James River Group Holdings, Inc. · NASDAQ:JRVR
James River — Q3 2018 Earnings Presentation
29 slides from James River's earnings presentation, Nov 13, 2018
Slide 1: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit Third Quarter 2018 Investor Presentation
Slide 2: Disclosure: Forward-Looking Statements
Disclosure 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, int
Slide 3: Table of Contents
Overview Slide 4 Franchise Slide 12 Operating Segments Slide 16 Financial Highlights Slide 18 Appendix Slide 25 Table of Contents 3
Slide 4: Overview
Overview
Slide 5: Our Strategy
Our Strategy We seek to deliver consistent, top tier returns on tangible equity and achieve sector leading value creation We are active managers of capital, seeking to generate top tier returns and return excess capital, while maintaining the ability to respond quickly to match capital to evolving
Slide 6: Our Business
6 Our Business E&S Segment Specialty Admitted Segment Casualty Reinsurance Segment • E&S business underwritten by specialists in 13 divisions organized by product or industry segment • 84.9% average combined ratio from 2013 - 2017 • Focus on small and medium - sized commercial accounts; 97% casualty
Slide 7: Our Current Valuation Supports Meaningful Upside
Our Current Valuation Supports Meaningful Upside 7 P/TBV vs Operating ROATE 1 Price/Next Twelve Month Consensus Earnings Source: SNL Financial. Market price data as of 11/08/18. Financial metrics reflect September 30, 2018 reported results 1 Consensus Operating Return on Average Tangible Equity for
Slide 8: We Have a History of Profitable Growth and Disciplined Underwriting
$59 $58 $61 $71 $47 $43 $54 $0 $10 $20 $30 $40 $50 $60 $70 $80 2013 2014 2015 2016 2017 YTD Q3 2017 YTD Q3 2018 We Have a History of Profitable Growth and Disciplined Underwriting 8 Net Written Premiums & Operating ROATE Adjusted Net Operating Income $MM ROATE $MM Gross Fee Income ($MM) • Strong, co
Slide 9: Growth and Benefits of Scale
Our material expense advantage positions us well for profitability Growth and Benefits of Scale 9 1 GAAP expense ratio; all corporate/other expenses adjusted for inclusion in the expense ratio. 2 Peer Group: Amerisafe Inc., Argo Group International Holdings, Ltd., Kinsale Capital Group Inc., Markel
Slide 10: Leading Value Creation
Leading Value Creation We have delivered best in class shareholder returns since becoming a public company 10 1. Shareholder return represents the dividend - adjusted share price appreciation from James River’s initial public offering date of December 12, 2014 until November 8, 2018. 2. KNSL’s total
Slide 11: Capital Management Maximizes Shareholder Value
Capital Management Maximizes Shareholder Value 11 Capital Management History • $398 million of capital returned since 2008 • $192 million of capital returned to shareholders since December 2014 IPO, or 41.2% of tangible book value at that time • Last twelve month d ividend yield of 4.5% 1 1. Calcula
Slide 12: Franchise
Franchise
Slide 13: Franchise Overview
Franchise Overview 13 Property 4% Casualty 96% Negligible Primary Property Exposure 2017 Group - wide NWP: $767mm Excess & Surplus Lines 81% Specialty Admitted 19% 2017 Group - wide Net Written Premiums by Type 2017 Group - wide Net Written Premiums by Coverage • We are a specialty, low volatility u
Slide 14: Company history and milestones
Adam Abram and a group of investors purchase Front Royal, Inc., for $3 million • James River Group, Inc. is formed with $58 million of capital and a single insurance subsidiary, James River Insurance Company, an E&S underwriter • Stonewood Insurance Company is formed in Raleigh, NC to write highly i
Slide 15: E&S Focus: Profitable, Niche Specialty Underwriting
15 E&S Focus | Profitable, Niche Specialty Underwriting Profitability of E&S vs. Total P&C Industry E&S Gaining Share of P&C Insurance Market E&S segment GWP grew by 43% during 2017 and 27% YTD Q3 2018. Avg. Combined Ratios 2000 – 2017 Difference of 5 percentage points Total P&C GWP: $327.3bn E&S GW
Slide 16: Operating Segments
Operating Segments
Slide 17: Attractive Growth in Gross Written Premium
17 $207 $172 $184 $235 $223 $98 2014 2015 2016 2017 YTD Q3 2017 YTD Q3 2018 Attractive Growth in Gross Written Premium Growth driven by attractive new economy risks, core E&S growth, and expansion of fronting business E&S Segment Specialty Admitted Segment Casualty Reinsurance Segment ($ in Millions
Slide 18: Financial Highlights
Financial Highlights
Slide 19: Broad Risk Appetite Permits Us to 'Pick Our Spots'
Broad Risk Appetite Permits Us to ‘Pick Our Spots’ 19 Each Excess & Surplus lines policy is underwritten by in - house specialists with deep technical expertise across 13 underwriting divisions • The first nine months of 2018 has seen pricing increase of 5 . 5 % across our core (non - commercial aut
Slide 20: Demonstrated Underwriting Discipline
(3.8) (23.1) (25.0) (15.9) 12.8 21.1 21.3 31.3 22.2 20.1 42.9 (3.5) (6.2) (4.1) (3.8) (1.8) 11.8 8.4 6.7 2.5 2.8 5.8 (40.0%) (20.0%) 0.0% 20.0% 40.0% 60.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GWP Growth (%) JRVR E&S Market Demonstrated Underwriting Discipline Source: Company filin
Slide 21: A Growing Fee Business
21 A Growing Fee Business Fee Income Example Insured Companies (e.g. MGA ) Highly Rated Third Party Reinsurers Retains $17M (or 10%) of premium/risk and receives $5.4M of fees Assumes $154M (or 90%) of premium/risk $171M Premium Net of XOL Cover Claims Payments $154M Ceded Premium $5.4M Fronting Fee
Slide 22: Prudent Reserving Philosophy
Prudent Reserving Philosophy • $112 million of net favorable reserve development from 2008 through Q3 2018 • As of September 30, 2018, 62.7% of net reserves were attributable to IBNR • Full internal reserve reviews performed quarterly, external reserve reviews performed during Q3 and Q4 22 Commentar
Slide 23: Traditional Investment Approach Augmented by Higher Yielding Alternatives
23 Traditional Investment Approach Augmented by Higher Yielding Alternatives Total Cash and Investments: $1,804MM Duration: Investment Portfolio (as of September 30, 2018) Net Investment Yield • Our investment portfolio consists of investment grade fixed maturity securities, selectively supplemented
Slide 24: Consistent Top Tier Returns
24 Consistent Top Tier Returns Extremely attractive risk reward proposition Source: SNL Financial Data as of September 30, 2018 3 - Yr Average Operating ROATE Standard Deviation 3 - Yr Average Operating ROATE AMSF , 15.1% ARGO , 5.2% KNSL , 13.8% MKL , 4.8% NAVG , 5.2% RLI , 12.0% WRB , 8.1% JRVR ,
Slide 25: Appendix
Appendix
Slide 26: James River Group Key Metrics
James River Group Key Metrics 26 Exchange/Ticker NASDAQ / “JRVR” Initial Public Offering $21.00 (December 12, 2014) Current Share Price $37.91 (Closing Price November 8, 2018) Market Capitalization $1.135 billion (November 8, 2018 market close) LTM Dividend / Yield $1.70 per share declared
Slide 27: Non-GAAP Measures Reconciliation
Non - GAAP Measures Reconciliation 27 Non - GAAP Reconciliation Underwriting Profit (Loss) YTD Q3 2017 YTD Q3 2018 ($mm) 2014 2015 2016 2017 Underwriting profit (loss) of the operating segments: Excess and Surplus Lines $ 35.1 $ 47.6 $ 47.2 $ 29.7 $ 30.5 $ 32.7 Specialty Admitted Insurance 0.0 1.1 2
Slide 28: Non-GAAP Reconciliation: Adj. Net Operating Income
Non - GAAP Reconciliation ($mm) Adj. Net Operating Income 2014 2015 2016 2017 YTD Q3 2017 YTD Q3 2018 Income as reported $ 44.7 $ 53.5 $ 74.5 $ 43.6 $ 43.3 $ 52.2 Net realized inv. (gains) losses (0.9) 4.1 (5.2) 1.4 (1.0) 0.4 Initial public offering costs 13.2 - - - - - Dividend withholding taxes -
Slide 29: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit InvestorRelations@jrgh.net
James River Group Holdings — Q3 2018 Earnings Presentation on 6ix