Exhibit 99.1
FOR IMMEDIATE RELEASE Contact: Michael Oakes
- --------------------- Chief Financial Officer
(919) 883-4171
JAMES RIVER GROUP REPORTS FOURTH QUARTER NET INCOME OF $10.1
MILLION OR $0.62 PER DILUTED SHARE
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ACHIEVES 17.8% RETURN ON AVERAGE EQUITY FOR 2006 AND 23.4%
GROWTH IN GROSS WRITTEN PREMIUMS
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DECLARES $0.15 PER SHARE QUARTERLY DIVIDEND
CHAPEL HILL, North Carolina - (February 15, 2007) - James River Group, Inc.
(NASDAQ: JRVR) today announced financial results for the fourth quarter and year
ended December 31, 2006.
Highlights for the fourth quarter include:
o Net income in 2006 of $10.1 million, or $0.62 per diluted share. Results
for the fourth quarter of 2005 were $12.3 million, or $0.78 per diluted
share which included a $3.8 million, or $0.24 per diluted share,
after-tax benefit related to favorable development applicable to the
2005 hurricanes;
o An annualized return on average stockholders' equity of 19.3%;
o A combined ratio of 82.7%;
o An underwriting profit of $10.3 million; and
o Growth in gross written premiums of 13.4% to $81.1 million in the
quarter - - from $71.5 million in the fourth quarter of 2005. Growth in
casualty lines was 16.6% to $73.7 million from $63.2 million in 2005.
Gross written premiums in property lines decreased from $8.3 million to
$7.4 million principally as a result of the Company's re-underwriting of
its property business.
Highlights for the year ended December 31, 2006, include:
o Net income of $34.7 million, or $2.17 per diluted share, compared to net
income of $12.1 million, or $0.94 per diluted share, for the same period
in 2005. Results for 2005 include $13.8 million in after-tax
hurricane-related costs;
o An annualized return on average stockholders' equity of 17.8%;
o A combined ratio of 83.5%;
o An underwriting profit of $35.9 million; and
o Growth in gross written premiums of 23.4% to $297.4 million from $241.0
million in 2005. Casualty lines grew 30.0% to $271.1 million up from
$208.5 million in the prior year. Gross written premiums in property
lines decreased 19.1% from $32.5 million in 2005 to $26.3 million in
2006 principally as a result of the Company's re-underwriting of its
property business.
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300 Meadowmont Village Circle, Suite 333 o Chapel Hill, North Carolina 27517
o 919.883.4171 o Fax 919.883.4177
www.james-river-group.com
JRVR Announces Fourth Quarter Results
Page 2
February 15, 2007
Earnings per diluted share for the fourth quarter of 2006 were $0.62 compared to
$0.78 for the same period in 2005. Earnings per share for the year ended
December 31, 2006 were $2.17 compared to $0.94 in 2005 (the Company's initial
public offering was in August 2005). Diluted shares outstanding were 16.1
million for the quarter and 16.0 million for the year ended December 31, 2006
and exceeded those of the prior year of 15.8 million and 12.8 million,
respectively. Results for the fourth quarter and year ended December 31, 2006
include after-tax favorable reserve development on prior accident years of
$666,000 and $5.1 million, respectively. In the prior year, this after-tax
favorable reserve development was $1.0 million and $3.2 million, respectively.
For the quarter ended December 31, 2006, the Excess and Surplus Insurance
segment wrote $68.0 million in gross written premiums reflecting an 8.8%
increase over the $62.4 million written in the same period in 2005. Casualty
gross written premiums, which represent the largest portion of the premiums
written by the Excess and Surplus Insurance segment, totaled $60.6 million for
the quarter, an 11.9% increase over the $54.1 million written in the same period
in 2005. For the quarter ended December 31, 2006, property insurance gross
written premiums were $7.4 million reflecting an 11.0% decrease from the
property gross written premiums in the fourth quarter of 2005.
For the year ended December 31, 2006, the Excess and Surplus Insurance segment
wrote $249.1 million in gross written premiums reflecting a 20.1% increase over
the $207.4 million written in 2005. Gross written premiums for casualty lines of
$222.8 million grew 27.4% over the $174.9 million written in 2005, while gross
written premiums for property lines in 2006 of $26.3 million reflected a
decrease of 19.1% over the prior year, principally as a result of the Company's
re-underwriting of its property business.
The Excess and Surplus Insurance segment's combined ratio was 81.3% and 79.0%
for the quarter and year ended December 31, 2006, respectively.
The Workers' Compensation Insurance segment wrote $13.2 million in gross written
premiums in the quarter ended December 31, 2006 for a 44.5% increase over the
$9.1 million written in the same period in 2005. For the year ended December 31,
2006, this segment wrote $48.3 million in gross written premiums for a 43.6%
increase over the $33.6 million written in 2005. The Workers' Compensation
Insurance segment's combined ratio was 79.8% for the quarter and was 93.8% for
the year. The Workers' Compensation Insurance segment benefited from very good
loss experience during the quarter.
J. Adam Abram, President and Chief Executive Officer, said, "We are pleased for
our shareholders with our performance. The results for our fourth quarter were
excellent in an already excellent year. Each of our subsidiaries found
meaningful opportunities for profitable growth, our annualized return on average
equity was attractive and our book value per share increased to $14.18 during
the quarter."
"Looking forward to 2007," Mr. Abram added, "we anticipate our gross written
premiums will increase between 10% and 20% and that our return on average equity
will be 15% or greater."
The Company also announced that its Board of Directors declared its first
quarterly cash dividend of $0.15 per share of common stock. The dividend is
payable on Friday, March 30, 2007 to all shareholders of record on Thursday,
March 15, 2007.
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JRVR Announces Fourth Quarter Results
Page 3
February 15, 2007
Additionally, the Company announced that Michael H. Steinhardt will not stand
for re-election to the Company's Board of Directors at the Company's Annual
Meeting of Stockholders in May 2007. Mr. Abram said, "We would like to take this
opportunity to thank Michael for his service and commitment to James River Group
since our inception."
James River Group will hold a conference call to discuss this press release
today, February 15, 2007, at 11:00 a.m. Eastern time. Investors may access the
conference call via internet by going to www.james-river-group.com and clicking
on the Investor Relations link, or by going to www.earnings.com. Please visit
the website at least 15 minutes early to register, download and install any
necessary audio software. A replay will be available shortly after the call and
through the end of business on February 22, 2007 at (617) 801-6888 (passcode:
68649936) and at the websites referenced above.
Certain matters discussed in this release are forward-looking statements,
including but not limited to the Company's outlook for 2007, expected growth in
gross written premiums and return on average equity. Such statements involve
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. Potential risks and uncertainties
include the accuracy of assumptions underlying the Company's outlook and other
risks described in the Company's filings with the Securities and Exchange
Commission, including the Company's Form 10-K for the fiscal year ended December
31, 2005. These forward-looking statements represent the Company's judgment as
of the date of this release. The Company disclaims any intent or obligation to
update these forward-looking statements.
James River Group, Inc. is an insurance holding company that 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 and
the District of Columbia; and workers' compensation, primarily for the
residential construction industry in North Carolina.
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JRVR Announces Fourth Quarter Results
Page 4
February 15, 2007
JAMES RIVER GROUP, INC. AND SUBSIDIARIES
SUMMARIZED CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
DECEMBER 31, DECEMBER 31,
2006 2005
------------ ------------
($ in thousands except for
share data)
ASSETS
Investments available-for-sale, at fair value:
Fixed maturity securities $ 486,016 $ 339,512
Equity securities 8,703 -
------------ ------------
Total investments 494,719 339,512
Cash and cash equivalents 40,319 41,029
Accrued investment income 5,471 3,988
Premiums receivable and agents' balances 34,862 32,521
Reinsurance recoverable on unpaid losses 90,495 110,514
Reinsurance recoverable on paid losses 7,041 11,544
Deferred policy acquisition costs 15,005 13,899
Other assets 53,809 44,037
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Total assets $ 741,721 $ 597,044
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LIABILITIES AND STOCKHOLDERS' EQUITY
Reserve for losses and loss adjustment expenses $ 300,294 $ 226,493
Unearned premiums 131,286 115,765
Senior debt 15,000 15,000
Junior subordinated debt 43,300 22,681
Funds held 15,567 21,992
Other liabilities 21,882 18,958
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Total liabilities 527,329 420,889
Total stockholders' equity 214,392 176,155
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Total liabilities and stockholders' equity $ 741,721 $ 597,044
============ ============
Debt to total capitalization ratio 21.4% 17.6%
Book value per share including accumulated other
comprehensive loss $ 14.18 $ 11.69
Book value per share excluding accumulated other
comprehensive loss $ 14.27 $ 11.91
Common shares outstanding 15,117,308 15,070,053
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JRVR Announces Fourth Quarter Results
Page 5
February 15, 2007
JAMES RIVER GROUP, INC. AND SUBSIDIARIES
SUMMARIZED CONSOLIDATED INCOME STATEMENT DATA
(Unaudited)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
($ in thousands except for share data)
REVENUES
Gross written premiums $ 81,121 $ 71,547 $ 297,369 $ 241,017
============ ============ ============ ============
Net written premiums $ 60,939 $ 38,845 $ 227,763 $ 140,590
============ ============ ============ ============
Net earned premiums $ 59,809 $ 38,139 $ 217,946 $ 117,500
Net investment income 5,638 3,764 19,328 10,212
Realized investment losses (56) (141) (204) (252)
Other income 67 29 222 133
------------ ------------ ------------ ------------
Total revenues 65,458 41,791 237,292 127,593
EXPENSES
Losses and loss adjustment expenses 34,730 12,645 127,537 79,214
Other operating expenses 14,742 10,043 54,555 28,446
Interest expense 1,316 743 4,294 2,667
------------ ------------ ------------ ------------
Total expenses 50,788 23,431 186,386 110,327
------------ ------------ ------------ ------------
Income before taxes 14,670 18,360 50,906 17,266
Federal income tax expense 4,609 6,106 16,203 5,202
------------ ------------ ------------ ------------
NET INCOME $ 10,061 $ 12,254 $ 34,703 $ 12,064
============ ============ ============ ============
EARNINGS PER SHARE
Basic $ 0.67 $ 0.81 $ 2.30 $ 1.56
============ ============ ============ ============
Diluted $ 0.62 $ 0.78 $ 2.17 $ 0.94
============ ============ ============ ============
Weighted-average common shares outstanding:
Basic 15,098,395 15,070,053 15,087,258 5,844,904
============ ============ ============ ============
Diluted 16,148,974 15,755,758 16,020,328 12,793,243
============ ============ ============ ============
Ratios:
Loss ratio 58.1% 33.2% 58.5% 67.4%
Expense ratio 24.6% 26.3% 25.0% 24.2%
Combined ratio 82.7% 59.5% 83.5% 91.6%
Annualized return on average
stockholders' equity 19.3% 28.8% 17.8% 9.4%
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JRVR Announces Fourth Quarter Results
Page 6
February 15, 2007
JAMES RIVER GROUP, INC. AND SUBSIDIARIES
SEGMENT RESULTS
EXCESS AND SURPLUS INSURANCE
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
($ in thousands)
Gross written premiums $ 67,968 $ 62,446 $ 249,089 $ 207,396
============ ============ ============ ============
Net written premiums $ 48,982 $ 30,693 $ 184,689 $ 111,074
============ ============ ============ ============
Net earned premiums $ 47,533 $ 30,060 $ 176,776 $ 91,427
Losses and loss adjustment expenses 27,764 7,849 99,475 62,868
Underwriting expenses 10,885 7,454 40,140 18,360
------------ ------------ ------------ ------------
Underwriting profit (a) $ 8,884 $ 14,757 $ 37,161 $ 10,199
============ ============ ============ ============
Ratios:
Loss ratio 58.4% 26.1% 56.3% 68.8%
Expense ratio 22.9% 24.8% 22.7% 20.1%
Combined ratio 81.3% 50.9% 79.0% 88.8%
(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 YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
($ in thousands)
CASUALTY LINES
Net earned premiums $ 47,088 $ 26,814 $ 171,933 $ 89,572
Losses and loss adjustment expenses $ 26,908 $ 11,902 $ 96,110 $ 52,511
Loss ratio 57.1% 44.4% 55.9% 58.6%
PROPERTY LINES
Net earned premiums $ 445 $ 3,246 $ 4,843 $ 1,855
Losses and loss adjustment expenses $ 856 $ (4,053) $ 3,365 $ 10,357
Loss ratio 192.4% (124.9)% 69.5% 558.3%
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JRVR Announces Fourth Quarter Results
Page 7
February 15, 2007
WORKERS' COMPENSATION INSURANCE
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
($ in thousands)
Gross written premiums $ 13,153 $ 9,101 $ 48,280 $ 33,621
============ ============ ============ ============
Net written premiums $ 11,957 $ 8,152 $ 43,074 $ 29,516
============ ============ ============ ============
Net earned premiums $ 12,276 $ 8,079 $ 41,170 $ 26,073
Losses and loss adjustment expenses 6,966 4,796 28,062 16,346
Underwriting expenses 2,829 2,585 10,570 8,907
------------ ------------ ------------ ------------
Underwriting profit (a) $ 2,481 $ 698 $ 2,538 $ 820
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Ratios:
Loss ratio 56.7% 59.4% 68.2% 62.7%
Expense ratio 23.0% 32.0% 25.7% 34.2%
Combined ratio 79.8% 91.4% 93.8% 96.9%
(a) See "Reconciliation of Non-GAAP Measures."
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JRVR Announces Fourth Quarter Results
Page 8
February 15, 2007
RECONCILIATION OF NON-GAAP MEASURES
The following table reconciles the underwriting profit (loss) by individual
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 (loss) of insurance
segments. Our definition of underwriting profit (loss) of insurance segments and
underwriting profit (loss) may not be comparable to that of other companies.
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
($ in thousands)
Underwriting profit of the insurance segments:
Excess and Surplus Insurance $ 8,884 $ 14,757 $ 37,161 $ 10,199
Workers' Compensation Insurance 2,481 698 2,538 820
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Total underwriting profit of insurance segments 11,365 15,455 39,699 11,019
Other operating expenses of the Corporate and
Other segment (1,028) (4) (3,845) (1,179)
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Underwriting profit 10,337 15,451 35,854 9,840
Net investment income 5,638 3,764 19,328 10,212
Realized investment losses (56) (141) (204) (252)
Other income 67 29 222 133
Interest expense (1,316) (743) (4,294) (2,667)
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Consolidated income before taxes $ 14,670 $ 18,360 $ 50,906 $ 17,266
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