James River Group Holdings, Inc. · NASDAQ:JRVR
James River — Q2 2018 Earnings Presentation
29 slides from James River's earnings presentation, Aug 17, 2018
Slide 1: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit Second 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 8/13/18. Financial metrics reflect June 30, 2018 reported results. 1 Consensus Operating Return on Average Tangible Equity for the f
Slide 8: We Have a History of Profitable Growth and Disciplined Underwriting
$59 $58 $61 $71 $47 $33 $34 $0 $10 $20 $30 $40 $50 $60 $70 $80 2013 2014 2015 2016 2017 1H 2017 1H 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, consistent
Slide 9: Growth and Benefits of Scale
35.2 33.6 33.6 31.5 24.4 24.9 23.1 34.3 34.1 34.4 34.6 34.6 34.5 34.6 - 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 2013 2014 2015 2016 2017 2018Q1 2018Q2 James River Peer Average Our material expense advantage positions us well for profitability Growth and Benefits of Scale 9 1 GAAP expense ratio; all c
Slide 10: Leading Value Creation
0% 50% 100% 150% 200% 250% 300% KNSL JRVR RLI AMSF NAVG MKL ARGO WRB Median = 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 pub
Slide 11: Capital Management Maximizes Shareholder Value
Capital Management Maximizes Shareholder Value 11 Capital Management History • $389 million of capital returned since 2008 • $183 million of capital returned to shareholders since December 2014 IPO, or 39.2% of tangible book value at that time • Last twelve month d ividend yield of 4.2% 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
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 35% YTD Q2 2018. 102.3 96.1 Total P&C Total US E&S Avg. Combined Ratios 1999 – 2016 Difference of 6 percentage poi
Slide 16: Operating Segments
Operating Segments
Slide 17: Attractive Growth in Gross Written Premium
$59 $91 $182 $316 $149 $185 $36 $45 $56 $61 $35 $28 2014 2015 2016 2017 1H 2017 1H 2018 Gross Written Premium $309 $371 $530 $247 $333 2015 2016 2017 1H 2017 1H 2018 17 Attractive Growth in Gross Written Premium Growth driven by attractive new economy risks, core E&S growth, and expansion of frontin
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 half of 2018 has seen pricing increase of 7 % across our core (non - commercial auto) E&S busi
Slide 20: Demonstrated Underwriting Discipline
56.1 61.4 62.6 54.9 48.5 52.6 40.4 55.2 54.5 62.6 52.4 68.3 65.4 71.0 75.9 80.4 62.5 56.7 57.0 62.0 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Loss Ratio (%) James River Calendar Year E&S Industry Demonstrated Underwriting Discipline Source: Company f
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 • Over $124 million of net favorable reserve development from 2008 through Q2, 2018 • As of June 30, 2018, 63.5% of net reserves were attributable to IBNR • Full internal reserve reviews performed quarterly, external reserve reviews performed during Q3 and Q4 22 Commenta
Slide 23: Traditional Investment Approach Augmented by Higher Yielding Alternatives
23 Traditional Investment Approach Augmented by Higher Yielding Alternatives Total Cash and Investments: $1,728MM Duration: Investment Portfolio (as of June 30, 2018) Net Investment Yield 59% 5% 15% 1% 4% 16% Fixed Maturity Securities Equity Securities Bank Loans (Floating Rate) Short-Term Investmen
Slide 24: Consistent Top Tier Returns
AMSF , 15.0% ARGO , 5.2% KNSL , 12.1% MKL , 6.4% NAVG , 5.6% RLI , 12.4% WRB , 8.1% JRVR , 12.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 24 Consistent Top Tier Returns Extremely attractive risk reward proposition Source: SNL Financial Data as of June
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 $40.31 (Closing Price August 13, 2018) ; Market Capitalization $1.206 billion (August 13, 2018 market close) ; LTM Dividend / Yield $1.70 per share declared 4
Slide 27: Non-GAAP Measures Reconciliation
Non - GAAP Measures Reconciliation 27 Non - GAAP Reconciliation Underwriting Profit (Loss) 1H 2017 1H 2018 ($mm) 2014 2015 2016 2017 Underwriting profit (loss) of the operating segments: Excess and Surplus Lines $ 35.1 $ 47.6 $ 47.2 $ 29.7 $ 20.5 $ 21.4 Specialty Admitted Insurance 0.0 1.1 2.9 3.2 1
Slide 28: Non-GAAP Reconciliation
Non - GAAP Reconciliation ($mm) Adj. Net Operating Income 2014 2015 2016 2017 1H 2017 1H 2018 Income as reported $ 44.7 $ 53.5 $ 74.5 $ 43.6 $ 33.0 $ 32.6 Net realized inv. (gains) losses (0.9) 4.1 (5.2) 1.4 (1.1) 0.8 Initial public offering costs 13.2 - - - - - Dividend withholding taxes - 2.5 - 1.
Slide 29: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit InvestorRelations@jrgh.net
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