Strategic Actions Frequently Asked Questions
Strategic Actions
Frequently Asked Questions
Forward-Looking Statements
This presentation contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. In some cases, such forward- looking statements may be identified by terms such as believe, expect, seek, may, will, intend, project, anticipate, plan, estimate, guidance or similar words. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Although it is not possible to identify all of these risks and factors, they include, among others, the following: the inherent uncertainty of estimating reserves and the possibility that incurred losses may be greater than our loss and loss adjustment expense reserves; inaccurate estimates and judgments in our risk management may expose us to greater risks than intended; the downgrade in the financial strength rating of our regulated insurance subsidiaries announced
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Frequently Asked Questions
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James River Group Holdings, Ltd. ("James River" or the "Company") has completed a detailed review of its Casualty
Re segment reserves which resulted in$115 MM of reserve strengthening, primarily related to a limited number of treaties from underwriting years 2014-2018.- A primary subsidiary of the Company has also executed a retroactive retrocession agreement for the majority of the
reserves in the Casualty Re segment with |
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What do today's |
rated legacy reinsurer. Closing will occur upon receipt of regulatory approval by FRL and satisfaction of other |
announcements |
customary closing conditions. |
mean? |
• |
assets. It or one or more of its affiliated funds will purchase |
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and James River's Board has approved the appointment of |
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managing partners, as a Director, effective following receipt of any necessary regulatory approvals. Until applicable |
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regulatory approvals are obtained, |
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2022. |
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2 |
• In the Company's view, the Casualty Re segment has not had any bearing on the Company's two US insurance |
segments. |
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Do the actions |
• The Company has continued to take advantage of very attractive growth, rate and conditions in its Excess & Surplus |
and Specialty Admitted segments. |
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taken with regard |
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─ E&S segment gross written premium growth of 19% in 2021 and fourth quarter combined ratio of 82.1%. |
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to the Casualty Re |
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segment impact |
─ Specialty Admitted segment gross written premium growth of 20% in 2021 and fourth quarter combined ratio of |
the Company's |
84.7%. |
other segments? |
• The Company's Core E&S business reached approximately |
generated more than |
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─ The Core E&S business has grown more than 2.75x over the last four years, since year end 2017. |
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Frequently Asked Questions
3
What type of risk
drove the Casualty
Re Reserve
Movements?
4
What external
validation of the
Casualty Re reserve movements did the Company pursue?
5
What retrocessional reinsurance has the Company purchased?
Are there any conditions to close?
- The reserve increase was primarily driven by general liability risks including construction exposure, where actual reported and paid losses significantly exceeded expectations. To a lesser extent, treaties contributing to the increase in reserves also had aspects of premises and financial lines exposures.
- In addition to the quarterly internal review and conclusions, we believe external reserve validation includes:
-
- The retroactive retrocession agreement, which will incept within
$6.8 MM of held reserves. - The
$150 MM Gallatin Point convertible preferred investment. - That the year end 2021 third party actuarial review of our carried reserves for both the Casualty Re segment and Group in total is above the external actuaries' central estimate as of 12/31/2021.
- The retroactive retrocession agreement, which will incept within
JRG Reinsurance Company, Ltd. ("JRG Re") has purchased coverage for net reserves for certain treaties that JRG
Re participated on over the 2011-2020 underwriting years. Many of the treaties covered have already been non- renewed in recent years.- Under the terms of the agreement, JRG Re's coverage is subject to an aggregate limit of
$400 MM. This$65 MM net limit incepts$6.8 MM above the Company's12/31/2021 reserves for the portfolio. - The only condition to close is regulatory non-disapproval by the
Bermuda Monetary Authority , which is expected in due course.
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6
What Casualty Re
liabilities are
included in the
transaction?
Are further strategic
actions expected with regard to this segment?
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What is the cost of the retrocessional reinsurance transaction and financial impact on James River?
Frequently Asked Questions
- The retrocession transaction covers the majority of the historical reserves of the Casualty Re segment and a majority of the segment reserves related specifically to construction and construction defect risk.
- The Casualty Re portfolio had been downsized and de-risked beginning in 2018 and has also gained significant improvement in both rate and terms and conditions, especially in the last two years.
- The Company expects to meaningfully reduce gross written premium in the Casualty Re segment over the course of 2022.
- James River will recognize an after-tax loss of
$6.8 MM in connection with the transaction during the first quarter of 2022, which is expected to be reported as prior year reserve development within the Casualty Re segment. - As part of the transaction, James River will not recognize any earnings on the portfolio during the first quarter of 2022, which will result in an increase in current accident year losses of
$5 MM in that quarter. - James River will pay FRL premium of
$335 MM. -
- This includes
$25 MM of cash paid to FRL at closing. The Company currently has this cash on hand. - The remaining
$310 MM will be held by the Company on a funds withheld basis until balances decline to a certain level.
- This includes
- The total premium, initial funds withheld balance, and the aggregate limit will be adjusted for claims paid from
October 1, 2021 to the closing date. - The Company will pay to FRL a crediting rate of 2% per annum, paid quarterly, on the funds withheld assets. This balance will decline as the liabilities run off. The expense of the interest credit will run through the Consolidated Income Statement.
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