Frank D'Orazio, the Company’s Chief Executive Officer, commented, “2023 was a year of significant transformation and strategic progress for James River, with the Company now purely focused on our E&S and fronting platforms. During the fourth quarter we eclipsed $1 billion in annual E&S premium, a significant milestone for the organization that demonstrates the strength of our franchise, driven by meaningful submission growth. We expect to continue to build on this momentum in 2024 as our team remains focused on leveraging sustained attractive market conditions. Our Board of Directors continues its exploration of strategic alternatives for the Company that was announced in November. We expect to provide an update on the process in due course.”

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¹ Adjusted net operating income is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.
² Percent change before common dividends paid.

Fourth Quarter 2023 Operating Results - Continuing Operations

• Gross written premium of $389.3 million, consisting of the following:
  
  

• Net written premium of $172.2 million, consisting of the following:
  
  

• Net earned premium of $182.0 million, consisting of the following:
  

• E&S segment gross written premium increased 12.1% compared to the prior year quarter, with broad strength from most underwriting divisions. Renewal rate increases were 11.0% during the fourth quarter of 2023. Premium retention in the segment was lower than recent periods and net written premium declined 6.2% from the prior year quarter due to the impact of the restructured ceded reinsurance structure put in place at mid-year 2023, which is designed to further limit volatility, and $4.1 million of reinsurance reinstatement premiums incurred during the current quarter.

• Gross written premium for fronting and program business increased 12.5% compared to the prior year quarter excluding the impact of our large workers' compensation fronted program that was previously not renewed. Fronting and program business growth was driven by both existing programs and new programs initiated earlier in 2023. Gross written premium for the Specialty Admitted Insurance segment declined 1.7% compared to the fourth quarter of 2022, with the reduction due to the impact of the non-renewed workers' compensation program and the renewal rights sale of the individual risk workers' compensation business.

• The fourth quarter of 2023 reflected $25.0 million of unfavorable reserve development in the E&S segment and minimal reserve movements in the Specialty Admitted segment. Reserve development in the E&S segment related to accident years 2015 through 2020 for primary general liability. During the fourth quarter of 2023, the Company also reduced its estimate of current accident year losses and loss adjustment expenses to reflect the strong level of rate increases, meaningfully above both plan and trend, and other underwriting improvements.

• Pre-tax favorable (unfavorable) reserve development by segment on business not subject to retroactive reinsurance accounting for loss portfolio transfers was as follows:

• Additionally, the Company recognized adverse prior year development of $3.8 million on the reserves subject to the Commercial Auto LPT, which provides unlimited coverage. Retroactive benefits of $5.0 million were recorded in loss and loss adjustment expenses during the fourth quarter and the deferred retroactive reinsurance gain on the Balance Sheet is $20.7 million as of December 31, 2023.

• Gross fee income was as follows:

• The consolidated expense ratio was 24.2% for the fourth quarter of 2023, which was an increase from 22.0% in the prior year fourth quarter. The expense ratio was primarily impacted by changes in reinsurance cessions in both E&S and Specialty Admitted segments that resulted in a lower level of ceding commissions in the current period, with an offset for lower compensation expenses due to performance relative to Company targets.
  

Investment Results

Net investment income for the fourth quarter of 2023 was $25.6 million, an increase of 67.0% compared to $15.3 million in the prior year quarter. Growth in income was broad-based across the portfolio, as positive operating cash flow and portfolio cash flow was deployed at higher yields. On a sequential basis, income increased modestly in most asset classes. For the fourth quarter of 2023, income from private investments included approximately $2.5 million related to a performance based contingent payment from a renewable energy investment that was sold during the fourth quarter of 2022.

The Company’s net investment income consisted of the following:

The Company’s annualized gross investment yield on average fixed maturity, bank loan and equity securities for the three months ended December 31, 2023 was 4.8% (versus 3.9% for the three months ended December 31, 2022). The investment yield increased primarily as a result of higher market yields on fixed maturity securities and bank loans.

Net realized and unrealized gains on investments of $8.0 million for the three months ended December 31, 2023 compared to net realized and unrealized gains on investments of $3.9 million in the prior year quarter. The majority of the realized and unrealized gains during the fourth quarter of 2023 were related to our equity securities and secured bank loan portfolio.

Taxes

The Company's effective tax rate fluctuates from period to period based on the relative mix of income reported by country and the respective tax rates imposed by each tax jurisdiction. The effective tax rate on net income from continuing operations for the year ended December 31, 2023 was 29.6%.

Tangible Equity

Shareholders' equity of $534.6 million at December 31, 2023 declined 5.0% compared to shareholders' equity of $562.5 million at September 30, 2023. Tangible equity³ of $485.6 million at December 31, 2023 decreased 8.4% compared to tangible equity of $530.4 million at September 30, 2023, as net income from continuing operations and unrealized investment gains in accumulated other comprehensive loss ("AOCI") were offset by the loss from discontinued operations, primarily reflecting the sale of the Casualty Reinsurance business.

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³ Tangible equity is a non-GAAP financial measure. See “Non-GAAP Financial Measures” and “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.

Capital Management

The Company announced that its Board of Directors declared a cash dividend of $0.05 per common share. This dividend is payable on Friday, March 29, 2024 to all shareholders of record on Monday, March 11, 2024.

Other

On November 8, 2023, the Company entered into an agreement to sell JRG Re. The sale will result in the full disposition of the Company's Casualty Reinsurance business and related assets. All necessary regulatory approvals for the sale have been received and we are expecting the transaction to close in the first quarter of 2024. The operating results of JRG Re have been classified as discontinued operations and the related assets and liabilities have been classified as held for sale for all periods presented. The net loss from discontinued operations was $170.2 million for the fourth quarter of 2023, which included an $80.4 million loss on held for sale classification of JRG Re and $53.2 million associated with JRG Re's fixed maturity securities as the Company no longer has the intent or ability to hold securities in an unrealized loss position until a recovery of their fair value could occur.

As previously disclosed, in preparing our unaudited consolidated financial statements for the three and nine months ended September 30, 2023, the Company became aware that the unaudited consolidated financial statements for the six months ended June 30, 2023 contained material misstatements related to unrecorded reinsurance reinstatement premium. Management of the Company concluded that the deficiencies in controls over the review of the determination of when reinstatement premiums for reinsurance should be recognized were a material weakness in the Company's internal control over financial reporting.

The material weakness has been remediated as of December 31, 2023.

Conference Call

James River will hold a conference call to discuss its fourth quarter results tomorrow, February 29, 2024 at 8:30 a.m. Eastern Time. Investors may access the conference call by dialing (800) 715-9871, Conference ID 1369790, or via the internet by visiting www.jrvrgroup.com and clicking on the “Investor Relations” link. A webcast replay of the call will be available by visiting the company website.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward-looking statements may be identified by terms such as believe, expect, seek, may, will, should, intend, project, anticipate, plan, estimate, guidance or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Although it is not possible to identify all of these risks and uncertainties, they include, among others, the following: the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves; inaccurate estimates and judgments in our risk management may expose us to greater risks than intended; downgrades in the financial strength rating of our regulated insurance subsidiaries impacting our ability to attract and retain insurance business that our subsidiaries write, our competitive position, and our financial condition; the timing of the, or potential failure to, close the sale by the Company of the common shares of JRG Re announced on November 8, 2023; potential uncertainty regarding the outcome of our exploration of strategic alternatives, and the impacts that it may have on our business; the potential loss of key members of our management team or key employees and our ability to attract and retain personnel; adverse economic factors resulting in the sale of fewer policies than expected or an increase in the frequency or severity of claims, or both; the impact of a persistent high inflationary environment on our reserves, the values of our investments and investment returns, and our compensation expenses; exposure to credit risk, interest rate risk and other market risk in our investment portfolio; reliance on a select group of brokers and agents for a significant portion of our business and the impact of our potential failure to maintain such relationships; reliance on a select group of customers for a significant portion of our business and the impact of our potential failure to maintain, or decision to terminate, such relationships; our ability to obtain reinsurance coverage at prices and on terms that allow us to transfer risk, adequately protect our company against financial loss and that supports our growth plans; losses resulting from reinsurance counterparties failing to pay us on reinsurance claims, insurance companies with whom we have a fronting arrangement failing to pay us for claims, or a former customer with whom we have an indemnification arrangement failing to perform its reimbursement obligations, and our potential inability to demand or maintain adequate collateral to mitigate such risks; inadequacy of premiums we charge to compensate us for our losses incurred; changes in laws or government regulation, including tax or insurance law and regulations; changes in U.S. tax laws and the interpretation of certain provisions of Public Law No. 115-97, informally titled the 2017 Tax Cuts and Jobs Act (including associated regulations), which may be retroactive and could have a significant effect on us including, among other things, by potentially increasing our tax rate, as well as on our shareholders; in the event we do not qualify for the insurance company exception to the passive foreign investment company (“PFIC”) rules and are therefore considered a PFIC, there could be material adverse tax consequences to an investor that is subject to U.S. federal income taxation; the Company or any of its foreign subsidiaries becoming subject to U.S. federal income taxation; a failure of any of the loss limitations or exclusions we utilize to shield us from unanticipated financial losses or legal exposures, or other liabilities; losses from catastrophic events, such as natural disasters and terrorist acts, which substantially exceed our expectations and/or exceed the amount of reinsurance we have purchased to protect us from such events; potential effects on our business of emerging claim and coverage issues; the potential impact of internal or external fraud, operational errors, systems malfunctions or cyber security incidents; our ability to manage our growth effectively; failure to maintain effective internal controls in accordance with the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”); changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends; and an adverse result in any litigation or legal proceedings we are or may become subject to. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those in the forward-looking statements, is contained in our filings with the U.S. Securities and Exchange Commission ("SEC"), including our most recently filed Annual Report on Form 10-K. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Non-GAAP Financial Measures

In presenting James River Group Holdings, Ltd.’s results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (“GAAP”). Such measures, including underwriting profit (loss), adjusted net operating income, tangible equity, tangible common equity, adjusted net operating return on tangible equity (which is calculated as annualized adjusted net operating income divided by the average quarterly tangible equity balances in the respective period), and adjusted net operating return on tangible common equity excluding AOCI (which is calculated as annualized adjusted net operating income divided by the average quarterly tangible common equity balances in the respective period, excluding AOCI), are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those measures determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included at the end of this press release.

About James River Group Holdings, Ltd.

James River Group Holdings, Ltd. is a Bermuda-based insurance holding company that owns and operates a group of specialty insurance companies. The Company operates in two specialty property-casualty insurance segments: Excess and Surplus Lines and Specialty Admitted Insurance. Each of the Company’s regulated U.S. insurance subsidiaries are rated “A-” (Excellent) by A.M. Best Company.

Visit James River Group Holdings, Ltd. on the web at www.jrvrgroup.com.

SPECIALTY ADMITTED INSURANCE

Underwriting Performance Ratios

The following table provides the underwriting performance ratios of the Company's continuing operations inclusive of the business subject to retroactive reinsurance accounting for a loss portfolio transfer. There is no economic impact to the Company over the life of a loss portfolio transfer contract so long as any additional losses subject to the contract are within the limit of the loss portfolio transfer and the counterparty performs under the contract. Retroactive reinsurance accounting is not indicative of our current and ongoing operations. Management believes that providing loss ratios and combined ratios on business not subject to retroactive reinsurance accounting for loss portfolio transfers gives the users of our financial statements useful information in evaluating our current and ongoing operations.

RECONCILIATION OF NON-GAAP MEASURES

Underwriting Profit

The following table reconciles the underwriting profit by individual operating segment and for the entire Company to consolidated income before taxes. We believe that the disclosure of underwriting profit by individual segment and of the Company as a whole is useful to investors, analysts, rating agencies and other users of our financial information in evaluating our performance because our objective is to consistently earn underwriting profits. We evaluate the performance of our segments and allocate resources based primarily on 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. Other operating expenses include the underwriting, acquisition, and insurance expenses of the operating segments and, for consolidated underwriting profit, the expenses of the Corporate and Other segment. Our definition of underwriting profit may not be comparable to that of other companies.

Adjusted Net Operating Income

We define adjusted net operating income 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. We use adjusted net operating income as an internal performance measure in the management of our operations because we believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and our definition of adjusted net operating income may not be comparable to that of other companies.

Our income available to common shareholders reconciles to our adjusted net operating income as follows:

Tangible Equity (per Share) and Tangible Common Equity (per Share)

We define tangible equity as shareholders' equity plus mezzanine Series A preferred shares and the unrecognized deferred retroactive reinsurance gain on loss portfolio transfers less goodwill and intangible assets (net of amortization). We define tangible common equity as tangible equity less mezzanine Series A preferred shares. Our definition of tangible equity and tangible common equity may not be comparable to that of other companies, and it should not be viewed as a substitute for shareholders’ equity calculated in accordance with GAAP. We use tangible equity and tangible common equity internally to evaluate the strength of our balance sheet and to compare returns relative to this measure. The following table reconciles shareholders’ equity to tangible equity and tangible common equity for December 31, 2023, September 30, 2023, December 31, 2022, and September 30, 2022.

CONTACT: For more information contact: Brett Shirreffs SVP, Finance, Investments and Investor Relations Investors@jrvrgroup.com