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美国

证券交易委员会

华盛顿特区20549

表格 10-Q

☒			根据1934年证券交易法第13或第15(d)条的规定，截至季度结束的季度报告 2024年9月30日

or

☐			根据1934年证券交易法第13或第15(d)条的过渡报告，过渡期从_______到_______

委托文件编号：001-39866001-36777

james river GROUP HOLDINGS，LTD。

(根据其章程规定的注册人准确名称)

百慕大						98-0585280
（国家或其他管辖区的 公司成立或组织）						（IRS雇主 唯一识别号码）

克拉伦登大厦, 2号教堂街, 汉密尔顿, 彭伯克 HM11, 百慕大

，（主要行政办公地址）

(邮政编码)

(441) 295-1422

（注册人电话，包括区号）'电话号码（包括区号）

在法案第12(b)条的规定下注册的证券：

每一类的名称

交易标志

注册在每个交易所的名称

每股普通股面值为$0.0002。

JRVR

纳斯达克

全球精选市场

请勾选以下内容。申报人是否（1）在过去12个月内（或申报人需要报告这些报告的时间较短的期间内）已提交证券交易法规定的第13或15（d）条要求提交的所有报告；以及（2）过去90天内已被要求提交此类报告。    是   x 没有 ¨

请勾选以下内容。申报人是否已在过去12个月内（或申报人需要提交此类文件的时间较短的期间内）逐个以电子方式提交了根据规则405提交的互动数据文件。这章的交易中规定。    是  x 没有 ¨

请勾选标记以说明注册人是大型快速申报人、加速申报人、非加速申报人、较小的报告公司还是新兴成长型公司。请查看《交易所法》第120亿.2条中“大型快速申报人”、“加速申报人”、“较小的报告公司”和“新兴成长型公司”的定义。

大型加速报告人

x

加速文件申报人

☐

非急速申报人

☐

更小的报告公司

☐

新兴成长公司

☐

如果是新兴成长公司，请打勾表示注册人已选择不使用根据交易所法第13(a)节提供的任何新的或修订后的财务会计准则延长过渡期符合要求。¨

请在复选标志处注明公司是否为壳公司（根据交易所法令第12b-2条的定义）。

是   ☐ 无 x

2024年11月8日，注册人普通股的流通股数目： 37,829,475

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james river集团控股有限公司。

10-Q表格

指数

						页 数字
第一部分 财务信息
项目 1。			基本报表
			汇编的综合资产负债表—2024年9月30日和2023年12月31日			5
			汇编的并表报表 （损失） 损益及综合收入 （亏损） 收入—2024年和2023年9月30日结束的三个和九个月			7
			简明综合股东权益变动表—2024年和2023年9月30日结束的三个和九个月			8
			简明综合现金流量表—2024年和2023年9月30日结束的九个月			10
			简明合并财务报表注释			11
项目 2。			管理层对财务状况和经营成果的讨论与分析			39
			关键会计政策和估计			40
项目 3.			有关市场风险的定量和定性披露			66
条款 4。			控制和程序			66
第二部分.其他信息
项目 1。			法律诉讼			66
项目1A。			风险因素			67
项目 2。			未注册的股票股权销售和筹款用途			68
项目 3.			对优先证券的违约			68
条款 4。			矿山安全披露			68
项目5。			其他信息			68
项目6。			展示资料			69
签名						70

 

2

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有关前瞻性声明的特别说明

本季度10-Q表格中包含根据1933年证券法第27条和1934年证券交易法第21E条的前瞻性陈述。这些陈述可能被识别为与历史或当前事实不严格相关的事实。通过使用诸如“预期”、“估计”、“期望”、“打算”、“计划”、“寻求”和“相信”等词语，以及类似表达或未来或条件动词如“将”、“应该”、“将会”、“可能”和“可能”的词语，您可以在本季度报告中识别前瞻性陈述。这些前瞻性陈述包括，但不限于，所有关于我们未来财务表现、业务前景和策略、预期财务状况和金融实力评级、流动性和资本需求以及其他类似事宜的陈述。这些前瞻性陈述基于管理层对未来事件的当前期望和假设，其本质上受到难以预测的不确定性、风险和环境变化的影响。

我们的实际结果可能会因本季度报告中包含的前瞻性声明所反映或暗示的各种因素而有所不同，其中许多因素超出我们的控制范围，包括但不限于：

•估计储备存在固有的不确定性，已发生损失可能大于我们的损失和赔付准备金。

•我们在风险管理中的不准确估计和判断可能使我们面临比预期更大的风险；

•监管保险子公司的财务实力评级或前景的下调影响我们吸引和留住子公司所承保的保险业务的能力、我们的竞争地位和我们的财务控件；

•我们对战略选择进行探索的结果，以及市场对此的反应；

•t在2024年11月11日宣布未能完成与恩斯塔集团有限公司的普通股权投资和不利发展覆盖再保险交易；

•有关出售我们意外伤害再保险业务的最终后收购价格调整金额以及与此交易相关的诉讼结果；

•管理团队或关键员工的潜在流失，以及我们吸引和留住人才的能力；

•不利的经济因素导致销售的保险单少于预期，或索赔频率或严重程度增加，或两者都有；

•高于预期的通货膨胀环境对我们的储备、投资价值和投资回报以及我们的补偿支出产生的影响；

•我们的投资组合面临信用风险、利率风险和其他市场风险。

•我们业务的很大一部分依赖于一小群经纪人和代理商，如果我们无法维持这些关系，可能会对我们造成影响；

•我们业务的重要部分依赖于一些客户群体，如果我们未能保持这些关系，或者决定终止与他们的合作，可能会产生重大影响。

•our ability to obtain insurance and 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 (including associated regulations) and the interpretation of certain provisions applicable to insurance/reinsurance businesses with U.S. and non-U.S. operations, 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;

3

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•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 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;

•changes in our financial condition, regulations or other factors that may restrict our subsidiaries’ ability to pay us dividends;

•an adverse result in any litigation or legal proceedings we are or may become subject to; and

•other risks and uncertainties discussed under “Risk Factors” and elsewhere in this Quarterly Report.

Accordingly, you should read this Quarterly Report completely and with the understanding that our actual future results may be materially different from information contained in forward-looking statements.

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 Part II, Item 1A "Risk Factors" in this Quarterly Report, and our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024.

Forward-looking statements speak only as of the date of this Quarterly Report. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not have any obligation, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date of this Quarterly Report, whether as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this Quarterly Report or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

 

 

JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

			(Unaudited) September 30, 2024						December 31, 2023
			(in thousands)
Assets
Invested assets:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: 2024 – $1,269,418; 2023 – $1,405,136)			$	1,215,244					$	1,324,476
Equity securities, at fair value (cost: 2024 – $118,226; 2023 – $114,107)			131,187						119,945
Bank loan participations, at fair value			149,113						156,169
Short-term investments			43,588						72,137
Other invested assets			35,932						33,134
Total invested assets			1,575,064						1,705,861
Cash and cash equivalents			359,773						274,298
Restricted cash equivalents			28,364						72,449
Accrued investment income			10,248						12,106
Premiums receivable and agents’ balances, net			202,575						249,490
Reinsurance recoverable on unpaid losses, net			1,939,388						1,358,474
Reinsurance recoverable on paid losses			133,257						157,991
Prepaid reinsurance premiums			310,367						293,108
Deferred policy acquisition costs			27,279						31,497
Intangible assets, net			32,541						32,813
Goodwill			181,831						181,831
Other assets			158,044						163,939
Assets held-for-sale (Note 2 - discontinued operations)			—						783,393
Total assets			$	4,958,731					$	5,317,250

 

See accompanying notes.

 

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets (continued)

  

			(Unaudited) September 30, 2024						December 31, 2023
			(in thousands, except share amounts)
Liabilities and Shareholders’ Equity
Liabilities:
Reserve for losses and loss adjustment expenses			$	3,001,913					$	2,606,107
Unearned premiums			577,074						587,899
Payables to reinsurers			108,465						158,670
Funds held			25,157						65,235
Deferred reinsurance gain			31,001						20,733
Senior debt			200,800						222,300
Junior subordinated debt			104,055						104,055
Accrued expenses			51,991						56,722
Other liabilities			183,030						174,513
Liabilities held-for-sale (Note 2 - discontinued operations)			—						641,497
Total liabilities			4,283,486						4,637,731
Commitments and contingent liabilities (Note 8)
Series A redeemable preferred shares – 2024 and 2023: $0.00125 par value; 20,000,000 shares authorized; 150,000 shares issued and outstanding			144,898						144,898
Shareholders’ equity:
Common shares – 2024 and 2023: $0.0002 par value; 200,000,000 shares authorized; 37,829,475 and 37,641,563 shares issued and outstanding, respectively			7						7
Additional paid-in capital			881,074						876,240
Retained deficit			(307,937)						(277,905)
Accumulated other comprehensive loss			(42,797)						(63,721)
Total shareholders’ equity			530,347						534,621
Total liabilities, Series A redeemable preferred shares, and shareholders’ equity			$	4,958,731					$	5,317,250

 

See accompanying notes.

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 JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

 

Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (Unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands, except share amounts)
Revenues
Gross written premiums			$	330,423					$	342,851					$	1,073,480					$	1,119,355
Ceded written premiums			(183,085)						(196,869)						(606,617)						(597,655)
Net written premiums			147,338						145,982						466,863						521,700
Change in net unearned premiums			12,388						37,691						27,747						4,352
Net earned premiums			159,726						183,673						494,610						526,052
Net investment income			23,564						21,799						71,127						58,458
Net realized and unrealized gains on investments			4,150						712						6,428						2,487
Other income			4,057						4,135						8,748						6,908
Total revenues			191,497						210,319						580,913						593,905
Expenses
Losses and loss adjustment expenses			184,294						120,174						409,814						366,995
Other operating expenses			51,224						49,693						146,130						147,922
Other expenses			1,752						641						4,582						1,467
Interest expense			6,128						6,486						18,957						18,066
Amortization of intangible assets			90						90						272						272
Impairment of intangible assets			—						2,500						—						2,500
Total expenses			243,488						179,584						579,755						537,222
(Loss) income from continuing operations before income taxes			(51,991)						30,735						1,158						56,683
Income tax (benefit) expense on continuing operations			(13,914)						7,013						1,249						15,530
Net (loss) income from continuing operations			(38,077)						23,722						(91)						41,153
Discontinued operations (Note 2):
(Loss) income from discontinued operations			—						(4,171)						(13,583)						1,318
Loss on disposal of discontinued operations			(1,304)						—						(2,679)						—
Total (loss) income from discontinued operations			(1,304)						(4,171)						(16,262)						1,318
Net (loss) income			(39,381)						19,551						(16,353)						42,471
Dividends on Series A preferred shares			(2,625)						(2,625)						(7,875)						(7,875)
Net (loss) income available to common shareholders			$	(42,006)					$	16,926					$	(24,228)					$	34,596
Other comprehensive income (loss):
Net unrealized gains (losses), net of taxes of $8,255 and $5,562 in 2024 and $(7,624) and $(6,255) in 2023			31,056						(40,226)						20,924						(25,781)
Total comprehensive (loss) income			$	(8,325)					$	(20,675)					$	4,571					$	16,690
Net (loss) income per common share:
Basic
Continuing operations			$	(1.07)					$	0.56					$	(0.21)					$	0.88
Discontinued operations			$	(0.03)					$	(0.11)					$	(0.43)					$	0.04
			$	(1.10)					$	0.45					$	(0.64)					$	0.92
Diluted
Continuing operations			$	(1.07)					$	0.55					$	(0.21)					$	0.88
Discontinued operations			$	(0.03)					$	(0.10)					$	(0.43)					$	0.03
			$	(1.10)					$	0.45					$	(0.64)					$	0.91
Dividend declared per common share			$	0.05					$	0.05					$	0.15					$	0.15
Weighted-average common shares outstanding:
Basic			37,880,297						37,642,632						37,827,968						37,605,986
Diluted			37,880,297						43,463,064						37,827,968						37,822,774

 

See accompanying notes. 

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

 

			Number of Common Shares Outstanding						Common Shares (Par)												Additional Paid-in Capital						Retained Deficit						Accumulated Other Comprehensive Loss						Total
			(in thousands, except share amounts)
Balances at June 30, 2024			37,825,767						$	7											$	879,631					$	(263,994)					$	(73,853)					$	541,791
Net loss			—						—												—						(39,381)						—						(39,381)
Other comprehensive income			—						—												—						—						31,056						31,056
Vesting of RSUs			3,708						—												(3)						—						—						(3)
Compensation expense under share incentive plans			—						—												1,446						—						—						1,446
Dividends on Series A preferred shares			—						—												—						(2,625)						—						(2,625)
Dividends on common shares			—						—												—						(1,937)						—						(1,937)
Balances at September 30, 2024			37,829,475						$	7											$	881,074					$	(307,937)					$	(42,797)					$	530,347
Balances at December 31, 2023			37,641,563						$	7											$	876,240					$	(277,905)					$	(63,721)					$	534,621
Net loss			—						—												—						(16,353)						—						(16,353)
Other comprehensive income			—						—												—						—						20,924						20,924
Vesting of RSUs			187,912						—												(840)						—						—						(840)
Compensation expense under share incentive plans			—						—												5,674						—						—						5,674
Dividends on Series A preferred shares			—						—												—						(7,875)						—						(7,875)
Dividends on common shares			—						—												—						(5,804)						—						(5,804)
Balances at September 30, 2024			37,829,475						$	7											$	881,074					$	(307,937)					$	(42,797)					$	530,347

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JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

 

			Number of Common Shares Outstanding						Common Shares (Par)												Additional Paid-in Capital						Retained Deficit						Accumulated Other Comprehensive Loss						Total
			(in thousands, except share amounts)
Balances at June 30, 2023			37,619,226						$	7											$	872,359					$	(138,225)					$	(148,599)					$	585,542
Net income			—						—												—						19,551						—						19,551
Other comprehensive loss			—						—												—						—						(40,226)						(40,226)
Vesting of RSUs			523						—												(6)						—						—						(6)
Compensation expense under share incentive plans			—						—												2,224						—						—						2,224
Dividends on Series A preferred shares			—						—												—						(2,625)						—						(2,625)
Dividends on common shares			—						—												—						(1,916)						—						(1,916)
Balances at September 30, 2023			37,619,749						$	7											$	874,577					$	(123,215)					$	(188,825)					$	562,544
Balances at December 31, 2022			37,470,237						$	7											$	868,858					$	(152,055)					$	(163,044)					$	553,766
Net income			—						—												—						42,471						—						42,471
Other comprehensive loss			—						—												—						—						(25,781)						(25,781)
Vesting of RSUs			149,512						—												(1,513)						—						—						(1,513)
Compensation expense under share incentive plans			—						—												7,232						—						—						7,232
Dividends on Series A preferred shares			—						—												—						(7,875)						—						(7,875)
Dividends on common shares			—						—												—						(5,756)						—						(5,756)
Balances at September 30, 2023			37,619,749						$	7											$	874,577					$	(123,215)					$	(188,825)					$	562,544

See accompanying notes.

 

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 JAMES RIVER GROUP HOLDINGS, LTD. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

			Nine Months Ended September 30,
			2024						2023
			(in thousands)
Operating activities
Net cash (used in) provided by operating activities (a)			$	(254,550)					$	97,751
Investing activities
Sale of JRG Re			96,412						—
Securities available-for-sale:
Purchases – fixed maturity securities			(123,004)						(194,222)
Sales – fixed maturity securities			198,046						11,181
Maturities and calls – fixed maturity securities			117,537						96,917
Purchases – equity securities			(11,319)						(9,310)
Sales – equity securities			14,098						10,033
Bank loan participations:
Purchases			(91,922)						(47,805)
Sales			69,457						39,513
Maturities			27,384						18,369
Other invested assets:
Purchases			(4,725)						(11,525)
Return of capital			558						1,508
Proceeds from sales			3,919						7,570
Short-term investments, net			28,549						53,683
Securities receivable or payable, net			(1,461)						9,379
Purchases of property and equipment			(2,157)						(3,307)
Net cash provided by (used in) investing activities			321,372						(18,016)
Financing activities
Senior debt repayments			(21,500)						—
Payroll taxes withheld and remitted on net settlement of RSUs			(840)						(1,513)
Dividends on Series A preferred shares			(10,500)						(7,875)
Dividends on common shares			(5,794)						(5,810)
Payment of debt issuance costs			—						(1,135)
Net cash used in financing activities			(38,634)						(16,333)
Change in cash, cash equivalents, and restricted cash equivalents			28,188						63,402
Cash, cash equivalents, and restricted cash equivalents at beginning of period			359,949						276,379
Cash, cash equivalents, and restricted cash equivalents at end of period			$	388,137					$	339,781
Supplemental information
Interest paid			$	22,433					$	22,744
Restricted cash equivalents at beginning of period			$	72,449					$	103,215
Restricted cash equivalents at end of period			$	28,364					$	106,858
Change in restricted cash equivalents			$	(44,085)					$	3,643

(a) Cash provided by operating activities for the nine months ended September 30, 2024 and 2023 includes the restricted cash activity above related to a former insured, per the terms of a collateral trust. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book”. Excluding the restricted cash activity, cash (used in) provided by operating activities was $(210.5) million and $94.1 million for the nine months ended September 30, 2024 and 2023, respectively.

See accompanying notes.

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 JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

1.    Accounting Policies

Organization

James River Group Holdings, Ltd. (referred to as “JRG Holdings” or, with its subsidiaries, the “Company”) is an exempted holding company registered in Bermuda, organized for the purpose of acquiring and managing insurance entities.

The Company owns five insurance companies based in the United States (“U.S.”) focused on specialty insurance niches as described below:

•James River Group Holdings UK Limited (“James River UK”) is an insurance holding company formed in 2015 in the United Kingdom (“U.K.”). JRG Holdings contributed James River Group, Inc. (“James River Group”), a U.S. insurance holding company, to James River UK in 2015.

•James River Group is a Delaware domiciled insurance holding company formed in 2002 which owns all of the Company’s U.S.-based subsidiaries, either directly or indirectly through one of its wholly-owned U.S. subsidiaries. James River Group oversees the Company’s U.S. insurance operations and maintains all of the outstanding debt in the U.S.

•James River Insurance Company is an Ohio domiciled excess and surplus lines insurance company that, with its wholly-owned insurance subsidiary, James River Casualty Company, an Ohio domiciled company, is authorized to write business in every state and the District of Columbia.

•Falls Lake National Insurance Company (“Falls Lake National”) is an Ohio domiciled insurance company which wholly owns Stonewood Insurance Company, an Ohio domiciled company, and Falls Lake Fire and Casualty Company, a California domiciled company. Falls Lake National and its subsidiaries primarily write specialty admitted fronting and program business.

The Company previously owned JRG Reinsurance Company Ltd. (“JRG Re”), a Bermuda domiciled reinsurer, which comprised the former Casualty Reinsurance segment, and which, prior to the suspension of its underwriting activities in 2023, primarily provided non-catastrophe casualty reinsurance to U.S. third parties. On November 8, 2023, the Company entered into an agreement to sell JRG Re. The sale closed on April 16, 2024 and resulted in the Company’s disposition of its casualty reinsurance business and related assets. See Held-for-Sale and Discontinued Operations below and Note 2 for additional disclosure.

Basis of Presentation

The accompanying condensed consolidated financial statements and notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements include the results of the Company and its subsidiaries from their respective dates of inception or acquisition, as applicable. Readers are urged to review the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a more complete description of the Company’s business and accounting policies. In the opinion of management, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Such adjustments consist only of normal recurring items. Interim results are not necessarily indicative of results of operations for the full year. The consolidated balance sheet as of December 31, 2023 was derived from the Company’s audited annual consolidated financial statements.

Intercompany transactions and balances have been eliminated.

Held-for-Sale and Discontinued Operations

The results of operations of a component of the Company are reported in discontinued operations when certain criteria are met as of the date of disposal, or earlier if classified as held-for-sale. The Company determined that the definitive agreement to sell JRG Re met the criteria for JRG Re to be classified as held for sale at December 31, 2023 and that the sale represented a strategic shift that will have a major effect on the Company's operations. Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held-for-sale and segregated for all periods presented in this interim report on Form 10-Q. See Note 2 for additional disclosure.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Estimates and Assumptions

Preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Those estimates are inherently subject to change, and actual results may ultimately differ from those estimates.

Variable Interest Entities

Entities that do not have sufficient equity at risk to allow the entity to finance its activities without additional financial support or in which the equity investors, as a group, do not have the characteristic of a controlling financial interest are referred to as variable interest entities (“VIE”). A VIE is consolidated by the variable interest holder that is determined to have the controlling financial interest (primary beneficiary) as a result of having both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company determines whether it is the primary beneficiary of an entity subject to consolidation based on a qualitative assessment of the VIE’s capital structure, contractual terms, nature of the VIE’s operations and purpose, and the Company’s relative exposure to the related risks of the VIE on the date it becomes initially involved in the VIE. The Company reassesses its VIE determination with respect to an entity on an ongoing basis.

The Company holds interests in VIEs through certain equity method investments included in “other invested assets” in the accompanying condensed consolidated balance sheets. The Company has determined that it should not consolidate any of the VIEs as it is not the primary beneficiary in any of the relationships. Although the investments resulted in the Company holding variable interests in the entities, they did not empower the Company to direct the activities that most significantly impact the economic performance of the entities. The Company’s investments related to these VIEs totaled $7.5 million at September 30, 2024 and $8.4 million at December 31, 2023, representing the Company’s maximum exposure to loss.

Income Tax Expense

Our effective tax rate fluctuates from period to period based on the relative mix of income from continuing operations reported by country and the respective tax rates imposed by each tax jurisdiction. Statutory tax rates are 0% and 21% for Bermuda and the U.S. For the three months ended September 30, 2024, our effective tax rate on income from continuing operations was 26.8% and our effective tax rate for the nine months ended September 30, 2024 was not meaningful due to minimal pre-tax income in the period (22.8% and 27.4% in the respective prior year periods). The Company does not receive a U.S. tax deduction for losses in our Bermuda entities. Bermuda had losses in both periods primarily due to Bermuda holding company expenses and interest expense. For U.S.-sourced income, the Company’s U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities, dividends received income, and excess tax benefits and expenses on share based compensation.

Adopted Accounting Standards

There were no new accounting standards adopted in 2024 that materially impacted the Company's financial statements.

Prospective Accounting Standards

The guidance in ASU 2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures was designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and are not expected to have a material impact on the Company's financial statements.

The guidance in ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures was designed to increase transparency about income tax information through improvements to the rate reconciliation and disclosure of income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and are not expected to have a material impact on the Company's financial statements.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

2.    Discontinued Operations

On November 8, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Fleming Intermediate Holdings LLC, a Cayman Islands limited liability company (the “Buyer”). Pursuant to the Stock Purchase Agreement, and on the terms and subject to the conditions therein, the Buyer agreed to purchase from the Company all of the common shares of JRG Re. JRG Re comprised the remaining operations of the former Casualty Reinsurance segment, and the sale of JRG Re, which closed on April 16, 2024, resulted in the Company’s disposition of its casualty reinsurance business and related assets.

Pursuant to the terms of the Stock Purchase Agreement, the aggregate purchase price received by the Company, after giving effect to estimated adjustments based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing, totaled approximately $291.4 million (the “Closing Date Purchase Price”). The aggregate Closing Date Purchase Price was comprised of (i) $152.4 million paid in cash by the Buyer and (ii) an aggregate $139.0 million dividend and distribution from contributed surplus by JRG Re to the Company. In accordance with the Stock Purchase Agreement, the cash portion of the purchase price was calculated based on an estimated balance sheet of JRG Re as of the date of closing. The estimated balance sheet is subject to final post-closing adjustments, which resulted in the downward adjustment to the purchase price discussed below. Additionally, the Buyer may pay an additional $2.5 million to the Company in the event that certain conditions outlined in the Stock Purchase Agreement are met on the date that is nine months following the date of closing.

The Buyer delivered a closing statement to the Company, and pursuant to the procedures in the Stock Purchase Agreement, the Company has given its notice of disagreement with the Buyer’s closing statement. In its notice of disagreement, the Company (i) agreed with an $11.4 million downward adjustment to the Closing Date Purchase Price due to losses from JRG Re’s operations between the date of the balance sheet used to produce the estimated closing statement and the Closing Date, which downward adjustment is included in “Other Liabilities” on the Company’s Balance Sheet at September 30, 2024 (and was paid to the Buyer on October 18, 2024), and (ii) disputed $54.1 million in aggregate downward adjustments to the Closing Date Purchase Price claimed by the Buyer, which the Company believes are unsupported by the facts known to the Company and the terms of the Stock Purchase Agreement. The Stock Purchase Agreement provides procedures for resolving disputes between the parties regarding the closing statement and it is possible that the resolution of these disputes could result in a significant reduction to the amount of the purchase price.

The Company determined that the sale of JRG Re met the criteria to be classified as held for sale at December 31, 2023 and that the sale represented a strategic shift that will have a major effect on its operations. Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held for sale and segregated for all periods presented in this interim report on Form 10-Q.

The $139.0 million pre-closing dividend was completed in the first quarter of 2024. It included the forgiveness of $133.2 million owed from JRG Holdings to JRG Re and $5.8 million paid in cash to JRG Holdings. In the fourth quarter of 2023, after giving effect to the pre-closing dividend, we recorded an estimated loss on sale of $80.4 million to write down the carrying value of JRG Re to its estimated fair value based upon the estimated sales price of the transaction less costs to sell and other adjustments in accordance with the Stock Purchase Agreement. In the nine months ended September 30, 2024, the estimated loss on the sale was revised to $78.3 million. The loss on disposal for the nine months ended September 30, 2024 of $2.7 million includes the $2.1 million gain for the change in the estimated loss on sale and selling costs incurred of $4.8 million. The $5.8 million cash portion of the pre-closing dividend was included in other liabilities at December 31, 2023.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

JRG Re's assets and liabilities held for sale at December 31, 2023 were comprised of the following:

									December 31, 2023
									(in thousands)
Assets
Invested assets:
Fixed maturity securities, at fair value									$	532,242
Equity securities, at fair value									2,779
Total invested assets									535,021
Cash and cash equivalents									13,202
Accrued investment income									3,589
Premiums receivable and agents’ balances, net									68,441
Reinsurance recoverable on unpaid and paid losses, net									234,615
Deferred policy acquisition costs									4,986
Write down of JRG Re to fair value less cost to sell									(80,400)
Other assets									3,939
Assets held for sale									$	783,393
Liabilities
Reserve for losses and loss adjustment expenses									$	441,666
Unearned premiums									17,223
Funds held									137,796
Deferred reinsurance gain									33,167
Accrued expenses									1,955
Other liabilities									9,690
Liabilities held for sale									$	641,497

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The operating results of JRG Re reported in discontinued operations were as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Revenues:
Gross written premiums			$	—					$	(348)					$	1,137					$	14,782
Ceded written premiums			—						3,839						877						2,069
Net written premiums			—						3,491						2,014						16,851
Change in net unearned premiums			—						15,461						8,371						65,172
Net earned premiums			—						18,952						10,385						82,023
Net investment income			—						4,506						4,432						18,794
Net realized and unrealized (losses) gains on investments			—						(350)						(9,472)						427
Total revenues			—						23,108						5,345						101,244
Expenses:
Losses and loss adjustment expenses			—						18,997						13,157						68,772
Other operating expenses			—						7,436						5,039						28,331
Interest expense			—						846						732						2,823
Total expenses			—						27,279						18,928						99,926
(Loss) income from discontinued operations			—						(4,171)						(13,583)						1,318
Loss on disposal of discontinued operations			(1,304)						—						(2,679)						—
Total (loss) income from discontinued operations			(1,304)						(4,171)						(16,262)						1,318

Cash flows from discontinued operations included in the consolidated statements of cash flows were as follows:

			Nine Months Ended September 30,
			2024						2023
			(in thousands)
Net cash used in operating activities of discontinued operations			$	(25,115)					$	(76,309)
Net cash provided by investing activities of discontinued operations			63,104						72,314
Net cash provided by (used in) discontinued operations			$	37,989					$	(3,995)
Interest paid by discontinued operations			$	1,388					$	3,106

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

3.    Investments

The Company’s available-for-sale fixed maturity securities are summarized as follows:

			Cost or Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Fair Value
			(in thousands)
September 30, 2024
Fixed maturity securities:
State and municipal			$	222,272					$	1,332					$	(20,546)					$	203,058
Residential mortgage-backed			350,155						2,230						(14,275)						338,110
Corporate			479,653						4,188						(20,135)						463,706
Commercial mortgage and asset-backed			195,925						306						(7,005)						189,226
U.S. Treasury securities and obligations guaranteed by the U.S. government			21,413						35						(304)						21,144
Total fixed maturity securities, available-for-sale			$	1,269,418					$	8,091					$	(62,265)					$	1,215,244
December 31, 2023
Fixed maturity securities:
State and municipal			$	273,462					$	1,834					$	(26,459)					$	248,837
Residential mortgage-backed			336,064						1,243						(19,379)						317,928
Corporate			530,408						4,167						(28,847)						505,728
Commercial mortgage and asset-backed			235,302						78						(12,527)						222,853
U.S. Treasury securities and obligations guaranteed by the U.S. government			29,900						8						(778)						29,130
Total fixed maturity securities, available-for-sale			$	1,405,136					$	7,330					$	(87,990)					$	1,324,476

The amortized cost and fair value of available-for-sale investments in fixed maturity securities at September 30, 2024 are summarized, by contractual maturity, as follows:

			Cost or Amortized Cost						Fair Value
			(in thousands)
One year or less			$	19,640					$	19,456
After one year through five years			329,396						327,214
After five years through ten years			239,132						222,779
After ten years			135,170						118,459
Residential mortgage-backed			350,155						338,110
Commercial mortgage and asset-backed			195,925						189,226
Total			$	1,269,418					$	1,215,244

 

Actual maturities may differ for some securities because borrowers have the right to call or prepay obligations with or without penalties.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The following table shows the Company’s gross unrealized losses and fair value for available-for-sale securities aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:

			Less Than 12 Months												12 Months or More												Total
			Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses						Fair Value						Gross Unrealized Losses
			(in thousands)
September 30, 2024
Fixed maturity securities:
State and municipal			$	7,903					$	(113)					$	153,391					$	(20,433)					$	161,294					$	(20,546)
Residential mortgage-backed			76,799						(211)						150,760						(14,064)						227,559						(14,275)
Corporate			50,176						(244)						232,435						(19,891)						282,611						(20,135)
Commercial mortgage and asset-backed			4,700						(6)						116,043						(6,999)						120,743						(7,005)
U.S. Treasury securities and obligations guaranteed by the U.S. government			—						—						12,409						(304)						12,409						(304)
Total fixed maturity securities, available-for-sale			$	139,578					$	(574)					$	665,038					$	(61,691)					$	804,616					$	(62,265)
December 31, 2023
Fixed maturity securities:
State and municipal			$	30,196					$	(287)					$	168,517					$	(26,172)					$	198,713					$	(26,459)
Residential mortgage-backed			68,497						(1,256)						145,954						(18,123)						214,451						(19,379)
Corporate			55,970						(532)						290,308						(28,315)						346,278						(28,847)
Commercial mortgage and asset-backed			24,048						(151)						182,295						(12,376)						206,343						(12,527)
U.S. Treasury securities and obligations guaranteed by the U.S. government			7,961						(71)						19,889						(707)						27,850						(778)
Total fixed maturity securities, available-for-sale			$	186,672					$	(2,297)					$	806,963					$	(85,693)					$	993,635					$	(87,990)

 

At September 30, 2024, the Company held fixed maturity securities of 397 issuers that were in an unrealized loss position with a total fair value of $804.6 million and gross unrealized losses of $62.3 million. None of the fixed maturity securities with unrealized losses has ever missed, or been delinquent on a scheduled principal or interest payment. At September 30, 2024, 99.9% of the Company’s fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or received an equivalent rating from another nationally recognized rating agency. The Company holds one fixed maturity security that is not rated by Standard & Poor's or another nationally recognized rating agency with a fair value of $151,000.

The Company reviews its available-for-sale fixed maturities to determine whether unrealized losses are due to credit-related factors. An allowance for credit losses is established for any credit-related impairments, limited to the amount by which fair value is below amortized cost. Changes in the allowance for credit losses are recognized in earnings and included in net realized and unrealized gains (losses) on investments. Unrealized losses that are not credit-related are recognized in other comprehensive income.

The Company considers the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at September 30, 2024, December 31, 2023, or September 30, 2023. During the nine months ended September 30, 2024, management recognized an impairment loss of $207,000 for one fixed maturity security due to the Company’s inability to hold the security until a recovery in its value to the amortized cost basis. For the remainder of securities in an unrealized loss position, management does not intend to sell the securities, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company elected the fair value option to account for bank loan participations. Under the fair value option, bank loan participations are measured at fair value, and changes in unrealized gains and losses in bank loan participations are reported in the income statement as net realized and unrealized gains (losses) on investments. Applying the fair value option to the bank loan portfolio increases volatility in the Company's financial statements, but management believes it is less subjective and less burdensome to implement and maintain than ASU 2016-13, which would have otherwise been required.

At September 30, 2024, the Company's bank loan portfolio had an aggregate fair value of $149.1 million and unpaid principal of $157.3 million. Investment income on bank loan participations included in net investment income was $4.1 million and $13.2 million for the three and nine months ended September 30, 2024, respectively ($4.3 million and $7.8 million for the three and nine months ended September 30, 2023, respectively). Net realized and unrealized losses on bank loan participations were $2.0 million and $3.1 million for the three and nine months ended September 30, 2024, respectively (gains of $2.6 million and $4.6 million for the three and nine months ended September 30, 2023, respectively). For the three and nine months ended September 30, 2024, management concluded that $654,000 and $2.5 million of the net realized and unrealized losses were due to credit-related impairments. For the nine months ended September 30, 2023, management concluded that $153,000 of the net realized and unrealized losses were due to credit-related impairments. Losses due to credit-related impairments are determined based upon consultations and advice from the Company's specialized investment manager and consideration of any adverse situations that could affect the borrower's ability to repay, the estimated value of underlying collateral, and other relevant factors.

Bank loan participations generally provide a higher yield than our portfolio of fixed maturities and have a credit rating that is below investment grade (i.e. below “BBB-” for Standard & Poor’s) at the date of purchase. These bank loans are primarily senior, secured floating-rate debt rated “BB”, “B”, or “CCC” by Standard & Poor’s or an equivalent rating from another nationally recognized rating agency. These bank loans include assignments of, and participations in, performing and non-performing senior corporate debt generally acquired through primary bank syndications and in secondary markets. Bank loans consist of, but are not limited to, term loans, the funded and unfunded portions of revolving credit loans, and other similar loans and investments. Management believed that it was probable at the time that these loans were acquired that the Company would be able to collect all contractually required payments receivable.

Interest income on bank loan participations is accrued on the unpaid principal balance, and discounts and premiums on bank loan participations are amortized to income using the interest method. Generally, the accrual of interest on a bank loan participation is discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest. A bank loan participation may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Generally, bank loan participations are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Interest received on nonaccrual loans generally is reported as investment income. There were no bank loans on nonaccrual status at September 30, 2024 or December 31, 2023.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company’s net realized and unrealized gains and losses on investments are summarized as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Fixed maturity securities:
Gross realized gains			$	46					$	—					$	1,589					$	—
Gross realized losses			(152)						(307)						(2,804)						(334)
			(106)						(307)						(1,215)						(334)
Bank loan participations:
Gross realized gains			135						140						666						182
Gross realized losses			(1,186)						(577)						(2,447)						(3,286)
Changes in fair values of bank loan participations			(922)						3,007						(1,316)						7,740
			(1,973)						2,570						(3,097)						4,636
Equity securities:
Gross realized gains			1,087						349						2,634						1,280
Gross realized losses			(2)						(2)						(179)						(269)
Changes in fair values of equity securities			5,145						(1,897)						8,286						(2,809)
			6,230						(1,550)						10,741						(1,798)
Short-term investments and other:
Gross realized gains			—						—						—						2
Gross realized losses			—						(1)						—						(19)
Changes in fair values of short-term investments and other			(1)						—						(1)						—
			(1)						(1)						(1)						(17)
Total			$	4,150					$	712					$	6,428					$	2,487

  

Realized investment gains or losses are determined on a specific identification basis.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Company invests selectively in private debt and equity opportunities. These investments, which together comprise the Company’s other invested assets, are primarily focused in renewable energy, limited partnerships, and private debt.

			Carrying Value												Investment Income
			September 30,						December 31,						Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023						2024						2023
			(in thousands)
Renewable energy LLCs (a)
Excess and Surplus Lines			$	7,454					$	8,382					$	548					$	98					$	1,210					$	796
Corporate & Other			—						—						—						—						293						170
			7,454						8,382						548						98						1,503						966
Renewable energy notes receivable (b)
Excess and Surplus Lines			—						608						—						18						61						90
Corporate & Other			—						761						—						23						77						113
			—						1,369						—						41						138						203
Limited partnerships (c)
Excess and Surplus Lines			13,971						11,914						1,050						(171)						1,452						450
Corporate & Other			464						664						—						—						—						—
			14,435						12,578						1,050						(171)						1,452						450
Private Debt (d)
Excess and Surplus Lines			14,043						10,805						158						59						427						231
Corporate & Other			—						—						—						—						—						—
			14,043						10,805						158						59						427						231
Total other invested assets
Excess and Surplus Lines			35,468						31,709						1,756						4						3,150						1,567
Corporate & Other			464						1,425						—						23						370						283
			$	35,932					$	33,134					$	1,756					$	27					$	3,520					$	1,850

 

(a)The Company's Excess and Surplus Lines segment owns equity interests ranging from 3.7% to 5.1% in various LLCs whose principal objective is capital appreciation and income generation from owning and operating renewable energy production facilities (wind and solar). The Company's former Non-Executive Chairman invested in certain of these LLCs. The equity method is used to account for the Company’s LLC investments. Income for the LLCs primarily reflects adjustments to the carrying values of investments in renewable energy projects to their determined fair values. The fair value adjustments are included in revenues for the LLCs. Expenses for the LLCs are not significant and are comprised of administrative and interest expenses. The Company received cash distributions from these investments totaling $439,000 and $50,000 in the nine months ended September 30, 2024 and 2023, respectively. During the fourth quarter of 2022, the underlying projects in two of our LLCs were sold at the manager's discretion. In the three months ended March 31, 2023, the Company received additional proceeds from the sales of $1.2 million comprised of $984,000 in the Excess and Surplus Lines segment and $170,000 in the Corporate and Other segment. In the nine months ended September 30, 2024, the Company received additional proceeds from the sale of $2.0 million comprised of $1.7 million in the Excess and Surplus Lines segment and $293,000 in the Corporate and Other segment.

(b)The Company's Excess and Surplus Lines and Corporate and Other segments invested in two notes receivable for renewable energy projects. Interest on the notes was fixed at 12%. During the nine months ended September 30, 2024, the Company received final principal repayments of $608,000 and $761,000 on the notes receivable in the Company's Excess and Surplus Lines segment and Corporate and Other segment, respectively.

(c)The Company owns investments in limited partnerships that invest in concentrated portfolios including publicly-traded small cap equities, loans of middle market private equity sponsored companies, private equity general partnership interests, commercial mortgage-backed securities, specialty private credit, and tranches of distressed home loans. Income from the partnerships is recognized under the equity method of accounting. At September 30, 2024, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $5.0 million in the limited partnerships.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

(d)The Company's Excess and Surplus Lines segment has invested in two notes receivable for structured private specialty credit. Interest on the notes, which mature in 2031, is fixed at 4.25% and 5.25%. At September 30, 2024, the Company’s Excess and Surplus Lines segment has outstanding commitments to invest another $2.3 million in these notes. Previously, the Company's Excess and Surplus Lines segment held $4.5 million of subordinated notes issued by a bank holding company for which the former Non-Executive Chairman of the Company was previously the Lead Independent Director and an investor. The notes matured on August 12, 2023. Interest on the notes was fixed at 7.6% per annum.

4.    Goodwill and Intangible Assets

On December 11, 2007, the Company completed an acquisition of James River Group by acquiring 100% of the outstanding shares of James River Group common stock, referred to herein as the “Merger”. The transaction was accounted for under the purchase method of accounting, and goodwill and intangible assets were recognized by the Company as a result of the transaction. Goodwill resulting from the Merger was $181.8 million at September 30, 2024 and December 31, 2023.

The gross carrying amounts and accumulated amortization for each major specifically identifiable intangible asset class were as follows: 

									September 30, 2024												December 31, 2023
			Life (Years)						Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
									($ in thousands)
Intangible Assets
Trademarks			Indefinite						$	19,700					$	—					$	19,700					$	—
Insurance licenses and authorities			Indefinite						8,964						—						8,964						—
Identifiable intangible assets not subject to amortization									28,664						—						28,664						—
Broker relationships			24.6						11,611						7,734						11,611						7,462
Identifiable intangible assets subject to amortization									11,611						7,734						11,611						7,462
									$	40,275					$	7,734					$	40,275					$	7,462

 

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

5.    Earnings Per Share

The following represents a reconciliation of the numerator and denominator of the basic and diluted earnings per common share computations contained in the condensed consolidated financial statements:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands, except share and per share amounts)
Net (loss) income from continuing operations			$	(38,077)					$	23,722					$	(91)					$	41,153
Less: Dividends on Series A preferred shares			(2,625)						(2,625)						(7,875)						(7,875)
(Loss) income from continuing operations available to common shareholders			$	(40,702)					$	21,097					$	(7,966)					$	33,278
(Loss) income from discontinued operations			(1,304)						(4,171)						(16,262)						1,318
Net (loss) income available to common shareholders			$	(42,006)					$	16,926					$	(24,228)					$	34,596
Weighted average common shares outstanding:
Basic			37,880,297						37,642,632						37,827,968						37,605,986
Dilutive potential common shares			—						5,820,432						—						216,788
Diluted			37,880,297						43,463,064						37,827,968						37,822,774
Net (loss) income per common share:
Basic
Continuing operations			$	(1.07)					$	0.56					$	(0.21)					$	0.88
Discontinued operations			$	(0.03)					$	(0.11)					$	(0.43)					$	0.04
			$	(1.10)					$	0.45					$	(0.64)					$	0.92
Diluted
Continuing operations			$	(1.07)					$	0.55					$	(0.21)					$	0.88
Discontinued operations			$	(0.03)					$	(0.10)					$	(0.43)					$	0.03
			$	(1.10)					$	0.45					$	(0.64)					$	0.91

For the three and nine months ended September 30, 2024, potential common shares of 6,949,943 and 6,957,275 were excluded from the calculation of diluted earnings per common share, respectively, as their effects were anti-dilutive. For the three months ended September 30, 2023, all potential common shares were dilutive and included in the calculation of diluted earnings per common share. For the nine months ended September 30, 2023, potential common shares of 5,640,158 were excluded from the calculation of diluted earnings per common share as their effects were anti-dilutive.

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

6.    Reserve for Losses and Loss Adjustment Expenses

The following table provides a reconciliation of the beginning and ending reserve balances for losses and loss adjustment expenses, net of reinsurance, to the gross amounts reported in the condensed consolidated balance sheets. Reinsurance recoverables on unpaid losses and loss adjustment expenses are presented gross of an allowance for credit losses on reinsurance balances of $776,000 at September 30, 2024, $744,000 at June 30, 2024, $660,000 at December 31, 2023, $662,000 at September 30, 2023, $637,000 at June 30, 2023, and $580,000 at December 31, 2022.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at beginning of period			$	1,301,662					$	1,154,958					$	1,246,973					$	1,080,766
Add: Incurred losses and loss adjustment expenses net of reinsurance:
Current year			109,464						115,552						332,410						354,141
Prior years - retroactive reinsurance			17,954						(3,187)						10,268						6,261
Prior years - excluding retroactive reinsurance			56,876						7,809						67,136						6,593
Total incurred losses and loss and adjustment expenses			184,294						120,174						409,814						366,995
Deduct: Loss and loss adjustment expense payments net of reinsurance:
Current year			10,472						10,513						18,755						18,594
Prior years			82,539						75,966						252,773						231,066
Total loss and loss adjustment expense payments			93,011						86,479						271,528						249,660
Deduct: Change in deferred reinsurance gain - retroactive reinsurance			17,954						(3,187)						10,268						6,261
Deduct: Loss reserves ceded in E&S ADC			313,242						—						313,242						—
Reserve for losses and loss adjustment expenses net of reinsurance recoverables at end of period			1,061,749						1,191,840						1,061,749						1,191,840
Add: Reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period			1,940,164						1,284,775						1,940,164						1,284,775
Reserve for losses and loss adjustment expenses gross of reinsurance recoverables on unpaid losses and loss adjustment expenses at end of period			$	3,001,913					$	2,476,615					$	3,001,913					$	2,476,615

  

The Company experienced $56.9 million of net adverse reserve development in the three months ended September 30, 2024 on the reserve for losses and loss adjustment expenses held at December 31, 2023 (excluding adverse prior year development subject to retroactive reinsurance accounting - see Loss Portfolio Transfers below). This reserve development included $57.0 million of net adverse development in the Excess and Surplus Lines segment, including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves), and $165,000 of net favorable development in the Specialty Admitted Insurance segment.

The Company experienced $7.8 million of net adverse reserve development in the three months ended September 30, 2023 on the reserve for losses and loss adjustment expenses held at December 31, 2022 (excluding adverse prior year development subject to retroactive reinsurance accounting - see Loss Portfolio Transfers below). This reserve development included $7.8 million of net adverse development in the Excess and Surplus Lines segment and no development in the Specialty Admitted Insurance segment.

The Company experienced $67.1 million of net adverse reserve development in the nine months ended September 30, 2024 on the reserve for losses and loss adjustment expenses held at December 31, 2023 (excluding adverse prior year development subject to retroactive reinsurance accounting - see Loss Portfolio Transfers below). This reserve development included $67.7 million of net adverse development in the Excess and Surplus Lines segment, including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves), and $607,000 of net favorable development in the Specialty Admitted Insurance segment.

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Notes to Condensed Consolidated Financial Statements (continued)

The Company experienced $6.6 million of net adverse reserve development in the nine months ended September 30, 2023 on the reserve for losses and loss adjustment expenses held at December 31, 2022 (excluding adverse prior year development subject to retroactive reinsurance accounting - see Loss Portfolio Transfers below). This reserve development included $7.6 million of net adverse development in the Excess and Surplus Lines segment and $1.0 million of net favorable development in the Specialty Admitted Insurance segment.

Loss Portfolio Transfers

Loss portfolio transfers are a form of reinsurance utilized by the Company to transfer losses and loss adjustment expenses and associated risk of adverse development on covered subject business, as defined in the respective agreements, to an assuming reinsurer in exchange for a reinsurance premium. Loss portfolio transfers can bring economic finality (up to the limit of such loss portfolio transfer, if applicable) on the subject risks when they no longer meet the Company's risk appetite or are no longer aligned with the Company's risk management guidelines. There is no economic impact to the Company over the life of a loss portfolio transfer so long as any additional losses subject to the contract are within the limit of the contract and the counterparty performs under the contract.

Combined Loss Portfolio Transfer and Adverse Development Cover

On July 2, 2024, James River Insurance Company (“JRIC”) and James River Casualty Company (together with JRIC, the “Ceding Companies”), two of the Company’s principal operating subsidiaries, entered into a Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract (the “E&S ADC”) with State National Insurance Company, Inc. (“State National”). The transaction closed upon signing.

The E&S ADC was effective January 1, 2024 (the “Effective Date”) and applies to the Ceding Companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “Subject Business”). Pursuant to the E&S ADC, (a) State National reinsures 85% of losses paid on and after the Effective Date in respect of the Subject Business in excess of $716.6 million up to an aggregate limit of $467.1 million (with State National’s share of the aggregate limit being $397.0 million) in exchange for a reinsurance premium paid by the Ceding Companies equal to $313.2 million, (b) the Ceding Companies continue to manage claims and to manage and collect the benefit of other existing third-party reinsurance on the Subject Business, which third-party reinsurance inures to the benefit of the E&S ADC, and (c) the Ceding Companies are entitled to a profit commission of 50% of any favorable development on the business ceded to State National below 104.5% of carried reserves, which profit commission shall not exceed $87.0 million in total.

Commercial Auto Loss Portfolio Transfer

On September 27, 2021, James River Insurance Company and James River Casualty Company (together, “James River”) entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc. (“Aleka”), a captive insurance company affiliate of Rasier LLC, to reinsure substantially all of the Excess and Surplus Lines segment's legacy portfolio of commercial auto policies previously issued to Rasier LLC and its affiliates (collectively, “Rasier”) for which James River is not otherwise indemnified by Rasier. The reinsurance coverage is structured to be fully collateralized, is not subject to an aggregate limit, and is subject to certain exclusions.

Retroactive Reinsurance Accounting

The Company periodically reevaluates the remaining reserves subject to the Commercial Auto LPT and the E&S ADC, and when recognized adverse prior year development on the subject business causes the cumulative amounts ceded under the loss portfolio transfers to exceed the consideration paid, the loss portfolio transfers move into a gain position subject to retroactive reinsurance accounting under GAAP. Gains are deferred under retroactive reinsurance accounting and recognized in earnings in proportion to actual paid recoveries under the loss portfolio transfers using the recovery method. While the deferral of gains can introduce volatility in our results in the short-term, over the life of the contract, we would expect no economic impact to the Company as long as the counterparty performs under the contract. The impact of retroactive reinsurance accounting is not indicative of our current and ongoing operations.

For the three and nine months ended September 30, 2024, due to adverse paid and reported loss trends on the legacy Rasier business, the Company recognized adverse prior year development of $914,000 and $2.8 million, respectively ($7.1 million and $60.6 million in the respective prior year periods), on the net reserves subject to the Commercial Auto LPT, resulting in corresponding additional amounts ceded under the Commercial Auto LPT. As a result, the cumulative amounts ceded under the Commercial Auto LPT exceed the consideration paid, putting the Commercial Auto LPT into a gain position. The Company has applied retroactive reinsurance accounting to the loss portfolio transfer. Retroactive reinsurance benefits of $2.2 million and $11.8 million for the three and nine months ended September 30, 2024, respectively ($10.2 million and $54.4 million in the

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Notes to Condensed Consolidated Financial Statements (continued)

respective prior year periods), were recorded in losses and loss adjustment expenses on the Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income using the recovery method. The cumulative amounts ceded under the loss portfolio transfer were $459.1 million and $456.2 million as of September 30, 2024 and December 31, 2023, respectively. The deferred retroactive reinsurance gain related to the Commercial Auto LPT was $11.8 million and $20.7 million at September 30, 2024 and December 31, 2023, respectively.

In the three months ended September 30, 2024, the Company recognized $19.2 million of net adverse development on E&S business subject to the E&S ADC and retroactive reinsurance accounting which put the E&S ADC into a gain position. Retroactive reinsurance accounting was applied, resulting in a deferred retroactive reinsurance gain related to the E&S ADC of $19.2 million at September 30, 2024. The Company also recognized a reserve charge upon execution of the contract (consideration paid in excess of initial reserves) of $52.2 million, which was recorded as adverse development within losses and loss adjustment expenses in the three and nine months ended September 30, 2024. The Company has $75.9 million of aggregate limit remaining on the E&S ADC at September 30, 2024.

7.    Other Comprehensive Income (Loss)

The following table summarizes the components of other comprehensive income (loss):

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Unrealized gains (losses) arising during the period, before U.S. income taxes			$	39,205					$	(48,328)					$	25,271					$	(32,883)
U.S. income taxes			(8,233)						7,688						(5,307)						6,325
Unrealized gains (losses) arising during the period, net of U.S. income taxes			30,972						(40,640)						19,964						(26,558)
Less reclassification adjustment:
Net realized investment losses			(106)						(478)						(1,215)						(847)
U.S. income taxes			22						64						255						70
Reclassification adjustment for investment losses realized in net income			(84)						(414)						(960)						(777)
Other comprehensive income (loss)			$	31,056					$	(40,226)					$	20,924					$	(25,781)

In addition to the $106,000 and $1.2 million of net realized investment losses on available-for-sale fixed maturities for the three and nine months ended September 30, 2024 ($478,000 and $847,000 of net realized investment losses for the three and nine months ended September 30, 2023, respectively), the Company also recognized net realized and unrealized investment losses in the respective periods of $2.0 million and $3.1 million on its investments in bank loan participations (net realized and unrealized investment gains of $2.6 million and $4.6 million in the respective prior year periods) and net realized and unrealized investment gains of $6.2 million and $10.7 million on its investments in equity securities (net realized and unrealized investment losses of $1.6 million and $1.8 million in the respective prior year periods).

8.       Contingent Liabilities

The Company is involved in various legal proceedings, including commercial matters and litigation regarding insurance claims which arise in the ordinary course of business, as well as the matters specifically discussed below. In addition, the Company is involved from time to time in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in the handling of insurance claims. The Company believes that the outcome of such matters, individually and in the aggregate, is not reasonably likely to have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

On November 13, 2023, a purported class action lawsuit was filed in the U.S. District Court, Southern District of New York, on behalf of Paul Glantz against James River Group Holdings, Ltd. and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On January 12, 2024, both Mr. Glantz and Madhav Ghimire, another individual shareholder, filed an application with the court for appointment as Lead Plaintiff, and on January 26, 2024 Mr. Glantz filed a notice of non-opposition to Mr. Ghimire's competing motion for appointment as Lead Plaintiff. On March 25, 2024 the court entered an order appointing Mr. Ghimire as lead plaintiff. On May 24, 2024, Plaintiff filed its consolidated amended complaint alleging that he acquired the Company’s common stock at artificially inflated pricing between May 2, 2023 and November 7, 2023, inclusive, that the Company knew and/or recklessly disregarded that it had improperly accounted for

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Notes to Condensed Consolidated Financial Statements (continued)

reinsurance premiums and did not have effective internal control over financial reporting, and that as a result, he suffered unspecified damages, and seeking unspecified damages, costs, attorneys’ fees and such other relief as the court may deem proper. On July 23, 2024 the Company filed a motion to dismiss the consolidated amended complaint. On September 6, 2024, the plaintiff filed its Opposition to Motion to Dismiss and on October 8, 2024, the Company filed its Reply to the plaintiff’s Opposition to Motion to Dismiss. The Company believes that the claims are without merit and intends to vigorously defend this lawsuit.

On March 11, 2024, the Company filed a complaint (the “Complaint”) in the Supreme Court of the State of New York, New York County, Commercial Division against Fleming Intermediate Holdings LLC (“Fleming”), a Cayman Islands limited liability company, relating to the previously announced Stock Purchase Agreement, dated as of November 8, 2023 (the “Stock Purchase Agreement”), pursuant to which Fleming agreed to purchase all of the outstanding common shares of JRG Re (the “Transaction”). The complaint alleges that Fleming breached the Stock Purchase Agreement by its refusal to close the Transaction on March 1, 2024 as required under the terms of the Stock Purchase Agreement, and seeks specific performance of Fleming’s obligation to complete the Transaction and an award of damages. The Company subsequently filed a motion for preliminary injunction to require Fleming to fulfill its contractual obligation to close the Transaction, and on April 6, 2024 the Court granted the Company’s motion and ordered Fleming to complete the Transaction on or prior to April 16, 2024. On April 8, 2024, Fleming filed a notice of appeal of the preliminary injunction, which Fleming withdrew on October 9, 2024. The Transaction closed on April 16, 2024. On April 19, 2024, Fleming filed a motion to dismiss the Complaint. On May 9, 2024, the Company filed an amended complaint seeking, among other things, specific performance and damages suffered as a result of Fleming’s breach of the Stock Purchase Agreement. On June 6, 2024, Fleming filed a motion to dismiss the amended complaint, on July 3, 2024 the Company filed an opposition to the motion to dismiss, on July 24, 2024 Fleming filed its reply to the opposition, and on October 29, 2024 the court heard oral arguments on the motion to dismiss.

On July 15, 2024, Fleming filed a lawsuit in the U.S. District Court, Southern District of New York against James River Group Holdings, Ltd. and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, common law fraud, and breaches of contract, and seeking unspecified monetary damages, including compensatory, consequential and punitive damages, all associated with Fleming’s purchase of JRG Re pursuant to the Stock Purchase Agreement. On July 31, 2024, Fleming filed an amended complaint, on September 13, 2024 the Company filed a motion to dismiss the amended complaint, and on October 18, 2024 Fleming filed an amended complaint. The Company’s motion to dismiss the amended complaint is due November 15, 2024, Fleming’s opposition to the motion to dismiss is due December 23, 2024 and the Company’s reply to the opposition is due January 17, 2025. The Company believes Fleming’s claims are without merit and intends to vigorously defend this lawsuit.

Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book

James River previously issued a set of commercial auto insurance contracts (the “Rasier Commercial Auto Policies”) to Rasier under which James River pays losses and loss adjustment expenses on the contracts. James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River. On September 27, 2021, James River entered into the Commercial Auto LPT with Aleka to reinsure substantially all of the Rasier Commercial Auto Policies for which James River is not otherwise indemnified by Rasier under the Indemnity Agreements. Under the terms of the Commercial Auto LPT, effective as of July 1, 2021, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to Rasier Commercial Auto Policies written in the years 2013-2019, which amount constituted the reinsurance premium. Since inception, due to adverse paid and reported loss trends on the legacy Rasier business, the Company has recognized adverse prior year development of $113.9 million on the reserves subject to the Commercial Auto LPT, bringing the cumulative amount ceded under the Commercial Auto LPT to $459.1 million at September 30, 2024.

Each of Rasier and Aleka are required to post collateral under the Indemnity Agreements and the Commercial Auto LPT, respectively:

•Pursuant to the Indemnity Agreements, Rasier is required to post collateral equal to 102% of James River’s estimate of the amounts that are recoverable or may be recoverable under the Indemnity Agreements, including, among other things, case loss and loss adjustment expense reserves, IBNR loss and loss adjustment expense reserves, extra contractual obligations and excess policy limits liabilities. The collateral is provided through a collateral trust arrangement (the “Indemnity Trust”) in favor of James River by Aleka. In connection with the execution of the Commercial Auto LPT, James River returned $691.3 million to the Indemnity Trust, representing the remaining balance of the amount withdrawn in October 2019, as was permitted under the indemnification agreements with Rasier and the associated trust agreement. At September 30, 2024, the balance in the Indemnity Trust was $85.3 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the

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Notes to Condensed Consolidated Financial Statements (continued)

Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $102.7 million.

•Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River’s estimate of Aleka’s obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in the Company’s statutory financial statements. The collateral is provided through a collateral trust arrangement (the “LPT Trust”) established in favor of James River by Aleka. At September 30, 2024, the balance in the LPT Trust was $40.1 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Commercial Auto LPT as described below, the total balance of collateral securing Aleka’s obligations under the Commercial Auto LPT was $47.8 million. At September 30, 2024, the total reinsurance recoverables under the Commercial Auto LPT was $46.9 million.

In connection with the execution of the Commercial Auto LPT, James River and Aleka entered into an administrative services agreement (the “Administrative Services Agreement”) with a third party claims administrator (the “Administrator”) pursuant to which the Administrator handles the claims on the Rasier Commercial Auto Policies for the remaining life of those claims. The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established a loss fund trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations. James River funds the Loss Fund Trust using funds withdrawn from the Indemnity Trust, funds withdrawn from the LPT Trust, and its own funds, in each case in an amount equal to the pro rata portion of the required Loss Fund Trust balance attributable to the Indemnity Agreements, the Commercial Auto LPT and James River’s existing third party reinsurance agreements, respectively. At September 30, 2024, the balance in the Loss Fund Trust was $28.4 million, including $17.4 million representing collateral supporting Rasier’s obligations under the Indemnity Agreements and $7.7 million representing collateral supporting Aleka’s obligations under the Commercial Auto LPT. Funds posted to the Loss Fund Trust are classified as restricted cash equivalents on the Company’s balance sheets.

While the Commercial Auto LPT brings economic finality to substantially all of the Rasier Commercial Auto Policies, the Company has credit exposure to Rasier and Aleka under the Indemnity Agreements and the Commercial Auto LPT if the estimated losses and expenses of the Rasier Commercial Auto Policies grow at a faster pace than the growth in the collateral balances. In addition, the Company has credit exposure if its estimates of future losses and loss adjustment expenses and other amounts recoverable under the Indemnity Agreements and the Commercial Auto LPT, which are the basis for establishing the collateral balances, are lower than actual amounts paid or payable. The amount of our credit exposure in any of these instances could be material. To mitigate these risks, the Company closely and frequently monitors its exposure compared to the collateral held, and requests additional collateral in accordance with the terms of the Commercial Auto LPT and Indemnity Agreements when its analysis indicates that it has uncollateralized exposure.

9.    Segment Information

The Company’s continuing operations are comprised of three reportable segments, two of which are separately managed business units and the third (“Corporate and Other”) includes the Company’s remaining operations. Prior to entering into a definitive agreement to sell JRG Re on November 8, 2023, JRG Re was considered a reportable segment (the “Casualty Reinsurance” segment). After entering into the agreement to sell JRG Re, the Company no longer considered Casualty Reinsurance to be a reportable segment, but instead it is reported as discontinued operations. The segment information below excludes discontinued operations for all periods presented.

Segment profit (loss) is measured by underwriting profit (loss), which is generally defined as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) in “other income” in the Condensed Consolidated Statements of Income and Comprehensive Income less loss and loss adjustment expenses on business not subject to retroactive reinsurance accounting for loss portfolio transfers (see Loss Portfolio Transfers in Note 6 – Reserve for Losses and Loss Adjustment Expenses) and other operating expenses of the operating segments. Gross fee income of $1.1 million and $3.7 million for the Specialty Admitted Insurance segment was included in other income and in underwriting profit (loss) for the three and nine months ended September 30, 2024, respectively ($1.2 million and $3.6 million in the respective prior year periods). Segment results are reported prior to the effects of intercompany reinsurance agreements among the Company’s insurance subsidiaries.

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Notes to Condensed Consolidated Financial Statements (continued)

The following table summarizes the Company’s segment results:

			Excess and Surplus Lines						Specialty Admitted Insurance												Corporate and Other						Total
			(in thousands)
Three Months Ended September 30, 2024
Gross written premiums			$	230,215					$	100,208											$	—					$	330,423
Net earned premiums			138,892						20,834												—						159,726
Underwriting (loss) profit of operating segments			(50,155)						1,810												—						(48,345)
Net investment income			17,970						4,370												1,224						23,564
Interest expense			—						—												6,128						6,128
Segment revenues			163,488						26,421												1,588						191,497
Segment goodwill			181,831						—												—						181,831
Segment assets			3,423,073						1,417,883												117,775						4,958,731
Three Months Ended September 30, 2023
Gross written premiums			$	217,151					$	125,700											$	—					$	342,851
Net earned premiums			157,600						26,073												—						183,673
Underwriting profit of operating segments			18,342						1,967												—						20,309
Net investment income			18,204						3,420												175						21,799
Interest expense			—						—												6,486						6,486
Segment revenues			177,026						32,938												355						210,319
Segment goodwill			181,831						—												—						181,831
Segment assets			2,864,996						1,379,044												72,625						4,316,665
Nine Months Ended September 30, 2024
Gross written premiums			$	736,742					$	336,738											$	—					$	1,073,480
Net earned premiums			424,962						69,648												—						494,610
Underwriting (loss) profit of operating segments			(25,237)						6,012												—						(19,225)
Net investment income			56,651						12,453												2,023						71,127
Interest expense			—						—												18,957						18,957
Segment revenues			491,981						86,012												2,920						580,913
Segment goodwill			181,831						—												—						181,831
Segment assets			3,423,073						1,417,883												117,775						4,958,731
Nine Months Ended September 30, 2023
Gross written premiums			$	732,180					$	387,175											$	—					$	1,119,355
Net earned premiums			455,640						70,412												—						526,052
Underwriting profit of operating segments			45,449						1,882												—						47,331
Net investment income			48,160						9,578												720						58,458
Interest expense			—						—												18,066						18,066
Segment revenues			506,876						85,778												1,251						593,905
Segment goodwill			181,831						—												—						181,831
Segment assets			2,864,996						1,379,044												72,625						4,316,665

  

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Notes to Condensed Consolidated Financial Statements (continued)

The following table reconciles the underwriting (loss) profit of the operating segments by individual segment to consolidated (loss) income from continuing operations before income taxes:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Underwriting profit (loss) of the operating segments:
Excess and Surplus Lines			$	(50,155)					$	18,342					$	(25,237)					$	45,449
Specialty Admitted Insurance			1,810						1,967						6,012						1,882
Total underwriting profit of operating segments			(48,345)						20,309						(19,225)						47,331
Other operating expenses of the Corporate and Other segment			(8,421)						(8,482)						(28,182)						(26,312)
Underwriting (loss) profit			(56,766)						11,827						(47,407)						21,019
Losses and loss adjustment expenses – retroactive reinsurance			(17,954)						3,187						(10,268)						(6,261)
Net investment income			23,564						21,799						71,127						58,458
Net realized and unrealized gains on investments			4,150						712						6,428						2,487
Other income and expenses			1,233						2,286						507						1,818
Interest expense			(6,128)						(6,486)						(18,957)						(18,066)
Amortization of intangible assets			(90)						(90)						(272)						(272)
Impairment of intangible assets			—						(2,500)						—						(2,500)
(Loss) income from continuing operations before income taxes			$	(51,991)					$	30,735					$	1,158					$	56,683

10.    Other Operating Expenses and Other Expenses

Other operating expenses consist of the following:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Amortization of policy acquisition costs			$	18,412					$	19,314					$	50,217					$	56,073
Other underwriting expenses of the operating segments			24,391						21,897						67,731						65,537
Other operating expenses of the Corporate and Other segment			8,421						8,482						28,182						26,312
Total			$	51,224					$	49,693					$	146,130					$	147,922

Other expenses of $1.8 million and $4.6 million for the three and nine months ended September 30, 2024, respectively ($641,000 and $1.5 million in the respective prior year periods), primarily consist of certain nonoperating expenses including legal and other professional fees and other expenses related to various strategic initiatives.

11.    Senior Debt

On April 16, 2024, the Company amended a senior revolving credit facility (as amended or amended and restated, the (“2013 Facility”) in connection with the closing of the sale of JRG Re by the Company to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, and (ii) decrease a secured revolving facility commitment to $45.0 million. At September 30, 2024, the 2013 Facility is comprised of the following:

•    A $212.5 million unsecured revolving facility to meet the working capital needs of the Company. At September 30, 2024 and December 31, 2023, the Company had a drawn balance of $185.8 million outstanding on the unsecured revolver.

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Notes to Condensed Consolidated Financial Statements (continued)

•    A $45.0 million secured revolving facility to issue letters of credit for the benefit of third-party reinsureds. At September 30, 2024, the Company had $23.9 million of letters of credit issued under the secured facility, all of which are collateralized by a back-to-back letter of credit issued by Comerica Bank on behalf of JRG Re.

The 2013 Facility contains certain financial and other covenants (including minimum net worth, maximum ratio of total adjusted debt outstanding to total capitalization, and financial strength ratings) with which the Company was in compliance at September 30, 2024.

Also in connection with the closing of the sale of JRG Re by the Company, on April 16, 2024, the Company amended a credit agreement (the “2017 Facility”) to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, (ii) increase the applicable interest rates, (iii) eliminate the letter of credit portion of the facility, and (iv) to build in an automatic decrease of the facility amount by the amount of each letter of credit outstanding under the 2017 Facility as of the date of the amendment with effect from the date each such letter of credit is cancelled. The 2017 Facility provides the Company with a revolving line of credit which may be used for loans and letters of credit made or issued, at the borrowers’ option, on a secured or unsecured basis. In the nine months ended September 30, 2024, the Company repaid $21.5 million of unsecured loans under the facility. At September 30, 2024, there were no loans outstanding and $24.4 million of letters of credit were issued under the facility, all of which are collateralized by a back-to-back letter of credit issued by Comerica Bank on behalf of JRG Re. The 2017 Facility contains certain financial and other covenants with which the Company was in compliance at September 30, 2024.

12.    Fair Value Measurements

Three levels of inputs are used to measure fair value of financial instruments: (1) Level 1: quoted price (unadjusted) in active markets for identical assets, (2) Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument, and (3) Level 3: inputs to the valuation methodology are unobservable for the asset or liability.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.

The fair values of fixed maturity securities, equity securities, and bank loan participations have been determined using fair value prices provided by the Company’s investment accounting services provider or investment managers, who utilize internationally recognized independent pricing services. The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g. broker quotes and prices observed for comparable securities). Values for U.S. Treasury and publicly-traded equity securities are generally based on Level 1 inputs which use the market approach valuation technique. The values for all other fixed maturity securities (including state and municipal securities and obligations of U.S. government corporations and agencies) and bank loan participations generally incorporate significant Level 2 inputs, and in some cases, Level 3 inputs, using the market approach and income approach valuation techniques. There have been no changes in the Company’s use of valuation techniques since December 31, 2022.

The Company reviews fair value prices provided by its outside investment accounting service provider or investment managers for reasonableness by comparing the fair values provided by the managers to those provided by its investment custodian. The Company also reviews and monitors changes in unrealized gains and losses. The Company has not historically adjusted security prices. The Company obtains an understanding of the methods, models and inputs used by the investment managers and independent pricing services, and controls are in place to validate that prices provided represent fair values. The Company’s control process includes, but is not limited to, initial and ongoing evaluation of the methodologies used, a review of specific securities and an assessment for proper classification within the fair value hierarchy, and obtaining and reviewing internal control reports for our investment manager that obtains fair values from independent pricing services.

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Notes to Condensed Consolidated Financial Statements (continued)

Assets measured at fair value on a recurring basis as of September 30, 2024 are summarized below:

			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets Level 1						Significant Other Observable Inputs Level 2						Significant Unobservable Inputs Level 3						Total
			(in thousands)
Fixed maturity securities, available-for-sale:
State and municipal			$	—					$	203,058					$	—					$	203,058
Residential mortgage-backed			—						338,110						—						338,110
Corporate			—						463,706						—						463,706
Commercial mortgage and asset-backed			—						189,226						—						189,226
U.S. Treasury securities and obligations guaranteed by the U.S. government			21,144						—						—						21,144
Total fixed maturity securities, available-for-sale			$	21,144					$	1,194,100					$	—					$	1,215,244
Equity securities:
Preferred stock			—						73,793						—						73,793
Common stock			54,919						2,464						11						57,394
Total equity securities			$	54,919					$	76,257					$	11					$	131,187
Bank loan participations			$	—					$	149,113					$	—					$	149,113
Short-term investments			$	—					$	43,588					$	—					$	43,588

  

Assets measured at fair value on a recurring basis as of December 31, 2023 are summarized below:

			Fair Value Measurements Using
			Quoted Prices in Active Markets for Identical Assets Level 1						Significant Other Observable Inputs Level 2						Significant Unobservable Inputs Level 3						Total
			(in thousands)
Fixed maturity securities, available-for-sale:
State and municipal			$	—					$	248,837					$	—					$	248,837
Residential mortgage-backed			—						317,928						—						317,928
Corporate			—						505,728						—						505,728
Commercial mortgage and asset-backed			—						222,853						—						222,853
U.S. Treasury securities and obligations guaranteed by the U.S. government			29,130						—						—						29,130
Total fixed maturity securities, available-for-sale			$	29,130					$	1,295,346					$	—					$	1,324,476
Equity securities:
Preferred stock			—						69,310						—						69,310
Common stock			48,370						2,254						11						50,635
Total equity securities			$	48,370					$	71,564					$	11					$	119,945
Bank loan participations			$	—					$	156,169					$	—					$	156,169
Short-term investments			$	—					$	72,137					$	—					$	72,137

A reconciliation of the beginning and ending balances of available-for-sale fixed maturity securities, equity securities, and bank loan participations measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is shown below:

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Notes to Condensed Consolidated Financial Statements (continued)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)												(in thousands)
Beginning balance			$	5					$	16					$	11					$	7
Transfers out of Level 3			—						—						—						—
Transfers in to Level 3			—						—						—						—
Purchases			—						—						—						—
Sales			—						—						—						—
Maturities, calls and paydowns			—						—						—						—
Amortization of discount			—						—						—						—
Total gains or losses (realized/unrealized):
Included in earnings			6						8						—						17
Included in other comprehensive income			—						—						—						—
Ending balance			$	11					$	24					$	11					$	24

The Company held one equity security at December 31, 2023 and September 30, 2024 for which the fair value was determined using significant unobservable inputs (Level 3). The fair value of $11,000 at September 30, 2024 for the equity security was obtained from our asset manager and was derived from an internal model.

The Company held one equity security at December 31, 2022 and September 30, 2023 for which the fair value was determined using significant unobservable inputs (Level 3). The fair value of $24,000 at September 30, 2023 for the equity security was obtained from our asset manager and was derived from an internal model.

Transfers out of Level 3 occur when the Company is able to obtain reliable prices from pricing vendors for securities for which the Company was previously unable to obtain reliable prices. Transfers in to Level 3 occur when the Company is unable to obtain reliable prices for securities from pricing vendors and instead must use broker price quotes to value the securities.

There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2024 or 2023. The Company recognizes transfers between levels at the beginning of the reporting period.

In the determination of the fair value for bank loan participations and certain high yield bonds, the Company’s investment manager endeavors to obtain data from multiple external pricing sources. External pricing sources may include brokers, dealers and price data vendors that provide a composite price based on prices from multiple dealers. Such external pricing sources typically provide valuations for normal institutional size trading units of such securities using methods based on market transactions for comparable securities, and various relationships between securities, as generally recognized by institutional dealers. For investments in which the investment manager determines that only one external pricing source is appropriate or if only one external price is available, the relevant investment is generally recorded at fair value based on such price.

Investments for which external sources are not available or are determined by the investment manager not to be representative of fair value are recorded at fair value as determined by the Company, with input from its investment managers and valuation specialists as considered necessary. In determining the fair value of such investments, the Company considers one or more of the following factors: type of security held, convertibility or exchangeability of the security, redeemability of the security (including the timing of redemptions), application of industry accepted valuation models, recent trading activity, liquidity, estimates of liquidation value, purchase cost, and prices received for securities with similar terms of the same issuer or similar issuers. At September 30, 2024 and December 31, 2023, there were no investments for which external sources were unavailable to determine fair value.

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Notes to Condensed Consolidated Financial Statements (continued)

The carrying values and fair values of financial instruments are summarized below:

			September 30, 2024												December 31, 2023
			Carrying Value						Fair Value						Carrying Value						Fair Value
			(in thousands)
Assets
Fixed maturity securities, available-for-sale			$	1,215,244					$	1,215,244					$	1,324,476					$	1,324,476
Equity securities			131,187						131,187						119,945						119,945
Bank loan participations			149,113						149,113						156,169						156,169
Cash and cash equivalents			359,773						359,773						274,298						274,298
Restricted cash equivalents			28,364						28,364						72,449						72,449
Short-term investments			43,588						43,588						72,137						72,137
Other invested assets – notes receivable			14,043						13,550						12,174						11,702
Liabilities
Senior debt			200,800						205,874						222,300						233,408
Junior subordinated debt			104,055						130,460						104,055						138,264

 

The fair values of fixed maturity securities, equity securities, and bank loan participations have been determined using quoted market prices for securities traded in the public market or prices using bid or closing prices for securities not traded in the public marketplace. The fair values of cash and cash equivalents and short-term investments approximate their carrying values due to their short-term maturity.

The fair values of other invested assets-notes receivable, senior debt, and junior subordinated debt at September 30, 2024 and December 31, 2023 were determined by calculating the present value of expected future cash flows under the terms of the note agreements or debt agreements, as applicable, discounted at an estimated market rate of interest at September 30, 2024 and December 31, 2023, respectively. The Company also utilized an internally developed valuation model based on the spread of a comparable market index to determine the fair value of certain other invested assets-notes receivable at September 30, 2024 and December 31, 2023.

The fair values of senior debt, junior subordinated debt, and investments in notes receivable, classified in other invested assets, at September 30, 2024 and December 31, 2023 were determined using inputs to the valuation methodology that are unobservable (Level 3).

13.    Series A Preferred Shares

On February 24, 2022, the Company entered into an Investment Agreement with GPC Partners Investments (Thames) LP (“GPC Partners”), an affiliate of Gallatin Point Capital LLC, relating to the issuance and sale of 150,000 7% Series A Perpetual Cumulative Convertible Preferred Shares, par value $0.00125 per share (the “Series A Preferred Shares”), for an aggregate purchase price of $150.0 million, or $1,000 per share, in a private placement. The transaction closed on March 1, 2022 (the “Series A Closing Date”).

The Series A Preferred Shares rank senior to our common shares with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company, upon which the holders of Series A Preferred Shares would receive the greater of the $1,000 liquidation preference per share (the “Liquidation Preference”) plus accrued and unpaid dividends, or the amount they would have received if they had converted all of their Series A Preferred Shares to common shares immediately before such liquidation, dissolution or winding up.

Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the Liquidation Preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at the Company’s election. On the five-year anniversary of the Series A Closing Date, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S. treasury rate plus 5.2%. Dividends accrue and are payable quarterly. Cash dividends of $10.5 million were paid in the nine months ended September 30, 2024 including cash dividends paid in January, April, July, and September for the three month periods ended December 31, 2023, March 31, 2024, June 30, 2024, and September 30, 2024. In the nine months ended September 30, 2023, cash dividends of $7.9 million were paid including cash dividends paid in January, March, and June for the three month periods ended December 31, 2022, March 31, 2023, and June 30, 2023, respectively. Dividends of $2.6 million for the three months ended September 30, 2023 were paid on October 2, 2023.

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Notes to Condensed Consolidated Financial Statements (continued)

The Series A Preferred Shares are convertible at the option of the holders thereof at any time into common shares at an initial conversion price of $26.5950, making the Series A Preferred Shares convertible into 5,640,158 common shares. The conversion price is subject to customary anti-dilution adjustments, including cash dividends on the common shares above specified levels, as well as certain adjustments in case of net adverse reserve developments in excess of a threshold over a period of time. The measurement period for the adverse reserve development anti-dilution adjustment commenced with the quarter beginning January 1, 2022 and ends with the quarter ending December 31, 2025. As of September 30, 2024, net adverse reserve development exceeded the threshold. If net adverse reserve development exceeds the threshold at the conclusion of the measurement period (or upon a mandatory or optional conversion, if earlier), the conversion price will be adjusted pursuant to the Certificate of Designations, subject to a floor conversion price of $21.902, and the adjusted conversion price will become effective after the filing of the Company's financial statements for the period ending December 31, 2025 (or immediately after the close of business on the date of the public filing of the Company's financial statements for the most recent quarterly period preceding a mandatory or optional conversion, if earlier). None of the other triggers that would result in additional adjustments to the conversion price have been met at September 30, 2024.

The Certificate of Designations setting forth the terms of the Series A Preferred Shares (the “Certificate of Designations”) limits the Company's ability to pay dividends to its common shareholders. If the Company pays cash dividends of more than $0.05 per common share per quarter, without the consent of at least the majority of the Series A Preferred Shares then outstanding, the Company will be required to reduce the conversion price of the Series A Preferred Shares. Additionally, the payment of cash dividends in excess of $0.10 per common share per quarter is not permitted if the dividends on the Series A Preferred Shares for that quarter are not paid in cash, unless the Company’s U.S.-based insurance subsidiaries and direct Bermuda-based insurance subsidiary satisfy certain capital requirements. Share dividends payable on the common shares to the Company's shareholders also trigger a reduction of the conversion price applicable to the Series A Preferred Shares.

At any time on or after the two year anniversary of the Series A Closing Date, if the volume-weighted average price (“VWAP”) per common share is greater than 130% of the then-applicable conversion price for at least twenty consecutive trading days, the Company will be able to elect to convert (a “Mandatory Conversion”) all of the outstanding Series A Preferred Shares into common shares. In the case of a Mandatory Conversion, each Series A Preferred Share then outstanding will be converted into (i) the number of common shares equal to the quotient of (A) the sum of the Liquidation Preference and the accrued and unpaid dividends with respect to such Series A Preferred Share to be converted divided by (B) the conversion price of such share in effect as of the date of the Mandatory Conversion plus (ii) cash in lieu of fractional shares.

Upon any Mandatory Conversion on or before the five-year anniversary of the Series A Closing Date, all dividends that would have accrued from the date of the Mandatory Conversion to the later of the five-year anniversary of the Series A Closing Date or the last day of the eighth quarter following the date of the Mandatory Conversion, the last eight quarters of which will be discounted to present value using a discount rate of 3.5% per annum, and will be immediately payable in common shares, valued at the average of the daily VWAP of the Company’s common shares during the five (5) trading days immediately preceding the Mandatory Conversion.

The holders of the Series A Preferred Shares may require the Company to repurchase their shares upon the occurrence of certain change of control events. Upon the occurrence of a Fundamental Change (as defined in the Certificate of Designations designating the Series A Preferred Shares), each holder of outstanding Series A Preferred Shares will be permitted to, at its election, (i) effective as of immediately prior to the Fundamental Change, convert all or a portion of its Series A Preferred Shares into common shares, or (ii) require the Company to repurchase any or all of such holder’s Series A Preferred Shares at a purchase price per Series A Preferred Share equal to the Liquidation Preference of such Series A Preferred Share plus accrued and unpaid dividends plus, if the Fundamental Change repurchase occurs prior to the five-year anniversary of the Series A Closing Date, all dividends that would have accrued up to such five-year anniversary, but that have not been paid. The repurchase price will be payable in cash.

Because the Company may be required to repurchase all or a portion of the Series A Preferred Shares at the option of the holder upon the occurrence of certain change of control events, the Series A Preferred Shares have been classified as mezzanine equity in the Company's condensed consolidated balance sheets and are recognized at fair value of $150.0 million (the proceeds on the date of issuance) less issuance costs of $5.1 million, resulting in a carrying value of $144.9 million. The Certificate of Designations was amended by the Company and GPC Partners on November 11, 2024. See Note 15 – Subsequent Events below.

Under the terms of the Investment Agreement, GPC Partners has the right to designate one member of the Board (the “Series A Designee”) for appointment to the Board, or election at the Company’s annual general meeting. GPC Partners initially designated Matthew Botein as the Series A Designee, and Mr. Botein was approved by the Board as a Class I director

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JAMES RIVER GROUP HOLDING, LTD. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

with a term that expired at the 2024 annual general meeting of the Company’s shareholders. Mr. Botein was re-elected as a director at the 2024 annual general meeting for a term ending at the 2025 annual general meeting.

14.    Capital Stock and Equity Awards

Common Shares

Total common shares outstanding increased from 37,641,563 at December 31, 2023 to 37,829,475 at September 30, 2024, reflecting 187,912 common shares issued in the nine months ended September 30, 2024 related to vesting of RSUs.

Dividends

The Company declared the following dividends on common shares during the first nine months of 2024 and 2023:

Date of Declaration						Dividend per Common Share						Payable to Shareholders of Record on						Payment Date						Total Amount
2024
February 15, 2024						$	0.05					March 11, 2024						March 29, 2024						$	1,940,410
April 25, 2024						$	0.05					June 10, 2024						June 28, 2024						1,938,439
July 25, 2024						$	0.05					September 16, 2024						September 30, 2024						1,937,934
						$	0.15																	$	5,816,783
2023
February 16, 2023						$	0.05					March 13, 2023						March 31, 2023						$	1,921,802
April 27, 2023						$	0.05					June 12, 2023						June 30, 2023						$	1,921,040
July 27, 2023						$	0.05					September 11, 2023						September 29, 2023						$	1,921,550
						$	0.15																	$	5,764,392

Included in the total dividends for the nine months ended September 30, 2024 and 2023 are $143,000 and $121,000, respectively, of dividend equivalents on unvested RSUs. The balance of dividends payable on unvested RSUs was $260,000 at September 30, 2024 and $255,000 at December 31, 2023.

Equity Incentive Plans

The Company’s shareholders have approved various equity incentive plans, including the 2014 Long Term Incentive Plan (“2014 LTIP”) and the 2014 Non-Employee Director Incentive Plan (“2014 Director Plan”) (collectively, the “Plans”). All awards issued under the Plans are issued at the discretion of the Board of Directors.

Employees are eligible to receive non-qualified stock options, incentive stock options, share appreciation rights, performance shares, restricted shares, RSUs, and other awards under the 2014 LTIP. At September 30, 2024, the maximum number of shares available for issuance under the 2014 LTIP was 4,982,650 and 1,180,368 shares were available for grant.

On July 26, 2022, the Board of Directors of the Company approved a new long-term incentive plan (the “LTI Plan”) under the 2014 LTIP. The LTI Plan is designed to align compensation of designated senior officers of the Company with Company performance and shareholder interests over the long-term. Awards under the LTI Plan are made in the form of performance restricted share units (a “PRSU”) and service based restricted share units (RSUs).

Each PRSU represents a contingent right to receive one Company common share based upon the level of achievement of certain performance metrics during the performance period, with payout for achievement of threshold, target and maximum performance levels to be set at 50%, 100% and 200% of the target number of PRSUs, respectively. The PRSUs awarded in the first quarter of 2023 have a performance period of January 1, 2023 through December 31, 2025. The PRSUs awarded in the first quarter of 2024 have a performance period of January 1, 2024 through December 31, 2026.

Non-employee directors of the Company are eligible to receive non-qualified stock options, share appreciation rights, performance shares, restricted shares, RSUs, and other awards under the 2014 Director Plan. At September 30, 2024, the maximum number of shares available for issuance under the 2014 Director Plan was 150,000 and 31,927 shares were available for grant.

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Notes to Condensed Consolidated Financial Statements (continued)

Generally, awards issued under the 2014 LTIP and 2014 Director Plan vest immediately in the event that an award recipient is terminated without Cause (as defined in the applicable plans), and in the case of the 2014 LTIP for Good Reason (as defined in the applicable plans), at any time following a Change in Control (as defined in the applicable plans).

Options

The following table summarizes option activity:

			Nine Months Ended September 30,
			2024												2023
			Shares						Weighted- Average Exercise Price						Shares						Weighted- Average Exercise Price
Outstanding:
Beginning of period			74,390						$	42.17					287,974						$	35.26
Granted			—						$	—					—						$	—
Exercised			—						$	—					—						$	—
Forfeited			—						$	—					(47,033)						$	35.22
Lapsed			(74,390)						$	42.17					(164,548)						$	32.07
End of period			—						$	—					76,393						$	42.17
Exercisable, end of period			—						$	—					76,393						$	42.17

The options outstanding at December 31, 2023 lapsed in the nine months ended September 30, 2024. At September 30, 2024, no options remain outstanding.

The following table summarizes RSU activity:

			Nine Months Ended September 30,
			2024												2023
			Shares						Weighted- Average Grant Date Fair Value						Shares						Weighted- Average Grant Date Fair Value
Unvested, beginning of period			751,254						$	23.48					665,458						$	25.98
Granted			541,520						$	9.75					376,016						$	24.63
Vested			(273,035)						$	25.00					(212,968)						$	28.91
Forfeited			(90,546)						$	17.01					(30,719)						$	23.28
Unvested, end of period			929,193						$	15.66					797,787						$	24.66

Outstanding RSUs granted to employees generally vest ratably over a three year vesting period in the case of time-vest RSUs and cliff vest at the end of a three-year performance period in the case of PRSUs. RSUs granted to non-employee directors generally have a one year vesting period. The holders of RSUs are entitled to dividend equivalents. The dividend equivalents are settled in cash at the same time that the underlying RSUs vest and are subject to the same risk of forfeiture as the underlying shares. The fair value of the RSUs granted is generally based on the market price of the underlying shares at the date of grant. The RSUs granted in 2024 and 2023 include 231,492 and 91,818 PRSU awards, respectively. The number of PRSUs is based upon the probable outcome of performance conditions.

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Notes to Condensed Consolidated Financial Statements (continued)

Compensation Expense

Share based compensation expense is recognized on a straight-line basis over the vesting period. The amount of expense and related tax benefit is summarized below:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Share based compensation expense			$	1,446					$	2,224					$	5,674					$	7,232
U.S. tax benefit on share based compensation expense			256						412						1,047						1,355

At September 30, 2024, the Company had $8.2 million of unrecognized share based compensation expense expected to be charged to earnings over a weighted-average period of 1.7 years.

15.    Subsequent Events

On October 18, 2024, the Company disbursed $11.9 million to Fleming Intermediate Holdings LLC. The disbursement included $11.4 million for the downward adjustment to the Closing Date Purchase Price due to losses from JRG Re’s operations between the date of the balance sheet used to produce the estimated closing statement and the Closing Date (see Note 2 - Discontinued Operations), and $471,000 of interest pursuant to the terms in the Stock Purchase Agreement.

On November 9, 2024, the Board of Directors declared a cash dividend of $0.01 per common share. The dividend is payable on December 31, 2024 to shareholders of record on December 16, 2024.

On October 24, 2024, the Board of Directors declared a dividend of up to $2.6 million on the Series A Preferred Shares. The dividend will be payable in cash on December 31, 2024 to shareholders of record on December 15, 2024.

At the 2024 annual general meeting of shareholders (the “Annual Meeting”) of James River Group Holdings, Ltd. (the “Company”) held on October 24, 2024, the Company’s shareholders approved an amendment (the “Third Amendment”) to the James River Group Holdings, Ltd. 2014 Long-Term Incentive Plan (the “2014 LTIP”). The Third Amendment increases the number of the Company’s common shares authorized for issuance under the 2014 LTIP by 525,000 common shares.

At the Annual Meeting, the Company’s shareholders also approved an amendment (the “Second Amendment”) to the James River Group Holdings, Ltd. 2014 Non-Employee Director Incentive Plan (the “Non-Employee Director Plan”). The Second Amendment increases the number of the Company’s common shares authorized for issuance under the Non-Employee Director Plan by 100,000 common shares and extends the duration of the Non-Employee Director Plan from 2024 to 2034.

On November 6, 2024, the Company received notification from the lender under the 2017 Facility of their intent to terminate the agreement. As provided for in the credit agreement, the maturity date will occur 30 days after the notification of termination.

The Company is commencing a multi-pronged strategic partnership with Enstar Group Limited ("Enstar"). As part of this, on November 11, 2024, Enstar, through its subsidiary Cavello Bay Reinsurance Limited, entered into (i) a subscription agreement to purchase $12.5 million of the Company’s common shares at a share price of $6.40, in addition to 637,640 shares Enstar previously purchased in the open market, and (ii) an adverse development cover agreement with James River Insurance Company and James River Casualty Company, pursuant to which, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium) to be paid by the ceding companies, Cavello Bay will reinsure, effective January 1, 2024, 100% of the losses associated with the ceding companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates, subject to a retention by the ceding companies of $1,183.7 million (the limit of the E&S ADC executed on July 2, 2024) and up to an aggregate limit of $75.0 million (such transactions together, the “Enstar Transactions”). The Company expects to recognize a reduction in pre-tax income of $52.8 million in connection with the adverse development cover upon closing. The Enstar Transactions are subject to satisfaction or waiver of customary closing conditions, including approval of the adverse development cover by the Bermuda Monetary Authority.

On November 11, 2024, the Company amended the Certificate of Designations setting forth the terms of the Series A Preferred Shares (the “Certificate of Designations”) held by GPC Partners to, among other things, (i) convert $37.5 million of the outstanding Series A Preferred Shares to common stock at a per share price of $6.40 (the “Minimum Price”), (ii) increase the voluntary conversion price from 127.5% to 130% of the Minimum Price, (iv) increase the mandatory conversion price from 130% to 200% of the voluntary conversion price, (v) delay the first date on which the dividend rate re-sets from March 1, 2027 to October 1, 2029, (vi) cap the dividend rate at 8%, (vii) eliminate the adverse development anti-dilution adjustment provision,

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Notes to Condensed Consolidated Financial Statements (continued)

and (viii) limit transfers of the Series A Preferred Shares without the Company’s consent if, after the transfer, the transferee would hold 9.9% or more of the voting equity of the Company or, in the event of an A.M. Best downgrade of James River Insurance Company below A- (Excellent), 19.9% of the voting equity.

With these announcements, the Board of Directors has concluded the strategic review process announced in November of 2023. While the strategic review process has been completed, in the ordinary course of business the Company expects to consider beneficial opportunities.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward-Looking Statements”, Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, and Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and include the accounts of James River Group Holdings, Ltd. and its subsidiaries. Unless the context indicates or suggests otherwise, references to “the Company”, “we”, “us” and “our” refer to James River Group Holdings, Ltd. and its subsidiaries.

Our Business

James River Group Holdings, Ltd. is a Bermuda-based holding company. We own and operate a group of specialty insurance companies with the objective of generating compelling returns on tangible equity while limiting underwriting and investment volatility. We seek to accomplish this by earning profits from insurance underwriting and generating meaningful risk-adjusted investment returns while managing our capital.

We report our continuing operations in three reportable segments:

•The Excess and Surplus Lines segment offers commercial excess and surplus lines liability and property insurance in every U.S. state, the District of Columbia, Puerto Rico and the U.S. Virgin Islands through James River Insurance Company and its wholly-owned subsidiary, James River Casualty Company;

•The Specialty Admitted Insurance segment focuses on niche classes within the standard insurance markets with a primary focus on fronting business, where we retain a minority share of the risk and seek to earn fee income by allowing other carriers and producers to use our licensure, ratings, expertise and infrastructure. Through Falls Lake National and its subsidiaries, this segment has admitted licenses and the authority to write excess and surplus lines insurance in 50 states and the District of Columbia and distributes through a variety of sources, including program administrators and managing general agents;

•The Corporate and Other segment consists of the management and treasury activities of our holding companies, interest expense associated with our debt, and expenses of our holding companies, including public company expenses and equity compensation for the group, that are not reimbursed by our insurance segments.

Our discontinued operations include JRG Re, which comprised the remaining operations of the former Casualty Reinsurance segment, and which, prior to the suspension of its underwriting activities in 2023, provided proportional and working layer casualty reinsurance to third parties. On November 8, 2023, the Company entered into a definitive agreement to sell JRG Re. The sale transaction closed on April 16, 2024.

All of the Company’s U.S.-domiciled insurance subsidiaries are party to an intercompany pooling agreement that distributes the net underwriting results among the group companies based on their approximate pro-rata level of statutory capital and surplus to the total Company statutory capital and surplus. We report all segment information in this ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ prior to the effects of intercompany reinsurance, consistent with the manner in which we evaluate the operating performance of our reportable segments.

Our group’s regulated U.S. insurance subsidiaries have a financial strength rating of “A-” (Excellent) from A.M. Best Company.

Key Metrics

We discuss certain key metrics, described below, which we believe provide useful information about our business and the operational factors underlying our financial performance.

Underwriting profit is a non-GAAP measure commonly used in the property and casualty insurance industry to evaluate underwriting performance. We believe that the disclosure of underwriting profit by individual segment and of the Company as a whole is useful to investors, analysts, rating agencies and other users of our financial information in evaluating our performance because our objective is to consistently earn underwriting profits. We evaluate the performance of our segments and allocate resources based primarily on underwriting profit. We define underwriting profit as net earned premiums and gross fee income

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(in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting and other operating expenses. Other operating expenses include the underwriting, acquisition, and insurance expenses of the operating segments and, for consolidated underwriting profit, the expenses of the Corporate and Other segment. Our definition of underwriting profit may not be comparable to that of other companies. See “Reconciliation of Non-GAAP Measures” for a reconciliation of underwriting profit to income from continuing operations before taxes and for additional information.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting to net earned premiums. Our definition of loss ratio may not be comparable to that of other companies. See “Underwriting Performance Ratios” for a reconciliation of underwriting ratios.

Accident year loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses for the current accident year (excluding development on prior accident year reserves) to net earned premiums for the current year (excluding net earned premium adjustments on certain reinsurance treaties with reinstatement premiums associated with prior years).

Expense ratio, expressed as a percentage, is the ratio of other operating expenses net of gross fee income included in other income to net earned premiums.

Combined ratio is a measure of underwriting performance calculated as the sum of the loss ratio and the expense ratio. A combined ratio of less than 100% indicates an underwriting profit, while a combined ratio greater than 100% reflects an underwriting loss. Our definition of combined ratio may not be comparable to that of other companies. See “Underwriting Performance Ratios” for a reconciliation of underwriting ratios.

Adjusted net operating income is an internal performance measure used in the management of our operations. We believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance. Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations b) the impact of retroactive reinsurance accounting, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to certain lawsuits, various strategic initiatives, and the filing of registration statements for the offering of securities, and e) severance costs associated with terminated employees. Adjusted net operating income is a non-GAAP measure and should not be viewed as a substitute for net income calculated in accordance with GAAP. Our definition of adjusted net operating income may not be comparable to that of other companies. See “Reconciliation of Non-GAAP Measures” for a reconciliation of income available to common shareholders to adjusted net operating income.

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares (as defined below) and the unrecognized deferred retroactive reinsurance gain less goodwill and intangible assets, net of amortization. We believe tangible equity is a good measure to evaluate the strength of our balance sheet and to compare returns relative to this measure. Key financial measures that we use to assess our longer term financial performance include the percentage growth in our tangible equity per share and our return on tangible equity. Tangible equity is a non-GAAP measure and should not be viewed as a substitute for shareholders’ equity calculated in accordance with GAAP. Our definition of tangible equity may not be comparable to that of other companies. See “Reconciliation of Non-GAAP Measures” for a reconciliation of shareholders' equity to tangible equity.

Adjusted net operating return on tangible equity is defined as annualized adjusted net operating income expressed as a percentage of the average quarterly tangible equity balances in the respective period.

Tangible equity per share represents tangible equity divided by the sum of total common shares outstanding plus the common shares resulting from an assumed conversion of the outstanding Series A Preferred Shares into common shares (at the conversion price effective as of the last day of the applicable period).

Net retention is defined as the ratio of net written premiums to gross written premiums.

Gross investment yield is annualized investment income before any deductions for fees and expenses, expressed as a percentage of the average beginning and ending carrying values of those investments during the period.

Unless specified otherwise, all references to our defined metrics above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are for our business from continuing operations that is not subject to retroactive reinsurance accounting. Management believes that the lack of economic impact of retroactive reinsurance accounting makes the presentation of our key metrics on business not subject to retroactive reinsurance accounting helpful to the users of our financial information. See “Underwriting Performance Ratios” and “Reconciliation of Non-GAAP Measures.”

Critical Accounting Policies and Estimates

In preparing the unaudited condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of

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the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates.

The most critical accounting policies involve significant estimates and include those used in determining the reserve for losses and loss adjustment expenses and investment valuation and impairment. For a detailed discussion of each of these policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to any of these policies during the current year.

Recent Strategic Actions

The Company is commencing a multi-pronged strategic partnership with Enstar Group Limited ("Enstar"). As part of this, on November 11, 2024, Enstar, through its subsidiary Cavello Bay Reinsurance Limited, entered into (i) a subscription agreement to purchase $12.5 million of the Company’s common shares at a share price of $6.40, in addition to 637,640 shares Enstar previously purchased in the open market, and (ii) an adverse development cover agreement with James River Insurance Company and James River Casualty Company, pursuant to which, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium) to be paid by the ceding companies, Cavello Bay will reinsure, effective January 1, 2024, 100% of the losses associated with the ceding companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates, subject to a retention by the ceding companies of $1,183.7 million (the limit of the E&S ADC executed on July 2, 2024) and up to an aggregate limit of $75.0 million (such transactions together, the “Enstar Transactions”). The Company expects to recognize a reduction in pre-tax income of $52.8 million in connection with the adverse development cover upon closing. The Enstar Transactions are subject to satisfaction or waiver of customary closing conditions, including approval of the adverse development cover by the Bermuda Monetary Authority.

On November 11, 2024, the Company amended the Certificate of Designations setting forth the terms of the Series A Preferred Shares (the “Certificate of Designations”) held by GPC Partners to, among other things, (i) convert $37.5 million of the outstanding Series A Preferred Shares to common stock at a per share price of $6.40 (the “Minimum Price”), (ii) increase the voluntary conversion price from 127.5% to 130% of the Minimum Price, (iv) increase the mandatory conversion price from 130% to 200% of the voluntary conversion price, (v) delay the first date on which the dividend rate re-sets from March 1, 2027 to October 1, 2029, (vi) cap the dividend rate at 8%, (vii) eliminate the adverse development anti-dilution adjustment provision, and (viii) limit transfers of the Series A Preferred Shares without the Company’s consent if, after the transfer, the transferee would hold 9.9% or more of the voting equity of the Company or, in the event of an A.M. Best downgrade of James River Insurance Company below A- (Excellent), 19.9% of the voting equity.

The Company has also reduced its quarterly common dividend to $0.01 per share beginning with its next dividend payable on December 31, 2024.

With these announcements, the Board of Directors have concluded the strategic review process announced in November of 2023. While the strategic review process has been completed, in the ordinary course of business the Company expects to consider beneficial opportunities.

Combined Loss Portfolio Transfer and Adverse Development Cover

On July 2, 2024, James River Insurance Company and James River Casualty Company (together, the “Ceding Companies”), two of the Company's principal operating subsidiaries, entered into a Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract (the “E&S ADC”) with State National Insurance Company, Inc. (“State National”). The transaction closed upon signing.

The E&S ADC was effective January 1, 2024 (the “Effective Date”) and applies to the Ceding Companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “Subject Business”). Pursuant to the E&S ADC, (a) State National reinsures 85% of losses paid on and after the Effective Date in respect of the Subject Business in excess of $716.6 million up to an aggregate limit of $467.1 million (with State National’s share of the aggregate limit being $397.0 million) in exchange for a reinsurance premium paid by the Ceding Companies equal to $313.2 million, (b) the Ceding Companies continue to manage claims and to manage and collect the benefit of other existing third-party reinsurance on the Subject Business, which third-party reinsurance inures to the benefit of the E&S ADC, and (c) the Ceding Companies are entitled to a profit commission of 50% of any favorable development on the business ceded to State National below 104.5% of carried reserves, which profit commission shall not exceed $87.0 million in total.

Sale of JRG Re

On November 8, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Fleming Intermediate Holdings LLC, a Cayman Islands limited liability company (the “Buyer”). Pursuant to the Stock Purchase Agreement, and on the terms and subject to the conditions therein, the Buyer agreed to purchase from the Company all of the

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common shares of JRG Re. JRG Re comprised the remaining operations of the former Casualty Reinsurance segment, and the sale of JRG Re, which closed on April 16, 2024, resulted in the Company’s disposition of its casualty reinsurance business and related assets.

Pursuant to the terms of the Stock Purchase Agreement, the aggregate purchase price received by the Company, after giving effect to estimated adjustments based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing, totaled approximately $291.4 million (the “Closing Date Purchase Price”). The aggregate Closing Date Purchase Price was comprised of (i) $152.4 million paid in cash by the Buyer and (ii) an aggregate $139.0 million dividend and distribution from contributed surplus by JRG Re to the Company. In accordance with the Stock Purchase Agreement, the cash portion of the purchase price was calculated based on an estimated balance sheet of JRG Re as of the date of closing. The estimated balance sheet is subject to final post-closing adjustments, which resulted in the downward adjustment to the purchase price discussed below. Additionally, the Buyer may pay an additional $2.5 million to the Company in the event that certain conditions outlined in the Stock Purchase Agreement are met on the date that is nine months following the date of closing.

The Buyer delivered a closing statement to the Company, and pursuant to the procedures in the Stock Purchase Agreement, the Company has given its notice of disagreement with the Buyer’s closing statement. In its notice of disagreement, the Company (i) agreed with an $11.4 million downward adjustment to the Closing Date Purchase Price due to losses from JRG Re’s operations between the date of the balance sheet used to produce the estimated closing statement and the Closing Date, which downward adjustment is included in “Other Liabilities” on the Company’s Balance Sheet at September 30, 2024 (and was paid to the Buyer on October 18, 2024), and (ii) disputed $54.1 million in aggregate downward adjustments to the Closing Date Purchase Price claimed by the Buyer, which the Company believes are unsupported by the facts known to the Company and the terms of the Stock Purchase Agreement. The Stock Purchase Agreement provides procedures for resolving disputes between the parties regarding the closing statement and it is possible that the resolution of these disputes could result in a significant reduction to the amount of the purchase price.

We have determined that the sale of JRG Re met the criteria to be classified as held for sale at December 31, 2023 and that the sale represents a strategic shift that will have a major effect on the Company's operations. Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held for sale and segregated for all periods presented in this interim report on Form 10-Q.

The $139.0 million pre-closing dividend was completed in the first quarter of 2024. It included the forgiveness of $133.2 million owed from JRG Holdings to JRG Re and $5.8 million paid in cash to JRG Holdings. In the fourth quarter of 2023, after giving effect to the pre-closing dividend, we recorded an estimated loss on sale of $80.4 million to write down the carrying value of JRG Re to its estimated fair value based upon the estimated sales price of the transaction less costs to sell and other adjustments in accordance with the Stock Purchase Agreement. In the nine months ended September 30, 2024, the estimated loss on the sale was revised to $78.3 million. The year to date loss on disposal of $2.7 million includes the $2.1 million gain for the change in the estimated loss on sale and selling costs incurred of $4.8 million.

Reduction of Workers' Compensation Book

In June 2023, the Company non-renewed its large California workers' compensation program in the Specialty Admitted Insurance segment. This action was taken due to persistent rate pressure and tighter reinsurance capacity. Gross written premiums for the program were $2.9 million and $20.8 million for the three and nine months ended September 30, 2024 compared to $25.7 million and $79.0 million in the respective prior year periods.

On September 25, 2023, the Company announced that certain of its subsidiaries entered into an agreement to sell the renewal rights to the Individual Risk Workers’ Compensation (“IRWC”) business in the Specialty Admitted Insurance segment. The transaction included the full operations of the business, including underwriting, loss control and claims, and transfer of the employees supporting the business. The transaction closed on September 29, 2023. Gross written premiums for IRWC were $513,000 and $3.8 million for the three and nine months ended September 30, 2024 compared to $11.0 million and $35.3 million in the respective prior year periods.

The sales of JRG Re and the renewal rights to the IRWC business are aligned with our strategy to focus our resources on core businesses where we have meaningful scale.

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RESULTS OF OPERATIONS

The following table summarizes our results:

			Three Months Ended September 30,												%						Nine Months Ended September 30,
			2024						2023						Change						2024						2023						% Change
			($ in thousands)
Gross written premiums			$	330,423					$	342,851					(3.6)		%				$	1,073,480					$	1,119,355					(4.1)		%
Net retention			44.6		%				42.6		%										43.5		%				46.6		%
Net written premiums			$	147,338					$	145,982					0.9		%				$	466,863					$	521,700					(10.5)		%
Net earned premiums			$	159,726					$	183,673					(13.0)		%				$	494,610					$	526,052					(6.0)		%
Losses and loss adjustment expenses excluding retroactive reinsurance			(166,340)						(123,361)						34.8		%				(399,546)						(360,734)						10.8		%
Other operating expenses			(50,152)						(48,485)						3.4		%				(142,471)						(144,299)						(1.3)		%
Underwriting (loss) profit (1), (2)			(56,766)						11,827						—						(47,407)						21,019						—
Losses and loss adjustment expenses - retroactive reinsurance			(17,954)						3,187						—						(10,268)						(6,261)						64.0		%
Net investment income			23,564						21,799						8.1		%				71,127						58,458						21.7		%
Net realized and unrealized gains on investments			4,150						712						482.9		%				6,428						2,487						158.5		%
Other income and expense			1,233						2,286						(46.1)		%				507						1,818						(72.1)		%
Interest expense			(6,128)						(6,486)						(5.5)		%				(18,957)						(18,066)						4.9		%
Amortization of intangible assets			(90)						(90)						—						(272)						(272)						—
Impairment of intangible assets			—						(2,500)						—						—						(2,500)						—
(Loss) income from continuing operations before taxes			(51,991)						30,735						—						1,158						56,683						(98.0)		%
Income tax (benefit) expense on continuing operations			(13,914)						7,013						—						1,249						15,530						(92.0)		%
Net (loss) income from continuing operations			(38,077)						23,722						—						(91)						41,153						—
Net (loss) income from discontinued operations			(1,304)						(4,171)						(68.7)		%				(16,262)						1,318						—
Net (loss) income			(39,381)						19,551						—						(16,353)						42,471						—
Dividends on Series A Preferred Shares			(2,625)						(2,625)						—						(7,875)						(7,875)						—
Net (loss) income available to common shareholders			$	(42,006)					$	16,926					—						$	(24,228)					$	34,596					—
Adjusted net operating (loss) income (1)			$	(28,196)					$	18,859					—						$	(700)					$	37,875					—
Ratios:
Loss ratio			104.1		%				67.2		%										80.8		%				68.6		%
Expense ratio			31.4		%				26.4		%										28.8		%				27.4		%
Combined ratio			135.5		%				93.6		%										109.6		%				96.0		%
Accident year loss ratio			66.4		%				62.9		%										66.3		%				65.8		%

(1)Underwriting (loss) profit and adjusted net operating (loss) income are non-GAAP measures. See “Reconciliation of Non-GAAP Measures.”

(2)Included in underwriting results for the three and nine months ended September 30, 2024 is gross fee income of $5.2 million and $16.1 million, respectively ($6.8 million and $18.3 million in the respective prior year periods).

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Three months ended September 30, 2024 and 2023

The Company reported a net loss from continuing operations of $38.1 million for the three months ended September 30, 2024. This compares to $23.7 million of net income from continuing operations for the three months ended September 30, 2023. The net loss from continuing operations in the current quarter was largely attributable to $57.0 million of adverse development recorded in the Excess and Surplus Lines segment including a $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). Adjusted net operating loss was $28.2 million in the three months ended September 30, 2024 compared to adjusted net operating income of $18.9 million in the prior year period.

Underwriting results were a loss of $56.8 million (combined ratio of 135.5%) in the three months ended September 30, 2024 compared to income of $11.8 million (combined ratio of 93.6%) in the three months ended September 30, 2023. The underwriting results for the three months ended September 30, 2024 were impacted by net adverse reserve development (see loss ratio discussion below) as well as $5.2 million of premium adjustments associated with prior years including reinstatement premium in the Excess and Surplus Lines segment, which reduced net written and net earned premiums, and underwriting profit. The impact of the premium adjustments was a 4.3 percentage point increase in our combined ratio in the quarter.

Our loss ratio increased from 67.2% in the prior year quarter to 104.1% in the current year quarter primarily driven by higher net adverse reserve development. Net adverse reserve development on prior accident years (excluding adverse prior year development from continuing operations that is subject to retroactive reinsurance accounting - see discussion below) was $56.9 million or 35.6 points adverse in the three months ended September 30, 2024 compared to $7.8 million or 4.3 points adverse in the three months ended September 30, 2023. The adverse reserve development in the three months ended September 30, 2024 included $57.0 million of net adverse development in the Excess and Surplus Lines segment, including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). A higher current accident year loss ratio and premium adjustments associated with prior years including reinstatement premium in the Excess and Surplus Lines segment (+3.3 percentage point impact) also contributed to the higher consolidated loss ratio in the current period.

Our expense ratio increased from 26.4% in the prior year quarter to 31.4% in the current year quarter largely driven by higher compensation and bad debt expenses, and lower net earned premiums in the Excess and Surplus Lines segment. Premium adjustments associated with prior years including reinstatement premium in the Excess and Surplus Lines segment represented a 1.0 percentage point increase in the expense ratio for the current year quarter.

Investment income grew by $1.8 million or 8.1% in the three months ended September 30, 2024 compared to the same period in the prior year driven primarily by higher gains from our private investments. Net realized and unrealized gains on investments for the three months ended September 30, 2024 includes $4.2 million of favorable mark-to-market adjustments on our equity securities and bank loan participations, reflecting increases in their fair values in the period. This compares to $1.1 million of favorable mark-to-market adjustments on equity securities and bank loan participations in the prior year period (see Investing Results below).

The Company entered into a definitive agreement on November 8, 2023 to sell JRG Re. The sale closed on April 16, 2024. Discontinued operations for the three months ended September 30, 2024 reflect a $1.3 million increase in the loss on disposal resulting from certain transaction-related expenses associated with the sale. Discontinued operations for the three months ended September 30, 2023 include a $4.2 million operating loss for JRG Re in the period.

Adjusted net operating results primarily reflect the lower underwriting results. Our adjusted net operating (loss) return on tangible equity was (23.1)% for the three months ended September 30, 2024 compared to a 14.0% return for the three months ended September 30, 2023.

Nine Months Ended September 30, 2024 and 2023

The Company reported a net loss from continuing operations of $91,000 for the nine months ended September 30, 2024 compared to net income from continuing operations of $41.2 million for the nine months ended September 30, 2023. The net loss from continuing operations in the current year was largely attributable to $67.7 million of adverse development recorded in the Excess and Surplus Lines segment including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). Adjusted net operating loss was $700,000 for the nine months ended September 30, 2024 compared to adjusted net operating income of $37.9 million in the respective prior year period.

Underwriting results were a loss of $47.4 million (combined ratio of 109.6%) for the nine months ended September 30, 2024 compared to profit of $21.0 million (combined ratio of 96.0%) for the nine months ended September 30, 2023. The underwriting loss in the current year was largely driven by net adverse reserve development (see loss ratio discussion below). Underwriting results for the nine month periods also include $6.4 million and $12.3 million of premium adjustments associated with prior years including reinstatement premium in the Excess and Surplus Lines segment which reduced net written and net earned premiums, and underwriting profit. The impact of the premium adjustments was a 1.4 and 2.2 percentage point increase in our combined ratios in the respective nine month periods.

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Our loss ratios for the nine month periods include net reserve development on prior accident years (excluding adverse prior year development from continuing operations that is subject to retroactive reinsurance accounting – see discussion below) that was $67.1 million or 13.6 points adverse in the nine months ended September 30, 2024 compared to $6.6 million or 1.3 points adverse in the nine months ended September 30, 2023. The adverse reserve development in the nine months ended September 30, 2024 included $67.7 million of net adverse development in the Excess and Surplus Lines segment, including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). The premium adjustments associated with prior years including reinstatement premium also impacted the loss ratios reflecting increases of 1.1 and 1.6 percentage points in the respective nine month periods.

Our expense ratio increased from 27.4% in the prior year to 28.8% in the current year reflecting a higher current year expense ratio for the Excess and Surplus Lines segment due to higher compensation expenses, partially offset by a lower current year expense ratio for the Specialty Admitted Insurance segment driven by lower commissions and lower expenses for compensation and taxes, licenses, and fees. Expenses for the Corporate and Other segment were higher due to higher compensation, insurance and outside professional service expenses in the current year.

Investment income grew by $12.7 million or 21.7% in the nine months ended September 30, 2024 compared to the same period in the prior year driven by higher yields and higher invested assets in our continuing operations following the commutation of an internal quota share arrangement with JRG Re in the second and third quarters of 2023. Net realized and unrealized gains on investments for the nine months ended September 30, 2024 include $7.0 million of favorable mark-to-market adjustments on our equity securities and bank loan participations reflecting increases in their fair values in the period compared to $4.9 million of favorable mark-to-market adjustments on equity securities and bank loan participations in the prior year period (see Investing Results below). Interest expense was $891,000 higher in the nine months ended September 30, 2024 compared to the same period in the prior year driven by higher interest rates on our variable rate senior and trust preferred debt. The applicable rates on our debt reset periodically and are structured as SOFR plus a margin or spread.

The Company entered into a definitive agreement on November 8, 2023 to sell JRG Re. The sale closed on April 16, 2024 and discontinued operations for both periods include the operating results of JRG Re which were a loss of $13.6 million for the nine months ended September 30, 2024 compared to income of $1.3 million in the nine months ended September 30, 2023. The current year loss from discontinued operations primarily reflects net adverse development of $7.1 million on treaties not subject to the Casualty Re loss portfolio transfer and $9.5 million of realized and unrealized losses on fixed maturity securities. Discontinued operations in the current year also includes $4.8 million of certain transaction-related expenses associated with the sale and a change in the estimate of the loss on sale which together resulted in a $2.7 million loss on disposal in the current year.

Adjusted net operating results declined from the prior year primarily reflecting lower underwriting results with a partial offset for higher investment income. Growth in tangible equity of 1.3% was largely driven by unrealized gains on fixed maturities in other comprehensive income and the impact of retroactive reinsurance benefits. Our 0.2% adjusted net operating loss on tangible equity for the nine months ended September 30, 2024 compares to a 12.5% return for the nine months ended September 30, 2023.

Commercial Auto Loss Portfolio Transfer

On September 27, 2021, James River Insurance Company and James River Casualty Company (together, “James River”), two of the Company’s principal operating subsidiaries, entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc. (“Aleka”), a captive insurance company affiliate of Rasier LLC, to reinsure substantially all of the Excess and Surplus Lines segment's legacy portfolio of commercial auto policies previously issued to Rasier LLC and its affiliates (collectively, “Rasier”) for which James River is not otherwise indemnified by Rasier. The reinsurance coverage is structured to be fully collateralized, is not subject to an aggregate limit, and is subject to certain exclusions.

Combined Loss Portfolio Transfer and Adverse Development Cover

On July 2, 2024, James River Insurance Company and James River Casualty Company (together, the “Ceding Companies”) entered into a Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract (the “E&S ADC”) with State National Insurance Company, Inc. (“State National”). The transaction closed upon signing.

The E&S ADC was effective January 1, 2024 (the “Effective Date”) and applies to the Ceding Companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “Subject Business”). Pursuant to the E&S ADC, (a) State National reinsures 85% of losses paid on and after the Effective Date in respect of the Subject Business in excess of $716.6 million up to an aggregate limit of $467.1 million (with State National’s share of the aggregate limit being $397.0 million) in exchange for a reinsurance premium paid by the Ceding Companies equal to $313.2 million, (b) the Ceding Companies continue to manage claims and to manage and collect the benefit of other existing third-party reinsurance on the Subject Business, which third-party reinsurance shall inure to the benefit of the E&S ADC, and (c) the

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Ceding Companies are entitled to a profit commission of 50% of any favorable development on the business ceded to State National below 104.5% of carried reserves, which profit commission shall not exceed $87.0 million in total.

Retroactive Reinsurance Accounting

The Company periodically reevaluates the remaining reserves subject to the Commercial Auto LPT and the E&S ADC, and when recognized adverse prior year development on the subject business causes the cumulative amounts ceded under the loss portfolio transfer to exceed the consideration paid, the loss portfolio transfer moves into a gain position subject to retroactive reinsurance accounting under GAAP. Gains are deferred under retroactive reinsurance accounting and recognized in earnings in proportion to actual paid recoveries under the loss portfolio transfer using the recovery method. While the deferral of gains can introduce volatility in our results in the short-term, over the life of the contract, we would expect no economic impact to the Company as long as the counterparty performs under the contract. The impact of retroactive reinsurance accounting is not indicative of our current and ongoing operations.

For the three and nine months ended September 30, 2024, due to adverse paid and reported loss trends on the legacy Rasier business, the Company recognized adverse prior year development of $914,000 and $2.8 million, respectively ($7.1 million and $60.6 million in the respective prior year periods), on the net reserves subject to the Commercial Auto LPT, resulting in corresponding additional amounts ceded under the Commercial Auto LPT. As a result, the cumulative amounts ceded under the Commercial Auto LPT exceed the consideration paid, putting the Commercial Auto LPT into a gain position. The Company has applied retroactive reinsurance accounting to the loss portfolio transfer. Retroactive reinsurance benefits of $2.2 million and $11.8 million for the three and nine months ended September 30, 2024, respectively ($10.2 million and $54.4 million in the respective prior year periods), were recorded in losses and loss adjustment expenses on the Condensed Consolidated Statements of Income and Comprehensive Income (Loss) using the recovery method. The cumulative amounts ceded under the loss portfolio transfer were $459.1 million and $456.2 million as of September 30, 2024 and December 31, 2023, respectively. The deferred retroactive reinsurance gain related to the Commercial Auto LPT was $11.8 million and $20.7 million at September 30, 2024 and December 31, 2023, respectively.

In the three months ended September 30, 2024, the Company recognized $19.2 million of net adverse development on E&S business subject to the E&S ADC and retroactive reinsurance accounting which put the E&S ADC into a gain position. Retroactive reinsurance accounting was applied, resulting in a deferred retroactive reinsurance gain related to the E&S ADC of $19.2 million at September 30, 2024. The Company also recognized a reserve charge upon execution of the contract (consideration paid in excess of initial reserves) of $52.2 million, which was recorded as adverse development within losses and loss adjustment expenses in the three and nine months ended September 30, 2024. The Company has $75.9 million of aggregate limit remaining on the E&S ADC at September 30, 2024.

Premiums

Insurance premiums are earned ratably over the terms of our insurance policies, generally twelve months. The following table summarizes the change in premium volume by component and business segment:

			Three Months Ended September 30,												%						Nine Months Ended September 30,
			2024						2023						Change						2024						2023						% Change
			($ in thousands)
Gross written premiums:
Excess and Surplus Lines			$	230,215					$	217,151					6.0		%				$	736,742					$	732,180					0.6		%
Specialty Admitted Insurance			100,208						125,700						(20.3)		%				336,738						387,175						(13.0)		%
			$	330,423					$	342,851					(3.6)		%				$	1,073,480					$	1,119,355					(4.1)		%
Net written premiums:
Excess and Surplus Lines			$	129,735					$	123,046					5.4		%				$	408,761					$	442,923					(7.7)		%
Specialty Admitted Insurance			17,603						22,936						(23.3)		%				58,102						78,777						(26.2)		%
			$	147,338					$	145,982					0.9		%				$	466,863					$	521,700					(10.5)		%
Net earned premiums:
Excess and Surplus Lines			$	138,892					$	157,600					(11.9)		%				$	424,962					$	455,640					(6.7)		%
Specialty Admitted Insurance			20,834						26,073						(20.1)		%				69,648						70,412						(1.1)		%
			$	159,726					$	183,673					(13.0)		%				$	494,610					$	526,052					(6.0)		%

Gross written premiums for the Excess and Surplus Lines segment (which represents 68.6% of our consolidated gross written premiums from continuing operations in the nine months ended September 30, 2024) were 6.0% higher in the three months ended September 30, 2024 (0.6% higher for the nine months ended September 30, 2024) driven by growth in our

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casualty divisions. Amid moderating rate increases and increased competition, we are remaining selective in our Excess Property portfolio, resulting in a gross written premium decline of 20.7% in that line of business for the nine months ended September 30, 2024. Submission growth for Core E&S lines (excluding commercial auto) increased 10.0% and 7.5% over the prior year three and nine-month periods, respectively. Year-to-date, the number of bound policies declined 3.2% and average premium size decreased 8.4%. Renewal rates for the Excess and Surplus Lines segment were up 8.6% and 9.4% compared to the three and nine months ended September 30, 2023, respectively. The change in gross written premiums was notable in several divisions as shown below:

			Three Months Ended September 30,												%						Nine Months Ended September 30,												%
			2024						2023						Change						2024						2023						Change
			($ in thousands)
Excess Casualty			$	74,423					$	66,649					11.7		%				$	240,715					$	240,955					(0.1)		%
General Casualty			46,322						47,347						(2.2)		%				159,580						145,625						9.6		%
Manufacturers & Contractors			45,670						41,567						9.9		%				130,019						130,622						(0.5)		%
Excess Property			9,760						10,558						(7.6)		%				41,755						52,646						(20.7)		%
All other Core E&S divisions			46,436						41,925						10.8		%				144,936						139,635						3.8		%
Total Core E&S divisions			222,611						208,046						7.0		%				717,005						709,483						1.1		%
Commercial Auto			$	7,604					$	9,105					(16.5)		%				19,737						22,697						(13.0)		%
Excess and Surplus Lines gross written premium			$	230,215					$	217,151					6.0		%				$	736,742					$	732,180					0.6		%

The components of gross written premiums for the Specialty Admitted Insurance segment (which represents 31.4% of our consolidated gross written premiums for the nine months ended September 30, 2024) are as follows:

			Three Months Ended September 30,												%						Nine Months Ended September 30,												%
			2024						2023						Change						2024						2023						Change
			($ in thousands)
Fronting and program premium			$	99,694					$	114,726					(13.1)		%				332,924						351,833						(5.4)		%
Individual risk workers’ compensation premium			514						10,974						(95.3)		%				$	3,814					$	35,342					(89.2)		%
Specialty Admitted gross written premium			$	100,208					$	125,700					(20.3)		%				$	336,738					$	387,175					(13.0)		%

Our fronting written premium decreased from the prior year driven by the non-renewal of a large California workers' compensation program in the prior year. Excluding the non-renewed program, our fronting written premium grew by 8.7% and 14.4% for the three and nine months ended September 30, 2024, respectively. Our largest fronting relationship represented $42.4 million and $142.9 million (42.3% and 42.4%) of segment gross written premium for the three and nine months ended September 30, 2024, respectively, compared to $41.2 million and $121.8 million (32.8% and 31.5%) for the three and nine months ended September 30, 2023, respectively. The Company has received notifications of non-renewal for this relationship which will decrease future written premiums over time, and result in a full run-off of the business beginning July 1, 2025. Individual risk workers' compensation premium declined due to the sale of the renewal rights to that business in the prior year third quarter.

Net Retention

Our net premium retention is summarized by segment as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Excess and Surplus Lines			56.4		%				56.7		%				55.5		%				60.5		%
Specialty Admitted Insurance			17.6		%				18.2		%				17.3		%				20.3		%
Total			44.6		%				42.6		%				43.5		%				46.6		%

Lower net premium retention for the Excess and Surplus Lines segment in the nine months ended September 30, 2024 was primarily driven by the renewal of a quota share treaty, effective July 1, 2023, that increased premium cessions across all underwriting divisions other than Excess Casualty and resulted in lower retentions for the segment. The comparative nine

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month periods also include $6.4 million and $12.3 million of premium adjustments associated with prior years including reinstatement premium which reduced net written premiums and the net retention ratios.

The net premium retention for the Specialty Admitted Insurance segment decreased for the three and nine months ended September 30, 2024 as fronting business, where we retain a much smaller percentage, represents a greater portion of the book following the sale of the renewal rights to the individual risk workers' compensation business in the prior year third quarter. The net retention on the fronting business was 17.7% and 16.8% for the three and nine months ended September 30, 2024, up from 12.5% and 14.9% for the three and nine months ended September 30, 2023 due to the mix of business and changes in reinsurance as coverages renew.

Segment Results

The following table presents our combined ratios by segment:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Excess and Surplus Lines			136.1		%				88.4		%				105.9		%				90.0		%
Specialty Admitted Insurance			91.3		%				92.5		%				91.4		%				97.3		%
Total			135.5		%				93.6		%				109.6		%				96.0		%

Excess and Surplus Lines Segment

Results for the Excess and Surplus Lines segment are as follows:

			Three Months Ended September 30,												%						Nine Months Ended September 30,												%
			2024						2023						Change						2024						2023						Change
			($ in thousands)
Gross written premiums			$	230,215					$	217,151					6.0		%				$	736,742					$	732,180					0.6		%
Net written premiums			$	129,735					$	123,046					5.4		%				$	408,761					$	442,923					(7.7)		%
Net earned premiums			$	138,892					$	157,600					(11.9)		%				$	424,962					$	455,640					(6.7)		%
Losses and loss adjustment expenses excluding retroactive reinsurance			(150,249)						(103,077)						45.8		%				(345,387)						(307,364)						12.4		%
Underwriting expenses			(38,798)						(36,181)						7.2		%				(104,812)						(102,827)						1.9		%
Underwriting (loss) profit (1)			$	(50,155)					$	18,342					—						$	(25,237)					$	45,449					—
Ratios:
Loss ratio			108.2		%				65.4		%										81.3		%				67.5		%
Expense ratio			27.9		%				23.0		%										24.6		%				22.5		%
Combined ratio			136.1		%				88.4		%										105.9		%				90.0		%
Accident year loss ratio			64.7		%				60.4		%										64.4		%				64.1		%

(1)Underwriting Profit is a non-GAAP Measure. See “Reconciliation of Non-GAAP Measures.”

The Excess and Surplus Lines segment had an underwriting loss of $50.2 million (combined ratio of 136.1%) in the three months ended September 30, 2024 compared to an underwriting profit of $18.3 million (combined ratio of 88.4%) in the three months ended September 30, 2023. The underwriting results for the three months ended September 30, 2024 were impacted by net adverse reserve development (see loss ratio discussion below) and $5.2 million of premium adjustments associated with prior years including reinstatement premium which reduced net written and net earned premiums, and underwriting profit. The impact of the premium adjustments was a 4.9 percentage point increase in our combined ratio in the quarter.

The loss ratio for the three months ended September 30, 2024 was higher than the prior year period driven primarily by net adverse reserve development. Net adverse reserve development on prior accident years (excluding adverse prior year development that is subject to retroactive reinsurance accounting - see discussion above) was $57.0 million or 41.1 percentage points adverse in the three months ended September 30, 2024 compared to $7.8 million or 5.0 percentage points adverse in the three months ended September 30, 2023. The adverse reserve development for the three months ended September 30, 2024 included a $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). The loss ratio for the three months ended September 30, 2024 was also impacted by a higher current accident year loss ratio and premium adjustments associated with prior years including reinstatement premium which represented an increase of 4.0 percentage points in the quarter.

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The expense ratio increased from 23.0% in the prior year quarter to 27.9% in the current year quarter reflecting higher compensation and bad debt expenses, and lower net earned premiums. Premium adjustments associated with prior years including reinstatement premium represented a 1.0 percentage point increase in the expense ratio for the current year quarter.

For the nine months ended September 30, 2024 and 2023, segment underwriting results were a loss of $25.2 million (combined ratio of 105.9%) compared to underwriting profit of $45.4 million (combined ratio of 90.0%), respectively. The underwriting loss in the current year was largely driven by net adverse reserve development (see loss ratio discussion below). Underwriting results for the nine month periods also include $6.4 million and $12.3 million of premium adjustments associated with prior years including reinstatement premium which reduced net written and net earned premiums, and underwriting profit. The impact of the premium adjustments was a 1.5 and 2.4 percentage point increase in our combined ratios in the respective nine month periods.

The loss ratios for the nine month periods include net reserve development on prior accident years (excluding adverse prior year development that is subject to retroactive reinsurance accounting - see discussion above) that was $67.7 million or 15.9 percentage points adverse in the nine months ended September 30, 2024 compared to $7.6 million or 1.7 percentage points adverse in the nine months ended September 30, 2023. The adverse reserve development in the nine months ended September 30, 2024 includes a $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves). The premium adjustments associated with prior years including reinstatement premium also impacted the loss ratios reflecting increases of 1.2 and 1.8 percentage points in the respective nine month periods.

The nine-month expense ratio increased from 22.5% in the prior year to 24.6% in the current year primarily due to higher compensation costs and lower net earned premiums in the current year.

Specialty Admitted Insurance Segment

Results for the Specialty Admitted Insurance segment are as follows:

			Three Months Ended September 30,												%						Nine Months Ended September 30,												%
			2024						2023						Change						2024						2023						Change
			($ in thousands)
Gross written premiums			$	100,208					$	125,700					(20.3)		%				$	336,738					$	387,175					(13.0)		%
Net written premiums			$	17,603					$	22,936					(23.3)		%				$	58,102					$	78,777					(26.2)		%
Net earned premiums			$	20,834					$	26,073					(20.1)		%				$	69,648					$	70,412					(1.1)		%
Losses and loss adjustment expenses			(16,091)						(20,284)						(20.7)		%				(54,159)						(53,370)						1.5		%
Underwriting expenses			(2,933)						(3,822)						(23.3)		%				(9,477)						(15,160)						(37.5)		%
Underwriting profit (loss) (1), (2)			$	1,810					$	1,967					(8.0)		%				$	6,012					$	1,882					219.4		%
Ratios:
Loss ratio			77.2		%				77.8		%										77.8		%				75.8		%
Expense ratio			14.1		%				14.7		%										13.6		%				21.5		%
Combined ratio			91.3		%				92.5		%										91.4		%				97.3		%
Accident year loss ratio			78.0		%				77.8		%										78.6		%				77.2		%

(1)Underwriting Profit is a non-GAAP Measure. See “Reconciliation of Non-GAAP Measures.”

(2)Underwriting results include gross fee income of $5.2 million and $16.1 million for the three and nine months ended September 30, 2024, respectively ($6.8 million and $18.3 million in the respective prior year periods).

The Specialty Admitted Insurance segment produced underwriting profits of $1.8 million and $2.0 million (combined ratios of 91.3% and 92.5%) in the three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the segment produced underwriting profits of $6.0 million and $1.9 million (combined ratios of 91.4% and 97.3%), respectively. Net favorable development in our loss estimates for prior accident years was $165,000 and $607,000 (0.8 and 0.9 points) in the three and nine months ended September 30, 2024, respectively, compared to $0 and $1.0 million (0.0 and 1.4 points) in the three and nine months ended September 30, 2023, respectively. The segment expense ratio for the current year to date benefited from lower commissions driven by sliding scale and other adjustments on certain programs in the current year, as well as lower expenses for compensation and taxes, licenses, and fees following the reductions to our workers' compensation book in the prior year including the non-renewal of a large California workers' compensation program and the sale of the renewal rights to the individual risk workers' compensation business which included the transfer of employees associated with the business.

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Corporate and Other Segment

Other operating expenses for the Corporate and Other segment include personnel costs associated with the Bermuda and U.S. holding companies, professional fees, share based compensation for the full Company, and various other corporate expenses that were not reimbursed by our subsidiaries, including costs associated with rating agencies and strategic initiatives. The expenses are included in our calculation of consolidated underwriting profit, and in our consolidated expense ratio and combined ratio. Total operating expenses of the Corporate and Other segment were $8.4 million and $28.2 million for the three and nine months ended September 30, 2024, respectively ($8.5 million and $26.3 million in the respective prior year periods). The higher year to date expense is related to higher expenses for employee compensation, corporate insurance, and outside professional services.

Investing Results

Net investment income was $23.6 million and $71.1 million for the three and nine months ended September 30, 2024, respectively, compared to $21.8 million and $58.5 million in the respective prior year periods. The Company's private investments generated gains of $1.8 million and $3.5 million for the three and nine months ended September 30, 2024, respectively, compared to gains of $27,000 and $1.9 million in the corresponding prior year periods. Excluding private investments, our net investment income for the three and nine months ended September 30, 2024 increased 0.2% and 19.4% over the prior year periods, respectively, principally due to higher yields on cash, cash equivalents, restricted cash equivalents, and short-term investments. The average duration of our portfolio excluding restricted cash equivalents was 3.3 years at September 30, 2024.

Major categories of the Company’s net investment income are summarized as follows:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			($ in thousands)
Fixed maturity securities			$	10,970					$	12,767					$	36,463					$	36,834
Bank loan participations			4,135						4,277						13,215						7,796
Equity securities			2,188						1,678						5,734						4,900
Other invested assets			1,756						27						3,520						1,850
Cash, cash equivalents, restricted cash equivalents and short-term investments			5,448						3,861						14,952						9,208
Gross investment income			24,497						22,610						73,884						60,588
Investment expense			(933)						(811)						(2,757)						(2,130)
Net investment income			$	23,564					$	21,799					$	71,127					$	58,458

The following table summarizes our annualized gross investment yields:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Cash and invested assets			4.7		%				4.7		%				4.9		%				4.4		%
Fixed maturity securities			4.5		%				4.7		%				4.6		%				4.3		%

Of our total cash and invested assets of $1,934.8 million at September 30, 2024 (excluding restricted cash equivalents), $359.8 million represents the cash and cash equivalents portion of the portfolio. The majority of the portfolio, or $1,215.2 million, is comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income (loss). Also included in our investments are $149.1 million of bank loan participations, $131.2 million of equity securities, $43.6 million of short-term investments, and $35.9 million of other invested assets.

Bank loan participations generally provide a higher yield than our portfolio of fixed maturity securities and are primarily senior, secured floating-rate debt rated “BB”, “B”, or “CCC” by Standard & Poor’s or an equivalent rating from another nationally recognized statistical rating organization, and are therefore below investment grade. Bank loans include assignments of and participations in performing and non-performing senior corporate debt generally acquired through primary bank syndications and in secondary markets. They consist of, but are not limited to, term loans, the funded and unfunded portions of revolving credit facilities, and similar loans and investments. Bank loan participations are measured at fair value pursuant to the

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Company's election of the fair value option, and changes in unrealized gains and losses in bank loan participations are reported in our income statement as net realized and unrealized gains (losses) on investments. At September 30, 2024 and December 31, 2023, the fair market value of these securities was $149.1 million and $156.2 million, respectively.

For the nine months ended September 30, 2024, the Company recognized net realized and unrealized investment gains of $6.4 million ($4.2 million of net realized and unrealized investment gains for the three months ended September 30, 2024), including $1.3 million of net unrealized losses on bank loan participations, $8.3 million of net unrealized gains for the change in the fair value of equity securities, $1.8 million of net realized investment losses on the sale of bank loan participations, $2.5 million of net realized investment gains on the sale of equity securities, $1.0 million of net realized investment losses on the sale of fixed maturity securities, and a $207,000 impairment for one fixed maturity security. In the nine months ended September 30, 2024, $591,000 of net realized losses were recognized on sales of fixed maturities primarily to fund the premium due under the E&S ADC.

For the nine months ended September 30, 2023, the Company recognized net realized and unrealized investment gains of $2.5 million ($712,000 of net realized and unrealized investment gains for the three months ended September 30, 2023), including $7.7 million of net unrealized gains on bank loan participations, $2.8 million of net unrealized losses for the change in the fair value of equity securities, $334,000 of net realized investment losses on the sale of fixed maturity securities, $3.1 million of net realized investment losses on the sale of bank loan participations, and $1.0 million of net realized investment gains on the sale of equity securities.

In conjunction with its outside investment managers, the Company performs quarterly reviews of all securities within its investment portfolio to determine whether any impairment has occurred. As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at September 30, 2024, December 31, 2023, or September 30, 2023. During the nine months ended September 30, 2024, management recognized an impairment loss of $207,000 for one fixed maturity security due to the Company’s inability to hold the security until a recovery in its value to the amortized cost basis. For the remainder of securities in an unrealized loss position, management does not intend to sell the securities, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs. At September 30, 2024, 99.9% of the Company’s fixed maturity security portfolio was rated “BBB-” or better (“investment grade”) by Standard & Poor’s or received an equivalent rating from another nationally recognized rating agency.

The amortized cost and fair value of our available-for-sale fixed maturity securities were as follows:

			September 30, 2024																		December 31, 2023
			Cost or Amortized Cost						Fair Value						% of Total Fair Value						Cost or Amortized Cost						Fair Value						% of Total Fair Value
			($ in thousands)
Fixed maturity securities, available-for-sale:
State and municipal			$	222,272					$	203,058					16.7		%				$	273,462					$	248,837					18.8		%
Residential mortgage-backed			350,155						338,110						27.8		%				336,064						317,928						24.0		%
Corporate			479,653						463,706						38.2		%				530,408						505,728						38.2		%
Commercial mortgage and asset-backed			195,925						189,226						15.6		%				235,302						222,853						16.8		%
U.S. Treasury securities and obligations guaranteed by the U.S. government			21,413						21,144						1.7		%				29,900						29,130						2.2		%
Total fixed maturity securities, available-for-sale			$	1,269,418					$	1,215,244					100.0		%				$	1,405,136					$	1,324,476					100.0		%

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The following table sets forth the composition of the Company’s portfolio of available-for-sale fixed maturity securities by rating as of September 30, 2024:

Standard & Poor’s or Equivalent Designation			Fair Value						% of Total
			($ in thousands)
AAA			$	244,186					20.1		%
AA			512,932						42.2		%
A			326,074						26.8		%
BBB			131,901						10.9		%
Below BBB and unrated			151						—		%
Total			$	1,215,244					100.0		%

The amortized cost and fair value of our available-for-sale investments in fixed maturity securities summarized by contractual maturity are as follows:

			September 30, 2024
			Amortized Cost						Fair Value						% of Total Value
			($ in thousands)
Due in:
One year or less			$	19,640					$	19,456					1.6		%
After one year through five years			329,396						327,214						26.9		%
After five years through ten years			239,132						222,779						18.3		%
After ten years			135,170						118,459						9.8		%
Residential mortgage-backed			350,155						338,110						27.8		%
Commercial mortgage and asset-backed			195,925						189,226						15.6		%
Total			$	1,269,418					$	1,215,244					100.0		%

Other Income and Expense

Other income and expense items netted to income of $1.2 million and $507,000 for the three and nine months ended September 30, 2024, respectively. Non-operating expenses included in the respective totals were $1.8 million and $4.6 million, primarily consisting of legal and other professional fees and other expenses related to various strategic initiatives and litigation that the Company is involved in, as well as interest accrued and payable to Fleming on the $11.4 million downward adjustment to the Closing Date Purchase Price. The non-operating expenses were offset by $2.8 million and $4.5 million of broker incentive rebates in the Excess and Surplus Lines segment, as well as other miscellaneous income in the respective periods.

Other income and expense items netted to income of $2.3 million and $1.8 million for the three and nine months ended September 30, 2023, respectively, and included a $2.2 million gain on the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment and $540,000 of broker incentive rebates in the Excess and Surplus Lines segment in the prior year quarter. These were partially offset by non-operating expenses of $641,000 and $1.5 million in the respective three and nine months of the prior year primarily consisting of legal fees related to a purported class action lawsuit and legal and other professional fees and other expenses related to various strategic initiatives including the sale of renewal rights to the IRWC business in the Specialty Admitted Insurance segment and loss portfolio transfers accounted for as retroactive reinsurance.

Interest Expense

Interest expense was $6.1 million and $19.0 million for the three and nine months ended September 30, 2024, respectively ($6.5 million and $18.1 million in the respective prior year periods). The nine month increase over the prior year reflects the impact of higher interest rates on our variable rate senior and trust preferred debt. See “—Liquidity and Capital Resources—Sources and Uses of Funds” for more information regarding our senior bank debt facilities and trust preferred securities.

Amortization of Intangibles and Impairment of Intangible Assets

The Company recorded $90,000 of amortization of intangible assets in each of the three months ended September 30, 2024 and 2023 ($272,000 in each of the nine months ended September 30, 2024 and 2023).

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Income Tax Expense

Our effective tax rate fluctuates from period to period based on the relative mix of income from continuing operations reported by country and the respective tax rates imposed by each tax jurisdiction. Statutory tax rates are 0% and 21% for Bermuda and the U.S. For the three months ended September 30, 2024, our effective tax rate on income from continuing operations was 26.8% and our effective tax rate for the nine months ended September 30, 2024 was not meaningful due to minimal pre-tax income in the period (22.8% and 27.4% in the respective prior year periods). The Company does not receive a U.S. tax deduction for losses in our Bermuda entities. Bermuda had losses in both periods primarily due to Bermuda holding company expenses and interest expense. For U.S.-sourced income, the Company’s U.S. federal income tax expense differs from the amounts computed by applying the federal statutory income tax rate to income before taxes due primarily to interest income on tax-advantaged state and municipal securities, dividends received income, and excess tax benefits and expenses on share based compensation.

Reserves

An indicator of reserve strength that we monitor closely is the percentage of our gross and net loss reserves that are comprised of incurred but not reported (“IBNR”) reserves.

The Company’s gross reserve for losses and loss adjustment expenses at September 30, 2024 was $3,001.9 million. Of this amount, 71.6% relates to amounts that are IBNR. This amount was 66.9% at December 31, 2023. The Company’s gross reserves for losses and loss adjustment expenses by segment are summarized as follows:

			Gross Reserves at September 30, 2024
			Case						IBNR						Total
			($ in thousands)
Excess and Surplus Lines			$	462,345					$	1,673,453					$	2,135,798
Specialty Admitted Insurance			390,937						475,178						866,115
Total			$	853,282					$	2,148,631					$	3,001,913

At September 30, 2024, the amount of net reserves (prior to the $776,000 allowance for uncollectible reinsurance recoverables) of $1,061.7 million that related to IBNR was 62.7%. This amount was 72.0% at December 31, 2023. The 62.7% net IBNR percentage at September 30, 2024 declined from the December 31, 2023 percentage due to the E&S ADC executed on July 2, 2024 that resulted in a cession of $261.0 million of IBNR for the in-the-money subject reserves and no cession of case reserves. The Company’s net reserves for losses and loss adjustment expenses by segment are summarized as follows:

			Net Reserves at September 30, 2024
			Case						IBNR						Total
			($ in thousands)
Excess and Surplus Lines			$	331,726					$	588,097					$	919,823
Specialty Admitted Insurance			64,251						77,675						141,926
Total			$	395,977					$	665,772					$	1,061,749

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LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Funds

Our sources of funds consist primarily of premiums written, investment income, reinsurance recoveries, proceeds from sales and redemptions of investments, borrowings on our credit facilities, and the issuance of common and 7% Series A Perpetual Cumulative Convertible Preferred Shares, par value $0.00125 per share (the “Series A Preferred Shares”). We use operating cash flows primarily to pay operating expenses, losses and loss adjustment expenses, reinsurance premiums, and income taxes. Cash flow from operations may differ substantially from net income. The potential for a large claim under an insurance contract means that substantial and unpredictable payments may need to be made within relatively short periods of time.

The following table summarizes our cash flows:

			Nine Months Ended September 30,
			2024						2023
			($ in thousands)
Cash and cash equivalents provided by (used in):
Operating activities (excluding restricted cash equivalents)			$	(210,465)					$	94,108
Investing activities			321,372						(18,016)
Financing activities			(38,634)						(16,333)
Change in cash and cash equivalents			72,273						59,759
Change in restricted cash equivalents (operating activities)			(44,085)						3,643
Change in cash, cash equivalents, and restricted cash equivalents			$	28,188					$	63,402

 

Cash used in operating activities excluding restricted cash equivalents of $210.5 million for the nine months ended September 30, 2024 largely reflects the $313.2 million premium paid in July to effect the E&S ADC. Excluding the premium payment, cash provided by operating activities was $102.7 million compared to $94.1 million for the nine months ended September 30, 2023 driven by the growth in our U.S. segments and the collection of premiums receivable at a quicker rate than payments of loss and loss adjustment expenses. Cash used in operating activities from continuing operations excluding restricted cash equivalents was $185.4 million for the nine months ended September 30, 2024 compared to cash provided by operating activities from continuing operations of $170.4 million for the nine months ended September 30, 2023. Cash used in operating activities of discontinued operations was $25.1 million and $76.3 million in the respective periods. We believe the sale of JRG Re, which closed on April 16, 2024, will increase our future cash flows from operations.

Cash provided by investing activities of $321.4 million for the nine months ended September 30, 2024 includes $96.4 million of proceeds received from the sale of JRG Re (net of JRG Re's cash balances sold) and $198.0 million of proceeds from the sales of fixed maturities to provide funding for the premium due under the E&S ADC. Cash used in investing activities of $18.0 million for the nine months ended September 30, 2023 reflects efforts to enhance the yield in our investment portfolio by investing available cash and cash equivalents into higher yielding investments. Cash and cash equivalents (excluding restricted cash equivalents) comprised 18.6% and 9.6% of total cash and invested assets at September 30, 2024 and 2023, respectively. Cash provided by investing activities from continuing operations was $161.9 million for the nine months ended September 30, 2024. This compares to cash used in investing activities from continuing operations of $90.3 million for the nine months ended September 30, 2023. Cash provided by investing activities of discontinued operations was $63.1 million and $72.3 million in the respective periods.

Cash used in financing activities of $38.6 million for the nine months ended September 30, 2024 includes the $21.5 million repayment of an unsecured loan under the 2017 facility, $5.8 million of dividends paid to common shareholders, $10.5 million of dividends paid on the Series A Preferred Shares, and $840,000 of payroll taxes withheld and remitted on net settlement of RSUs. Cash used in financing activities of $16.3 million for the nine months ended September 30, 2023 includes $5.8 million of dividends paid to common shareholders, $7.9 million of dividends paid on the Series A Preferred Shares, $1.1 million of paid issuance costs related to the amendment of the 2013 Facility (as defined below) in July, 2023, and $1.5 million of payroll taxes withheld and remitted on net settlement of RSUs.

The activity in restricted cash equivalents for the nine months ended September 30, 2024 and 2023 relates to a former insured, per the terms of a collateral trust. See Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book below.

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Dividends

We are organized as a Bermuda holding company with our operations conducted by our wholly-owned subsidiaries. Accordingly, our holding company may receive cash through loans from banks, issuance of equity and debt securities, corporate service fees or dividends received from our subsidiaries and/or other transactions. Our U.S. holding company may receive cash in a similar manner and also through payments from our subsidiaries pursuant to our U.S. consolidated tax allocation agreement.

The payment of dividends by our subsidiaries to us is limited by statute. In general, the laws and regulations applicable to our domestic insurance subsidiaries limit the aggregate amount of dividends or other distributions that they may declare or pay within any 12-month period without advance regulatory approval. Generally, the limitations are based on the greater of statutory net income for the preceding year or 10.0% of statutory surplus at the end of the preceding year. In addition, insurance regulators have broad powers to prevent reduction of statutory surplus to inadequate levels and could refuse to permit the payment of dividends calculated under any applicable formula. See “Item 1. Business – U.S. Insurance Regulation – State Regulation” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024 for additional information. The maximum amount of dividends available to the U.S. holding company from our U.S. insurance subsidiaries during 2024 without regulatory approval is $107.1 million.

Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the Liquidation Preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election. Pursuant to the amendment of the Certificate of Designations governing the Series A Preferred Shares, on October 1, 2029 and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S. treasury rate plus 5.2%, provided that the dividend rate shall not exceed 8.0%. Cash dividends of $10.5 million were paid in the nine months ended September 30, 2024 including cash dividends paid in January, April, July, and September for the three month periods ended December 31, 2023, March 31, 2024, June 30, 2024, and September 30, 2024. In the nine months ended September 30, 2023, cash dividends of $7.9 million were paid including cash dividends paid in January, March, and June for the three month periods ended December 31, 2022, March 31, 2023, and June 30, 2023, respectively. Dividends of $2.6 million for the three months ended September 30, 2023 were paid on October 2, 2023.

At September 30, 2024, the Bermuda holding company had $72.8 million of cash and cash equivalents. The U.S. holding company had $15.5 million of cash and invested assets, comprised of cash and cash equivalents of $11.9 million, equities of $3.1 million and other invested assets of $464,000, which are not subject to regulatory restrictions. Additionally, our U.K. intermediate holding company had no invested assets and cash of less than ten thousand dollars at September 30, 2024.

Credit Agreements

At September 30, 2024, the Company had a $257.5 million senior revolving credit facility (as amended or amended and restated, the “2013 Facility”). The 2013 Facility was comprised of the following at September 30, 2024:

•A $212.5 million unsecured revolving facility to meet the working capital needs of the Company. All unpaid principal on the revolver is due at maturity. Interest accrues quarterly and is payable in arrears, currently at 1-month SOFR (the Company, per the terms of the credit agreement, can elect between one, three, or six month interest periods) plus a 0.1% SOFR index adjustment and a SOFR margin which is currently 1.75% and is subject to change according to terms in the credit agreement. At September 30, 2024, the Company had a drawn balance of $185.8 million outstanding on the unsecured revolver.

•A $45.0 million secured revolving facility to issue letters of credit for the benefit of third-party reinsureds. At September 30, 2024, the Company had $23.9 million of letters of credit issued under the secured facility, all of which are collateralized by a back-to-back letter of credit issued by Comerica Bank on behalf of JRG Re.

On July 7, 2023, the Company entered into a Third Amended and Restated Credit Agreement for the 2013 Facility which, among other things, extended the maturity date of such facility until July 7, 2026 and increased the applicable interest rate and letter of credit fees. The 2013 Facility has been amended from time to time, including on April 16, 2024 when the 2013 Facility was amended in connection with the closing of the sale of JRG Re by the Company to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, and (ii) decrease the secured revolving facility commitment from $102.5 million to $45.0 million.

The 2013 Facility contains certain financial and other covenants (including minimum net worth, maximum ratio of total adjusted debt outstanding to total capitalization, and financial strength ratings) with which the Company was in compliance at September 30, 2024.

On August 2, 2017, the Company, and its former wholly-owned subsidiary, JRG Re, together as borrowers, entered into a credit agreement (the "2017 Facility") that provided the Company with a revolving line of credit of up to $100.0 million, which may be used for loans and, until April 16, 2024, letters of credit made or issued, at the borrowers' option, on a secured or

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unsecured basis. Obligations under the 2017 Facility carry a variable rate of interest subject to terms in the credit agreement and will mature 30 days after notice of termination from the lender. The loans made under the revolving line of credit of the 2017 Facility may be used to finance the borrowers' general corporate purposes. Interest accrues and is payable in arrears at variable rates which are subject to change according to terms in the credit agreement. In the nine months ended September 30, 2024, the Company repaid $21.5 million of unsecured loans under the facility. At September 30, 2024, there were no loans outstanding and $24.4 million of letters of credit were issued under the facility, all of which are collateralized by a back-to-back letter of credit issued by Comerica Bank on behalf of JRG Re.

The 2017 Facility has been amended from time to time since its inception in 2017, including on April 16, 2024 in connection with the closing of the sale of JRG Re by the Company to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, (ii) increase the applicable interest rates, (iii) eliminate the letter of credit portion of the facility, and (iv) to build in an automatic decrease of the facility amount by the amount of each letter of credit outstanding under the 2017 Facility as of the date of the amendment with effect from the date each such letter of credit is cancelled.

On November 6, 2024, the Company received notification from the lender of their intent to terminate the 2017 Facility. As provided for in the credit agreement, the maturity date will occur 30 days after the notification of termination.

The 2017 Facility contains certain financial and other covenants (including minimum net worth, maximum ratio of total adjusted debt outstanding to total capitalization, and financial strength ratings) with which the Company was in compliance at September 30, 2024.

Senior Debt and Trust Preferred Securities

On May 26, 2004, we issued $15.0 million of senior debt due April 29, 2034. The senior debt is not redeemable by the holder or subject to sinking fund requirements. Interest accrues quarterly and is payable in arrears at a floating rate per annum equal to the 3-month SOFR plus 4.11%. This senior debt is redeemable at par prior to its stated maturity at our option in whole or in part. The terms of the senior debt contain certain covenants, with which we are in compliance at September 30, 2024, and which, among other things, restrict our ability to assume senior indebtedness secured by our U.S. holding company’s common stock or its subsidiaries’ capital stock or to issue shares of its subsidiaries’ capital stock.

From May 2004 through January 2008, we sold trust preferred securities through five Delaware statutory trusts sponsored and wholly-owned by the Company or its subsidiaries. Each trust used the net proceeds from the sale of its trust preferred securities to purchase our floating-rate junior subordinated debt.

The following table summarizes the nature and terms of the junior subordinated debt and trust preferred securities outstanding at September 30, 2024 (including the Company’s repurchases of a portion of these trust preferred securities):

			James River Capital Trust I						James River Capital Trust II						James River Capital Trust III						James River Capital Trust IV						Franklin Holdings II (Bermuda) Capital Trust I
			($ in thousands)
Issue date			May 26, 2004						December 15, 2004						June 15, 2006						December 11, 2007						January 10, 2008
Principal amount of trust preferred securities			$7,000						$15,000						$20,000						$54,000						$30,000
Principal amount of junior subordinated debt			$7,217						$15,464						$20,619						$55,670						$30,928
Carrying amount of junior subordinated debt net of repurchases			$7,217						$15,464						$20,619						$44,827						$15,928
Maturity date of junior subordinated debt, unless accelerated earlier			May 24, 2034						December 15, 2034						June 15, 2036						December 15, 2037						March 15, 2038
Trust common stock			$217						$464						$619						$1,670						$928
Interest rate, per annum			Three-Month SOFR plus 4.3%						Three-Month SOFR plus 3.7%						Three-Month SOFR plus 3.3%						Three-Month SOFR plus 3.4%						Three-Month SOFR plus 4.3%

All of the junior subordinated debt is currently redeemable at 100.0% of the unpaid principal amount at our option.

The junior subordinated debt contains certain covenants with which we are in compliance as of September 30, 2024.

At September 30, 2024 and December 31, 2023, the Company's leverage ratio was 24.8% and 26.0%, respectively. The leverage ratio is defined in our senior credit agreements as the ratio of adjusted consolidated debt to total capital. Adjusted consolidated debt treats trust preferred securities as equity capital up to 15% of total capital. The Series A Preferred Shares represent equity capital for purposes of the leverage ratio calculation under the credit agreements. Total capital is defined as

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total debt plus tangible equity excluding accumulated other comprehensive income. The maximum leverage ratio permitted by the agreements is 35.0%.

Ceded Reinsurance

Our insurance segments enter into reinsurance contracts to limit our exposure to potential losses arising from large risks, to protect against the aggregation of several risks in a common loss occurrence, and to provide additional capacity for growth. Our reinsurance is contracted under excess of loss and proportional quota share reinsurance contracts. In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company’s losses in excess of a specified amount. The premiums payable to the reinsurer are negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company’s losses. In proportional quota share reinsurance, the reinsurer agrees to assume a specified percentage of the ceding company’s losses arising out of a defined class of business in exchange for a corresponding percentage of premiums. The Company also utilizes facultative reinsurance to reduce the amount of exposure it retains on individual accounts according to its guidelines for accepting risk across various industry segments, locations and types of exposure. For the three months ended September 30, 2024 and 2023, our net premium retention was 44.6% and 42.6%, respectively. For the nine months ended September 30, 2024 and 2023, our net premium retention was 43.5% and 46.6%, respectively.

The following is a summary of our Excess and Surplus Lines segment’s ceded reinsurance in place as of September 30, 2024:

Line of Business						Company Retention
Casualty
Specialty Casualty						Up to $3.2 million per occurrence.(1)
Primary Casualty						Up to $1.38 million per occurrence.(2)
Excess Casualty						Up to $1.98 million per occurrence.
Property
Excess Property						Up to $5.0 million per risk.(3)

(1)    Excluding Excess Casualty.

(2)    Total exposure to any one claim is generally $694,000.

(3)    The property catastrophe reinsurance treaty has a limit of $20.0 million per event with one reinstatement.

We use catastrophe modeling software to analyze the risk of severe losses from hurricanes and earthquakes on our exposure. We utilize the model in our risk selection, pricing, and to manage our overall portfolio probable maximum loss (“PML”) accumulations. A PML is an estimate of the amount we would expect to pay in any one catastrophe event within a given annual probability of occurrence (i.e. a return period or loss exceedance probability).

In our Excess and Surplus Lines segment, we write a small book of excess property insurance, but we do not write primary property insurance. The Excess and Surplus Lines segment has a specific proportional quota share treaty in effect to cover property risks. The proportional quota share treaty along with facultative reinsurance helps ensure that our net retained limit per risk will be $5.0 million or less.

Also in our Excess and Surplus Lines segment, a specialty casualty treaty providing $9.0 million in excess of $2.0 million coverage is subject to reinstatement premiums for treaty years spanning July 1, 2017 through July 1, 2022.

Based upon the modeling of our Excess and Surplus Lines and Specialty Admitted segments, it would take an event greater than the 1 in 1,000 year PML to exhaust our $20.0 million property catastrophe reinsurance. In the event of a catastrophe loss exhausting our $20.0 million property catastrophe reinsurance, we estimate our pre-tax cost would not exceed 2.5% of shareholders’ equity, including reinstatement premiums and net retentions. In addition to this retention, we would retain any losses in excess of our reinsurance coverage limits.

The Commercial Auto LPT with Aleka reinsures substantially all of the Excess and Surplus Lines segment’s legacy portfolio of commercial auto policies previously issued to Rasier. See “Amounts Recoverable from an Indemnifying Party and Reinsurer on the Legacy Commercial Auto Book” below for further information on this reinsurance agreement.

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The following is a summary of our Specialty Admitted Insurance segment’s ceded reinsurance in place as of September 30, 2024:

Line of Business						Coverage
Casualty
Workers’ Compensation						Excess of loss coverage for $29.5 million in excess of $500,000.
Auto Programs						Quota share coverage for 62.5%-100% of limits up to $1.5 million liability and $1.5 million physical damage per occurrence.
General Liability & Professional Liability – Programs						Quota share coverage for 62.5%-100% of limits up to $2.0 million per occurrence.
Umbrella and Excess Casualty - Programs						Quota share coverage for at least 85% of limits up to $10.0 million per occurrence, and 82% of excess of loss coverage for $5.0 million in excess of $10.0 million.
Property
Property within Package - Programs						Quota share coverage for 100% of limits up to $40.0 million per risk.
Excess Property						Quota share coverage for 100% of limits up to $58.9 million per occurrence.
Aviation Programs						Quota share coverage for 82.5% of limits up to $25 million liability, $5.0 million hull, and $5.0 million spares per occurrence, each aircraft; and excess of loss coverage for up to $7.7 million excess of $175,000 of our 17.5% share of the quota share each occurrence.

Our Specialty Admitted Insurance segment purchases reinsurance for at least 62.5% of the exposed limits on specialty admitted property-casualty business. The segment enters into reinsurance contracts for the fronting and program business. While the segment focuses on casualty business, incidental property risk is incurred in the fronting and program business. The segment is covered for $20.0 million in excess of $5.0 million per occurrence to manage its property exposure to an approximate 1 in 1,000 year PML.

In the aggregate, we believe our pre-tax group-wide PML from a 1 in 1,000 year property catastrophe event would not exceed 2.5% of shareholders’ equity, inclusive of reinstatement premiums payable.

We also had a contingency clash reinsurance treaty to cover both the Excess and Surplus Lines and Specialty Admitted Insurance segments in the event of a claim incident involving more than one of our insureds in addition to Extra Contractual and Excess Policy Limits protection. The treaty covered $10.0 million in excess of a $2.0 million retention for loss occurrences within the treaty term. This coverage was put into runoff effective July 1, 2022.

Effective January 1, 2020, we purchased an additional $10.0 million in claims made coverage for excess policy limits and extra contractual obligations exposures above the clash and contingency treaty for the period 2014 to its expiration on December 31, 2022. This treaty had one reinstatement.

The Company’s insurance segments remain liable to policyholders if its reinsurers are unable to meet their contractual obligations under applicable reinsurance agreements. We establish an allowance for credit losses for our current estimate of uncollectible reinsurance recoverables. At September 30, 2024, the allowance for credit losses on reinsurance recoverables was $776,000. To minimize exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. The Company generally seeks to purchase reinsurance from reinsurers with A.M. Best financial strength ratings of “A-” (Excellent) or better. The Company’s reinsurance contracts generally require reinsurers that are not authorized as reinsurers under U.S. state insurance regulations or that experience rating downgrades from rating agencies below specified levels to fund their share of the Company’s ceded outstanding losses and loss adjustment expense reserves, typically through the use of irrevocable and unconditional letters of credit. In fronting arrangements, which the Company conducts through its Specialty Admitted Insurance segment, we are subject to credit risk with regard to insurance companies who act as reinsurers for us in such arrangements. We require collateral, in the form of a trust arrangement or letter of credit, to secure the obligations of the insurance entity for whom we are fronting.

At September 30, 2024, we had reinsurance recoverables on unpaid losses of $1,939.4 million (net of a $776,000 allowance for credit losses) and reinsurance recoverables on paid losses of $133.3 million, and all material recoverable amounts were from companies with A.M. Best ratings of “A-" (Excellent) or better, or are collateralized by the reinsurer for our benefit through letters of credit or funds on deposit in trust accounts.

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Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book

James River previously issued a set of commercial auto insurance contracts to Rasier (the “Rasier Commercial Auto Policies”) under which James River pays losses and loss adjustment expenses on the contracts. James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River. On September 27, 2021, James River entered into a loss portfolio transfer reinsurance agreement (the “Commercial Auto LPT”) with Aleka to reinsure substantially all of the Rasier Commercial Auto Policies for which James River is not otherwise indemnified by Rasier under the Indemnity Agreements. Under the terms of the Commercial Auto LPT, effective as of July 1, 2021, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to Rasier Commercial Auto Policies written in the years 2013-2019, which amount constituted the reinsurance premium.

Each of Rasier and Aleka is required to post collateral under the Indemnity Agreements and the Commercial Auto LPT, respectively:

•Pursuant to the Indemnity Agreements, Rasier is required to post collateral equal to 102% of James River's estimate of the amounts that are recoverable or may be recoverable under the indemnity agreements, including, among other things, case loss and loss adjustment expense reserves, IBNR loss and loss adjustment expense reserves, extra contractual obligations and excess policy limits liabilities. The collateral is provided through a collateral trust arrangement (the “Indemnity Trust”) in favor of James River by Aleka. In connection with the execution of the Commercial Auto LPT, James River returned $691.3 million to the Indemnity Trust, representing the remaining balance of the amount withdrawn in October 2019, as was permitted under the indemnification agreements with Rasier and the associated trust agreement. At September 30, 2024, the balance in the Indemnity Trust was $85.3 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $102.7 million.

•Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with statutory actuarial principles and based on reserves recorded in the Company's statutory financial statements. The collateral is provided through a collateral trust arrangement (the “LPT Trust”) established in favor of James River by Aleka. At September 30, 2024, the balance in the LPT Trust was $40.1 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Commercial Auto LPT as described below, the total balance of collateral securing Aleka’s obligations under the Commercial Auto LPT was $47.8 million. At September 30, 2024, the total reinsurance recoverables under the Commercial Auto LPT was $46.9 million.

In connection with the execution of the Commercial Auto LPT, James River and Aleka entered into an administrative services agreement (the “Administrative Services Agreement”) with a third party claims administrator (the “Administrator”) pursuant to which the Administrator handles the claims on the Rasier Commercial Auto Policies for the remaining life of those claims. The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established a loss fund trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations. James River funds the Loss Fund Trust using funds withdrawn from the Indemnity Trust, funds withdrawn from the LPT Trust, and its own funds, in each case in an amount equal to the pro rata portion of the required Loss Fund Trust balance attributable to the Indemnity Agreements, the Commercial Auto LPT and James River’s existing third party reinsurance agreements, respectively. At September 30, 2024, the balance in the Loss Fund Trust was $28.4 million, including $17.4 million representing collateral supporting Rasier’s obligations under the Indemnity Agreements and $7.7 million representing collateral supporting Aleka’s obligations under the Commercial Auto LPT. Funds posted to the Loss Fund Trust are classified as restricted cash equivalents on the Company's balance sheet.

While the Commercial Auto LPT brings economic finality to substantially all of the Rasier Commercial Auto Policies, the Company has credit exposure to Rasier and Aleka under the Indemnity Agreements and the Commercial Auto LPT if the estimated losses and expenses of the Rasier Commercial Auto Policies grow at a faster pace than the growth in our collateral balances. In addition, we have credit exposure if our estimates of future losses and loss adjustment expenses and other amounts recoverable under the Indemnity Agreements and the Commercial Auto LPT, which are the basis for establishing the collateral balances, are lower than actual amounts paid or payable. The amount of our credit exposure in any of these instances could be material. To mitigate these risks, we closely and frequently monitor our exposure compared to our collateral held, and we request additional collateral in accordance with the terms of the Commercial Auto LPT and Indemnity Agreements when our analysis indicates that we have uncollateralized exposure.

Ratings

The A.M. Best financial strength rating for our group’s regulated U.S. insurance subsidiaries is “A-” (Excellent) with a negative outlook. This rating reflects A.M. Best’s opinion of our insurance subsidiaries’ financial strength, operating

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performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors. The rating for our U.S. operating insurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M. Best and is assigned to insurers that have, in A.M. Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders.

The financial strength ratings assigned by A.M. Best have an impact on the ability of our regulated subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive. We believe the “A-” (Excellent) ratings assigned to our U.S. insurance subsidiaries allow our subsidiaries to actively pursue relationships with the agents and brokers identified in their marketing plans.

Series A Preferred Shares

The Company closed on the issuance and sale of 150,000 Series A Preferred Shares on March 1, 2022 for an aggregate purchase price of $150.0 million, or $1,000 per share, in a private placement. The Series A Preferred Shares are convertible into the Company’s common shares at the option of the holder at any time, or at the Company’s option under certain circumstances. Dividends on the Series A Preferred Shares accrue quarterly at the initial rate of 7% of the Liquidation Preference per annum, which may be paid in cash, in-kind in common shares or in Series A Preferred Shares, at the Company’s election.

On November 11, 2024, the Company amended the Certificate of Designations setting forth the terms of the Series A Preferred Shares to, among other things, convert outstanding Series A Preferred Shares with a liquidation value of $37.5 million to common shares at a per share price of $6.40.

EQUITY

Total common shares outstanding increased from 37,641,563 at December 31, 2023 to 37,829,475 at September 30, 2024, reflecting 187,912 common shares issued in the nine months ended September 30, 2024 related to vesting of RSUs.

Share Based Compensation Expense

The Company recognized $1.4 million and $5.7 million of share based compensation expense in the three and nine months ended September 30, 2024, respectively ($2.2 million and $7.2 million in the respective prior year periods). As of September 30, 2024, the Company had $8.2 million of unrecognized share based compensation expense expected to be charged to earnings over a weighted-average period of 1.7 years.

Equity Incentive Plans

Options

The following table summarizes option activity:

			Nine Months Ended September 30,
			2024												2023
			Shares						Weighted- Average Exercise Price						Shares						Weighted- Average Exercise Price
Outstanding:
Beginning of period			74,390						$	42.17					287,974						$	35.26
Granted			—						$	—					—						$	—
Exercised			—						$	—					—						$	—
Forfeited			—						$	—					(47,033)						$	35.22
Lapsed			(74,390)						$	42.17					(164,548)						$	32.07
End of period			—						$	—					76,393						$	42.17
Exercisable, end of period			—						$	—					76,393						$	42.17

The options outstanding at December 31, 2023 lapsed in the nine months ended September 30, 2024. At September 30, 2024, no options remain outstanding.

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RSUs

The following table summarizes RSU activity:

			Nine Months Ended September 30,
			2024												2023
			Shares						Weighted- Average Grant Date Fair Value						Shares						Weighted- Average Grant Date Fair Value
Unvested, beginning of period			751,254						$	23.48					665,458						$	25.98
Granted			541,520						$	9.75					376,016						$	24.63
Vested			(273,035)						$	25.00					(212,968)						$	28.91
Forfeited			(90,546)						$	17.01					(30,719)						$	23.28
Unvested, end of period			929,193						$	15.66					797,787						$	24.66

Outstanding RSUs granted to employees generally vest ratably over a three-year vesting period in the case of time-vest RSUs and cliff vest at the end of a three-year performance period in the case of PRSUs. RSUs granted to non-employee directors generally have a one year vesting period. The RSUs granted in 2024 and 2023 include 231,492 and 91,818 PRSU awards, respectively. The number of PRSUs is based upon the probable outcome of performance conditions.

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Underwriting Performance Ratios

The following table provides the underwriting performance ratios of the Company's continuing operations inclusive of the business subject to retroactive reinsurance accounting. There is no economic impact to the Company over the life of a retroactive reinsurance contract so long as any additional losses subject to the contract are within the limit of the contract and the counterparty performs under the contract. Retroactive reinsurance accounting is not indicative of our current and ongoing operations. Management believes that providing loss ratios and combined ratios on business not subject to retroactive reinsurance accounting gives the users of our financial statements useful information in evaluating our current and ongoing operations.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
Excess and Surplus Lines:
Loss Ratio			108.2		%				65.4		%				81.3		%				67.5		%
Impact of retroactive reinsurance			12.9		%				(2.0)		%				2.4		%				1.4		%
Loss Ratio including impact of retroactive reinsurance			121.1		%				63.4		%				83.7		%				68.9		%
Combined Ratio			136.1		%				88.4		%				105.9		%				90.0		%
Impact of retroactive reinsurance			12.9		%				(2.0)		%				2.4		%				1.4		%
Combined Ratio including impact of retroactive reinsurance			149.0		%				86.4		%				108.3		%				91.4		%
Consolidated:
Loss Ratio			104.1		%				67.2		%				80.8		%				68.6		%
Impact of retroactive reinsurance			11.2		%				(1.7)		%				2.1		%				1.2		%
Loss Ratio including impact of retroactive reinsurance			115.3		%				65.5		%				82.9		%				69.8		%
Combined Ratio			135.5		%				93.6		%				109.6		%				96.0		%
Impact of retroactive reinsurance			11.2		%				(1.7)		%				2.1		%				1.2		%
Combined Ratio including impact of retroactive reinsurance			146.7		%				91.9		%				111.7		%				97.2		%

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RECONCILIATION OF NON-GAAP MEASURES

See “Key Metrics” above for descriptions of why management believes the following Non-GAAP measures provide useful information about our financial condition and results of operation.

Reconciliation of Underwriting Profit

We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting and other operating expenses. Other operating expenses include the underwriting, acquisition, and insurance expenses of the operating segments and, for consolidated underwriting profit, the expenses of the Corporate and Other segment. Our definition of underwriting profit may not be comparable to that of other companies.

The following table reconciles the underwriting (loss) profit of the operating segments by individual segment to consolidated (loss) income from continuing operations before income taxes:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2024						2023						2024						2023
			(in thousands)
Underwriting (loss) profit of the operating segments:
Excess and Surplus Lines			$	(50,155)					$	18,342					$	(25,237)					$	45,449
Specialty Admitted Insurance			1,810						1,967						6,012						1,882
Total underwriting (loss) profit of operating segments			(48,345)						20,309						(19,225)						47,331
Other operating expenses of the Corporate and Other segment			(8,421)						(8,482)						(28,182)						(26,312)
Underwriting (loss) profit (1)			(56,766)						11,827						(47,407)						21,019
Losses and loss adjustment expenses - retroactive reinsurance			(17,954)						3,187						(10,268)						(6,261)
Net investment income			23,564						21,799						71,127						58,458
Net realized and unrealized gains on investments			4,150						712						6,428						2,487
Other income and expenses			1,233						2,286						507						1,818
Interest expense			(6,128)						(6,486)						(18,957)						(18,066)
Amortization of intangible assets			(90)						(90)						(272)						(272)
Impairment of intangible assets			—						(2,500)						—						(2,500)
(Loss) income from continuing operations before income taxes			$	(51,991)					$	30,735					$	1,158					$	56,683

(1)Included in underwriting results for the three and nine months ended September 30, 2024 is gross fee income of $5.2 million and $16.1 million, respectively ($6.8 million and $18.3 million in the respective prior year periods).

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Reconciliation of Adjusted Net Operating Income

Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations, b) the impact of retroactive reinsurance accounting, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to certain lawsuits, various strategic initiatives, and the filing of registration statements for the offering of securities, and e) severance costs associated with terminated employees. Adjusted net operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and our definition of adjusted net operating income may not be comparable to that of other companies.

Our (loss) income available to common shareholders reconciles to our adjusted net operating (loss) income as follows:

			Three Months Ended September 30,
			2024												2023
			Loss Before Taxes						Net Loss						Income Before Taxes						Net Income
			($ in thousands)
(Loss) income available to common shareholders			$	(55,920)					$	(42,006)					$	23,939					$	16,926
Loss from discontinued operations			1,304						1,304						4,171						4,171
Losses and loss adjustment expenses - retroactive reinsurance			17,954						14,184						(3,187)						(2,518)
Net realized and unrealized investment gains			(4,150)						(3,279)						(712)						(562)
Other expenses			1,752						1,601						(1,531)						(1,133)
Impairment of intangible assets			—						—						2,500						1,975
Adjusted net operating (loss) income			$	(39,060)					$	(28,196)					$	25,180					$	18,859

			Nine Months Ended September 30,
			2024												2023
			(Loss) Income Before Taxes						Net Loss						Income Before Taxes						Net Income
			($ in thousands)
(Loss) income available to common shareholders			$	(22,979)					$	(24,228)					$	50,126					$	34,596
Loss (income) from discontinued operations			16,262						16,262						(1,318)						(1,318)
Losses and loss adjustment expenses - retroactive reinsurance			10,268						8,112						6,261						4,946
Net realized and unrealized investment gains			(6,428)						(5,079)						(2,487)						(1,964)
Other expenses			4,582						4,233						(733)						(360)
Impairment of intangible assets			—						—						2,500						1,975
Adjusted net operating income (loss)			$	1,705					$	(700)					$	54,349					$	37,875

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Tangible Equity and Tangible Equity per Share

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares and the unrecognized deferred retroactive reinsurance gain less goodwill and intangible assets, net of amortization. Tangible equity per share represents tangible equity divided by the sum of total common shares outstanding plus the common shares resulting from an assumed conversion of the outstanding Series A Preferred Shares into common shares (at the conversion price effective as of the last day of the applicable period). Our definitions of tangible equity and tangible equity per share may not be comparable to that of other companies, and they should not be viewed as a substitute for shareholders’ equity and shareholders’ equity per share calculated in accordance with GAAP.

The following table reconciles shareholders’ equity to tangible equity as of September 30, 2024, December 31, 2023, and September 30, 2023:

			September 30, 2024												December 31, 2023												September 30, 2023
			Equity						Equity per Share						Equity						Equity per Share						Equity						Equity per Share
			($ in thousands, except share amounts)
Shareholders’ equity			$	530,347					$	14.02					$	534,621					$	14.20					$	562,544					$	14.95
Series A redeemable preferred shares			144,898												144,898												144,898
Deferred reinsurance gain			31,001												20,733												37,653
Less:
Goodwill			181,831												181,831												181,831
Intangible assets, net			32,541												32,813												32,904
Tangible equity			$	491,874					$	11.01					$	485,608					$	11.13					$	530,360					$	12.26
Common shares outstanding			37,829,475												37,641,563												37,619,749
Common shares from assumed conversion of Series A Preferred Shares			6,848,763												5,971,184												5,640,158
Common shares outstanding after assumed conversion of Series A Preferred Shares			44,678,238												43,612,747												43,259,907

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign currency exchange rates and commodity prices. Our consolidated balance sheets include assets and liabilities with estimated fair values that are subject to market risk. Our primary market risks have been interest rate risk associated with investments in fixed maturities and equity price risk associated with investments in equity securities. We do not have material exposure to foreign currency exchange rate risk or commodity risk.

There have been no material changes in market risk from the information provided in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding required disclosure. In connection with the preparation of this quarterly report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our CEO and CFO, as of September 30, 2024, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The effectiveness of any system of controls and procedures is subject to certain limitations, and, as a result, there can be no assurance that our controls and procedures will detect all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be attained.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in various legal proceedings, including commercial matters and litigation regarding insurance claims which arise in the ordinary course of business, as well as the matters specifically discussed below. In addition, the Company is involved from time to time in legal actions which seek extra-contractual damages, punitive damages or penalties, including claims alleging bad faith in the handling of insurance claims. We believe that the outcome of such matters, individually and in the aggregate, is not reasonably likely to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

On November 13, 2023, a purported class action lawsuit was filed in the U.S. District Court, Southern District of New York, on behalf of Paul Glantz against James River Group Holdings, Ltd. and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On January 12, 2024, both Mr. Glantz and Madhav Ghimire, another individual shareholder, filed an application with the court for appointment as Lead Plaintiff, and on January 26, 2024 Mr. Glantz filed a notice of non-opposition to Mr. Ghimire's competing motion for appointment as Lead Plaintiff. On March 25, 2024 the court entered an order appointing Mr. Ghimire as lead plaintiff. On May 24, 2024, Plaintiff filed its consolidated amended complaint alleging that he acquired the Company’s common stock at artificially inflated pricing between May 2, 2023 and November 7, 2023, inclusive, that the Company knew and/or recklessly disregarded that it had improperly accounted for reinsurance premiums and did not have effective internal control over financial reporting, and that as a result, he suffered unspecified damages, and seeking unspecified damages, costs, attorneys' fees and such other relief as the court may deem proper. On July 23, 2024 the Company filed a motion to dismiss the consolidated amended complaint. On September 6, 2024, the plaintiff filed its Opposition to Motion to Dismiss and on October 8, 2024, the Company filed its Reply to the plaintiff's Opposition to Motion to Dismiss. We believe that the claims are without merit and intend to vigorously defend this lawsuit.

On March 11, 2024, the Company filed a complaint (the “Complaint”) in the Supreme Court of the State of New York, New York County, Commercial Division against Fleming Intermediate Holdings LLC (“Fleming”), a Cayman Islands limited liability company, relating to the previously announced Stock Purchase Agreement, dated as of November 8, 2023 (the “Stock Purchase Agreement”), pursuant to which Fleming agreed to purchase all of the outstanding common shares of JRG Re (the

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“Transaction”). The complaint alleges that Fleming breached the Stock Purchase Agreement by its refusal to close the Transaction on March 1, 2024 as required under the terms of the Stock Purchase Agreement, and seeks specific performance of Fleming’s obligation to complete the Transaction and an award of damages. The Company subsequently filed a motion for preliminary injunction to require Fleming to fulfill its contractual obligation to close the Transaction, and on April 6, 2024 the Court granted the Company’s motion and ordered Fleming to complete the Transaction on or prior to April 16, 2024. On April 8, 2024, Fleming filed a notice of appeal of the preliminary injunction, which Fleming withdrew on October 9, 2024. The Transaction closed on April 16, 2024. On April 19, 2024, Fleming filed a motion to dismiss the Complaint. On May 9, 2024, the Company filed an amended complaint seeking, among other things, specific performance and damages suffered as a result of Fleming's breach of the Stock Purchase Agreement. On June 6, 2024, Fleming filed a motion to dismiss the amended complaint, on July 3, 2024 the Company filed an opposition to the motion to dismiss, on July 24, 2024 Fleming filed its reply to the opposition, and on October 29, 2024 the court heard oral arguments on the motion to dismiss.

On July 15, 2024, Fleming filed a lawsuit in the U.S. District Court, Southern District of New York against James River Group Holdings, Ltd. and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, common law fraud, and breaches of contract, and seeking unspecified monetary damages, including compensatory, consequential and punitive damages, all associated with Fleming's purchase of JRG Re pursuant to the Stock Purchase Agreement. On July 31, 2024, Fleming filed an amended complaint, on September 13, 2024 the Company filed a motion to dismiss the amended complaint, and on October 18, 2024 Fleming filed an amended complaint. The Company's motion to dismiss the amended complaint is due November 15, 2024, Fleming's opposition to the motion to dismiss is due December 23, 2024 and the Company's reply to the opposition is due January 17, 2025. We believe Fleming's claims are without merit and intend to vigorously defend this lawsuit.

Item 1A. Risk Factors

There have been no material changes in our risk factors in the quarter ended September 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, except as follows:

We are involved in disputes relating to the Stock Purchase Agreement and the sale of JRG Re to Fleming, which closed on April 16, 2024. An adverse outcome to these matters may have a material adverse effect on our financial position

In accordance with the Stock Purchase Agreement, the cash portion of the purchase price (the "Closing Date Purchase Price") received by the Company for the sale of JRG Re on April 16, 2024 (the “Closing Date”) was calculated based on an estimated closing statement, which in turn was based on an estimated balance sheet of JRG Re. Under the Stock Purchase Agreement, the estimated closing statement is subject to a post-closing adjustment process between the Company and Fleming to produce a final closing statement based on a final balance sheet of JRG Re as of the Closing Date.

Fleming delivered a closing statement to the Company, and pursuant to the procedures in the Stock Purchase Agreement, the Company has given notice of its disagreement with Fleming’s closing statement. In its notice of disagreement, the Company (i) agreed with an $11.4 million downward adjustment to the Closing Date Purchase Price due to the losses recorded on JRG Re's operations between the date of the balance sheet used to produce the estimated closing statement and the Closing Date, which downward adjustment was included in "Other Liabilities" on the Company's Balance Sheet at September 30, 2024 (and was paid to Fleming on October 18, 2024), and (ii) disputed $54.1 million in aggregate downward adjustments to the Closing Date Purchase Price claimed by Fleming, which the Company believes are unsupported by the facts known to the Company and the terms of the Stock Purchase Agreement. The Stock Purchase Agreement provides procedures for resolving disputes between the parties regarding the closing statement and it is possible that the resolution of these disputes could result in a significant reduction to the amount of the purchase price beyond the $11.4 million downward adjustment already paid by the Company to Fleming.

As described in Part II, Item 1., Legal Proceedings, we are involved in litigation with Fleming regarding the Stock Purchase Agreement and related matters. The outcome of the disputes over the post-closing adjustment and the litigation with Fleming cannot be predicted and, if determined adversely, could require us to repay a significant portion of the purchase price paid by Fleming on the Closing Date, as well as significant damage amounts, which could have a material adverse effect on our financial position.

The Enstar common equity investment and adverse development cover transactions are subject to conditions to closing over which we do not have control

On November 11, 2024, the Company announced that an affiliate of Enstar Group Limited, Cavello Bay Reinsurance Limited (“Cavello Bay”), entered into (i) a subscription agreement to purchase $12.5 million of the Company’s common shares at a share price of $6.40, in addition to 637,640 shares Enstar previously purchased in the open market, and (ii) an adverse development cover reinsurance contract (the "ADC”) with James River Insurance Company and James River Casualty Company, pursuant to which, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium) to be paid by the ceding companies, Cavello Bay will reinsure, effective January 1, 2024, 100% of the

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losses associated with the ceding companies’ Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates, subject to a retention by the ceding companies of $1,183.7 million (the limit of the E&S ADC executed on July 2, 2024) and up to an aggregate limit of $75.0 million (such transactions together, the “Enstar Transactions”). The Enstar Transactions are subject to a number of closing conditions, including the approval by the Bermuda Monetary Authority of the ADC, and there can be no assurance that these conditions will be satisfied on the timeline we expect or at all. The Enstar Transactions may also be terminated in certain circumstances, including termination by either the Company or Enstar if the Enstar Transactions are not completed by February 9, 2025 (subject to one 60-day extension in the event closing has not occurred solely because one or more required governmental approvals have not been obtained).

While the Enstar Transactions are pending or if the Enstar Transactions are not completed, we may be subject to several risks including:

•The current trading price of our common shares may reflect a market assumption that the Enstar Transactions will be completed, and may decline if the Enstar Transactions are not completed;

•We have incurred and expect to incur significant transaction costs in connection with the Enstar Transactions whether or not the Enstar Transactions are completed;

•The negative perception of investors, vendors, trading partners, or employees if the Enstar Transactions are not completed; and

•The attention of our management may be directed toward the completion of the pending Enstar Transactions and related matters, and their focus may be diverted from our day-to-day business operations.

Any of these risks could have a material adverse effect on our business, financial condition, results of operations and prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other information

None.

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Item 6. Exhibits

Exhibit Number						Description
10.1						Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract dated July 2, 2024 between James River Insurance Company and James River Casualty Company and State National Insurance Company, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 9, 2024) (File No. 001-36777)*
10.2						Form of Retention Award Letter (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 31, 2024) (File No. 001-36777)
10.3						Amended and Restated Employment Agreement, dated as of July 30, 2024, by and between Frank D’Orazio, James River Group Holdings, Ltd. and James River Group Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 31, 2024) (File No. 001-36777)
10.4						Third Amendment to the James River Group Holdings, Ltd. 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 25, 2024) (File No. 001-36777)
10.5						Second Amendment to the James River Group Holdings, Ltd. 2014 Non-Employee Director Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on October 25, 2024) (File No. 001-36777)
31.1						Chief Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a)
31.2						Chief Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a)
32.1						Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						Inline XBRL Instance Document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document in Exhibit 101.

*Pursuant to Item 601(a)(5) of Regulation S-K, the Schedules to this Exhibit have been omitted. A copy of the omitted schedules will be furnished to the Securities and Exchange Commission upon request.

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Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

						James River Group Holdings, Ltd.
Date:			November 12, 2024			By:			/s/ Frank N. D’Orazio
									Frank N. D’Orazio
									Chief Executive Officer and Director
									(Principal Executive Officer)
Date:			November 12, 2024			By:			/s/ Sarah C. Doran
									Sarah C. Doran
									Chief Financial Officer
									(Principal Financial Officer)

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