James River Group Holdings, Inc. · NASDAQ:JRVR
James River — Q4 2017 Earnings Presentation
31 slides from James River's earnings presentation, Mar 5, 2018
Slide 1: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit Fourth Quarter 2017 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 11 Operating Segments Slide 15 Financial Highlights Slide 18 Appendix Slide 27 Table of Contents 3
Slide 4: Overview
Overview
Slide 5: Strategy and Overview
Strategy and Overview 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 being able to respond quickly to match capital to evolving ris
Slide 6: Our current valuation supports meaningful upside
Our current valuation supports meaningful upside 6 P/TBV vs Operating ROTE 1 Price/Next Twelve Month Consensus Earnings Source: SNL Financial, company filings. Market data as of 3/1/18 1 P/TBV data as of March 1, 2018; Operating ROTE data is trailing twelve months as of December 31, 2017 31.3 28.2 2
Slide 7: We have a history of profitable growth and disciplined underwriting
We have a history of profitable growth and disciplined underwriting 7 Net Written Premiums & Operating ROATE Operating Income $58.9 $58.4 $61.1 $71.3 $47.4 $- $10 $20 $30 $40 $50 $60 $70 $80 2013 2014 2015 2016 2017 $325 $450 $471 $558 $767 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $0 $100 $200 $300 $4
Slide 8: Growth and Benefits of Scale
Growth and Benefits of Scale 8 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 Corp., Navigators Group Inc., RLI Corp. and W. R. Berkley Corp. Sou
Slide 9: Leading Value Creation
Leading Value Creation We have delivered best in class shareholder returns since becoming a public company 9 1. Shareholder return represents the dividend - adjusted share price appreciation from James River’s initial public offering date of December 12, 2014 until March 1, 2018. 2. KNSL’s total sha
Slide 10: Capital Management Maximizes Shareholder Value
Capital Management Maximizes Shareholder Value 10 Capital Management History • $370 million of capital returned since 2008 • $164 million of capital returned to shareholders since December 2014 IPO, or 35.2% of tangible book value at that time • Last twelve month d ividend yield of 5.3% 1 $388 $442
Slide 11: Franchise
Franchise
Slide 12: Franchise Overview
Franchise Overview 12 • We are a specialty, low volatility underwriting company with a proven history of generating consistent profits • Our area of focus is small and medium sized commercial account Excess & Surplus Lines casualty business with $1 million per occurrence limits and $20,000 average a
Slide 13: Our Specialty Market History
13 Our Specialty Market History Adam Abram and a group of investors purchase Front Royal, Inc., for $3 million • James River Group, Inc. is formed with $58 million of capital and a single insurance subsidiary, James River Insurance Company, an E&S underwriter • Stonewood Insurance Company is formed
Slide 14: E&S Focus: Profitable, niche specialty underwriting
14 E&S Focus | Profitable, niche specialty underwriting Profitability of E&S vs. Total P&C Industry E&S Gaining Share of P&C Insurance Market E&S segment GWP grew by 20% during 2016 and 43% during 2017. • Our business is heavily concentrated in E&S Casualty (81% of 2017 premium). • E&S is the most p
Slide 15: Operating Segments
Operating Segments
Slide 16: Segment Review
16 Segment Review E&S Segment Specialty Admitted Segment Casualty Reinsurance Segment • E&S business underwritten by specialists in 13 divisions organized by product or industry segment • 81.9% average combined ratio from 2013 - 2017 • Focus on small and medium - sized commercial accounts; 97% casua
Slide 17: Attractive Growth in Gross Written Premium
17 Attractive Growth in Gross Written Premium Growth driven by new economy risks, core E&S growth, and expansion of fronting business E&S Segment PROFITABLE SPECIALTY UNDERWRITING Specialty Admitted Segment A FOCUS ON FEE INCOME Casualty Reinsurance Segment LOW VOLATILITY UNDERWRITING ($ 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 ($ in millions) Lead U/W Years of Year Year Year Industry Ended Ended Ended Division Experience Dec 31, 20
Slide 20: Demonstrated underwriting discipline
Demonstrated underwriting discipline 20 Source: Company filings, A.M. Best data and research We have proven our willingness to expand and contract when market conditions dictate, and have a strong track record of profitable underwriting E&S Segment Loss Ratio vs. E&S Industry E&S Segment – GWP Growt
Slide 21: A Growing Fee Business
21 A Growing Fee Business Fee income example Insured Companies Capacity Providers Falls Lake National Insurance Company Retains $19M (or 10%) of premium/risk and receives $6M of fees Assumes $171M (or 90%) of premium/risk $190M GWP Claims Payments $171M GWP $6M Fronting Fees Claims Payments The effe
Slide 22: Prudent Reserving Philosophy
Prudent Reserving Philosophy • Over $120 million of net favorable reserve development since 2008 • As of December 31, 2017, 65% of net reserves were attributable to IBNR • Full internal reserve reviews performed quarterly, external reserve reviews performed during Q3 and Q4 22 Commentary
Slide 23: Updated Structure: Carolina Re
Updated Structure: Carolina Re A. Internal Quota Share (“IQS”) - > Carolina Re Prior IQS As of 12/31/2017: Runoff of IQS liabilities 2017 and prior (remaining at JRGRe) Future IQS Proforma 1/1/2018: Go forward IQS liabilities only B. Stop - Loss Cover Stop - loss protection written by JRG
Slide 24: Traditional investment approach augmented by higher yielding alternatives
3.4 3.8 4.0 0.0 1.0 2.0 3.0 4.0 5.0 2015 2016 2017 24 Traditional investment approach augmented by higher yielding alternatives Total Cash and Investments: $ 1,611M Duration: Investment Portfolio (as of December 31, 2017) Net Investment Yield 63% 5% 15% 2% 5% 10% Fixed Maturity Securities Equity Sec
Slide 25: Composition of Operating Return on Average Tangible Equity
Composition of Operating Return on Average Tangible Equity 25 1 1
Slide 26: Consistent Top Tier Returns
15.7% 14.8% 13.3% 12.8% 8.4% 6.9% 5.3% 5.2% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 3 - Yr Average Operating ROATE 3 - Yr Average Operating ROATE Standard Deviation 26 Consistent Top Tier Returns Extremely attractive risk reward proposition AMSF NAVG RLI WRB JRVR Source: SNL Fina
Slide 27: Appendix
Appendix
Slide 28: James River Group Key Metrics
James River Group Key Metrics 28 Exchange/Ticker NASDAQ / “JRVR” Initial Public Offering $21.00 (December 12, 2014) Current Share Price $32.38 (Closing Price March 1, 2018) Market Capitalization $963 million (March 1, 2018 market close) LTM Dividend / Yield $1.70 per share declared 5.3% yi
Slide 29: Non-GAAP Measures Reconciliation
Non - GAAP Measures Reconciliation 29
Slide 30: Non-GAAP Measures Reconciliation
Non - GAAP Measures Reconciliation 30 Note: In the Tangible Equity Table, 2008 to 2013 shares outstanding are retroactively adjusted for 50/1 stock split. Addition all y, all amounts are as of December 31 for each period indicated. Non-GAAP Reconciliation ($mm) Adj. Net Operating Income 2014 2015 20
Slide 31: 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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