization.
The following table summarizes the nature and terms of the junior subordinated debt and trust preferred securities outstanding at December 31, 2022 (including the Company’s repurchase of a portion of these trust preferred securities): James River Capital Trust I James River Capital Trust II James River Capital Trust III James River Capital Trust IV Franklin Holdings II (Bermuda) Capital Trust I ($ in thousands) Issue date May 26, 2004 December 15, 2004 June 15, 2006 December 11, 2007 January 10, 2008 Principal amount of trust preferred securities $7,000 $15,000 $20,000 $54,000 $30,000 Principal amount of junior subordinated debt $7,217 $15,464 $20,619 $55,670 $30,928 Carrying amount of junior subordinated debt net of repurchases $7,217 $15,464 $20,619 $44,827 $15,928 Maturity date of junior subordinated debt, unless accelerated earlier May 24, 2034 December 15, 2034 June 15, 2036 December 15, 2037 March 15, 2038 Trust common stock $217 $464 $619 $1,670 $928 Interest rate, per annum Three-Month LIBOR plus 4.0% Three-Month LIBOR plus 3.4% Three-Month LIBOR plus 3.0% Three-Month LIBOR plus 3.1% Three-Month LIBOR plus 4.0% All of the junior subordinated debt is currently redeemable at 100.0% of the unpaid principal amount at our option.
The following table summarizes the nature and terms of the junior subordinated debt and trust preferred securities outstanding at December 31, 2023 (including the Company’s repurchase of a portion of these trust preferred securities): James River Capital Trust I James River Capital Trust II James River Capital Trust III James River Capital Trust IV Franklin Holdings II (Bermuda) Capital Trust I ($ in thousands) Issue date May 26, 2004 December 15, 2004 June 15, 2006 December 11, 2007 January 10, 2008 Principal amount of trust preferred securities $7,000 $15,000 $20,000 $54,000 $30,000 Principal amount of junior subordinated debt $7,217 $15,464 $20,619 $55,670 $30,928 Carrying amount of junior subordinated debt net of repurchases $7,217 $15,464 $20,619 $44,827 $15,928 Maturity date of junior subordinated debt, unless accelerated earlier May 24, 2034 December 15, 2034 June 15, 2036 December 15, 2037 March 15, 2038 Trust common stock $217 $464 $619 $1,670 $928 Interest rate, per annum Three-Month SOFR plus 4.3% Three-Month SOFR plus 3.7% Three-Month SOFR plus 3.3% Three-Month SOFR plus 3.4% Three-Month SOFR plus 4.3% All of the junior subordinated debt is currently redeemable at 100.0% of the unpaid principal amount at our option. 94 TABLE OF CONTENTS The junior subordinated debt contains certain covenants with which we are in compliance as of December 31, 2023.
Those estimates are based on our historical information, industry information and estimates of future trends that may affect the frequency of claims and changes in the average cost of claims (severity) that may arise in the future. The Company’s gross reserve for losses and loss adjustment expenses at December 31, 2022 was $2,769.0 million.
Those estimates are based on our historical information, industry information and estimates of future trends that may affect the frequency of claims and changes in the average cost of claims (severity) that may arise in the future. The Company’s gross reserve for losses and loss adjustment expenses at December 31, 2023 was $2,606.1 million.
Interest on debt obligations was calculated using the LIBOR rate as of December 31, 2022 with the assumption that interest rates would remain flat over the remainder of the period that the debt was outstanding.
Interest on debt obligations was calculated using the SOFR rate as of December 31, 2023 with the assumption that interest rates would remain flat over the remainder of the period that the debt was outstanding.
Total invested assets and cash, excluding restricted cash, has an average duration of approximately 4.1 years at December 31, 2022, and fixed maturity securities and preferred stock investments in the portfolio have an average rating by at least one nationally recognized rating organization of “AA-”.
Total invested assets and cash, excluding restricted cash, has an average duration of approximately 3.6 years at December 31, 2023, and fixed maturity securities and preferred stock investments in the portfolio have an average rating by at least one nationally recognized rating organization of “AA-”.
Conversely, sufficient incurred and paid loss development is available for our oldest accident years, so more weight is given to the Incurred Loss Development method and the Paid Loss Development method than the Expected Loss 73 TABLE OF CONTENTS method.
Conversely, sufficient incurred and paid loss development is available for our oldest accident years, so more weight is given to the Incurred Loss Development method and the Paid Loss Development method than the Expected Loss Method.
In general, the laws and regulations applicable to our domestic insurance subsidiaries limit the aggregate amount of dividends or other distributions that they may declare or pay within any 12-month period without advance regulatory approval.
The payment of dividends by our subsidiaries to us is limited by statute. In general, the laws and regulations applicable to our domestic insurance subsidiaries limit the aggregate amount of dividends or other distributions that they may declare or pay within any 12-month period without advance regulatory approval.
Umbrella and Excess Casualty - Programs Quota share coverage for at least 65% of limits up to $10.0 million per occurrence, and 75% of excess of loss coverage for $5.0 million in excess of $10.0 million. Property Property within Package - Programs Quota share coverage for 100% of limits up to $40.0 million per occurrence.
Umbrella and Excess Casualty - Programs Quota share coverage for at least 85% of limits up to $10.0 million per occurrence, and 82% of excess of loss coverage for $5.0 million in excess of $10.0 million. Property Property within Package - Programs Quota share coverage for 100% of limits up to $40.0 million per risk.
Best rating as of December 31, 2022: Reinsurer Reinsurance Recoverable as of December 31, 2022 A.M.
Best rating as of December 31, 2023: Reinsurer Reinsurance Recoverable as of December 31, 2023 A.M.
At December 31, 2022, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $5.3 million in these limited partnerships.
At December 31, 2023, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $6.3 million in these limited partnerships.
Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the Liquidation Preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.
Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the $1,000 liquidation preference per share (the “Liquidation Preference”) per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.
Cash and cash equivalents (excluding restricted cash equivalents) comprised 7.3%, 8.2%, and 6.9% of total cash and invested assets at December 31, 2022, 2021, and 2020, respectively.
Cash and cash equivalents (excluding restricted cash equivalents) comprised 13.9%, 7.3%, and 8.2% of total cash and invested assets at December 31, 2023, 2022, and 2021, respectively.
The expenses are included in our calculation of consolidated underwriting profit, and in our consolidated expense ratio and combined ratio. Total operating expenses of the Corporate and Other segment were $31.3 million and $27.6 million for the years ended December 31, 2022 and 2021, respectively.
The expenses are included in our calculation of consolidated underwriting profit, and in our consolidated expense ratio and combined ratio. Total operating expenses of the Corporate and Other segment were $33.9 million and $31.3 million for the years ended December 31, 2023 and 2022, respectively.
At December 31, 2022, the balance in the Indemnity Trust was $267.0 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the 96 TABLE OF CONTENTS Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $336.2 million. • Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in our statutory financial statements.
At December 31, 2023, the balance in the Indemnity Trust was $138.4 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $183.6 million. 97 TABLE OF CONTENTS • Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in our statutory financial statements.
Aviation Programs Quota share coverage for 80% of limits up to $20 million liability and $2.5 million hull per occurrence, each aircraft; and excess of loss coverage for up to $8.7 million excess of $300,000 of our 20% share of the quota share each occurrence.
Aviation Programs Quota share coverage for 80% of limits up to $25 million liability, $5.0 million hull, and $5.0 million spares per occurrence, each aircraft; and excess of loss coverage for up to $8.7M excess of $300,000 of our 20% share of the quota share each occurrence.
See “Reconciliation of Non-GAAP Measures.” (2) Underwriting profit includes fee income of $23.6 million and $22.7 million for the years ended December 31, 2022 and 2021, respectively. The Specialty Admitted Insurance segment generated underwriting profits of $4.2 million and $9.7 million (combined ratios of 94.3% and 87.2%) for the years ended December 31, 2022 and 2021, respectively.
See “Reconciliation of Non-GAAP Measures.” (2) Underwriting profit includes fee income of $24.2 million and $23.6 million for the years ended December 31, 2023 and 2022, respectively. The Specialty Admitted Insurance segment generated underwriting profits of $4.1 million and $4.2 million (combined ratios of 95.9% and 94.3%) for the years ended December 31, 2023 and 2022, respectively.
Management does not intend to sell the securities in an unrealized loss position, 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.
Management does not intend to sell the securities in an unrealized loss position, 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. The Company elected the fair value option to account for bank loan participations.
Accident year loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses for the current accident year (excluding development on prior accident year reserves) to net earned premiums.
Accident year loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses for the current accident year (excluding development on prior accident year reserves) to net earned premiums for the current year (excluding net earned premium adjustments on reinstatement premiums associated with prior years).
The rating for our operating insurance and reinsurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. On March 4, 2021, A.M.
The rating for our U.S. operating insurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders. On December 20, 2023, A.M.
This adverse reserve development included $210,000 of favorable development in the Excess and Surplus Lines segment, $4.2 million of favorable development in the Specialty Admitted Insurance segment, and $13.4 million of adverse development in the Casualty Reinsurance segment.
This net favorable reserve development included $210,000 of net favorable development in the Excess and Surplus Lines segment and $4.2 million of net favorable development in the Specialty Admitted Insurance segment.
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 our income statement as net realized and unrealized gains (losses) on investments.
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 our Consolidated Statements of (Loss) Income and Comprehensive Loss as net realized and unrealized gains (losses) on investments.
Based upon the modeling of our Excess and Surplus Lines and Specialty Admitted segments, it would take an event at the 1 in 1000 year PML to exhaust our $60.0 million property catastrophe reinsurance.
Based upon the modeling of our Excess and Surplus Lines and Specialty Admitted segments, it would take an event greater than the 1 in 1,000 year PML to exhaust our $20.0 million property catastrophe reinsurance.
The impact of recording the net reserve for losses and loss adjustment expenses at the lowest value from the sensitivity analysis above would be to reduce losses and loss adjustment expenses incurred by $91.3 million, increase after-tax net income by $81.2 million, increase shareholders’ equity by $81.2 million, and increase tangible equity by $81.2 million, in each case at or for the year ended December 31, 2022.
The impact of recording the net reserve for losses and loss adjustment expenses at the lowest value from the sensitivity analysis above would be to reduce losses and loss adjustment expenses incurred by $113.1 million, increase after-tax net income by $89.4 million, increase shareholders’ equity by $89.4 million, and increase tangible equity by $89.4 million, in each case at or for the year ended December 31, 2023.
Members of our management team have participated in this market for over three decades and have long-standing relationships with the wholesale agents who place E&S lines accounts. The Excess and Surplus Lines segment produced 61.5% of our gross written premiums and 78.7% of our net written premiums for the year ended December 31, 2022.
Members of our management team have participated in this market for over three decades and have long-standing relationships with the wholesale agents who place E&S lines accounts. The Excess and Surplus Lines segment produced 66.8% of our gross written premiums and 85.0% of our net written premiums for the year ended December 31, 2023.
(1)(2) Excess of loss coverage for $29.0 million in excess of $1.0 million. (1)(2) Auto Programs Quota share coverage for 62.5-90% of limits up to $1.5 million liability and $7.5 million physical damage per occurrence. General Liability & Professional Liability – Programs Quota share coverage for 62.5%-100% of limits up to $3.0 million per occurrence.
Auto Programs Quota share coverage for 50%-90% of limits up to $1.5 million liability and $7.5 million physical damage per occurrence. General Liability & Professional Liability – Programs Quota share coverage for 61.3%-100% of limits up to $2.0 million per occurrence.
At December 31, 2022, the balance in the Loss Fund Trust was $103.2 million, including $69.2 million representing collateral supporting Rasier’s obligations under the Indemnity Agreements and $28.2 million representing collateral supporting Aleka’s obligations under the Commercial Auto LPT. Funds posted to the Loss Fund Trust are classified as restricted cash equivalents on the Company's balance sheet.
At December 31, 2023, the balance in the Loss Fund Trust was $72.4 million, including $45.2 million representing collateral supporting Rasier’s obligations under the Indemnity Agreements and $20.0 million representing collateral supporting Aleka’s obligations under the Commercial Auto LPT. Funds posted to the Loss Fund Trust are classified as restricted cash equivalents on the Company's balance sheet.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has given us an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to us or any of our operations, shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.
Biggest changeThe Company has obtained from the Minister of Finance under The Exempted Undertaking Tax Protection Act of 1966, as amended, ("EUTP Act") as assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable to the Company or to any of its operations or its shares, debentures or other obligations, until March 31, 2035.
Our technologies, systems and networks may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our insureds’, reinsureds’ or claimants’ confidential, proprietary and other information, or otherwise disrupt our or our insureds’, reinsureds’, claimants’or other third parties’ business operations, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to eliminate or mitigate further exposure and the loss of customers.
Our technologies, systems and networks may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our insureds’, reinsureds’ or claimants’ confidential, proprietary and other information, or otherwise disrupt our or our insureds’, reinsureds’, claimants’ or other third parties’ business operations, which in turn may result in legal claims, regulatory scrutiny and liability, reputational damage, the incurrence of costs to eliminate or mitigate further exposure and the loss of customers.
To date, the following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws : Alabama, California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Mississippi, New Hampshire, New York, North Dakota, Ohio, South Carolina, Tennessee, Virginia and Wisconsin.
To date, the following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws : Alabama, California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Mississippi, New Hampshire, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and Wisconsin.
In particular, competition in the insurance and reinsurance industry is based on many factors, including price of coverage, the general reputation and perceived financial strength of the company, relationships with brokers, terms and conditions of products offered, ratings assigned by independent rating agencies, speed of claims payment and reputation, and the experience and reputation of the members of our underwriting team in the particular lines of insurance and reinsurance we seek to underwrite.
In particular, competition in the insurance industry is based on many factors, including price of coverage, the general reputation and perceived financial strength of the company, relationships with brokers, terms and conditions of products offered, ratings assigned by independent rating agencies, speed of claims payment and reputation, and the experience and reputation of the members of our underwriting team in the particular lines of insurance we seek to underwrite.
In Ohio, the domiciliary state of Falls Lake National and James River Insurance, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of earned surplus of each of the companies, without obtaining regulatory approval.
In Ohio, the domiciliary state of Falls Lake National, James River Insurance and James River Casualty, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of earned surplus of each of the companies, without obtaining regulatory approval.
In the recent past, we have had in place intercompany loans from our U.S. subsidiaries to our parent company and intercompany reinsurance agreements among consolidated entities. We believe the terms of these transactions were appropriate and reflected arm’s-length arrangements and are consistent with all applicable rules and regulations. However, if the U.S.
In the past, we have had in place intercompany loans from our U.S. subsidiaries to our parent company and intercompany reinsurance agreements among consolidated entities. We believe the terms of these transactions were appropriate and reflected arm’s-length arrangements and are consistent with all applicable rules and regulations. However, if the U.S.
There can be no certainty as to whether the Company, Carolina Re or JRG Re will be treated as a FFI under FATCA. We strongly urge you to consult your own tax advisor regarding the potential impact of FATCA, the IGAs and any non-U.S. legislation implementing FATCA.
There can be no certainty as to whether the Company or JRG Re will be treated as a FFI under FATCA. We strongly urge you to consult your own tax advisor regarding the potential impact of FATCA, the IGAs and any non-U.S. legislation implementing FATCA.
Demand for insurance and reinsurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers, general economic conditions and underwriting results of primary insurers. All of these factors fluctuate and may contribute to price declines generally in the insurance and reinsurance industry.
Demand for insurance depends on numerous factors, including the frequency and severity of catastrophic events, levels of capacity, the introduction of new capital providers, general economic conditions and underwriting results of primary insurers. All of these factors fluctuate and may contribute to price declines generally in the insurance industry.
Historically, insurers and reinsurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse trends in litigation, regulatory constraints, general economic conditions and other factors. We have experienced these types of fluctuations since the Company’s inception.
Historically, insurers have experienced significant fluctuations in operating results due to competition, frequency and severity of catastrophic events, levels of capacity, adverse trends in litigation, regulatory constraints, general economic conditions and other factors. We have experienced these types of fluctuations since the Company’s inception.
Although we are continually monitoring these agents and administrators, our monitoring efforts may not be adequate. The insurance and reinsurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could materially adversely affect our business.
Although we are continually monitoring these agents and administrators, our monitoring efforts may not be adequate. The insurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates, which could materially adversely affect our business.
The applicability of BEAT depends on a number of factors and the extent to which we may be subject to BEAT in future periods as a result of changes in interpretations, as well as additional regulatory guidance that may be issued, is currently unknown.
The applicability of BEAT depends on a number of factors and the extent to which we may be subject to BEAT in future periods as a result of changes in interpretations, as well as additional regulatory guidance that may be issued, is currently unknown. IRA .
In addition, dividends on the Series A Preferred Shares accrue and are cumulative at the rate of 7.0% of the $1,000 per share liquidation preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.
In addition, dividends on the Series A Preferred Shares accrue and are cumulative at the initial rate of 7.0% of the $1,000 per share liquidation preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.
The Series A Preferred Shares, among other things, have the right to receive a payment on account of the distribution of assets on any 51 TABLE OF CONTENTS voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company before any payment may be made to holders of any other class or series of capital shares, pay dividends to the security holders at the initial rate of 7% of their liquidation preference of $1,000 per share per annum, include restrictions that may limit our ability to pay dividends to common shareholders and may not be redeemed at our election.
The Series A Preferred Shares, among other things, have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company before any payment may be made to holders of any other class or series of capital shares, pay dividends to the security holders at the initial rate of 7% of their liquidation preference of $1,000 per share per annum, include restrictions 50 TABLE OF CONTENTS that may limit our ability to pay dividends to common shareholders and may not be redeemed at our election.
The supply of insurance and reinsurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance and reinsurance industry.
The supply of insurance is related to prevailing prices, the level of insured losses and the level of capital available to the industry that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the insurance industry.
The credit-driven equity market collapse in 2008 or other significant market disruptions may increase the likelihood that some increased regulation of the industry is mandated. 47 TABLE OF CONTENTS Because we are a Bermuda company, we are subject to changes in Bermuda law and regulation that may have a material adverse impact on our operations, including through the imposition of tax liability or increased regulatory supervision.
The credit-driven equity market collapse in 2008 or other significant market disruptions may increase the likelihood that some increased regulation of the industry is mandated. 46 TABLE OF CONTENTS Because we are a Bermuda company, we are subject to changes in Bermuda law and regulation that may have a material adverse impact on our operations, including through the imposition of tax liability or increased regulatory supervision.
Additionally, certain recently released proposed regulations would expand the scope of related person insurance income to potentially include all of the insurance income any of our non-U.S. operating companies earn from reinsuring affiliates if such companies are majority owned (directly, indirectly or by application of certain constructive ownership rules) by U.S. persons.
Additionally, certain proposed regulations would expand the scope of related person insurance income to potentially include all of the insurance income any of our non-U.S. operating companies earn from reinsuring affiliates if such companies are majority owned (directly, indirectly or by application of certain constructive ownership rules) by U.S. persons.
Our credit agreements contain financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities . As of December 31, 2022, we had an outstanding unsecured balance of approximately $207.3 million in the aggregate under our two bank credit agreements.
Our credit agreements contain financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities . As of December 31, 2023, we had an outstanding unsecured balance of approximately $207.3 million in the aggregate under our two bank credit agreements.
Any such federal tax liability could materially adversely affect our results of operations. U.S. tax-exempt organizations who own our shares may recognize unrelated business taxable income. A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of our subpart F insurance income is allocated to it.
Any such federal tax liability could materially adversely affect our results of operations. U.S. tax-exempt organizations who own our shares may recognize unrelated business taxable income. A U.S. tax-exempt organization may recognize unrelated business taxable income if a portion of any subpart F insurance income we may have is allocated to it.
If our non-U.S. holding companies or JRG Re were deemed to be engaged in a trade or business in the United States (or, under the applicable income tax treaty, were deemed to be so engaged through a permanent establishment), our non-U.S. holding companies or JRG Re, as applicable, would become subject to U.S. 55 TABLE OF CONTENTS federal income tax on income “effectively connected” (or treated as effectively connected) with the U.S. trade or business and would become subject to the “branch profits” tax on earnings and profits that are both effectively connected with the U.S. trade or business and deemed repatriated out of the United States.
If our non-U.S. holding companies or JRG Re were deemed to be engaged in a trade or business in the United States (or, under the applicable income tax treaty, were deemed to be so engaged through a permanent establishment), our non-U.S. holding companies or JRG Re, as applicable, would become subject to U.S. federal income tax on income “effectively connected” (or treated as effectively connected) with the U.S. trade or business and would become subject to the “branch profits” tax on earnings and profits that are both effectively connected with the U.S. trade or business and deemed repatriated out of the United States.
Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the director designated by GPC Partners may differ from the interests of our security holders as a whole or of our other directors.
Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the director designated by GPC Partners for nomination may differ from the interests of our security holders as a whole or of our other directors.
Our admitted insurance and reinsurance subsidiaries are subject to extensive regulation, primarily by California (the domiciliary state for Falls Lake Fire and Casualty Company), Ohio (the domiciliary state for James River Insurance and Falls 48 TABLE OF CONTENTS Lake National), North Carolina (the domiciliary state for Stonewood Insurance), Virginia (the domiciliary state for James River Casualty), Bermuda (the domicile of JRG Re), and to a lesser degree, the other jurisdictions in the United States in which we operate.
Our admitted insurance and reinsurance subsidiaries are subject to extensive regulation, primarily by California (the domiciliary state for Falls Lake Fire and Casualty Company), Ohio (the domiciliary state for James River Insurance, James 47 TABLE OF CONTENTS River Casualty, and Falls Lake National), North Carolina (the domiciliary state for Stonewood Insurance), Bermuda (the domicile of JRG Re), and to a lesser degree, the other jurisdictions in the United States in which we operate.
In addition, our results of operations could be materially adversely affected if one of our business partners, such as brokers, general agents, third party claims administrators or vendors, experiences disruptions to their operating systems and/or a cybersecurity breach, as such disruption or breach could reduce submission flow, policy issuance, claims settlement, and/or make us more vulnerable to a cybersecurity breach ourselves.
In addition, our results of operations could be materially adversely affected if one of our business partners, such as brokers, general agents, third party claims administrators or vendors, experiences disruptions to their operating systems and/or a cybersecurity breach, as such disruption 65 TABLE OF CONTENTS or breach could reduce submission flow, policy issuance, claims settlement, and/or make us more vulnerable to a cybersecurity breach ourselves.
These assessments are generally set based on an insurer’s percentage of the total premiums written in the insurer’s state within a particular line of business. As our U.S.-based insurance subsidiaries grow, our share of any assessments may increase.
These assessments are generally set based on an insurer’s percentage of the total premiums written in the insurer’s state within a particular line of business. As our insurance subsidiaries grow, our share of any assessments may increase.
In addition, the insurance holding company laws and regulations of the states in which our insurance companies are domiciled generally require that, before a person can acquire direct or indirect control of an insurer domiciled in the state, and 62 TABLE OF CONTENTS in some cases prior to divesting its control, prior written approval must be obtained from the insurer’s domiciliary state insurance regulator.
In addition, the insurance holding company laws and regulations of the states in which our insurance companies are domiciled generally require that, before a person can acquire direct or indirect control of an insurer domiciled in the state, and in some cases prior to divesting its control, prior written approval must be obtained from the insurer’s domiciliary state insurance regulator.
The inability of our subsidiaries to pay dividends or make distributions to us, including as a result of regulatory or other restrictions or capital needs, may prevent us from paying our expenses or paying dividends to our shareholders. 60 TABLE OF CONTENTS Dividends paid by our U.S. subsidiaries to James River UK may not be eligible for benefits under the U.S.-U.K. income tax treaty.
The inability of our subsidiaries to pay dividends or make distributions to us, including as a result of regulatory or other restrictions or capital needs, may prevent us from paying our expenses or paying dividends to our shareholders. Dividends paid by our U.S. subsidiaries to James River UK may not be eligible for benefits under the U.S.-U.K. income tax treaty.
On July 9, 2021, a purported class action lawsuit was filed in the US District Court, Eastern District of Virginia on behalf of Employees’ Retirement Fund of the City of Fort Worth (“Plaintiff”) against the Company and certain of its present and former officers (together, “Defendants”), alleging claims under Section 10(b) of the Securities Exchange Act of 1934.
On July 9, 2021, a purported class action lawsuit was filed in the US District Court, Eastern District of Virginia on behalf of Employees’ Retirement Fund of the City of Fort Worth against the Company and certain of its present and former officers, alleging claims under Section 10(b) of the Securities Exchange Act of 1934.
As a result, the insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels.
As a result, the insurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity increased premium levels.
We are committed to developing and maintaining information technology systems that will allow our insurance subsidiaries to compete effectively. There can be no assurance that the development of current technology for future use will not result in our being competitively disadvantaged, especially with those carriers that have greater resources.
We are committed to developing and maintaining information technology systems and data analytics that will allow our insurance subsidiaries to compete effectively. There can be no assurance that the development of current technology or data analytics for future use will not result in our being competitively disadvantaged, especially with those carriers that have greater resources.
See also “Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity Securities - Dividends.” We cannot assure you that we will continue to pay dividends in the future, or that the amount of any such dividend will not decline from prior dividends we have paid.
See also “Item 5. Market For Registrant’s Common Equity, Related Stockholder 61 TABLE OF CONTENTS Matters and Issuer Purchases Of Equity Securities - Dividends.” We cannot assure you that we will continue to pay dividends in the future, or that the amount of any such dividend will not decline from prior dividends we have paid.
On the five-year anniversary of the issuance date, and each five-year anniversary thereafter, the dividend rate on the liquidation preference will reset to a rate equal to the five-year U.S. treasury rate (calculated as set forth in the Certificate of Designations designating the Series A Preferred Shares (the “Certificate of Designations”)) plus 5.2%.
On March 1, 2027 (the five-year anniversary of the issuance date of the Series A Preferred Shares), and each five-year anniversary thereafter, the dividend rate on the liquidation preference will reset to a rate equal to the five-year U.S. treasury rate (calculated as set forth in the Certificate of Designations designating the Series A Preferred Shares (the “Certificate of Designations”)) plus 5.2%.
Consequently, we cannot assure you that a person who is a direct or indirect U.S. shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year. Dispositions of Our Shares .
Consequently, we cannot assure you that a person who is a direct or 54 TABLE OF CONTENTS indirect U.S. shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year. Dispositions of Our Shares .
In addition, stock markets, including the NASDAQ Stock Market (the market on which our common shares are traded), have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities issued by many companies, including companies in our industry.
In addition, stock markets, including the NASDAQ Stock Market (the market on which our common shares are traded), have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities 57 TABLE OF CONTENTS issued by many companies, including companies in our industry.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of 61 TABLE OF CONTENTS Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Class actions are not available under Bermuda law.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in limited circumstances. Class actions are not available under Bermuda law.
Any sale of common shares following conversion of the Series A Preferred Shares or payment of dividends on the Series A Preferred Shares in common shares, would increase the number of common shares available for public trading, and may adversely affect prevailing market prices of our common shares.
Any sale of common shares following conversion of the Series A Preferred Shares or payment of dividends on 60 TABLE OF CONTENTS the Series A Preferred Shares in common shares, would increase the number of common shares available for public trading, and may adversely affect prevailing market prices of our common shares.
Share dividends payable on the common shares also trigger a reduction of the conversion price applicable to the Series A Preferred Shares. 59 TABLE OF CONTENTS Additionally, the declaration, payment and amount of dividends is further subject to the discretion of our board of directors.
Share dividends payable on the common shares also trigger a reduction of the conversion price applicable to the Series A Preferred Shares. Additionally, the declaration, payment and amount of dividends is further subject to the discretion of our board of directors.
The market price for our common shares could fluctuate significantly for various reasons, including, without limitation: • our operating and financial performance and prospects; • our quarterly or annual earnings or earnings estimates, or those of other companies in our industry; • failure to meet external expectations or management guidance; • market reaction to adverse loss reserve development; • the loss of one or more individually large clients, and its impact on our growth rate, profitability and financial condition; • adverse regulatory or rating agency action; • exposure to capital market risks related to changes in interest rates, realized investment losses, credit spreads, equity prices, foreign exchange rates and performance of insurance-linked investments; • our creditworthiness, financial condition, performance and prospects; • termination of payment of dividends on our common shares, or payment of a reduced amount of dividends; • actual or anticipated growth rates relative to our competitors; • perceptions of the investment opportunity associated with our common shares relative to other investment alternatives; • speculation by the investment community regarding our business; • future announcements concerning our business or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • changes in accounting standards, policies, guidance, interpretations or principles; • market and industry perception of our success, or lack thereof, in pursuing our strategy; 57 TABLE OF CONTENTS • strategic actions by us or our competitors, such as acquisitions, dispositions, restructurings, significant contracts or joint ventures; • catastrophes that are perceived by investors as impacting the insurance and reinsurance market in general; • changes in laws or government regulation, including tax or insurance laws and regulations; • potential characterization of us as a PFIC; • general market, economic and political conditions; • changes in conditions or trends in our industry, geographies or customers; • arrival and departure of key personnel; • the number of common shares that are publicly traded; • the offering and issuance of common shares or other securities by us, sales of common shares by our directors or executive officers, or sales of a significant number of common shares issued upon conversion of the Series A Preferred Shares; and • adverse resolution of litigation against us.
The market price for our common shares has, and may continue to, fluctuate significantly for various reasons, including, without limitation: • our operating and financial performance and prospects; • our quarterly or annual earnings or earnings estimates, or those of other companies in our industry; • failure to meet external expectations or management guidance; • market reaction to adverse loss reserve development; • market reaction to any strategic alternative transaction that we enter into, rumors regarding the same, or our determination to terminate the review of strategic alternatives without entering into a transaction; • the loss of one or more individually large clients, and its impact on our growth rate, profitability and financial condition; • adverse regulatory or rating agency action; • exposure to capital market risks related to changes in interest rates, realized investment losses, credit spreads, equity prices, foreign exchange rates and performance of insurance-linked investments; • our creditworthiness, financial condition, performance and prospects; • termination of payment of dividends on our common shares, or payment of a reduced amount of dividends; • actual or anticipated growth rates relative to our competitors; • perceptions of the investment opportunity associated with our common shares relative to other investment alternatives; • speculation by the investment community regarding our business; • future announcements concerning our business or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • changes in accounting standards, policies, guidance, interpretations or principles; • market and industry perception of our success, or lack thereof, in pursuing our strategy; • strategic actions by us or our competitors, such as acquisitions, dispositions, restructurings, significant contracts or joint ventures; • catastrophes that are perceived by investors as impacting the insurance and reinsurance market in general; • changes in laws or government regulation, including tax or insurance laws and regulations; • potential characterization of us as a PFIC; • general market, economic and political conditions; • changes in conditions or trends in our industry, geographies or customers; • arrival and departure of key personnel; • the number of common shares that are publicly traded; • the offering and issuance of common shares or other securities by us, sales of common shares by our directors or executive officers, or sales of a significant number of common shares issued upon conversion of the Series A Preferred Shares; and • adverse resolution of litigation against us.
A breach of any of these covenants could result in acceleration of our obligations to repay our outstanding indebtedness under such agreement if we are unable to obtain a waiver or amendment from our lenders, and otherwise could impair our ability to borrow funds or result in higher borrowing costs.
This breach or any other breach of any of the covenants could result in acceleration of our obligations to repay our outstanding indebtedness under such agreement if we are unable to obtain a waiver or amendment from our lenders, and otherwise could impair our ability to borrow funds or result in higher borrowing costs.
If the wholesale distribution model were to be significantly altered by changes in the way E&S lines risks are marketed, including, without limitation, through use of the Internet, it could have a material adverse effect on our premiums, underwriting results and profits. 52 TABLE OF CONTENTS There is no assurance that we will be able to continue to compete successfully in the insurance or reinsurance markets.
If the wholesale distribution model were to be significantly altered by changes in the way E&S lines risks are marketed, including, without limitation, through use of the internet, it could have a material adverse effect on our premiums, underwriting results and profits. 51 TABLE OF CONTENTS There is no assurance that we will be able to continue to compete successfully in the insurance market.
The Insurance Act, the conditions listed in the insurance license and the applicable approvals issued by the BMA provide that JRG Re is required to maintain a minimum statutory solvency margin of approximately $38.6 million as of December 31, 2022. See “Item 1.
The Insurance Act, the conditions listed in the insurance license and the applicable approvals issued by the BMA provide that JRG Re is required to maintain a minimum statutory solvency margin of approximately $31.1 million as of December 31, 2023. See “Item 1.
Increased competition in these markets could result in a change in the supply and/or demand for insurance or reinsurance, affect our ability to price our products at risk-adequate rates, affect our ability to retain business with existing customers, or underwrite new business on favorable terms.
Increased competition in the market could result in a change in the supply and/or demand for insurance, affect our ability to price our products at risk-adequate rates, affect our ability to retain business with existing customers, or underwrite new business on favorable terms.
As we have entered new lines of business, we now use third-party claims administrators and contract employees to administer claims subject to the supervision of our employed staff.
As we have entered new lines of business, we now use third-party claims administrators and contract employees to 52 TABLE OF CONTENTS administer claims subject to the supervision of our employed staff.
As a result, the holders of the Series A Preferred Shares may have the ability to influence the outcome of certain matters affecting our governance and capitalization. 58 TABLE OF CONTENTS The conversion of the Series A Preferred Shares into common shares would dilute the ownership of common shareholders and may adversely affect the market price of our common shares.
As a result, the holders of the Series A Preferred Shares may have the ability to influence the outcome of certain matters affecting our governance and capitalization. The conversion of the Series A Preferred Shares into common shares would dilute the ownership of common shareholders and could adversely affect the market price of our common shares.
Such defaults and impairments could reduce our net investment income and result in realized investment losses. We hold investments in bank loans (6.6% of the carrying value of our cash and invested assets (excluding restricted cash equivalents) as of December 31, 2022. Most of these loans are issued to sub-investment grade borrowers.
Such defaults and impairments could reduce our net investment income and result in realized investment losses. We hold investments in bank loans (7.9% of the carrying value of our cash and invested assets (excluding restricted cash equivalents) as of December 31, 2023. Most of these loans are issued to sub-investment grade borrowers.
Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements 64 TABLE OF CONTENTS retroactively.
Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively.
If we are unable to keep pace with the advancements being made in technology, our ability to compete with other insurance companies who have advanced technological capabilities will be negatively affected.
If we are unable to keep pace with the advancements being made in technology and data analytics, our ability to compete with other insurance companies who have advanced technological or data analytics capabilities will be negatively affected.
While this class of investment has been profitable for us, a severe downturn in the markets could materially adversely affect the value of these investments, including the possibility that we would suffer substantial losses on this portfolio. As of December 31, 2022, the fair value of our investments in bank loans was $155.0 million .
While this class of investment has been profitable for us, a severe downturn in the markets could materially adversely affect the value of these investments, including the possibility that we would suffer substantial losses on this portfolio. As of December 31, 2023, the fair value of our investments in bank loans was $156.2 million .
Additionally, on March 1, 2022 we issued 150,000 Series A Perpetual Cumulative Convertible Preferred Shares, par value $0.00125 per share (the "Series A Preferred Shares"), for an aggregate purchase price of $150 million, primarily to protect our balance sheet after experiencing $115.0 million of adverse reserve development in the Casualty Reinsurance segment in the fourth quarter of 2021, primarily related to underwriting years 2014 through 2018.
Additionally, on March 1, 2022 we issued 150,000 Series A Perpetual Cumulative Convertible Preferred Shares, par value $0.00125 per share (the "Series A Preferred Shares"), for an aggregate purchase price of $150 million, primarily to protect our balance sheet after experiencing $115.0 million of adverse reserve development in our former casualty reinsurance segment in the fourth quarter of 2021.
Our insurance companies are subject to assessments in California (the domiciliary state for Falls Lake Fire and Casualty Company), North Carolina (the domiciliary state for Stonewood Insurance), Ohio (the domiciliary state for James River Insurance and Falls Lake National) and Virginia (the domiciliary state for James River Casualty), for various purposes, including the provision of funds necessary to fund the operations of the various insurance departments and the state funds that pay covered claims under certain policies written by impaired, insolvent or failed insurance companies.
Our insurance companies are subject to assessments in California (the domiciliary state for Falls Lake Fire and Casualty Company), North Carolina (the domiciliary state for Stonewood Insurance), Ohio (the domiciliary state for James River Insurance, James River Casualty and Falls Lake National) and other states in which our insurance companies may be admitted, for various purposes, including the provision of funds necessary to fund the operations of the various insurance departments and the state funds that pay covered claims under certain policies written by impaired, insolvent or failed insurance companies.
Our invested assets also include interests in limited partnerships and privately held debt investments totaling $18.3 million at December 31, 2022. These investments were designed to provide diversification of risk and enhance the return on the overall portfolio. However, these investments entail substantial risks and are generally illiquid.
Our invested assets also include interests in limited partnerships and privately held debt investments totaling $24.8 million at December 31, 2023. These investments were designed to provide diversification of risk and enhance the return on the overall portfolio. However, these investments entail substantial risks and are generally illiquid.
The NAIC Amendments must be adopted by a state legislature and such state’s insurance regulator in order to be effective in that state. Each of California, North Carolina, Ohio and Virginia, the states in which our U.S. insurance subsidiaries are domiciled, adopted the NAIC Amendments, including the enterprise risk report requirement.
The NAIC Amendments must be adopted by a state legislature and such state’s insurance regulator in order to be effective in that state. Each of California, North Carolina and Ohio, the states in which our U.S. insurance subsidiaries are domiciled, adopted the NAIC Amendments, including the enterprise risk report requirement. In 2012, the NAIC also adopted the ORSA Model Act.
The insurance and reinsurance industries have historically been cyclical businesses with intense competition, often based on price. If actual renewals do not meet expectations or if we choose not to write a renewal (including in connection with the early termination of insurance policies), our premiums written in future years and our future operations could be materially adversely affected.
The insurance industry has historically been a cyclical business with intense competition, often based on price. If actual renewals do not meet expectations or if we choose not to write a renewal (including in connection with the early termination of insurance policies), our premiums written in future years and our future operations could be materially adversely affected.
In 2012, the NAIC also adopted the ORSA Model Act. The ORSA Model Act, when adopted by the various states, requires an insurance holding company system’s Chief Risk Officer to submit annually to its lead state insurance regulator an ORSA.
The ORSA Model Act, when adopted by the various states, requires an insurance holding company system’s Chief Risk Officer to submit annually to its lead state insurance regulator an ORSA.
Pursuant to applicable laws and regulations, “control” over an insurer is generally presumed to exist if any person, directly or indirectly, owns, controls, holds the power to vote or holds proxies representing, 10% or more of the voting securities of that reinsurer or insurer. Indirect ownership includes ownership of the Company’s common shares.
Pursuant to applicable laws and regulations, “control” over an insurer is generally presumed to exist if any person, directly or indirectly, owns, controls, holds the power to vote or holds proxies representing, 10% or more of the voting securities of that reinsurer or insurer.
New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS or the U.S. Department of the Treasury. We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.
There are currently only proposed regulations regarding the RPII Test. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS or the U.S. Department of the Treasury. We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.
In each of North Carolina and Virginia, the domiciliary states of Stonewood Insurance and James River Casualty, respectively, this limitation is the greater of statutory net income excluding realized capital gains for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.
In North Carolina, the domiciliary state of Stonewood Insurance, respectively, this limitation is the greater of statutory net income excluding realized capital gains for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.
Increases in interest rates during 2022, while generating higher investment yields, led to declines in the fair values of our fixed income securities, influenced by the duration of our fixed income investments and the extent of interest rate increases.
Increases in interest rates during 2022 and for much of 2023, while generating higher investment yields, led to declines in the fair values of our fixed income securities, influenced by 45 TABLE OF CONTENTS the duration of our fixed income investments and the extent of interest rate increases.
Given the complexity of the Tax Act, you are strongly encouraged to consult your own tax advisor regarding its potential impact on the U.S. federal income tax consequences to you considering your particular circumstances. Base Erosion and Anti-Abuse Tax .
Given the complexity of the Tax Act, you are strongly encouraged to consult your own tax advisor regarding its potential impact on the U.S. federal income tax consequences to you considering your particular circumstances. BEAT .
We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance and reinsurance at rates we consider appropriate and commensurate relative to the risk assumed.
We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate. Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed. If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially adversely affected.
See “Item 3. Legal Proceedings” for more information. We believe that the outcome of this matter and other presently pending matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position.
Legal Proceedings” for more information. We believe that the outcomes of these matters and other presently pending matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position.
General Risk Factors We rely on our systems and employees, and those of certain third-party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber-security incidents, could materially adversely affect our operations.
Indirect ownership includes ownership of the Company’s common shares. 64 TABLE OF CONTENTS General Risk Factors We rely on our systems and employees, and those of certain third-party vendors and service providers in conducting our operations, and certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber-security incidents, could materially adversely affect our operations.
Were the IRS to contend successfully that James River UK is not eligible for benefits under the U.K. Treaty, any dividends paid by James River Group, Inc., our U.S. holding company, to James River UK would be subject to the 30% withholding tax. Such a result would substantially reduce the amount of dividends that our shareholder may receive.
Were the IRS to contend successfully that James River UK is not eligible for benefits under the U.K. Treaty, any dividends paid by James River Group, Inc., our U.S. holding company, to James River UK would be subject to the 30% withholding tax.
However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could require us to pay significant damage amounts or to change aspects of our operations, which could have a material adverse effect on our financial results. Changes in accounting practices and future pronouncements may materially affect our reported financial results.
However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could require us to pay significant damage amounts or to change aspects of our operations, which could have a material adverse effect on our financial results.
This risk may be heightened as a result of continued remote work in response to the ongoing COVID-19 pandemic. Although to date we have 63 TABLE OF CONTENTS not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.
This risk may be heightened as a result of the current remote and hybrid work environment. Although to date we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.
While the Tax Act did not modify these rules, there has been proposed legislation before the U.S. Senate and House of Representatives that would exclude shareholders of certain 56 TABLE OF CONTENTS foreign corporations from this advantageous tax treatment.
While neither the Tax Act nor the IRA modified these rules, there has been proposed legislation before the U.S. Senate and House of Representatives that would exclude shareholders of certain foreign corporations from this advantageous tax treatment.
The holders of the Series A Convertible Preferred Shares are entitled to vote up to 9.9% of the aggregate voting power of our then-outstanding common shares on an as converted basis or of the outstanding voting securities of the Company, and have rights to approve certain actions.
The holders of the Series A Convertible Preferred Shares are entitled to vote up to 9.9% of the aggregate voting power of our then-outstanding common shares on an as converted basis or of the outstanding voting securities of the Company, and have rights to approve certain actions, which may allow such holders to exercise significant influence over matters requiring shareholder approval.
It is possible that these contract employees and third-party 53 TABLE OF CONTENTS claims administrators may achieve less desirable results on claims than has historically been the case for our internal staff, which could result in significantly higher losses and loss adjustment expenses in those lines of business.
It is possible that these contract employees and third-party claims administrators may achieve less desirable results on claims than has historically been the case for our internal staff, which could result in significantly higher losses and loss adjustment expenses in those lines of business. Risks Related to Taxation Changes in tax law may have a significant impact on the Company.
We may not be able to manage our growth or other changes effectively. We intend to continue to grow our business, may attempt to enter new business lines, and may also face changes from market, legal or regulatory developments. Such growth, new business lines, and changes could require additional capital, systems development and skilled personnel.
We may not be able to manage our growth or other changes effectively. We intend to continue to grow our excess and surplus and specialty admitted businesses, may attempt to enter new business lines, and may also face changes from market, legal or regulatory developments.
Risks Related to Taxation The ongoing effect of the 2017 Tax Act may have a significant impact on the Company. The Tax Act, enacted on December 22, 2017, introduced significant changes to the Internal Revenue Code of 1986, as amended (the “Code”).
Tax Act . The Tax Act, enacted on December 22, 2017, introduced significant changes to the Internal Revenue Code of 1986, as amended (the “Code”).
If securities or industry analysts do not continue to publish research or publish misleading or unfavorable research about our business, our common share price and trading volume could decline. The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about our business.
The trading market for our common shares depends in part on the research and reports that securities or industry analysts publish about our business. If one or more of these analysts downgrades our shares or publishes misleading or unfavorable research about our business, our share price would likely decline.
The agreements contain other covenants which, among other things, require ongoing compliance with applicable insurance regulations and require each of our regulated insurance subsidiaries to maintain ratings from A.M. Best not lower than an A-.
The agreements contain other covenants which, among other things, require ongoing compliance with applicable insurance regulations and require each of our regulated insurance subsidiaries to maintain ratings from A.M. Best not lower than an A-. At December 31, 2023, we were in default of the financial strength rating covenant due to the downgrade of JRG Re by A.M.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud against minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it. 63 TABLE OF CONTENTS When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company.
The failure to manage our growth and other changes effectively could have a material adverse effect on our business, financial condition and results of operations. Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.
Any of these risks could have a material adverse effect on our business, financial condition, results of operations and prospects. Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.
Changes in regulation of our business may materially reduce our profitability, limit our growth or otherwise materially adversely affect our operations. Changing climate conditions may increase the frequency and severity of catastrophic events and thereby adversely affect our financial condition and results of operations.
Changing climate conditions may increase the frequency and severity of catastrophic events and thereby adversely affect our financial condition and results of operations.
The Company had such a lawsuit filed against it following our May 2021 equity offering. The filing of this lawsuit against us, or any future filings of a lawsuit against us, regardless of the outcome, could have a negative effect on our business, as it could result in substantial legal costs and a diversion of management’s attention and resources.
The filing of these lawsuits against us, or any future filings of a lawsuit against us, regardless of the outcome, could have a negative effect on our business, as it could result in substantial legal costs and a diversion of management’s attention and resources. See “Item 3. Legal Proceedings” for more information.
Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control, which could materially adversely affect our performance.
Any of these factors could lead to a material adverse effect on our business, financial condition and results of operations. 49 TABLE OF CONTENTS Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control, which could materially adversely affect our performance.
As of December 31, 2022, we held equity investments of $9.2 million in non-public limited liability companies that have invested in renewable energy investments. These investments were sponsored and are managed by an entity for which two former directors serve as officers. We invested in the equity of these projects because we anticipate earning attractive risk-adjusted returns from these investments.
As of December 31, 2023, we held equity investments of $8.4 million in non-public limited liability companies that have invested in renewable energy investments. We invested in the equity of these projects because we anticipate earning attractive risk-adjusted returns from these investments.
If we, or one of our subsidiaries, were considered a PFIC, it could have material adverse tax consequences for an investor that is subject to U.S. federal income taxation. 54 TABLE OF CONTENTS A non-U.S. corporation generally will be classified as a CFC if U.S. persons, each of whom owns, directly, indirectly, or constructively, at least 10% of the voting power or value of such corporation’s stock (“U.S. 10% Shareholders”), own in the aggregate more than 50% of the voting power or value of the stock of such corporation.
A non-U.S. corporation generally will be classified as a CFC if U.S. persons, each of whom owns, directly, indirectly, or constructively, at least 10% of the voting power or value of such corporation’s stock (“U.S. 10% Shareholders”), own in the aggregate more than 50% of the voting power or value of the stock of such corporation.
The Tax Act, other tax laws and interpretations thereof, including with respect to whether a company is engaged in a U.S. trade or business, is a CFC, has related party insurance income, is a PFIC, or is subject to BEAT, are subject to change, possibly on a retroactive basis. There are currently only proposed regulations regarding the RPII Test.
Any such developments could materially adversely affect our results of operations. 55 TABLE OF CONTENTS Tax laws and interpretations thereof, including with respect to whether a company is engaged in a U.S. trade or business, is a CFC, has related party insurance income, is a PFIC, or is subject to BEAT, are subject to change, possibly on a retroactive basis.
Volatility in the market price of our common shares may prevent you from being able to sell your common shares at or above the price you paid for your common shares.
Risks Related to Ownership of Our Common Shares The trading price of our common shares has been, and may continue to be, volatile, and you could lose all or part of your investment. Volatility in the market price of our common shares may prevent you from being able to sell your common shares at or above the price you paid.
See “Item 3. Legal Proceedings” for more information. As a result of the factors described above, shareholders may not be able to resell their common shares at or above their purchase price or may not be able to resell them at all.
As a result of the factors described above, shareholders may not be able to resell their common shares at or above their purchase price or may not be able to resell them at all. These market and industry factors may materially reduce the market price of our common shares, regardless of our operating performance.

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