James River Announces Legacy Reinsurance Agreement with State National Insurance Company
James River Group Holdings (NASDAQ: JRVR) has announced a reinsurance agreement with State National Insurance Company. The deal provides $160 million in adverse development coverage for James River's Excess and Surplus Lines segment for accident years 2010-2023, with James River retaining a 15% co-participation. The reinsurance excludes certain large commercial auto exposures but covers most other liabilities, with no sublimits. Effective January 1, 2024, the agreement is expected to reduce James River's third-quarter pre-tax income by $52.2 million. A profit commission allows James River to benefit from favorable development under specific conditions. This transaction aims to de-risk the company's balance sheet and enhance financial stability.
- James River secured $160 million in adverse development reinsurance coverage.
- The reinsurance agreement helps de-risk the company’s financial position.
- The transaction includes a profit commission for favorable developments, potentially benefiting shareholders.
- James River will recognize a $52.2 million reduction in pre-tax income for the third quarter of 2024 due to the excess consideration paid.
Insights
The reinsurance agreement between James River and State National is significant due to its impact on James River's financial health. By securing
Financially, the immediate recognition of a
Retail investors should recognize that this deal reflects strategic risk management and financial prudence. It aims to bolster James River's financial resilience, ultimately adding value. The exclusion of large commercial auto exposure, already covered by a previous agreement, limits additional uncertainty.
This reinsurance agreement is a strategic maneuver within the insurance sector. Adverse development covers are common but important for managing long-tail liabilities, typical in casualty insurance. The inclusion of a
It's important to note the AM Best rating of 'A' for State National, indicating a strong ability to meet ongoing insurance obligations. This adds a layer of security for James River, knowing that the reinsurer is financially stable. The exclusion of large commercial auto claims from this agreement is also a positive, given the high unpredictability and potential for significant losses associated with such claims.
Overall, the transaction positions James River better against future uncertainties, a prudent step in the inherently risky insurance business. Retail investors should consider this as a positive move towards ensuring financial and operational stability.
PEMBROKE, Bermuda, July 09, 2024 (GLOBE NEWSWIRE) -- James River Group Holdings, Ltd. (“James River” or the “Company”) (NASDAQ: JRVR) today announced that two of its principal operating subsidiaries entered into a combined loss portfolio transfer and adverse development cover reinsurance agreement with State National Insurance Company, Inc. (“State National”).
Under the terms of the agreement, State National will provide
Frank D’Orazio, the Company’s Chief Executive Officer, commented, “We are pleased to have successfully completed a significant legacy reinsurance transaction with a highly rated carrier that is consistent with the Company's track record of de-risking the organization while bolstering the balance sheet and providing improved certainty to our stakeholders.”
The reinsurance agreement was executed on July 2, 2024 and is effective January 1, 2024. During the third quarter of 2024, James River will recognize a
Please see the Frequently Asked Questions slides being made available simultaneously with this press release for further information on this transaction.
The transaction closed upon signing. James River was represented by Howden Re and Mayer Brown LLP.
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; uncertainty regarding the outcome and timing 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 persistently 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 its foreign subsidiary 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 amount of the final post-closing adjustment to the purchase price received in connection with the sale of our casualty reinsurance business; 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 and Quarterly Report on 10-Q. 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.
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 insurance subsidiaries are rated “A-” (Excellent) by A.M. Best Company. Visit James River Group Holdings, Ltd. on the web at www.jrvrgroup.com.
FAQ
What is the recent reinsurance agreement announced by James River (NASDAQ: JRVR)?
How will the reinsurance agreement affect James River's financials in the third quarter of 2024?
What are the terms of the reinsurance agreement between James River and State National?
When is the effective date of the reinsurance agreement between James River and State National?