James River Group Holdings, Inc. · NASDAQ:JRVR
James River — Q1 2018 Earnings Presentation
31 slides from James River's earnings presentation, May 15, 2018
Slide 1: Compounding Value through an Unrelenting Focus on Underwriting Profit
Compounding Value through an Unrelenting Focus on Underwriting Profit First 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 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 maintaining the ability to respond quickly to match capital to
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 5/7/18 JRVR AMSF AGII KNSL MKL NAVG RLI WRB R² = 0.6191 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x 0.0% 5.0% 1
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 $MM ROATE $MM Gross Fee Income ($MM) • Strong, consistent underwriting, profitable growth • Efficient operator (24.9% expense ratio for Q1 2018) • Increasing E&S contribution
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 May 7, 2018. 2. KNSL’s total share
Slide 10: Capital Management Maximizes Shareholder Value
Capital Management Maximizes Shareholder Value 10 Capital Management History • $380 million of capital returned since 2008 • $174 million of capital returned to shareholders since December 2014 IPO, or 37.3% of tangible book value at that time • Last twelve month d ividend yield of 4.5% 1 1. Calcula
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 $58 million of capital and a single insurance subsidiary, James River Insurance Company, an E&S underwriter • Stonewood Insurance Company is formed
Slide 14: E&S Focus: Profitable, niche specialty underwriting
14 E&S Focus | Profitable, niche specialty underwriting Profitability of E&S vs. Total P&C Industry E&S Gaining Share of P&C Insurance Market E&S segment GWP grew by 43% during 2017 and 54% YTD Q1 2018. • Our business is heavily concentrated in E&S Casualty (81% of 2017 premium). • E&S is the most p
Slide 15: Operating Segments
Operating Segments
Slide 16: Segment Review
16 Segment Review E&S Segment Specialty Admitted Segment Casualty Reinsurance Segment • E&S business underwritten by specialists in 13 divisions organized by product or industry segment • 81.9% average combined ratio from 2013 - 2017 • Focus on small and medium - sized commercial accounts; 97% casua
Slide 17: Attractive Growth in Gross Written Premium
17 Attractive Growth in Gross Written Premium Growth driven by new economy risks, core E&S growth, and expansion of fronting business E&S Segment PROFITABLE SPECIALTY UNDERWRITING Specialty Admitted Segment A FOCUS ON FEE INCOME Casualty Reinsurance Segment LOW VOLATILITY UNDERWRITING ($ 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 Gross Written Premiums Years of Quarter Year Year Industry Ended Ended Ended Divi
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 $126 million of net favorable reserve development since 2008 • As of March 31, 2018, 65.6% 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
24 Traditional investment approach augmented by higher yielding alternatives Total Cash and Investments: $1,643MM Duration: Investment Portfolio (as of March 31, 2018) Net Investment Yield 64% 5% 16% 2% 4% 9% Fixed Maturity Securities Equity Securities Bank Loans Short-Term Investments Other Investe
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
26 Consistent Top Tier Returns Extremely attractive risk reward proposition Source: SNL Financial Data as of March 31, 2018 AMSF , 14.9% AGII , 5.6% KNSL , 10.3% MKL , 5.5% NAVG , 5.6% RLI , 12.9% WRB , 8.4% JRVR , 12.4% 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%
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 $37.64 (Closing Price May 7, 2018) Market Capitalization $1.124 billion (May 7, 2018 market close) LTM Dividend / Yield $1.70 per share declared 4.5% yiel
Slide 29: Non-GAAP Measures Reconciliation
Non - GAAP Measures Reconciliation 29 Non - GAAP Reconciliation Underwriting Profit (Loss) Q1 2017 Q1 2018 ($mm) 2014 2015 2016 2017 Underwriting profit (loss) of the operating segments: Excess and Surplus Lines $ 35.1 $ 47.6 $ 47.2 $ 29.7 $ 8.8 $ 11.3 Specialty Admitted Insurance 0.0 1.1 2.9 3.2 0.
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, except Q1 2017 and Q1 2018, which are as of March 31. Non - GAAP Rec
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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