Exhibit 99.1
James River Group Reports Third
Quarter
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+ SSN ED1 FC1 TNW RWB IRW (CORPORATE COMM/TENN 208000 TN/James River)
26 19 96 91 32 01 30 31 33
n...k/nocar r f bc-NC-James-River-Group 11-05
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[STK] JRVR [IN] FIN INS
[SU] ERN TO BUSINESS EDITOR:
James River Group Reports Third Quarter Net Income of $10.2 Million or
$0.63 Per Diluted Share After $1.0 Million or $0.04 Per Share of Costs
Associated with the Proposed Merger with a Member of the D. E. Shaw Group
Net Income of $10.8 Million or $0.67 Per Diluted Share Before $0.04 Per Share
of Costs Associated With Announced Transaction
CHAPEL HILL, N.C., Nov. 5 /PRNewswire-FirstCall/ -- James River Group,
Inc. (Nasdaq: JRVR) today announced financial results for the third quarter
ended September 30, 2007. The Company previously announced that it entered into
a definitive merger agreement under which a Bermuda-based holding company and
member of the D. E. Shaw group, a global investment management firm, would
acquire the Company. In connection with the proposed merger, during the third
quarter, the Company incurred $1.0 million in pre-tax costs ($619,000 after-tax
or $0.04 per diluted share) for legal, accounting and investment banking
services. On a year-to-date basis, the Company incurred $3.0 million in pre-tax
costs ($1.9 million after-tax or $0.12 per diluted share). See "Reconciliation
of Non-GAAP Measures" for a reconciliation of results presented herein as
adjusted to reflect these non-recurring costs to their comparable GAAP results.
Highlights for the third quarter include:
* Net income in 2007 of $10.2 million, or $0.63 per diluted share
($10.8 million, or $0.67 per diluted share excluding the costs
associated with the transaction with the D. E. Shaw group), compared
to net income of $9.3 million, or $0.58 per diluted share in the
third quarter of 2006;
* An annualized return on average stockholders' equity of 17.5%;
* A combined ratio of 85.0% (83.6% prior to the aforementioned
transaction costs) compared to 83.2% for the third quarter of the
prior year; and
* An underwriting profit of $10.0 million ($11.0 million prior to the
transaction costs) compared to $9.7 million in the third quarter of
the prior year.
Highlights for the year-to-date, nine-month period ended September 30,
2007, include:
* Net income in 2007 of $29.5 million, or $1.82 per diluted share
($31.4 million, or $1.94 per diluted share prior to the transaction
costs), compared to net income of $24.6 million, or $1.54 per
diluted share for the same period in 2006;
* An annualized return on average stockholders' equity of 17.3%;
* A combined ratio of 85.0% (83.4% prior to the transaction costs)
compared to 83.9% for the same period in 2006; and
* An underwriting profit of $28.5 million ($31.4 million prior to
transaction costs) compared to $25.5 million for the same period in
2006.
Reported earnings per diluted share for the third quarter of 2007 were
$0.63 compared to $0.58 for the same period in 2006. Adjusted diluted earnings
per share absent the $1.0 million of transaction costs were $0.67 for the third
quarter of 2007 -- an increase of $0.09, or 15.5% over the same period in the
prior year. Diluted shares outstanding were 16.2 million for the three months
ended September 30, 2007 and exceeded those for the quarter ended September 30,
2006 of 16.0 million. Results for the quarter ended September 30, 2007 include
net after-tax favorable reserve development on prior accident years of direct
business written by the Company of $2.0 million. In the prior year, the
favorable reserve development on direct business written was $1.7 million
after-tax.
Reported earnings per diluted share for the nine months ended September
30, 2007 were $1.82 compared to $1.54 for the same period in 2006. Adjusted
diluted earnings per share absent the $3.0 million of transaction costs were
$1.94 for the nine months ended September 30, 2007 -- an increase of $0.40, or
26.0% over the same period in the prior year. Diluted shares outstanding were
16.2 million for the nine months ended September 30, 2007 and exceeded those of
the same period of the prior year of 16.0 million. Results for the nine months
ended September 30, 2007 include net after-tax favorable reserve development on
prior accident years of direct business written by the Company of $5.8 million.
In the prior year, the favorable reserve development on direct business written
was $4.5 million after-tax.
The Excess and Surplus Insurance segment's combined ratio was 78.6% and
77.6% for the quarter ended September 30, 2007 and 2006, respectively, and 79.5%
and 78.1% for the nine-month period ended September 30, 2007 and 2006,
respectively. Net after-tax favorable reserve development on prior accident
years on direct business written by this segment was $2.3 million and $1.7
million for the quarter ended September 30, 2007 and 2006, respectively. This
amount was $5.8 million and $4.4 million after-tax for the nine months ended
September 30, 2007 and 2006, respectively.
The Workers' Compensation Insurance segment's combined ratio was 95.4% for
the third quarter of 2007. The combined ratio for the nine months ended
September 30, 2007 of 91.1% was significantly lower than the prior year's
combined ratio of 99.8% due to both lower losses and management of underwriting
and other expenses. Net after-tax reserve development on prior accident years of
direct business written by this segment included adverse development of $318,000
for the quarter ended September 30, 2007 and adverse development of $66,000 for
the same period in the prior year. For the nine months ended September 30, 2007
and 2006, net after-tax reserve development on prior accident years of direct
business written by this segment included adverse development of $48,000 and
favorable development of $91,000 respectively.
The Company's net investment income for the quarter ended September 30,
2007 was $6.3 million, an increase from the $5.2 million for the quarter ended
September 30, 2006. For the nine months ended September 30, 2007, net investment
income was $18.0 million, an increase from the $13.7 million reported for the
same period in the prior year. At September 30, 2007, the Company held $4.3
million in par value of securitizations of alternative-A and sub-prime
mortgages, all of which are rated "AAA" by the established ratings agencies.
J. Adam Abram, President and Chief Executive Officer, commented, "We are
pleased with our results despite increased competition which resulted in
pressure on pricing and premium volume. Annualized return on equity remains
attractive and our book value has increased to $15.78 per share."
Mr. Abram added, "Our acquisition by a member of the D. E. Shaw group
continues on its expected course and is expected to close in early December. We
are pleased that we have such well-capitalized and committed partners as we go
forward."
In light of the proposed transaction with a member of the D. E. Shaw
group, the Company is no longer providing guidance. On October 2, 2007, the
Company filed a definitive proxy statement with the Securities and Exchange
Commission containing information about the proposed transaction.
James River Group will not hold a conference call to discuss its quarterly
earnings.
James River Group, Inc. is an insurance holding company that primarily
owns and manages specialty property/casualty insurance companies with the
objective of consistently earning underwriting profits. Each of the Company's
two insurance company subsidiaries is rated "A-" (Excellent) by A.M. Best
Company. Founded in September 2002, the Company wrote its first policy in July
2003 and currently underwrites in two specialty areas: excess and surplus lines
in 48 states, the U.S. Virgin Islands and the District of Columbia; and workers'
compensation, primarily for the residential construction industry in North
Carolina and, in 2007, Virginia.
Cautionary Notice Regarding Forward Looking Statements
Certain matters discussed in this release and future releases may be
forward-looking statements. These forward-looking statements are based on
current expectations, estimates, forecasts and projections of future Company or
industry performance based on management's judgment, beliefs, current trends and
market conditions. Actual outcomes and results may differ materially from what
is expressed, forecasted or implied in any forward-looking statement.
Forward-looking statements may be identified by the use of words such as "will,"
"expects," "intends," "plans," "anticipates," "believes," "seeks," "estimates,"
and similar expressions. There are a number of risks and uncertainties that
could cause actual results to differ materially from the forward-looking
statements included in this press release. These include, but are not limited
to: (1) regulatory approvals required for the proposed merger with a member of
the D. E. Shaw group may not be obtained, or required regulatory approvals may
delay the transaction or result in the imposition of conditions that could have
a material adverse effect on James River Group or cause the parties not to
consummate the transaction; (2) conditions to the closing of the transaction may
not be satisfied or waived; (3) the occurrence of any event, change,
circumstance or effect that could give rise to the termination of the
transaction; (4) the outcome of any legal proceedings against James River Group
and others with respect to the transaction cannot be predicted; (5) the business
of James River Group may suffer as a result of uncertainty surrounding the
transaction; and (6) James River Group may be adversely affected by other
economic, business, and/or competitive factors. Other factors that could cause
James River Group's actual results to differ materially from those expressed or
implied are discussed in James River Group's most recent annual report on Form
10-K for the fiscal year ended December 31, 2006, most recent quarterly report
on Form 10-Q for the fiscal quarter ended June 30, 2007 and other filings with
the Securities and Exchange Commission. James River Group undertakes no
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements.
Additional Information and Where to Find It
In connection with the proposed merger, James River Group filed a
definitive proxy statement with the Securities and Exchange Commission on
October 2, 2007. INVESTORS AND SECURITY HOLDERS ARE STRONGLY ADVISED TO READ THE
PROXY STATEMENT BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors and
security holders may obtain a free copy of the proxy statement and other
documents filed by James River Group, Inc. at the Securities and Exchange
Commission's website at http://www.sec.gov. The proxy statement and such other
documents may also be obtained free of charge by directing such request to
Michael T. Oakes, Chief Financial Officer, James River Group, Inc., 300
Meadowmont Village Circle, Suite 333, Chapel Hill, NC 27517, telephone: (919)
883-4171, or on James River Group's website at www.james-river-group.com.
James River Group and its directors, executive officers and certain other
members of its management and employees may be deemed to be participants in the
solicitation of proxies from its stockholders in connection with the proposed
merger. Information regarding the interests of such directors and executive
officers is included in James River Group's proxy statement for its 2007 Annual
Meeting of Stockholders filed with the Securities and Exchange Commission on
April 13, 2007, and information concerning all of James River Group's
participants in the solicitation is included in the definitive proxy statement
relating to the proposed merger filed with the Securities and Exchange
Commission on October 2, 2007.
James River Group, Inc. and Subsidiaries
Summarized Consolidated Balance Sheet Data
(Unaudited)
September 30, December 31,
2007 2006
($ in thousands, except
for share data)
ASSETS
Investments available-for-sale, at fair value:
Fixed maturity securities $ 537,885 $ 486,016
Equity securities 33,104 8,703
Total investments 570,989 494,719
Cash and cash equivalents 36,419 40,319
Restricted cash 1,711 --
Accrued investment income 6,113 5,471
Premiums receivable and agents' balances 40,319 34,862
Reinsurance recoverable on unpaid losses 99,314 90,495
Reinsurance recoverable on paid losses 5,913 7,041
Deferred policy acquisition costs 17,076 15,005
Goodwill 9,341 --
Other assets 54,247 53,809
Total assets $ 841,442 $ 741,721
LIABILITIES AND STOCKHOLDERS' EQUITY
Reserve for losses and loss adjustment
expenses $ 374,776 $ 300,294
Unearned premiums 124,176 131,286
Senior debt 15,000 15,000
Junior subordinated debt 43,300 43,300
Note payable 1,231 --
Funds held 6,331 15,567
Other liabilities 37,688 21,882
Total liabilities 602,502 527,329
Total stockholders' equity 238,940 214,392
Total liabilities and stockholders' equity $ 841,442 $ 741,721
Debt to total capitalization ratio 19.9% 21.4%
Book value per share including accumulated
other comprehensive loss $ 15.78 $ 14.18
Book value per share excluding accumulated
other comprehensive loss $ 15.83 $ 14.27
Common shares outstanding 15,138,708 15,117,308
James River Group, Inc. and Subsidiaries
Summarized Consolidated Income Statement Data
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
($ in thousands, except for share data)
REVENUES
Gross written premiums $ 71,898 $ 73,449 $ 231,435 $ 216,248
Net written premiums $ 59,800 $ 58,312 $ 195,242 $ 166,824
Net earned premiums $ 66,836 $ 57,446 $ 190,072 $ 158,137
Net investment income 6,280 5,191 18,002 13,690
Net realized investment
losses (64) (64) (91) (148)
Other income 1,891 67 2,029 155
Total revenues 74,943 62,640 210,012 171,834
EXPENSES
Losses and loss
adjustment expenses 37,956 33,376 109,178 92,807
Other operating
expenses 18,851 14,404 52,419 39,813
Commissions, fees and
other agency expenses 2,181 -- 2,181 --
Interest expense 1,340 1,305 3,922 2,978
Total expenses 60,328 49,085 167,700 135,598
Income before taxes 14,615 13,555 42,312 36,236
Federal income tax
expense 4,431 4,293 12,845 11,594
NET INCOME $ 10,184 $ 9,262 $ 29,467 $ 24,642
EARNINGS PER SHARE:
Basic $ 0.67 $ 0.61 $ 1.95 $ 1.63
Diluted $ 0.63 $ 0.58 $ 1.82 $ 1.54
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
Basic 15,138,708 15,087,308 15,133,697 15,083,505
Diluted 16,233,982 16,034,821 16,205,773 15,977,405
Cash dividends
declared per
common share $ 0.15 $ - $ 0.45 $ -
RATIOS:
Loss ratio 56.8% 58.1% 57.4% 58.7%
Expense ratio 28.2% 25.1% 27.6% 25.2%
Combined ratio 85.0% 83.2% 85.0% 83.9%
Annualized return on
average stockholders'
equity 17.5% 19.0% 17.3% 17.3%
James River Group, Inc. and Subsidiaries
Segment Results
EXCESS AND SURPLUS INSURANCE
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
($ in thousands)
Gross written premiums $ 53,492 $ 59,565 $ 183,440 $ 181,121
Net written premiums $ 42,569 $ 45,763 $ 149,888 $ 135,707
Net earned premiums $ 50,993 $ 46,343 $ 147,126 $ 129,243
Losses and loss adjustment
expenses (27,108) (25,399) (81,334) (71,711)
Underwriting expenses (12,970) (10,558) (35,686) (29,255)
Underwriting profit (a) $ 10,915 $ 10,386 $ 30,106 $ 28,277
Ratios:
Loss ratio 53.2% 54.8% 55.3% 55.5%
Expense ratio 25.4% 22.8% 24.3% 22.6%
Combined ratio 78.6% 77.6% 79.5% 78.1%
(a) See "Reconciliation of Non-GAAP Measures".
Within the Excess and Surplus Insurance segment, results by major line of
business are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
($ in thousands)
CASUALTY LINES
Gross written premiums $ 50,088 $ 56,738 $165,051 $162,213
Net earned premiums $ 48,064 $ 45,518 $142,453 $124,845
Losses and loss
adjustment expenses $ 23,124 $ 24,026 $ 75,065 $ 69,201
Loss ratio 48.1% 52.8% 52.7% 55.4%
PROPERTY LINES
Gross written premiums $ 3,404 $ 2,827 $ 18,389 $ 18,908
Net earned premiums $ 2,929 $ 825 $ 4,673 $ 4,398
Losses and loss adjustment
expenses $ 3,984 $ 1,373 $ 6,269 $ 2,510
Loss ratio 136.0% 166.4% 134.2% 57.1%
WORKERS' COMPENSATION INSURANCE
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
($ in thousands)
Gross written premiums $18,406 $13,884 $47,995 $35,127
Net written premiums $17,231 $12,549 $45,354 $31,117
Net earned premiums $15,843 $11,103 $42,946 $28,894
Losses and loss
adjustment expenses (10,848) (7,977) (27,844) (21,096)
Underwriting expenses (4,263) (2,836) (11,300) (7,741)
Underwriting profit (a) $732 $290 $3,802 $57
Ratios:
Loss ratio 68.5% 71.8% 64.8% 73.0%
Expense ratio 26.9% 25.5% 26.3% 26.8%
Combined ratio 95.4% 97.4% 91.1% 99.8%
(a) See "Reconciliation of Non-GAAP Measures".
RECONCILIATION OF NON-GAAP MEASURES
The following table reconciles the underwriting profit by individual
insurance segment and of the whole Company to consolidated income before
taxes. We believe that these measures are useful to investors in evaluating
the performance of our Company and its insurance segments because our
objective is to consistently earn underwriting profits. We evaluate the
performance of our insurance segments and allocate resources based primarily
on underwriting profit of insurance segments. Our definition of underwriting
profit of insurance segments and underwriting profit may not be comparable
to that of other companies.
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
(in thousands)
Underwriting profit of the insurance segments:
Excess and Surplus Insurance $ 10,915 $ 10,386 $ 30,106 $ 28,277
Workers' Compensation Insurance 732 290 3,802 57
Total underwriting profit
of insurance segments 11,647 10,676 33,908 28,334
Other operating expenses
of the Corporate and
Other segment (1,618) (1,010) (5,433) (2,817)
Underwriting profit 10,029 9,666 28,475 25,517
Net investment income 6,280 5,191 18,002 13,690
Net realized investment
losses (64) (64) (91) (148)
Other income 1,891 67 2,029 155
Commissions, fees and
other agency expenses (2,181) -- (2,181) --
Interest expense (1,340) (1,305) (3,922) (2,978)
Consolidated income before taxes $ 14,615 $ 13,555 $ 42,312 $ 36,236
The following table reconciles underwriting profit, income before taxes,
Federal income tax expense, net income, earnings per share and combined
ratios for the Company showing the effect of the $3.0 million of costs for
legal, accounting and investment banking services incurred to date in
connection with the transaction.
Three Months Ended Nine Months Ended
September 30, 2007 September 30, 2007
Trans- Trans-
As action As As action As
Reported Costs Adjusted Reported Costs Adjusted
($ in thousands, except for share data)
Underwriting profit $ 10,029 $ 952 $ 10,981 $ 28,475 $ 2,966 $ 31,441
Income before taxes $ 14,615 $ 952 $ 15,567 $ 42,312 $ 2,966 $ 45,278
Federal income
tax expense 4,431 333 4,764 12,845 1,038 13,883
Net income $ 10,184 $ 619 $ 10,803 $ 29,467 $ 1,928 $ 31,395
Earnings per share:
Basic $ 0.67 $ 0.04 $ 0.71 $ 1.95 $ 0.13 $ 2.08
Diluted $ 0.63 $ 0.04 $ 0.67 $ 1.82 $ 0.12 $ 1.94
Ratios:
Loss ratio 56.8% 0.0% 56.8% 57.4% 0.0% 57.4%
Expense ratio 28.2% 1.4% 26.8% 27.6% 1.6% 26.0%
Combined ratio 85.0% 1.4% 83.6% 85.0% 1.6% 83.4%
Management believes that the presentation of underwriting profit, income
statement, earnings per share amounts and combined ratio information both
before and after the effects of the transaction costs incurred to date
relating to the proposed transaction allow for better comparisons to prior
periods. Management considers results both before and after the effects of
the transaction costs in assessing performance. Management does not
anticipate that additional costs for legal, accounting and investment
banking services for such a transaction will be incurred in subsequent
fiscal years. Assuming all conditions are met, the Company expects the
transaction to close in early December.
SOURCE James River Group, Inc.
-0- 11/05/2007
/CONTACT: Michael Oakes, Chief Financial Officer, +1-919-883-4171/
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.james-river-group.com/
(JRVR)
CO: James River Group, Inc.
ST: North Carolina
IN: FIN INS
SU: ERN