Mail Stop 6010
July 6, 2005
J. Adam Abram
President and Chief Executive Officer
James River Group, Inc.
1414 Raleigh Road - Suite 415
Chapel Hill, North Carolina 27517
Re: James River Group, Inc.
Amendment No. 1 to Form S-1 Registration Statement
File No. 333-124605
Dear Mr. Abram:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Prospectus Summary - page 1
1. We note your response to comment 6 in our previous letter, but
we
are unable to locate the revised language. Please revise as we
previously requested.
Selected Operating History - page 5
2. Refer to your response to comment one on page 3 of your
response.
"Underwriting profit (loss)" when compared to net income excludes
certain revenues and expenses that are recurring in nature. These
are the recurring items referred to in our previous comment. The
exclusion of these recurring items is inconsistent under the
existing
non-GAAP guidance. Please explain to us the appropriateness of
removing these recurring items or remove the references to this
measure.
Sources of Certain Statistical and Other Information - page 21
3. We note the revision you made in response to comment 16, but it
does not fully address the issue we raised. Please delete the
entire
paragraph as we previously requested.
Use of Proceeds - page 22
4. We have considered your response to comment 17. We continue to
believe that you should revise the disclosure as we previously
requested.
Dilution - page 24
5. While we note that you only had one common share as of March
31,
2005, please revise your table so that its starting point is
actual
net tangible book value per share.
Selected Historical Consolidated Financial and Other Data - page
25
6. Refer to your response to comment 19. We note that you added a
line item to reflect a stock split that you expect to affect prior
to
the completion of the offering. Please revise the disclosure to
clarify that the conversion and the stock-split will take place
after
effectiveness of the registration statement. In addition, clarify
that the diluted EPS will be reflective of the basic EPS upon the
conversion of the preferred shares.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations - page 27
Overview - page 27
7. Please explain to us why you provided the table at the bottom
of
page 28 that removes the effects of a reinsurance contract from
your
operations. Further clarify for us and in your disclosure whether
this agreement represents a modified co-insurance agreement and
how
you treat the assets maintained in the "funds-held account." Also
explain why you feel it is appropriate to remove the effects of
this
treaty in your discussions within document such as the fourth full
paragraph on page 44 where you discuss the expense ratio.
Critical Accounting Policies - page 29
Reserve for Losses and Loss Adjustment Expenses - page 29
8. Refer to your response to comment 20. In the first paragraph
of
this section you state that you "utilize several actuarial methods
to
arrive at [your] loss reserve estimates with emphasis on two
methods." Please disclose the following related to your
methodology:
* The multiple point estimates generated including specifically
the
two methods specifically referenced in addition to any other
methods
employed that generated point estimates outside the range of these
two methods.
* Clarify whether the same method is applied to each line of
business
or if the method may differ between lines of business.
* For the point estimate selected from these methods, discuss why
the
method selected at that point in time is appropriate. If you
switched methods, include a discussion of the specific factors
that
caused management to determine that the new methodology is the
most
appropriate.
* Provide quantified and narrative disclosure of the impact that
reasonably likely changes in one or more of the variables would
have
on reported results, financial position and liquidity.
Results of Operations - page 32
Three Months Ended March 31, 2005 Compared to Three Months Ended
March 31, 2004 - page 32
9. Please revise the table on page 34 to reflect your reserves by
major line of business not just business segment.
10. It appears that management significantly revised its estimate
of
loss reserves recorded in prior years. Please revise Management`s
Discussion and Analysis to explain the reason for this change in
estimate. For each line of business, include the following
disclosures:
* Identify the years to which the change in estimate relates and
discuss and quantify any offsetting changes in estimates that
increase and decrease the loss reserve.
* Identify the changes in the key assumptions made to estimate the
reserve since the last reporting date.
* Identify the nature and timing of the change in estimate,
explicitly identifying and describing in reasonable specificity
the
new events that occurred or additional information acquired since
the
last reporting date that led to the change in estimate.
* Ensure the disclosure clearly explains why recognition occurred
in
the periods that it did and why recognition was not required in
earlier periods.
Underwriting - page 116
11. We note your response to comment 28. We have not yet received
your directed shares offering materials. Please provide them as
soon
as possible so that we have an opportunity to review them.
Financial Statements - December 31, 2004, page F-1
Consolidated Statements of Operations, page F-5
12. Refer to your response to comment 32. Please provide pro
forma
EPS for the most recent annual and interim periods wherever EPS is
presented that reflects the conversion of the shares and the stock
split. Refer to Item 11-01(a)(8) of Regulation S-X.
Notes to Consolidated Financial Statements, page F-8
1. Accounting Policies, page F-8
Investments, page F-8
13. Refer to your response to comment 36. Please revise the added
disclosure to address the period that adjustments as a result of
changes in estimated prepayment experience are recognized.
Recent Accounting Pronouncements, page F-11
14. Refer to your response to comment 33. Please explain to us
the
appropriateness of adopting this statement in the middle of an
interim period as it appears is the company`s intention. Refer to
paragraphs 69 and 73 of SFAS 123R.
2. Acquisition, page F-12
15. Refer to your response to comment 34. Please provide further
clarification to us about the insurance operations of Fidelity
prior
to the acquisition. Clarify what you mean when you say it had
"very
minimal insurance operations." You state that the company had "no
net earned premium [or] no net incurred loss and loss adjustment
expenses." Please tell us what gross premiums and losses were.
3. Earnings (Loss) Per Share, page F-13
16. Refer to your response to comment 35. Please explain to us
why
the 4,647 shares excluded disclosed in the note differs from the
numbers that it appears that you excluded based on the table in
your
response.
12. Capital Stock, page F-20
Convertible Preferred Stock, page F-20
17. Refer to your response to comment 31. Please explain to us
and
disclose why the liquidation preference disclosed on the face of
the
balance sheet differs so significantly from the proceeds received
related to Series A. Also explain why the liquidation preference
related to the Series B shares increased so significantly in the
current period.
20. Segment Information, page F-28
18. Refer to your response to comment 38. Please explain to us
why
the revision that states that you use "underwriting profit (loss)"
to
evaluate the insurance segments in addition to "pre-tax net income
(loss)" is consistent with the guidance of paragraph 30 of SFAS
131.
Clarify which measure is the one actually used by management.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. We may have
additional comments after reviewing your amendment and responses
to
our comments.
You may contact Keira Ino at 202-551-3659 or James Atkinson
at
202-551-3674 if you have questions regarding comments on the
financial statements and related matters. Please contact Mary
Fraser
at 202-551-3609 or me at 202-551-3710 with any other questions.
Regards,
Jeffrey P. Riedler
Assistant Director
Cc: Kenneth L. Henderson, Esq.
Bryan Cave LLP
1290 Avenue of the Americas
New York, NY 10104-3300
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J. Adam Abram
James River Group, Inc.
June 2, 2005
Page 7