11 unchanged sentences
• Brokers or agents that produce our business may not forward premiums to us that they collect from our policyholders, and as a result, we may not receive compensation for coverage set forth in the underlying policy.
−Removed: • We rely on a select group of customers for a significant portion of our business, and the loss or termination of our relationship with any such customers, or a material reduction in their business, could materially adversely affect our rate of growth, results of operations and financial condition.
+Added: • We rely on a select group of customers for a significant portion of our business, and the continued loss or termination of our relationship with any such customers, or a material reduction in their business, could materially adversely affect our rate of growth, results of operations and financial condition.
• We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection.
2 unchanged sentences
• The failure of any of the loss limitations or exclusions we employ, or changes in other claims or coverage issues, could result in higher than anticipated losses.
−Removed: • We have exposure to losses arising from unpredictable natural disasters, terrorist acts, and other catastrophic events, the occurrence of which could result in an increase in the number or value of claims and could exceed the amount of reinsurance we purchased to protect us from such claims.
• The effect of emerging claim and coverage issues on our business is uncertain and may result in coverage of risks that we did not factor in our policy prices.
1 unchanged sentence
• We are subject to extensive regulation, and the cost of compliance with such regulation or new regulation, or the results of non-compliance, may materially adversely affect our ability to achieve our business objectives and additionally may materially adversely affect our financial condition and results of operations.
−Removed: • We, or agents we have appointed, may act based on inaccurate or incomplete information regarding the accounts we underwrite, the result of which may be to cause us to misprice our policies.
−Removed: • Agents may exceed their authority or commit fraud when binding policies on our behalf, causing us to make underwriting decisions on inadequate or inaccurate information.
−Removed: • Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control that are binding upon us, which could materially adversely affect our performance.
+Added: • We have exposure to losses arising from unpredictable natural disasters, terrorist acts, and other catastrophic events, the occurrence of which could result in an increase in the number or value of claims and could exceed the amount of reinsurance we purchased to protect us from such claims.
+Added: • We, or agents we have appointed, may act based on inaccurate or incomplete information regarding the accounts we underwrite, which may cause us to misunderstand the level of risk we are insuring.
+Added: • Agents may exceed their authority or commit fraud when binding policies on our behalf, which may expose us to reputational harm, regulatory intervention or adversely affect our financial condition and results of operations.
• We could be forced to sell investments to meet our liquidity requirements, causing us to incur losses on the investments.
• We may require additional capital in the future, which may not be available or available only on unfavorable terms.
−Removed: • Our credit agreements contain a number of financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facilities.
+Added: • Our credit agreement contains financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facility.
+Added: • We operate in a highly competitive environment, and may not be able to continue to compete effectively with larger or more well-established rivals.
• If we are unable to keep pace with the technological advancements in the insurance industry, our ability to compete effectively could be impaired.
• If actual renewals of our existing contracts do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected.
−Removed: • If California, North Carolina, Ohio or any other state in which our insurance companies are admitted significantly increase the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer.
+Added: • If California, Ohio or any other state in which our insurance companies are admitted significantly increase the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer.
• Our use of third-party claims administrators in certain lines of business may achieve less desirable results which could cause us to incur higher losses and loss adjustment expenses.
1 unchanged sentence
• Changes in U.S.
−Removed: tax laws (including associated regulations) and the interpretation of certain provisions applicable to insurance/reinsurance businesses with U.S.
+Added: tax laws (including associated regulations) and the interpretation of certain provisions applicable to insurance businesses with U.S.
operations, which may be retroactive, could have a significant impact on the Company and persons who own our shares.
−Removed: • The Company, JRG Re and James River Group Holdings UK Limited may be subject to U.S.
+Added: • The Company and James River Group Holdings UK Limited (“James River UK”) may be (and JRG Re, prior to its disposition, may have been) subject to U.S.
federal income taxation and our non-U.K.
5 unchanged sentences
Risks Related to Ownership of Our Common Shares
+Added: • An adverse outcome of the disputes pertaining to the sale of JRG Re may have a material adverse effect on our financial position.
• Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.
−Removed: • There is no guarantee that our evaluation of strategic alternatives will result in any particular outcome, and the perceived uncertainties related to the Company could adversely affect our business and our shareholders.
−Removed: • The sale of JRG Re is subject to closing conditions and there can be no assurance that these conditions will be satisfied on the timeline we expect or at all, the sale of JRG may be terminated in certain circumstances, including the failure of the buyer to obtain required financing, and a portion of the consideration for the sale of JRG Re is a pre-closing dividend that is subject to the availability of unencumbered assets of JRG Re on the closing date.
• The identification of material weaknesses or the failure to otherwise maintain effective internal controls may result in material misstatements in our financial reporting and/or cause us to fail to meet our periodic reporting obligations.
−Removed: • The amount of dividends that we may pay to our common shareholders is subject to restriction pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future.
+Added: • The holder of the Series A Convertible Preferred Shares (the “Series A Preferred Shares”) holds 9.9% of our aggregate voting power and may have significant influence over matters requiring shareholder approval, and additionally, any sales of a significant number of common shares by the holder may have an adverse affect on our share price.
• The conversion of the Series A Preferred Shares into common shares would dilute the ownership of common shareholders and may adversely affect the market price of our common shares.
+Added: • The amount of dividends that we may pay to our common shareholders is subject to restriction pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future.
• Dividends paid by our U.S.
9 unchanged sentences
Reserving for losses is an inherently uncertain process, and our actual incurred losses may be greater than our loss and loss adjustment expense reserves, which could have a material adverse effect on our financial condition and results of operations.
−Removed: Our financial condition and results of operations depend upon our ability to assess accurately the potential losses and loss adjustment expenses under the terms of the insurance policies or reinsurance contracts we underwrite.
+Added: Our financial condition and results of operations depend upon our ability to assess accurately the potential losses and loss adjustment expenses under the terms of the insurance policies we underwrite.
Reserves do not represent an exact calculation of liability.
Rather, reserves represent an estimate of what we expect the ultimate settlement and administration of claims will cost us, and our ultimate liability may be greater or less than current reserves.
−Removed: These estimates are
−Removed: based on our assessment of facts and circumstances then known, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors.
−Removed: These variables are affected by both internal and external events that could increase our exposure to losses, including changes in actuarial projections, claims handling procedures, inflation, climate change, economic and judicial trends, and legislative changes.
+Added: These estimates are based on our assessment of facts and circumstances then known, as well as estimates of future trends in claim severity, claim frequency, judicial theories of liability and other factors.
+Added: These variables are affected by both internal and external events that could increase our exposure to
+Added: losses, including changes in actuarial projections, claims handling procedures, inflation, climate change, economic and judicial trends, and legislative changes.
+Added: We believe that the insurance we write is subject to above-average variation in reserve estimates.
+Added: The Excess and Surplus Lines market is subject to high policyholder turnover and changes in underlying mix of exposures.
+Added: This turnover and change in underlying mix of exposures can cause actuarial estimates based on prior experience to be less reliable than estimates for more stable, admitted books of business.
We continually monitor reserves using new information on reported claims and a variety of statistical techniques.
−Removed: In the insurance and reinsurance industry, there is always the risk that reserves may prove inadequate, and actual results always differ from our reserve estimates.
−Removed: It is possible for insurance and reinsurance companies to underestimate the cost of claims.
+Added: In the insurance industry, there is always the risk that reserves may prove inadequate, and actual results always differ from our reserve estimates.
+Added: It is possible for insurance companies to underestimate the cost of claims.
Our estimates could prove to be low, and this underestimation could have a material adverse effect on our financial strength.
−Removed: For example, in our subsidiary JRG Re, we experienced adverse development on the reserves for losses and loss adjustment expenses of:
−Removed: $35.5 million for the calendar year ended December 31, 2023;
−Removed: $13.4 million for the calendar year ended December 31, 2022;
−Removed: and $137.6 million for the calendar year ended December 31, 2021 primarily in underwriting years 2014 through 2018.
−Removed: In addition, for the commercial auto business in our Excess and Surplus Lines segment, we experienced adverse development on the reserves for losses and loss adjustment expenses of:
−Removed: $8.7 million for the calendar year ended December 31, 2023 principally relating to 2021 and prior accident years;
−Removed: $8.9 million for the calendar year ended December 31, 2022 principally relating to the 2020 and prior accident years;
−Removed: and $200.1 million for the calendar year ended December 31, 2021 principally relating to the 2019 and prior accident years for Rasier and its affiliates.
−Removed: Our Core E&S business (excluding commercial auto) in the Excess and Surplus Lines segment experienced adverse development on the reserves for losses and loss adjustment expenses of $23.9 million for the calendar year ended December 31, 2023 principally relating to the 2020 and prior accident years.
+Added: For example, in our Excess and Surplus Lines segment, we experienced adverse development on the reserves for losses and loss adjustment expenses of:
+Added: $76.7 million for the calendar year ended December 31, 2024, including a $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves), and $32.6 million for the calendar year ended December 31, 2023, with adverse development in accident years 2020 and prior exceeding favorable development on accident years 2022 and 2021.
+Added: We also previously experienced significant adverse development in our commercial auto business in our Excess and Surplus Lines segment, including $200.1 million for the calendar year ended December 31, 2021, and in our former casualty reinsurance segment, which we disposed of on April 16, 2024.
We cannot assure you that we will not have further adverse development in our business.
13 unchanged sentences
This lack of loss experience may contribute to making errors of judgment when establishing reserves.
−Removed: In addition, reinsurance reserve estimates are typically subject to greater uncertainty than insurance reserve estimates, primarily due to reliance on the original underwriting decisions made by the ceding company.
−Removed: As a result, we are subject to the risk that our ceding companies may not have adequately evaluated the risks reinsured by us and the premiums ceded may not adequately compensate us for the risks we assume.
−Removed: Other factors resulting in additional uncertainty in establishing reinsurance reserves include:
−Removed: • The increased lapse of time from the occurrence of an event to the reporting of the claim and the ultimate resolution or settlement of the claim.
−Removed: • The diversity of development patterns among different types of reinsurance treaties.
−Removed: • The necessary reliance on the ceding company for information regarding claims.
−Removed: If any of our insurance or reinsurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the
−Removed: period in which the deficiency is identified.
+Added: If any of our insurance reserves should prove to be inadequate for the reasons discussed above, or for any other reason, we will be required to increase reserves, resulting in a reduction in our net income and shareholders’ equity in the period in which the deficiency is identified.
Future loss experience substantially in excess of established reserves could also have a material adverse effect on future earnings and liquidity and financial rating, which could affect our ability to attract business, our cost of capital and our ability to retain or hire qualified personnel.
5 unchanged sentences
Small changes in assumptions, which depend heavily on our judgment and foresight, can have a significant impact on the modeled outputs.
−Removed: Although we believe that these probabilistic measures provide a meaningful indicator of the relative risk of certain events and changes to our business over time, these measures do not predict our actual exposure to, nor guarantee our successful management of, future losses that could have a material adverse effect on our financial condition and results of operations.
+Added: Although we believe that these probabilistic measures provide a meaningful indicator of the relative risk of
+Added: certain events and changes to our business over time, these measures do not predict our actual exposure to, nor guarantee our successful management of, risks that could have a material adverse effect on our financial condition and results of operations.
A decline in our financial strength rating may result in a reduction of new or renewal business.
5 unchanged sentences
Also, on December 20, 2023, A.M.
−Removed: Best announced that it downgraded the financial strength rating of JRG Re from “A-” (Excellent) with a stable outlook to "B++" (good) with a negative outlook.
−Removed: Best announced that the ratings actions follow our announcements in November 2023 that we identified a material weakness in our internal control over financial reporting, that we entered into an agreement to sell JRG Re, and that we are exploring strategic alternatives for the Company.
−Removed: Best indicated that the negative outlook reflects the uncertainty that the actions will have on our organization, and reflects the execution risk associated with some of these initiatives.
−Removed: Best further announced that the ratings actions on JRG Re was based upon A.M.
−Removed: Best's view that JRG Re is less integral to our strategic, operational and financial objectives, as a result of our determination to suspend underwriting in our former casualty reinsurance segment, and our agreement to sell JRG Re at 75% of the book value, valued at September 30, 2023.
−Removed: Best assigns ratings that are intended to provide an independent opinion of an insurance or reinsurance company’s ability to meet its obligations to policyholders and such ratings are not an evaluation directed to investors.
+Added: Best announced that it downgraded the financial strength rating of JRG Re, our former reinsurance subsidiary, from “A-” (Excellent) with a stable outlook to “B++” (good) with a negative outlook.
+Added: Best announced that the ratings actions followed our announcements in November 2023 that we identified a material weakness in our internal control over financial reporting, that we entered into an agreement to sell JRG Re (which was completed on April 16, 2024), and that we were exploring strategic alternatives for the Company (which have since been completed as announced on November 11, 2024).
+Added: On January 30, 2025, A.M.
+Added: Best affirmed our “A-” (Excellent) financial strength rating.
+Added: The negative outlook remained with a focus on 2025 plan execution.
+Added: Best assigns ratings that are intended to provide an independent opinion of an insurance company’s ability to meet its obligations to policyholders and such ratings are not an evaluation directed to investors.
Best periodically reviews our rating and may revise it downward or revoke it at its sole discretion based primarily on its analysis of our balance sheet strength (including capital adequacy and loss and loss adjustment expense reserve adequacy), operating performance and business profile.
11 unchanged sentences
A downgrade of our rating could cause our current and future brokers and agents, retail brokers and insureds to choose other, more highly-rated competitors.
−Removed: A downgrade of this rating could also increase the cost or reduce the availability of reinsurance to us, increase collateral required for our assumed reinsurance business, trigger termination of assumed and/or ceded reinsurance contracts, trigger termination rights in certain of our agreements with MGAs in our Specialty Admitted segment, or, as occurred upon the downgrade by A.M.
−Removed: Best of JRG Re described above, result in a default under our credit facilities.
−Removed: See the Risk Factor “Our credit agreements contain a number of financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities.”
+Added: A downgrade of this rating could also increase the cost or reduce the availability of reinsurance to us, trigger termination of reinsurance contracts, trigger termination rights in certain of our agreements with MGAs in our Specialty Admitted segment, or result in a default under our credit facility.
+Added: See the Risk Factor “Our credit agreement contains financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facility.”
In addition, in view of the earnings and capital pressures experienced by many financial institutions, including insurance companies, i t is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, will increase the frequency and scope of their credit reviews, will request additional information from the companies that they rate and may increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels.
It is possible that such reviews of us may result in adverse ratings consequences, which could have a material adverse effect on our financial condition and results of operations.
−Removed: A downgrade below “A-” or withdrawal of any rating could severely limit or prevent us from writing new and renewal insurance contracts.
+Added: A downgrade below “A-” or withdrawal of any rating could severely limit or prevent us from writing new and renewal insurance contracts or entering into new programs in our Specialty Admitted segment.
See also “Item 7.
4 unchanged sentences
There can be no assurance that we can attract and retain the necessary employees to conduct our business activities on a timely basis or at all.
−Removed: Our competitors may offer more favorable compensation and/or permanent remote work arrangements to our key management or employees to incentivize them to leave our Company, or alternatively, to make it more difficult for us to recruit and hire new employees.
−Removed: Further, the transition to remote work by employees has allowed competitors that are located in different states or parts of the country to solicit our employees without requiring their relocation.
+Added: Our competitors may offer more favorable
+Added: compensation and/or permanent remote work arrangements to our key management or employees to incentivize them to leave our Company, or alternatively, to make it more difficult for us to recruit and hire new employees.
+Added: Further, remote work by employees has allowed competitors that are located in different states or parts of the country to solicit our employees without requiring their relocation.
Although we have employment agreements with most members of our senior management team, which include certain post-employment restrictions on engaging in businesses competitive with the Company, we do not have employment agreements with our senior underwriters or claims personnel.
−Removed: The November 2023 announcement that we are evaluating strategic alternatives caused uncertainty among our employees regarding our future operations or employment needs, which may limit our ability to retain or hire qualified personnel, and may contribute to the unplanned loss of highly skilled employees through attrition.
Our inability to attract and retain qualified personnel and the loss of services of key personnel could have a material adverse effect on our financial condition and results of operations.
7 unchanged sentences
These outcomes would reduce our underwriting profit to the extent these factors are not reflected in the rates we charge.
−Removed: We underwrite a significant portion of our insurance in (i) the Excess and Surplus Lines segment in Florida, California, Texas and New York, and (ii) the fronting and program business of the Specialty Admitted Insurance segment in California, Texas, North Carolina, Florida, and New York.
+Added: We underwrite a significant portion of our insurance in (i) the Excess and Surplus Lines segment in Florida, California, Texas and New York, and (ii) the fronting and program business of the Specialty Admitted Insurance segment in Texas, California, North Carolina, Florida, and Illinois.
Any economic downturn or reduced business activities in any such state, or other states where we conduct business, could have a material adverse effect on our financial condition and results of operations.
Higher than expected inflation could adversely affect the adequacy of our reserves by increasing average loss costs over time, negatively impact the values of our investments and our investment returns, and may increase our compensation expenses.
+Added: Recent actions by the federal government, including without limitation with respect to international trade regulation, including tariffs, could lead to higher inflation.
We distribute products through a select group of brokers and agents, several of which account for a significant portion of our business, and such relationships may not continue, or if they do continue, the relationship may not be on favorable terms to us.
10 unchanged sentences
Certain premiums from policyholders, where the business is produced by brokers or agents, are collected directly by the brokers or agents and forwarded to our insurance subsidiaries.
−Removed: In certain jurisdictions, when the insured pays its policy premium to brokers or agents for payment on behalf of our insurance subsidiaries, the premiums might be considered to have been paid under applicable insurance laws and regulations.
+Added: In most jurisdictions, when the insured pays its policy premium to brokers or agents for payment on behalf of our insurance subsidiaries, the premiums will be considered to have been paid under applicable insurance laws and regulations.
Accordingly, the insured would no longer be liable to us for those amounts, whether or not we have actually received the premiums from that broker or agent.
1 unchanged sentence
Where necessary, we review the financial condition of potential new brokers and agents before we agree to transact business with them.
−Removed: Although failures by brokers and agents to remit premiums have not been material to date, there may be instances where brokers and agents collect premiums but do not remit them to us and we may be required under applicable law to provide the coverage set forth in the policy despite the absence of premiums.
+Added: Although failures by brokers and agents to remit premiums have not been
+Added: material to date, there may be instances where brokers and agents collect premiums but do not remit them to us and we may be required under applicable law to provide the coverage set forth in the policy despite the absence of premiums.
Because the possibility of these events depends in large part upon the financial condition and internal operations of our brokers and agents (which in most cases is not public information), we are not able to quantify the exposure presented by this risk.
If we are unable to collect premiums from brokers and agents in the future, underwriting profits may decline and our financial condition and results of operations could be materially adversely affected.
−Removed: We rely on a select group of customers for a significant portion of our business, and the loss or termination of our relationship with any of these customers, or a material reduction in business with any of these customers, could materially adversely affect our rate of growth, results of operations and financial condition.
+Added: We rely on a select group of customers for a significant portion of our business, and the continued loss or termination of our relationship with any such customers, or a material reduction in their business, could materially adversely affect our rate of growth, results of operations and financial condition.
Our largest customer, an agent for the Specialty Admitted Insurance segment, accounted for approximately $175.7 million (12.3%) of our consolidated gross written premium from continuing operations in 2024.
−Removed: No other insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2023.
+Added: This same agent was our largest customer in 2023, accounting for approximately $163.1 million (10.8%) of our consolidated gross written premium from continuing operations in 2023.
+Added: No other customer generated 10.0% or more of consolidated gross written premiums from continuing operations in 2024 or in 2023.
+Added: As of December 31, 2024, this agent had given notice of its decision to non-renew or terminate its remaining programs with the Specialty Admitted Insurance segment, with the last program scheduled to end in mid-2025.
Our two largest customers in 2022, both agents for the Specialty Admitted Insurance segment, accounted for approximately $120.9 million (8.6%) and $110.9 million (7.9%) of our consolidated gross written premium from continuing operations in 2022.
−Removed: No insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2022.
−Removed: Our largest customer in 2021, an agent for the Specialty Admitted Insurance segment, accounted for approximately $124.1 million of our gross written premium, representing 9.4% of our consolidated gross written premium from continuing operations in 2021.
−Removed: No insured generated 10.0% or more of consolidated gross written premiums from continuing operations for 2021.
−Removed: The loss or termination of our relationship with these customers, or another significant customer, or a material reduction in business with any such party, could materially adversely affect our rate of growth, results of operations and financial condition.
+Added: No customer generated 10.0% or more of consolidated gross written premiums from continuing operations for 2022.
+Added: The continued loss or termination of our relationship with our customers, or a material reduction in business with any such party, could materially adversely affect our rate of growth, results of operations and financial condition.
We may be unable to obtain reinsurance coverage at reasonable prices or on terms that provide us adequate protection.
We purchase reinsurance in many of our lines of business to help manage our exposure to insurance and reinsurance risks that we underwrite and to reduce volatility in our results.
−Removed: In addition, JRG Re has managed its risk through retrocession arrangements with third-party reinsurers.
−Removed: A retrocession is a practice whereby a reinsurer cedes risk to one or more other reinsurers.
The availability and cost of reinsurance are subject to prevailing market conditions, both in terms of price and available capacity, each of which can affect our business volume and profitability.
2 unchanged sentences
Another way we use reinsurance is to purchase substantial protection against concentrated losses when we enter new markets.
−Removed: In addition, the ability to obtain reinsurance is critical to our objective to grow our fee-based fronting business.
+Added: In addition, the ability to obtain reinsurance is critical to our fee-based fronting business.
As a result, our ability to manage volatility and avoid significant losses, expand into new markets, grow by offering insurance to new kinds of enterprises, or grow our fronting business may be limited by the unavailability of reasonably priced reinsurance.
1 unchanged sentence
In such event, if we are unwilling to accept the terms or credit risk of potential reinsurers, we would have to reduce the level of our underwriting commitments, which would reduce our revenues.
−Removed: Reinsurance capacity has become more restricted making reinsurance placements more challenging during 2021, 2022 and 2023 than in prior years.
+Added: Reinsurance capacity has become more restricted making reinsurance placements more challenging in recent years.
Many reinsurance companies have begun to exclude certain coverages from, or alter terms in, the reinsurance contracts we enter into with them.
Some exclusions relate to risks that we cannot in turn exclude from the policies we write due to business or regulatory constraints.
−Removed: In addition, reinsurers are imposing terms, such as lower per occurrence and aggregate limits, and
−Removed: more exclusions, limiting the protection provided under the reinsurance contract.
+Added: In addition, reinsurers are imposing terms, such as lower per occurrence and aggregate limits, and more exclusions, limiting the protection provided under the reinsurance contract.
As a result, we, like other direct insurance companies, write insurance policies which to some extent do not have the benefit of reinsurance protection.
4 unchanged sentences
See also “Item 1.
−Removed: Business — Business Segments—Purchase of Reinsurance.”
+Added: Business — Purchase of Reinsurance.”
We are subject to credit risk with regard to our reinsurance counterparties, insurance companies with which we have a fronting arrangement and an indemnification arrangement we have with a former customer.
2 unchanged sentences
Additionally, prepaid reinsurance premiums ceded to three reinsurers at December 31, 2024 was $108.5 million in the aggregate, or 36.6% of the total balance of prepaid reinsurance premiums.
−Removed: In addition to reinsurance purchased to manage our ongoing business, we have two retroactive reinsurance arrangements on a legacy books of business:
−Removed: the first, a loss portfolio transfer reinsurance transaction on our legacy commercial auto lines business in our Excess & Surplus Lines segment (the “Commercial Auto LPT”), and the second, a loss portfolio transfer retrocession agreement entered into by JRG Re on February 23, 2022 (the "Casualty Re LPT").
−Removed: At December 31, 2023, reinsurance recoverables on the Commercial Auto LPT were $84.5 million (including $78.1 million of unpaid recoverables and $6.4 million of paid recoverables), and reinsurance recoverables on the Casualty Re LPT were $221.7 million.
+Added: In addition to reinsurance purchased to manage our prospective business, we have three retroactive reinsurance arrangements on legacy books of business in the Excess & Surplus Lines segment:
+Added: loss portfolio transfer reinsurance transaction on our legacy commercial auto lines business (the “Commercial Auto LPT”);
+Added: the second, a combined loss portfolio transfer and adverse development cover reinsurance contract entered into in July 2024 on our Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned 2010-2023, excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “casualty subject business”) (the “E&S ADC”);
+Added: and the third, an adverse development cover reinsurance contract entered into in November 2024 also covering the casualty subject business (the “E&S Top Up ADC”).
+Added: At December 31, 2024, reinsurance recoverables on the Commercial Auto LPT were $36.6 million and reinsurance recoverables on the E&S ADC were $362.0 million.
+Added: There were no reinsurance recoverables on the E&S Top Up ADC at December 31, 2024.
At December 31, 2024, all of our material reinsurance recoverable amounts are from companies with A.M.
−Removed: Best ratings of “A-” (Excellent) or better, are collateralized by the reinsurer for our benefit through letters of credit or funds held in trust accounts, or represent recoverables from a state residual market for automobile insurance, but we cannot be sure that our reinsurers will pay all reinsurance claims on a timely basis or at all.
+Added: Best ratings of “A-” (Excellent) or better, or, if not rated by A.M.
+Added: Best, have statutory surplus of $100 million or more, are collateralized by the reinsurer for our benefit through letters of credit or funds held in trust accounts, or represent recoverables from a state residual market for automobile insurance, but we cannot be sure that our reinsurers will pay all reinsurance claims on a timely basis or at all.
Similarly, in our fronting business, which we conduct through our Specialty Admitted Insurance segment, we are primarily liable to the insureds because we have issued the policies.
10 unchanged sentences
See also “Item 1.
−Removed: Business — Business Segments — Purchase of Reinsurance.”
+Added: Business — Purchase of Reinsurance.”
We are exposed to credit risk relating to a set of insurance contracts previously issued to Rasier, under which the Company pays losses and loss adjustment expenses on the contracts.
3 unchanged sentences
S ee also “Item 1.
−Removed: Business — Business Segments — Purchase of Reinsurance — Amounts Recoverable from an Indemnifying Party.”
+Added: Business — Purchase of Reinsurance — Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book.”
In situations where we manage our credit exposure to reinsurers or fronting partners with a collateral arrangement, which includes our Commercial Auto LPT and indemnification arrangements on the Rasier policies, it is possible that the collateral could be insufficient to cover all claims, either as a result of a decline in the value of the collateral, an increase in the obligations being collateralized, a failure of management to monitor the adequacy of the collateral held, or the refusal of the counterparty to post additional collateral.
34 unchanged sentences
These types of governmental actions could result in higher than anticipated losses and loss adjustment expenses, which could have a material adverse effect on our financial condition or results of operations.
−Removed: In some instances, these changes may not become
−Removed: apparent until sometime after we have issued insurance policies that are affected by the changes.
+Added: In some instances, these changes may not become apparent until sometime after we have issued insurance policies that are affected by the changes.
As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.
5 unchanged sentences
The extent of losses from catastrophes is a function of the frequency of loss events, the total amount of insured exposure in the area affected by each event and the severity of the events.
−Removed: Claims from catastrophic events could exceed our amount of reinsurance purchased to protect us from such events, cause us to pay reinstatement premiums, reduce our earnings and cash flows, cause volatility in our results of operations and cash flows for any fiscal period or materially impact our financial condition.
+Added: Claims from catastrophic events could exceed our amount of reinsurance purchased to protect us from such events, cause us to pay reinstatement premiums, reduce our earnings and cash flows, cause volatility in our results of operations and cash flows for any fiscal period or materially impact our financial
For example, for the third quarter ending September 30, 2022, we incurred $5.0 million in net catastrophe losses related to Hurricane Ian.
6 unchanged sentences
These issues may materially adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the number or size of claims.
−Removed: In some instances, these changes may not become apparent until sometime after we have issued insurance or reinsurance contracts that are affected by the changes.
−Removed: As a result, the full extent of liability under our insurance or reinsurance contracts may not be known for many years after a contract is issued.
−Removed: Four examples of unanticipated risks that affected the insurance industry are:
−Removed: • Asbestos liability applied to manufacturers of products and contractors who installed those products;
−Removed: • Apportionment of liability for settlement assigned to subcontractors who may have been involved in mundane tasks (such as installing sheetrock in a home);
−Removed: • Court decisions, such as the 1995 Montrose decision in California, that read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions;
−Removed: • Social inflation trends, including higher and more frequent claims, more favorable judgments and legislated increases.
+Added: In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes.
+Added: As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.
+Added: Examples of these claims and coverage issues include, but are not limited to:
+Added: • Judicial or Legislative Expansion of Coverage Terms or Theories of Liability — Evolving regulations, potential new legislation and emerging expanded theories of liability can adversely impact the application of policy terms, coverage requirements, potential liability, and claims handling processes.
+Added: • Economic and Political Factors, Social Inflation and Litigation Trends — Economic conditions, such as inflation, interest rate fluctuations, and market volatility and changes in the stability of the political environment can influence claim frequency and severity.
+Added: For example, evolving legal interpretation and a rise in large jury awards can extend coverage beyond our initial underwriting intent, resulting in increased claim costs.
+Added: Similarly, general economic inflation can increase medical, repair and replacement costs, leading to higher claim payouts.
+Added: • Technological Advancements Leading to Changes in Insured's Business Model — The rapid adoption of technology has caused the continued evolution of business models and fundamental changes in consumer and human behavior leading to unintended and unanticipated expansions in exposure.
+Added: One such recent example of this phenomenon is claims arising out of the use of personal property in commercial transactions related to the so-called "sharing economy."
+Added: • Advancements in Bioengineering, Life and Food Sciences — The continued rapid advancement in bioengineering, life, food and other sciences may lead to the ingestion of and/or implantation of new compounds into the human body resulting in long-term unintended consequences.
+Added: Previous and current examples of such exposures include asbestos, benzene, Diethylstilbestrol (DES), implantable medical devices (e.g., metal-on-metal hips), Nanotechnology, Bisphenol A (BPA) and Per- and Polyfluoroalkyl Substances (PFAS).
In addition, the passage of new legislation designed to expand the right to sue, to remove limitations on recovery, to deem by statute the existence of a covered occurrence, to extend or eliminate the statutes of limitations or otherwise to repeal or weaken tort reforms could have a material and adverse effect on our results of operations and/or financial position.
4 unchanged sentences
Our primary market risk exposures are to changes in interest rates and equity prices.
−Removed: See “ Item 7A.
−Removed: Quantitative and Qualitative Disclosures About Market Risk.” Prior to 2022, interest rates had been at or near historic lows, limiting yields on fixed income investments and negatively impacting investment income.
−Removed: Increases in interest rates during 2022 and for much of 2023, while generating higher investment yields, led to declines in the fair values of our fixed income securities, influenced by
−Removed: the duration of our fixed income investments and the extent of interest rate increases.
+Added: See also “ Item 7A.
+Added: Quantitative and Qualitative Disclosures About Market Risk.” A decline in interest rates reduces the return available on short-term investments and new fixed maturity investments (including those purchased for re-investment), thereby negatively impacting our net investment income on a going forward basis, while rising interest rates reduce the market value of existing fixed maturity investments, thereby negatively impacting our book value.
+Added: Prior to 2022, interest rates had been at or near historic lows, limiting yields on fixed income investments and negatively impacting investment income.
+Added: Increases in interest rates since 2022, while generating higher investment yields, led to declines in the fair values of our fixed income securities, influenced by the
+Added: duration of our fixed income investments and the extent of interest rate increases.
For example, for the year ended December 31, 2022, we experienced unrealized losses on fixed maturity investments of $193.0 million, which were recognized in other comprehensive loss.
During 2023, the fair values of our fixed maturity securities recovered some of the unrealized losses with signs of inflation easing and optimism about future Federal Reserve interest rate cuts.
−Removed: The $99.3 million reduction in accumulated other comprehensive loss in the year ended December 31, 2023 reflects the increase in fair values of our fixed maturity securities as well as $53.2 million of losses recognized on JRG Re's fixed maturities.
−Removed: The Company entered into a definitive agreement on November 8, 2023 to sell JRG Re.
−Removed: The sale is expected to close in the first quarter of 2024 and the Company no longer has the intent or ability to hold securities in an unrealized loss position until a recovery of their fair value could occur.
+Added: Unrealized gains of $99.3 million were recognized in other comprehensive income for the year ended December 31, 2023.
+Added: In 2024, interest rates rose moderately and $6.3 million of unrealized losses were recognized in other comprehensive loss for the year ended December 31, 2024.
Some fixed income securities have call or prepayment options, which represent possible reinvestment risk in declining rate environments.
2 unchanged sentences
Downgrades in the credit ratings of fixed maturities can have a significant negative effect on the market valuation of such securities.
−Removed: In the event of a financial crisis or severe downturn in public debt and equity markets, we could incur substantial realized and unrealized investment losses in future periods, which could have a material adverse impact on our financial condition, results of operations, debt and financial strength ratings, insurance subsidiaries’ capital liquidity and ability to access capital markets.
+Added: In the event of a financial crisis, return to a high inflationary environment, or severe downturn in public debt and equity markets, we could incur substantial realized and unrealized investment losses in future periods, which could have a material adverse impact on our financial condition, results of operations, debt and financial strength ratings, insurance subsidiaries’ capital liquidity and ability to access capital markets.
The value of our investment portfolio is subject to the risk that certain investments may default or become impaired due to deterioration in the financial condition of one or more issuers of the securities held, or due to deterioration in the financial condition of an insurer that guarantees an issuer’s payments of such investments.
15 unchanged sentences
, the carrying amount) does not reflect prices at which actual transactions would occur.
−Removed: Risks for all types of securities are managed through application of our investment policy, which establishes investment parameters that include (but are not limited to) maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within guidelines established by the NAIC, BMA and various state insurance departments, as applicable.
+Added: Risks for all types of securities are managed through application of our investment policy, which establishes investment parameters that include (but are not limited to) maximum percentages of investment in certain types of securities and minimum levels of credit quality, which we believe are within guidelines established by the NAIC and various state insurance departments, as applicable.
Although we seek to preserve our capital, we cannot be certain that our investment objectives will be achieved, and results may vary substantially over time.
1 unchanged sentence
We may become subject to additional government or market regulation which may have a material adverse impact on our business.
−Removed: Market disruptions like those experienced during the credit-driven financial market collapse in 2008, as well as the dramatic increase in the capital allocated to alternative asset management during recent years, have led to increased governmental as well as self-regulatory scrutiny of the insurance industry in general.
+Added: Market disruptions like those experienced during the credit-driven financial market collapse in 2008, as well as the significant amount of capital allocated to alternative asset management, have led to increased governmental as well as self-regulatory scrutiny of the insurance industry in general.
In addition, certain legislation proposing greater regulation of the industry is periodically considered by governing bodies of some jurisdictions as well as the U.S.
federal government.
−Removed: The credit-driven equity market collapse in 2008 or other significant market disruptions may increase the likelihood that some increased regulation of the industry is mandated.
+Added: The credit-driven financial market collapse in 2008 or other significant market disruptions may increase the likelihood that some increased regulation of the industry is mandated.
Because we are a Bermuda company, we are subject to changes in Bermuda law and regulation that may have a material adverse impact on our operations, including through the imposition of tax liability or increased regulatory supervision.
11 unchanged sentences
We are unable to predict whether any legislation will be enacted or any regulations will be adopted, or the effect that any such developments could have on our business, financial condition or results of operations.
−Removed: The Bermuda insurance and reinsurance regulatory framework has become subject to increased scrutiny in many jurisdictions.
−Removed: The BMA sought “regulatory equivalency” which enables Bermuda’s commercial insurers to transact business with the European Union on a “level playing field”.
−Removed: In connection with its initial efforts to achieve equivalency under Solvency II, the BMA implemented and imposed additional requirements on the companies it regulates, such as JRG Re.
−Removed: On November 26, 2015, via delegated act, the European Commission granted Bermuda’s commercial insurers full equivalence in all areas of Solvency II for an indefinite period of time.
−Removed: The European Commission’s act was reviewed and approved by the European Parliament and Council.
−Removed: On March 4, 2016, the delegated act was published in the official journal of the European Union.
−Removed: The grant of full equivalence came into force on March 24, 2016 and applies from January 1, 2016.
Additionally, the regulatory environment surrounding information security and privacy is increasingly demanding.
2 unchanged sentences
The NAIC adopted an Insurance Data Security Model Law on October 24, 2017, which requires licensed insurance entities to comply with detailed information security requirements.
−Removed: To date, the following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws :
−Removed: Alabama, California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Mississippi, New Hampshire, New York, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and Wisconsin.
−Removed: It is not yet known whether, and to what extent, other state legislatures or insurance regulators where we operate will enact the NAIC Insurance Data Security Model Law in whole or in part, or in a modified form.
+Added: Most states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws .
+Added: It is not yet known whether, and to what extent, additional state legislatures or insurance regulators where we operate will enact the NAIC Insurance Data Security Model Law in whole or in part, or in a modified form.
Such enactments, especially if inconsistent between states or with existing laws and regulations, could raise compliance costs or increase the risk of noncompliance, with the attendant risk of being subject to regulatory enforcement actions and penalties, as well as reputational harm.
3 unchanged sentences
Any such events could potentially have an adverse impact on our business, financial condition or results of operations.
+Added: In addition to the complexity of existing laws and regulations, the development of new laws and regulations and changes in application or interpretation of current laws and regulations also increase our legal and regulatory compliance obligations and costs.
+Added: The new presidential administration has to date proposed or promulgated numerous changes to laws and regulations that may impact our business and operations, the direct or indirect effect of which are not yet known.
It is impossible to predict what, if any, changes in the regulations applicable to us, the markets in which we operate, trade and invest or the counterparties with which we do business may be instituted in the future.
2 unchanged sentences
In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may materially adversely affect our financial condition and results of operations.
−Removed: Our admitted insurance and reinsurance subsidiaries are subject to extensive regulation, primarily by California (the domiciliary state for Falls Lake Fire and Casualty Company), Ohio (the domiciliary state for James River Insurance, James
−Removed: River Casualty, and Falls Lake National), North Carolina (the domiciliary state for Stonewood Insurance), Bermuda (the domicile of JRG Re), and to a lesser degree, the other jurisdictions in the United States in which we operate.
+Added: Our admitted insurance subsidiaries are subject to extensive regulation, primarily by California (the domiciliary state for Falls Lake Fire and Casualty), Ohio (the domiciliary state for James River Insurance, James River Casualty, Stonewood Insurance and Falls Lake National), and to a lesser degree, the other jurisdictions in the United States in which we operate.
Most insurance regulations are designed to protect the interests of insurance policyholders, as opposed to the interests of shareholders.
−Removed: These regulations generally are administered by a department of insurance in each state and, in the case of JRG Re, the BMA in Bermuda, and relate to, among other things, authorizations to write certain lines of business, capital and surplus requirements, reserve requirements, rate and form approvals, investment and underwriting limitations, affiliate transactions, dividend limitations, cancellation and non-renewal of policies, changes in control, solvency, receipt of reinsurance credit, accounting principles and a variety of other financial and non-financial aspects of our business.
+Added: These regulations generally are administered by a department of insurance in each state and relate to, among other things, authorizations to write certain lines of business, capital and surplus requirements, reserve requirements, rate and form approvals, investment and underwriting limitations, affiliate transactions, dividend limitations, cancellation and non-renewal of policies, changes in control, solvency, receipt of reinsurance credit, accounting principles and a variety of other financial and non-financial aspects of our business.
These laws and regulations are regularly re-examined and any changes in these laws and regulations or new laws or interpretations thereof may be more restrictive, could make it more expensive to conduct business or otherwise materially adversely affect our financial condition or operations.
−Removed: State insurance departments and the BMA also conduct periodic examinations of the affairs of insurance companies and reinsurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters.
+Added: State insurance departments also conduct periodic
+Added: examinations of the affairs of insurance companies and reinsurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters.
These regulatory requirements may impose timing and expense or other constraints that could materially adversely affect our ability to achieve some or all of our business objectives.
1 unchanged sentence
In addition, regulatory authorities have broad discretion to deny or revoke licenses for various reasons, including the violation of regulations.
−Removed: For example, an insurer’s registration may be cancelled by the BMA on certain grounds specified in the Insurance Act, including failure by the insurer to comply with its obligations under the Insurance Act, or if the BMA believes that the insurer has not been carrying on business in accordance with sound insurance principles.
In some instances, where there is uncertainty as to applicability, we follow practices based on our interpretations of regulations or practices that we believe are generally followed by the industry.
11 unchanged sentences
For additional information, see “Item 1.
−Removed: Business — Regulation — U.S.
+Added: Business — U.S.
Insurance Regulation — State Regulation.”
5 unchanged sentences
The NAIC Amendments must be adopted by a state legislature and such state’s insurance regulator in order to be effective in that state.
−Removed: Each of California, North Carolina and Ohio, the states in which our U.S.
+Added: Each of California and Ohio, the states in which our U.S.
insurance subsidiaries are domiciled, adopted the NAIC Amendments, including the enterprise risk report requirement.
3 unchanged sentences
The ORSA Model Act must be adopted by a state legislature in order to be effective in that state.
−Removed: Each of California, North Carolina and Ohio, the states in which our U.S.
+Added: Each of California and Ohio, the states in which our U.S.
insurance subsidiaries are domiciled, adopted the ORSA Model Act and require an ORSA filing.
4 unchanged sentences
Over the past several years, changing weather patterns and climatic conditions, such as global warming, appear to have contributed to the unpredictability, frequency and severity of natural disasters and created additional uncertainty as to future trends and exposures.
−Removed: There is a growing scientific consensus that global warming and other climate changes are increasing the frequency and severity of catastrophic weather and other events, such as hurricanes, fires, tornadoes, windstorms, floods and other natural disasters.
+Added: There is a substantial scientific opinion that global warming and other climate changes are increasing the frequency and severity of catastrophic weather and other events, such as hurricanes, fires, tornadoes, windstorms, floods and
+Added: other natural disasters.
Such changes make it more difficult for us to predict and model catastrophic events, reducing our ability to accurately price our exposure to such events and mitigate our risks.
3 unchanged sentences
As discussed under “Item 1.
−Removed: Business — Regulation — U.S.
+Added: Business — U.S.
Insurance Regulation — Federal Regulation,” the Terrorism Acts require commercial property and casualty insurance companies to offer coverage for acts of terrorism, whether foreign or domestic, and established a federal assistance program through the end of 2027 to help cover claims related to future terrorism-related losses.
15 unchanged sentences
We cannot predict with certainty whether market conditions will improve, remain constant or deteriorate.
−Removed: Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed.
+Added: Negative market conditions may impair our ability to underwrite insurance at rates we consider appropriate and commensurate relative to the risk assumed, and we may determine to exit lines or classes of business that are affected.
If we cannot underwrite insurance at appropriate rates, our ability to transact business will be materially adversely affected.
Any of these factors could lead to a material adverse effect on our business, financial condition and results of operations.
−Removed: Our reinsurance business is subject to loss settlements made by ceding companies and fronting carriers over which we have no control, which could materially adversely affect our performance.
−Removed: Where JRG Re enters into assumed reinsurance contracts with third parties, all loss settlements made by the ceding company will be unconditionally binding upon us, provided they are within the terms of the underlying policies and within the terms of the relevant contract.
−Removed: While we believe the ceding companies will settle such claims in good faith, we are bound to accept the claims settlements agreed to by the ceding companies.
−Removed: Under the underlying policies, each ceding company typically bears the burden of proving that a contractual exclusion applies to a loss, and there may be circumstances where the facts of a loss are insufficient to support the application of an exclusion.
−Removed: In such circumstances, we assume such losses under the reinsured policies, which could materially adversely affect our performance.
We could be forced to sell investments to meet our liquidity requirements.
−Removed: We invest the premiums we receive from our insureds and ceding companies until they are needed to pay policyholder claims or until they are recognized as profits.
+Added: We invest the premiums we receive from our insureds until they are needed to pay policyholder claims or until they are recognized as profits.
Consequently, we seek to manage the duration of our investment portfolio based on the duration of our loss and loss adjustment expense reserves to ensure sufficient liquidity and avoid having to liquidate securities to fund claims.
5 unchanged sentences
These include decisions such as setting underwriting guidelines and standards, product design and pricing, determining which business opportunities to pursue, claims management decisions, and other decisions.
−Removed: Although we employ controls and procedures designed to monitor employees’ business decisions and prevent us from taking excessive risks, these controls and procedures may not be effective.
+Added: Although we employ controls and procedures designed to monitor employees’ business
+Added: decisions and prevent us from taking excessive risks, these controls and procedures may not be effective.
If our employees take excessive risks, the impact of those risks could have a material adverse effect on our financial condition and business operations.
4 unchanged sentences
• fund liquidity needs caused by underwriting or investment losses;
−Removed: • replace capital lost in the event of significant reinsurance losses or adverse reserve developments;
+Added: • replace capital lost in the event of adverse reserve developments;
• satisfy letters of credit or guarantee bond requirements that may be imposed by our clients or by regulators;
5 unchanged sentences
In the May Equity Offering, we announced the offering of 6,497,500 shares at $31.00 per share the day after our shares had a closing market price equal to $46.50.
−Removed: Additionally, on March 1, 2022 we issued 150,000 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 million, primarily to protect our balance sheet after experiencing $115.0 million of adverse reserve development in our former casualty reinsurance segment in the fourth quarter of 2021.
−Removed: The Series A Preferred Shares, among other things, have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company before any payment may be made to holders of any other class or series of capital shares, pay dividends to the security holders at the initial rate of 7% of their liquidation preference of $1,000 per share per annum, include restrictions
−Removed: that may limit our ability to pay dividends to common shareholders and may not be redeemed at our election.
−Removed: See also " The Series A Preferred Shares have rights, preferences and privileges that are not held by, and are preferential to the rights of, our common shareholders, which could adversely affect our liquidity and financial condition" and " The amount of dividends that we may pay to our common shareholders is subject to restrictions pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future."
−Removed: Further, our ability to raise debt and certain types of equity capital may be constrained by covenants in our existing credit facilities.
−Removed: See the Risk Factor “ Our credit agreements contain financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facilities ” below.
−Removed: Additional capital raised through the issuance of debt would most likely result in creditors having rights, preferences and privileges senior or otherwise superior to those of the holders of our shares and may limit our flexibility in operating our business and make it more difficult to obtain capital in the future.
+Added: Also, on March 1, 2022 we issued 150,000 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 million, primarily to protect our balance sheet after experiencing $115.0 million of adverse reserve development in our former casualty reinsurance segment in the fourth quarter of 2021.
+Added: The Series A Preferred Shares, among other things, have the right to receive a payment on account of the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company before any payment may be made to holders of any other class or series of capital shares, pay dividends to the security holders at the initial rate of 7% of their liquidation preference of $1,000 per share per annum, include restrictions that may limit our ability to pay dividends to common shareholders and may not be redeemed at our election.
+Added: See the Risk Factors " The Series A Preferred Shares have rights, preferences and privileges that are not held by, and are preferential to the rights of, our common shareholders, which could adversely affect our liquidity and financial condition" and " The amount of dividends that we may pay to our common shareholders is subject to restrictions pursuant to the terms of the Series A Preferred Shares, and we cannot assure you that we will declare or pay dividends on our common shares in the future."
+Added: Additionally, on November 11, 2024 we entered into (i) an amendment of the investment agreement with the holder of the Series A Preferred Shares, which provided for the conversion of 37,500 Series A Preferred Shares, having a liquidation value of $37.5 million, into common shares, and (ii) a subscription agreement to issue common shares with a value of $12.5 million.
+Added: The price per share utilized for the share issuances pursuant to the two agreements was $6.40, resulting in the issuance of 7,812,500 common shares in the aggregate.
+Added: The closing price of our common shares on November 11, 2024, the last completed trading day prior to our announcement of the share issuances was $6.62 per share.
+Added: We also announced on November 11, 2024 that our quarterly dividend would be reduced to $0.01 per common shares from the $0.05 per common share that we had paid since March 2022.
+Added: Further, our ability to raise debt and certain types of equity capital may be constrained by covenants in our existing credit facility.
+Added: See the Risk Factor “ Our credit agreement contains financial and other covenants, the breach of which could result in acceleration of payment of amounts due under our credit facility ” below.
+Added: Additional capital raised through the issuance of debt would most likely result in creditors having rights, preferences and privileges senior or otherwise superior to those of our shareholders and may limit our flexibility in operating our business and make it more difficult to obtain capital in the future.
Disruptions, uncertainty, or volatility in the capital and credit markets may also limit our access to capital required to operate our business.
If we are not able to obtain adequate capital, or obtain it on favorable terms, our business, financial condition and results of operations could be materially adversely affected.
−Removed: Our credit agreements contain financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facilities .
−Removed: As of December 31, 2023, we had an outstanding unsecured balance of approximately $207.3 million in the aggregate under our two bank credit agreements.
−Removed: The agreements contain certain financial covenants that require us to maintain consolidated net worth in excess of a specified minimum amount and a leverage ratio as of the end of any fiscal quarter not in excess of 0.35 to 1.
−Removed: The agreements contain other covenants which, among other things, require ongoing compliance with applicable insurance regulations and require each of our regulated insurance subsidiaries to maintain ratings from A.M.
+Added: Our credit agreement contains financial and other covenants, the breach of any of which could result in acceleration of payment of amounts due under our credit facility .
+Added: As of December 31, 2024, we had an outstanding unsecured balance of approximately $185.8 million in the aggregate under our bank credit agreement.
+Added: The agreement contains certain financial covenants that require us to maintain consolidated net worth in excess of a specified minimum amount and a leverage ratio as of the end of any fiscal quarter not in excess of 0.35 to 1.
+Added: The agreement contains other covenants which, among other things, require ongoing compliance with applicable insurance regulations and require each of our regulated insurance subsidiaries to maintain ratings from A.M.
Best not lower than an A-.
−Removed: At December 31, 2023, we were in default of the financial strength rating covenant due to the downgrade of JRG Re by A.M.
−Removed: Best on December 20, 2023 from "A-" (Excellent) to "B++" (good), which default has been waived by our lenders until March 1, 2025.
−Removed: See the Risk Factor " A decline in the financial strength rating may result in a reduction of new or renewal business " above.
−Removed: This breach or any other breach of any of the covenants could result in acceleration of our obligations to repay our outstanding indebtedness under such agreement if we are unable to obtain a waiver or amendment from our lenders, and otherwise could impair our ability to borrow funds or result in higher borrowing costs.
+Added: Breaches of any of the covenants could result in acceleration of our obligations to repay our outstanding indebtedness under such agreement if we are unable to obtain a waiver or amendment from our lender, and otherwise could impair our ability to borrow funds or result in higher borrowing costs.
We operate in a highly competitive environment and we may not continue to be able to compete effectively against larger or more well-established business rivals.
19 unchanged sentences
There can be no assurance that the development of current technology or data analytics for future use will not result in our being competitively disadvantaged, especially with those carriers that have greater resources.
−Removed: If we are unable to keep pace with the advancements being made in technology and data analytics, our ability to compete with other insurance companies who have advanced technological or data analytics capabilities will be negatively affected.
+Added: If we are unable to keep pace with the advancements being made in technology and data analytics (including the use of artificial intelligence to create efficiencies in the conduct of our business), our ability to compete with other insurance companies who have advanced technological or data analytics capabilities will be negatively affected.
Further, if we are unable to effectively execute and update or replace our key legacy technology systems as they become obsolete or as emerging technology renders them competitively inefficient, our competitive position and our cost structure could be adversely affected.
6 unchanged sentences
Our management has the authority to change our underwriting guidelines or our strategy without notice to our shareholders and without shareholder approval.
−Removed: As a result, we may make fundamental changes to our operations without shareholder approval, which could result in our pursuing a strategy or implementing underwriting guidelines that may be materially different from the strategy or underwriting guidelines described in the section titled “Business” or elsewhere in this Annual Report.
−Removed: Our ability to implement our business strategy could be delayed or adversely affected by Bermuda employment restrictions relating to the ability to obtain and retain work permits for key employees in Bermuda.
−Removed: Under Bermuda law, non-Bermudians (other than spouses of Bermudians and holders of permanent residents’ certificates) may not engage in any gainful occupation in Bermuda without a valid government work permit.
−Removed: A work permit may be granted or renewed upon showing that, after proper public advertisement, no Bermudian, spouse of a Bermudian or a holder of a permanent resident’s certificate who meets the minimum standards reasonably required by the employer has applied for the job.
−Removed: A work permit is issued with an expiry date (up to five years) and no assurances can be given that any work permit will be issued or, if issued, renewed upon the expiration of the relevant term.
−Removed: If work permits are not obtained or are not renewed for our key employees, we would lose their services, which could materially affect our business.
−Removed: If California, North Carolina Ohio or any other state in which our insurance companies are admitted significantly increases the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer.
−Removed: Our insurance companies are subject to assessments in California (the domiciliary state for Falls Lake Fire and Casualty Company), North Carolina (the domiciliary state for Stonewood Insurance), Ohio (the domiciliary state for James River Insurance, James River Casualty and Falls Lake National) and other states in which our insurance companies may be admitted, for various purposes, including the provision of funds necessary to fund the operations of the various insurance departments and the state funds that pay covered claims under certain policies written by impaired, insolvent or failed insurance companies.
+Added: As a result, we may make fundamental changes to our operations without shareholder approval, which could result in our pursuing a strategy or implementing underwriting guidelines that may be materially different from the strategy or underwriting guidelines described in the section titled “Item 1.
+Added: Business” or elsewhere in this Annual Report.
+Added: If California, Ohio or any other state in which our insurance companies are admitted significantly increases the assessments our insurance companies are required to pay, our financial condition and results of operations will suffer.
+Added: Our insurance companies are subject to assessments in California (the domiciliary state for Falls Lake Fire and Casualty), Ohio (the domiciliary state for James River Insurance, James River Casualty, Stonewood Insurance and Falls Lake National) and other states in which our insurance companies may be admitted, for various purposes, including the provision of funds necessary to fund the operations of the various insurance departments and the state funds that pay covered claims under certain policies written by impaired, insolvent or failed insurance companies.
These assessments are generally set based on an insurer’s percentage of the total premiums written in the insurer’s state within a particular line of business.
4 unchanged sentences
Historically, our Excess and Surplus Lines and Specialty Admitted Insurance segments handled all claims using employed staff.
−Removed: As we have entered new lines of business, we now use third-party claims administrators and contract employees to
−Removed: administer claims subject to the supervision of our employed staff.
+Added: As we have entered new lines of business, we now use third-party claims administrators and contract employees to administer claims subject to the supervision of our employed staff.
It is possible that these contract employees and third-party claims administrators may achieve less desirable results on claims than has historically been the case for our internal staff, which could result in significantly higher losses and loss adjustment expenses in those lines of business.
1 unchanged sentence
Changes in tax law may have a significant impact on the Company.
−Removed: The Tax Act, enacted on December 22, 2017, introduced significant changes to the Internal Revenue Code of 1986, as amended (the “Code”).
−Removed: The Tax Act contained many provisions that impact us and our shareholders, including provisions that impose a base erosion and anti-abuse tax (“BEAT”) on income of a U.S.
−Removed: corporation determined without regard to certain otherwise deductible payments made to certain foreign affiliates (including premium or other consideration paid or accrued to a related foreign reinsurance company for reinsurance), broaden the definition of United States shareholder for purposes of the controlled foreign corporation (“CFC”) rules, and make it more difficult for a foreign insurance company to avoid being treated as a passive foreign investment company (“PFIC”).
−Removed: There is continued uncertainty regarding how these and other provisions of the Tax Act will be interpreted, although guidance in proposed and final forms has been released with respect to certain provisions of the Tax Act, including certain BEAT and PFIC provisions, that may impact the Company.
−Removed: The ultimate impact of the Tax Act may differ from the Company’s description below due to changes in interpretations, as well as additional regulatory guidance that may be issued.
−Removed: Given the complexity of the Tax Act, you are strongly encouraged to consult your own tax advisor regarding its potential impact on the U.S.
−Removed: federal income tax consequences to you considering your particular circumstances.
−Removed: The Tax Act’s BEAT provision imposes a minimum tax on “applicable taxpayers,” which are generally corporations that are part of a group with at least $500 million of applicable annual gross receipts and that make certain payments to related foreign persons, including payments that are deductible for U.S.
−Removed: tax purposes, payments to purchase depreciable or amortizable property, and reinsurance payments.
−Removed: BEAT subjects the “modified taxable income” of an applicable taxpayer to tax at a rate of 10% in 2020-2025, and 12.5% in 2026 and thereafter.
−Removed: In general, modified taxable income is calculated by adding back to a taxpayer’s regular taxable income the amount of certain “base erosion tax benefits” with respect to certain “base erosion payments” to foreign affiliates, as well as the “base erosion percentage” of any net operating loss deductions.
−Removed: BEAT applies to the extent it exceeds a taxpayer’s regular corporate income tax liability (determined without regard to certain tax credits).
−Removed: We have analyzed the regulations released by the U.S.
−Removed: Internal Revenue Service (the “IRS”) and U.S.
−Removed: Department of the Treasury regarding BEAT and have concluded that we will be subject to additional tax if regular U.S.
−Removed: income tax does not exceed a minimum amount.
−Removed: The applicability of BEAT depends on a number of factors and the extent to which we may be subject to BEAT in future periods as a result of changes in interpretations, as well as additional regulatory guidance that may be issued, is currently unknown.
−Removed: The Inflation Reduction Act of 2022 (the “IRA”) contains a number of tax-related provisions, including a 15% corporate alternative minimum tax imposed on certain corporations that meet an income-based test, as well as a 1% nondeductible excise tax on certain stock repurchases.
−Removed: It is unclear how these provisions of the IRA will be applied and what impact the IRA will have on our tax liability.
−Removed: We will continue to evaluate the IRA’s impact as further information becomes available.
In recent years, the Organization for Economic Co-operation and Development (“OECD”), with the support of the G20, has developed proposals to address perceived base erosion and profit shifting (“BEPS”).
7 unchanged sentences
As a result of these developments, the tax laws of certain countries in which we and our affiliates do business could change on a prospective or retroactive basis, and any such changes, including the adoption of the global minimum tax rules, could subject us to additional taxes and costs for tax compliance.
−Removed: persons who own our shares may be subject to U.S.
−Removed: federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of shares.
−Removed: If we are considered a PFIC (as defined in Section 1297(a) of the Code) for U.S.
−Removed: federal income tax purposes, a U.S.
−Removed: person who owns any of our shares could be subject to adverse tax consequences, including becoming subject to a greater tax liability than might otherwise apply and to tax on amounts in advance of when tax would otherwise be imposed, in which case your investment could be materially adversely affected.
−Removed: The PFIC rules include provisions intended to provide an exception for qualifying insurance corporations (“QIC”) engaged in the active conduct of an insurance business.
−Removed: Generally, a QIC is a company (i) that would be subject to tax under special provisions related to insurance companies if the company was a U.S.
−Removed: entity, and (ii) the applicable insurance liabilities of which constitute more than 25% of its total assets as reported on the company’s applicable financial statement.
−Removed: On January 15, 2021, the IRS and U.S.
−Removed: Department of the Treasury issued final regulations and proposed regulations that provide guidance regarding the PFIC rules and the QIC exception.
−Removed: More specifically, the complex regulations provide, among other things, clarity on the application of “applicable insurance liabilities” and the “applicable financial statement,” as well as the requirements to be engaged in the “active conduct” of an insurance business.
−Removed: The IRS has requested comments on several aspects of the proposed regulations, which are not effective until adopted in final form.
−Removed: It is uncertain when the proposed regulations will be finalized, and whether the provisions of any final or temporary regulations will vary from the proposed regulations.
−Removed: We believe that we are not and have not been, and currently do not expect to become, a PFIC for U.S.
−Removed: federal income tax purposes.
−Removed: Our belief that we are not and have not been a PFIC is based, in part, on the fact that we believe that we are a QIC engaged in the active conduct of an insurance business.
−Removed: New regulations or pronouncements interpreting or clarifying these rules may be forthcoming.
−Removed: We cannot predict what impact, if any, such guidance would have on an investor that is subject to U.S.
−Removed: federal income taxation.
−Removed: As a result, we cannot assure you that we, or one of our subsidiaries, will not be deemed a PFIC by the IRS.
−Removed: If we, or one of our subsidiaries, were considered a PFIC, it could have material adverse tax consequences for an investor that is subject to U.S.
−Removed: federal income taxation.
−Removed: corporation generally will be classified as a CFC if U.S.
−Removed: persons, each of whom owns, directly, indirectly, or constructively, at least 10% of the voting power or value of such corporation’s stock (“U.S.
−Removed: 10% Shareholders”), own in the aggregate more than 50% of the voting power or value of the stock of such corporation.
−Removed: The Tax Act eliminated the prohibition on “downward attribution” from non-U.S.
−Removed: persons to U.S.
−Removed: persons under the CFC constructive ownership rules.
−Removed: As a result, our U.S.
−Removed: subsidiaries are deemed to own all of the stock of our non-U.S.
−Removed: subsidiaries (other than James River Group Holdings UK Limited (“James River UK”)) for purposes of classifying those non-U.S.
−Removed: subsidiaries as CFCs.
−Removed: The legislative history under the Tax Act indicates that this change to the CFC constructive ownership rules was not intended to cause our non-U.S.
−Removed: subsidiaries to be treated as CFCs with respect to a 10% U.S.
−Removed: Shareholder that is not related (within the meaning of Section 954(d)(3) of the Code) to our U.S.
−Removed: However, it is not clear whether the IRS or a court would interpret the change made by the Tax Act in a manner consistent with such indicated intent.
−Removed: Under these rules, if a foreign corporation is a CFC, each U.S.
−Removed: 10% Shareholder who owns directly or indirectly shares of the CFC on the last day of the CFC’s taxable year must annually include in its taxable income its pro rata share of the CFC’s “subpart F income,” even if no distributions are made.
−Removed: Subpart F income typically includes “foreign personal holding company income” (such as interest, dividends and other types of passive income), as well as insurance and reinsurance income (including underwriting and investment income).
−Removed: In general (subject to the special rules applicable to “related person insurance income” described below), for purposes of taking into account insurance income, a foreign insurance company will be treated as a CFC if U.S.
−Removed: 10% Shareholders collectively own more than 25% of the voting power or value of the company’s shares at any point during any year.
−Removed: As discussed above, we cannot assure you that we are not and will not become a CFC.
−Removed: If you are a U.S.
−Removed: person, we strongly urge you to consult your own tax advisor concerning the CFC rules.
−Removed: Related Person Insurance Income .
−Removed: Under proposed regulations, if (i) our gross income attributable to insurance or reinsurance policies pursuant to which the direct or indirect insureds are our direct or indirect U.S.
−Removed: shareholders or persons related to such U.S.
−Removed: shareholders equals or exceeds 20% of our gross insurance income in any taxable year;
−Removed: and (ii) direct or indirect insureds and persons related to such insureds own directly or indirectly 20% or more of the voting power or value of our shares (together, the “RPII Test”), a U.S.
−Removed: person who owns any of our shares directly or indirectly on the last day of such taxable year would most likely be required to include its allocable share of our related person insurance income for such taxable year in its income, even if no distributions are made.
−Removed: We do not believe that the 20% gross insurance income threshold has been, or will be, met.
−Removed: However, we cannot assure you that this will continue to be the case.
−Removed: Additionally, certain proposed regulations would expand the scope of related person insurance income to potentially include all of the insurance income any of our non-U.S.
−Removed: operating companies earn from reinsuring affiliates if such companies are majority owned (directly, indirectly or by application of certain constructive ownership rules) by U.S.
−Removed: It is not certain whether any of these proposed regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of the related person insurance income rules by the IRS, the courts, or otherwise, might have retroactive effect.
−Removed: Consequently, we cannot assure you that a person who is a direct or
−Removed: indirect U.S.
−Removed: shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year.
−Removed: Dispositions of Our Shares .
−Removed: shareholder is treated as disposing of shares in a CFC of which it is a U.S.
−Removed: 10% Shareholder, or of shares in a foreign insurance corporation that has related person insurance income and in which U.S.
−Removed: persons collectively own 25% or more of the voting power or value of the company’s shares, any gain from the disposition will generally be treated as a dividend to the extent of the U.S.
−Removed: shareholder’s portion of the corporation’s undistributed earnings and profits, as the case may be, that were accumulated during the period that the U.S.
−Removed: shareholder owned the shares.
−Removed: In addition, the shareholder will be required to comply with certain reporting requirements.
−Removed: The Company, JRG Re and James River Group Holdings UK Limited may be subject to U.S.
+Added: More broadly, our tax positions could be materially adversely affected by several factors, including:
+Added: new or changing tax laws both domestically and internationally, including regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration by the international community, the practices of tax authorities in jurisdictions in which we
+Added: operate, and the resolution of issues arising from tax audits, examinations or assessments and any related interest or penalties.
+Added: We are currently unable to predict whether such changes or events will occur and, if so, the ultimate impact on our business.
+Added: The Company and James River Group Holdings UK Limited may be subject to U.S.
federal income taxation.
−Removed: The Company and JRG Re are each incorporated under the laws of Bermuda and James River UK is incorporated under the laws of England and Wales.
+Added: The Company is incorporated under the laws of Bermuda and James River UK is incorporated under the laws of England and Wales.
+Added: JRG Re was incorporated under the laws of Bermuda prior to its sale by the Company.
In general, a corporation organized under the laws of a foreign country or U.S.
3 unchanged sentences
We believe that the activities of each of the Company’s non-U.S.
−Removed: holding companies and JRG Re, as contemplated, will not cause them to be treated as engaging in a U.S.
+Added: holding companies and the historic activities of JRG Re, prior to its disposition, as contemplated, will not cause them to be treated as engaging in a U.S.
trade or business and as such, will not be subject to current U.S.
federal income taxation on their net income.
−Removed: However, there are no definitive standards provided by the Code, regulations or court decisions as to the specific activities that constitute being engaged in the conduct of a trade or business within the United States, and any such determination is essentially factual in nature and must be made annually.
+Added: However, there are no definitive standards provided by the Internal Revenue Code of 1986, as amended (the “Code”), regulations or court decisions as to the specific activities that constitute being engaged in the conduct of a trade or business within the United States, and any such determination is essentially factual in nature and must be made annually.
The IRS could assert that (1) our non-U.S.
−Removed: holding companies or JRG Re (or both) are engaged in a trade or business in the United States or, under the applicable income tax treaty, are engaged in a trade or business in the United States through a permanent establishment, and thus are subject to current U.S.
+Added: holding companies are engaged in a trade or business in the United States or, under the applicable income tax treaty, are engaged in a trade or business in the United States through a permanent establishment, and thus are subject to current U.S.
+Added: federal income taxation, or (2) JRG Re, prior to its disposition, was engaged in a trade or business in the United States or, under the applicable income tax treaty, was engaged in a trade or business in the United States through a permanent establishment, and thus was subject to current U.S.
federal income taxation.
If our non-U.S.
−Removed: holding companies or JRG Re were deemed to be engaged in a trade or business in the United States (or, under the applicable income tax treaty, were deemed to be so engaged through a permanent establishment), our non-U.S.
−Removed: holding companies or JRG Re, as applicable, would become subject to U.S.
+Added: holding companies or JRG Re, prior to its disposition, were deemed to be engaged in a trade or business in the United States (or, under the applicable income tax treaty, were deemed to be so engaged through a permanent establishment), our non-U.S.
+Added: holding companies or JRG Re, prior to its disposition, as applicable, would become subject to U.S.
federal income tax on income “effectively connected” (or treated as effectively connected) with the U.S.
4 unchanged sentences
tax-exempt organization may recognize unrelated business taxable income if a portion of any subpart F insurance income we may have is allocated to it.
−Removed: In general, subpart F insurance income will be allocated to a tax-exempt organization owning (or treated as owning) our shares if we are a CFC as discussed above and it is a U.S.
−Removed: 10% Shareholder or we earn related person insurance income and we satisfy the RPII Test.
+Added: In general, subpart F insurance income will be allocated to a tax-exempt organization owning (or treated as owning) our shares if we are a CFC (as defined below) and it is a U.S.
+Added: 10% Shareholder (as defined below) or we earn related person insurance income and we satisfy the RPII Test (as defined below).
We cannot assure you that U.S.
14 unchanged sentences
The United States has entered into intergovernmental agreements between the United States and Bermuda and between the United States and the United Kingdom (the “IGAs”), which potentially modify the FATCA withholding regime described above with respect to us and our common shares.
−Removed: There can be no certainty as to whether the Company or JRG Re will be treated as a FFI under FATCA.
+Added: There can be no certainty as to whether the Company will be treated as a FFI under FATCA.
We strongly urge you to consult your own tax advisor regarding the potential impact of FATCA, the IGAs and any non-U.S.
8 unchanged sentences
Tax laws and interpretations thereof, including with respect to whether a company is engaged in a U.S.
−Removed: trade or business, is a CFC, has related party insurance income, is a PFIC, or is subject to BEAT, are subject to change, possibly on a retroactive basis.
−Removed: There are currently only proposed regulations regarding the RPII Test.
−Removed: New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS or the U.S.
−Removed: Department of the Treasury.
−Removed: We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.
−Removed: If reinsurance premiums paid by our U.S.
+Added: trade or business, is a controlled foreign corporation (“CFC”), has related party insurance income, or is a PFIC (as defined in Section 1297(a) of the
+Added: Code), are subject to change, possibly on a retroactive basis.
+Added: We are not able to predict if, when or in what form any guidance on such tax laws will be provided and whether such guidance will have a retroactive effect.
+Added: If reinsurance premiums previously paid by our U.S.
subsidiaries to our non-U.S.
−Removed: subsidiaries do not reflect arm’s-length terms, the IRS could seek to recharacterize the payments in a way that is unfavorable to us.
+Added: subsidiaries did not historically reflect arm’s-length terms, the IRS could seek to recharacterize the payments in a way that is unfavorable to us.
The IRS is permitted to reallocate or recharacterize income, deductions or certain other items, and to make any other adjustment, to reflect the proper amount, source or character of the taxable income in respect of payments among related parties to reflect an arm’s-length transaction.
3 unchanged sentences
However, if the U.S.
−Removed: Department of the Treasury or the IRS reviews our intercompany agreements and successfully asserts, under Section 482 or 845 of the Code, that the terms do not reflect arm’s-length transactions, we may owe additional tax.
+Added: Department of the Treasury or the IRS reviews our former intercompany agreements and successfully asserts, under Section 482 or 845 of the Code, that the terms do not reflect arm’s-length transactions, we may owe additional tax.
Reduced tax rates for qualified dividend income may not be available in the future.
−Removed: We believe that the dividends paid on our common shares should qualify as “qualified dividend income” as long as the common shares are listed on a national securities exchange and we are not a PFIC.
+Added: We believe that the dividends paid on our common shares should qualify (and should have historically qualified) as “qualified dividend income” as long as the common shares are listed on a national securities exchange and we are not (and were not) a PFIC.
Qualified dividend income received by non-corporate U.S.
persons is generally eligible for long-term capital gain rates.
−Removed: While neither the Tax Act nor the IRA modified these rules, there has been proposed legislation before the U.S.
+Added: There has been proposed legislation before the U.S.
Senate and House of Representatives that would exclude shareholders of certain foreign corporations from this advantageous tax treatment.
10 unchanged sentences
through a permanent establishment in the U.K., and therefore such entities could become subject to U.K.
+Added: persons who owned our shares prior to January 1, 2025 may be subject to U.S.
+Added: federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of shares.
+Added: If we are considered a PFIC for U.S.
+Added: federal income tax purposes, a U.S.
+Added: person who owned any of our shares prior to January 1, 2025, could be subject to adverse tax consequences, including becoming subject to a greater tax liability than might otherwise apply and to tax on amounts in advance of when tax would otherwise be imposed, in which case your investment could be materially adversely affected.
+Added: The PFIC rules include provisions intended to provide an exception for qualifying insurance corporations (“QIC”) engaged in the active conduct of an insurance business.
+Added: Generally, a QIC is a company (i) that would be subject to tax under special provisions related to insurance companies if the company was a U.S.
+Added: entity, and (ii) the applicable insurance liabilities of which constitute more than 25% of its total assets as reported on the company’s applicable financial statement.
+Added: On January 15, 2021, the IRS and U.S.
+Added: Department of the Treasury issued final regulations and proposed regulations that provide guidance regarding the PFIC rules and the QIC exception.
+Added: More specifically, the complex regulations provide, among other things, clarity on the application of “applicable insurance liabilities” and the “applicable financial statement,” as well as the requirements to be engaged in the “active conduct” of an insurance business.
+Added: The IRS has requested comments on several aspects of the proposed regulations, which are not effective until adopted in final form.
+Added: It is uncertain when the proposed regulations will be finalized, and whether the provisions of any final or temporary regulations will vary from the proposed regulations.
+Added: We believe that we were not a PFIC for U.S.
+Added: federal income tax purposes while we owned JRG Re, through which we conducted our casualty reinsurance business.
+Added: Our belief that we were not a PFIC is based, in part, on the fact that we believe that we were a QIC engaged in the active conduct of an insurance business.
+Added: New regulations or pronouncements interpreting or clarifying these rules may be forthcoming.
+Added: We cannot predict what impact, if any, such guidance would have on an investor that is subject to U.S.
+Added: federal income taxation.
+Added: As a result, we cannot assure you that we, or one of our subsidiaries, will not have been deemed a PFIC by the IRS.
+Added: If we, or one of our subsidiaries, were considered a PFIC, it could have material adverse tax consequences for an investor that is subject to U.S.
+Added: federal income taxation.
+Added: corporation generally will be classified as a CFC if U.S.
+Added: persons, each of whom owns, directly, indirectly, or constructively, at least 10% of the voting power or value of such corporation’s stock (“U.S.
+Added: 10% Shareholders”), own in the aggregate more than 50% of the voting power or value of the stock of such corporation.
+Added: Tax legislation enacted in 2017
+Added: eliminated the prohibition on “downward attribution” from non-U.S.
+Added: persons to U.S.
+Added: persons under the CFC constructive ownership rules.
+Added: As a result, our U.S.
+Added: subsidiaries were deemed to own all of the stock of our non-U.S.
+Added: subsidiaries prior to the disposition or dissolution of such non-U.S.
+Added: subsidiaries (other than James River UK), for purposes of classifying those non-U.S.
+Added: subsidiaries as CFCs.
+Added: The legislative history under such tax legislation indicates that this change to the CFC constructive ownership rules was not intended to cause our then non-U.S.
+Added: subsidiaries to be treated as CFCs with respect to a 10% U.S.
+Added: Shareholder that is not related (within the meaning of Section 954(d)(3) of the Code) to our U.S.
+Added: However, it is not clear whether the IRS or a court would interpret the change made by the tax legislation in a manner consistent with such indicated intent.
+Added: Under these rules, if a foreign corporation is a CFC, each U.S.
+Added: 10% Shareholder who owns directly or indirectly shares of the CFC on the last day of the CFC’s taxable year must annually include in its taxable income its pro rata share of the CFC’s “subpart F income,” even if no distributions are made.
+Added: Subpart F income typically includes “foreign personal holding company income” (such as interest, dividends and other types of passive income), as well as insurance and reinsurance income (including underwriting and investment income).
+Added: In general (subject to the special rules applicable to “related person insurance income” described below), for purposes of taking into account insurance income, a foreign insurance company will be treated as a CFC if U.S.
+Added: 10% Shareholders collectively own more than 25% of the voting power or value of the company’s shares at any point during any year.
+Added: As discussed above, we cannot assure you that we were not previously a CFC.
+Added: If you are a U.S.
+Added: person, we strongly urge you to consult your own tax advisor concerning the CFC rules.
+Added: Related Person Insurance Income .
+Added: Under proposed regulations, if (i) our gross income attributable to insurance or reinsurance policies pursuant to which the direct or indirect insureds are our direct or indirect U.S.
+Added: shareholders or persons related to such U.S.
+Added: shareholders equals or exceeds 20% of our gross insurance income in any taxable year;
+Added: and (ii) direct or indirect insureds and persons related to such insureds own directly or indirectly 20% or more of the voting power or value of our shares (together, the “RPII Test”), a U.S.
+Added: person who owned any of our shares directly or indirectly on the last day of such taxable year would most likely be required to include its allocable share of our related person insurance income for such taxable year in its income, even if no distributions are made.
+Added: We do not believe that the 20% gross insurance income threshold was met while we owned JRG Re.
+Added: Additionally, certain proposed regulations would expand the scope of related person insurance income for the time in which we owned non-U.S.
+Added: operating companies to potentially include all of the insurance income of our non-U.S.
+Added: operating companies earned from reinsuring affiliates if such companies were majority owned (directly, indirectly or by application of certain constructive ownership rules) by U.S.
+Added: It is not certain whether any of these proposed regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of the related person insurance income rules by the IRS, the courts, or otherwise, might have retroactive effect.
+Added: Consequently, we cannot assure you that a person who was a direct or indirect U.S.
+Added: shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year in which we owned non-U.S.
+Added: operating companies.
+Added: Dispositions of Our Shares .
+Added: shareholder is treated as disposing of shares in a CFC of which it is a U.S.
+Added: 10% Shareholder, or of shares in a foreign insurance corporation that has related person insurance income and in which U.S.
+Added: persons collectively own 25% or more of the voting power or value of the company’s shares, any gain from the disposition will generally be treated as a dividend to the extent of the U.S.
+Added: shareholder’s portion of the corporation’s undistributed earnings and profits, as the case may be, that were accumulated during the period that the U.S.
+Added: shareholder owned the shares.
+Added: In addition, the shareholder will be required to comply with certain reporting requirements.
We may become subject to taxes in Bermuda, which may have a material adverse effect on our results of operations and your investment.
−Removed: The Organization for Economic Co-operation and Development is coordinating a global effort to reform certain aspects of the international tax system.
+Added: As discussed above, the OECD is coordinating a global effort to reform certain aspects of the international tax system.
This effort included the December 2021 release of model rules for a 15% global minimum tax regime.
If these model rules are partially or fully implemented globally, we could be subject to additional taxes and costs for tax compliance.
−Removed: In response to this initiative, Bermuda has recently introduced the Corporate Income Tax Act 2023 ("CIT Act") which will be fully effective for tax years beginning on or after January 1, 2025.
+Added: In response to this initiative, Bermuda introduced the Corporate Income Tax Act 2023 (“CIT Act”) which is fully effective for tax years beginning on or after January 1, 2025.
Entities subject to tax under the CIT Act are the Bermuda constituent entities of multi-national groups.
A multi-national group is defined under the CIT Act as a group with entities in more than one jurisdiction with consolidated revenues of at least €750 million for two of the four previous fiscal years.
−Removed: If Bermuda constituent entities of a multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15 per cent of the net income of such constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities).
+Added: If Bermuda constituent entities of a multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15% of the net income of such constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities).
No tax is chargeable under the CIT Act until tax years starting on or after January 1, 2025.
Provided that the Company is not part of a multi-national group, it is not currently expected to be subject to tax under the CIT Act and, under current Bermuda law, there is no other income, corporate or profits tax or withholding tax, capital gains tax or capital transfer tax payable by the Company.
−Removed: The Company has obtained from the Minister of Finance under The Exempted Undertaking Tax Protection Act of 1966, as amended, ("EUTP Act") as assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable to the Company or to any of its operations or its shares, debentures or other obligations, until March 31, 2035.
+Added: The Company has obtained from the Minister of Finance under The Exempted Undertaking Tax Protection Act of 1966, as amended (“EUTP Act”) an assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable to the Company or to any of its operations or its shares, debentures or other obligations, until March 31, 2035.
The Company could be subject to taxes in Bermuda after that date.
−Removed: This assurance is subject to the proviso that it is not to be construed so as to prevent the application of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967 or
−Removed: otherwise payable in relation to any property leased to the Company.
+Added: This assurance is subject to the proviso that it is not to be construed so as to prevent the application of any tax or duty to such persons as are ordinarily resident in Bermuda or to prevent the application of any tax payable in accordance with the provisions of the Land Tax Act 1967 or otherwise payable in relation to any property leased to the Company.
In the event the Company is subject to tax under the CIT Act, this would supersede the assurance received from the Minister of Finance under the EUTP Act.
6 unchanged sentences
• failure to meet external expectations or management guidance;
−Removed: • market reaction to adverse loss reserve development;
−Removed: • market reaction to any strategic alternative transaction that we enter into, rumors regarding the same, or our determination to terminate the review of strategic alternatives without entering into a transaction;
+Added: • market reaction to adverse loss reserve development, or any entry into a loss portfolio or adverse development cover transaction;
• the loss of one or more individually large clients, and its impact on our growth rate, profitability and financial condition;
11 unchanged sentences
• strategic actions by us or our competitors, such as acquisitions, dispositions, restructurings, significant contracts or joint ventures;
−Removed: • catastrophes that are perceived by investors as impacting the insurance and reinsurance market in general;
+Added: • catastrophes that are perceived by investors as impacting the insurance market in general;
• changes in laws or government regulation, including tax or insurance laws and regulations;
−Removed: • potential characterization of us as a PFIC;
+Added: • potential characterization of us as a PFIC for periods prior to the dispositions of JRG Re;
• general market, economic and political conditions;
2 unchanged sentences
• the number of common shares that are publicly traded;
−Removed: • the offering and issuance of common shares or other securities by us, sales of common shares by our directors or executive officers, or sales of a significant number of common shares issued upon conversion of the Series A Preferred Shares;
+Added: • the offering and issuance of common shares or other securities by us, sales of common shares by our directors or executive officers, or sales of a significant number of common shares issued upon conversion of additional Series A Preferred Shares;
• adverse resolution of litigation against us.
−Removed: In addition, stock markets, including the NASDAQ Stock Market (the market on which our common shares are traded), have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities
−Removed: issued by many companies, including companies in our industry.
+Added: In addition, stock markets, including the NASDAQ Stock Market (the market on which our common shares are traded), have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities issued by many companies, including companies in our industry.
In the past, some companies that have had volatile market prices for their securities have been subject to class action or derivative lawsuits.
−Removed: The filing of a lawsuit against us, regardless of the outcome, could have a negative effect on our business, as it could result in substantial legal costs and a diversion of management’s attention and resources.
The Company had such a lawsuit filed against it following our May 2021 equity offering and another regarding the restatement of our financial statements in November 2023.
3 unchanged sentences
These market and industry factors may materially reduce the market price of our common shares, regardless of our operating performance.
−Removed: We cannot assure you that our evaluation of strategic alternatives will result in any particular outcome, and the perceived uncertainties related to the Company could adversely affect our business and our shareholders.
−Removed: On November 10, 2023, we announced that our board of directors initiated an exploration of strategic alternatives for the Company, including consideration of a wide range of options including, among other things, a potential sale, merger, or other strategic transaction.
−Removed: We have not set a deadline or definitive timetable for the completion of the strategic review process, nor have we made any decisions relating to any strategic alternative at this time.
−Removed: No assurance can be given as to the outcome of the process, including whether the process will result in any particular outcome.
−Removed: Any potential transaction may be dependent on a number of factors that may be beyond our control, for example, market conditions, industry trends or acceptable terms.
−Removed: The process of reviewing potential strategic alternatives may be time consuming, distracting and disruptive to our business operations.
−Removed: In addition, given that the exploration of strategic alternatives may eventually result in a potential sale, merger or other strategic transaction, any perceived uncertainty regarding our future operations or employment needs may limit our ability to retain or hire qualified personnel and may contribute to unplanned loss of highly skilled employees through attrition, and result in the loss of brokers, agents or customers with whom we do business.
−Removed: We may ultimately determine that no transaction is in the best interest of our shareholders.
−Removed: We do not intend to comment further regarding the review of strategic alternatives until we determine disclosure is necessary or advisable.
−Removed: Accordingly, speculation regarding any developments associated with our review of strategic alternatives and any perceived uncertainties related to the Company or its business could cause the price of our shares to fluctuate significantly.
−Removed: The sale of JRG Re is subject to conditions to closing over which we do not have control, and a portion of the consideration is comprised of a pre-closing dividend that is subject to the availability of unencumbered assets at JRG Re.
−Removed: The sale of JRG Re announced on November 8, 2023 (the “Transaction”) is subject to a number of closing conditions and there can be no assurance that these conditions will be satisfied on the timeline we expect or at all.
−Removed: The Transaction may also be terminated in certain circumstances, including termination (A) by either the Company or the Buyer if the Transaction is not completed by June 3, 2024 (subject to one two-month extension in the event closing has not occurred solely because one or more required governmental approvals have not been obtained), or (B) by the Company if (i) all closing conditions have been met, (ii) the Company is ready, willing and able to consummate the closing, and (iii) the Buyer fails to complete the closing solely as a result of the failure to obtain debt financing or alternate financing that is sufficient to finance the consummation of the Transaction.
−Removed: In addition, a portion of the consideration pursuant to the Transaction is comprised of a $139 million dividend or return of capital or surplus by JRG Re to the Company prior to the closing date of the Transaction, which dividend or return of capital or surplus is subject to the availability of unencumbered assets at JRG Re on the closing date.
−Removed: A number of factors may impact the availability of unencumbered assets at JRG Re prior to the closing date, including collateral requirements of JRG Re’s cedents.
−Removed: While the Transaction is pending or if the Transaction is not completed, we may be subject to several risks including:
−Removed: • The current trading price of our common stock may reflect a market assumption that the Transaction will be completed, and may decline if the Transaction is not completed;
−Removed: • We have incurred and expect to incur significant transaction costs in connection with the Transaction whether or not the Transaction is completed;
−Removed: • Under the definitive agreements for the Transaction, we are subject to certain restrictions on the conduct of JRG Re’s business prior to the closing date of the Transaction, which restrictions could adversely affect our ability to realize certain business strategies or take advantage of certain business opportunities;
−Removed: • The negative perception of investors, vendors, trading partners, or employees if the Transaction is not completed;
−Removed: • The attention of our management may be directed toward the completion of the pending Transaction and related matters, and their focus may be diverted from our day-to-day business operations;
−Removed: • Our inability to cure the financial strength rating default under our credit agreements prior to the expiration of the waiver of such default provided by our lenders (see " Our credit agreements contain financial and other covenants, the breach of any of which could result in accelerations of payment of amounts due under our credit facilities ").
−Removed: Any of these risks could have a material adverse effect on our business, financial condition, results of operations and prospects.
+Added: 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.
+Added: An adverse outcome to these matters may have a material adverse effect on our financial position.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: As described in the Risk Factor below “ Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations ,” we are involved in litigation with Fleming regarding the Stock Purchase Agreement and related matters.
+Added: 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.
Litigation and legal proceedings against us or our subsidiaries could have a material adverse effect on our business, financial condition and/or results of operations.
1 unchanged sentence
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 handling of insurance claims.
−Removed: On July 9, 2021, a purported class action lawsuit was filed in the US District Court, Eastern District of Virginia on behalf of Employees’ Retirement Fund of the City of Fort Worth against the Company and certain of its present and former officers, alleging claims under Section 10(b) of the Securities Exchange Act of 1934.
−Removed: On December 7, 2023 we reached an agreement in principle to settle this purported securities class action lawsuit and on December 22, 2023 the parties submitted the stipulation of settlement to the Court for approval.
−Removed: On January 26, 2024 the Court issued its preliminary approval order of the settlement and scheduled a final settlement hearing for May 24, 2024.
−Removed: A final, non-appealable closure of the litigation could take several months.
Legal Proceedings” for more information.
−Removed: On November 13, 2023, a purported class action lawsuit was filed in the US District Court, Southern District of New York, on behalf of Paul Glantz against the Company and certain of its officers, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
−Removed: Glantz alleges that he purchased James River common stock between August 7, 2023 and November 7, 2023, inclusive, that the Company failed to disclose that it lacked effective internal controls regarding the recognition of reinstatement premiums for reinsurance causing the Company to overstate its net income, and that, as a result, Plaintiff suffered unspecified damages.
−Removed: Legal Proceedings” for more information.
−Removed: We believe that the outcomes of these matters and other presently pending matters, individually and in the aggregate, will not have a material adverse effect on our consolidated financial position.
+Added: We believe that the outcome of these matters and other presently pending matters, individually and in the aggregate, are not reasonably likely to have a material adverse effect on our consolidated financial position.
However, the outcomes of lawsuits cannot be predicted and, if determined adversely, could require us to pay significant damage amounts or to change aspects of our operations, which could have a material adverse effect on our financial results.
−Removed: In the future we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
+Added: In the future we may identify material weaknesses or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
The occurrence of any such event may have a material adverse effect on our business and common share price.
−Removed: We previously identified a material weakness in our internal control over financial reporting.
+Added: In November 2023, we identified a material weakness in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
−Removed: As previously disclosed, in preparing our unaudited consolidated financial statements for the three and nine months ended September 30, 2023, the Company became aware that the unaudited consolidated financial statements for the six months ended June 30, 2023 contained material misstatements related to unrecorded reinstatement premium as more fully described in Note 1 to the condensed consolidated financial statements of the 10-Q/A filed with the SEC on November 14, 2023.
−Removed: Management of the Company concluded that because the controls to evaluate the accounting and disclosure of the reinstatement premium did not operate effectively, and resulted in the failure to detect the misstatement, the deficiencies were a material weakness in the Company's internal control over financial reporting.
−Removed: Our internal controls did not detect the error related to the unrecorded reinstatement premium during the period ending June 30, 2023.
−Removed: This control deficiency resulted in the restatement of the Company's unaudited consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and if it was not remediated, could have resulted in a material misstatement to future annual or interim consolidated financial statements that would not be prevented or detected.
−Removed: Accordingly, management determined that this control deficiency constituted a material weakness.
−Removed: To address this material weakness, we took actions designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weakness, including (i) implementing additional review procedures
−Removed: within our accounting department, (ii) implementing additional training of accounting personnel, and (iii) enhancing our existing process and internal control documentation and financial statement preparation process, specifically including updates to accounting policies for reinstatement premium, to ensure completion of financial reporting and proper accounting in accordance with U.S.
−Removed: As of the year ended December 31, 2023, we concluded that our remediation efforts have been successful and that the previously identified material weakness in internal control over financial reporting has been remediated.
−Removed: However, while the material weakness has been remediated, we continue to seek improvements to enhance our control environment and to strengthen our internal controls to provide reasonable assurance that our financial statements continue to be fairly stated in all material respects .
+Added: While the material weakness has since been remediated, it is possible that additional material weaknesses may be identified.
If we discover additional weaknesses in our system of internal financial and accounting controls and procedures, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results.
8 unchanged sentences
As a result, such holders may be able to exercise significant influence over all matters requiring shareholder approval.
−Removed: Pursuant to the Investment Agreement dated February 24, 2022 (the “Investment Agreement”) by and between the Company and GPC Partners Investments (Thames) LP (“GPC Partners”), an affiliate of Gallatin Point Capital LLC, GPC Partners has the right to designate one candidate for nomination for election to our board of directors for so long as GPC Partners and its Permitted Transferees (as defined in the Investment Agreement) continue to beneficially own Series A Preferred Shares and/or common shares issued or issuable upon conversion of such Series A Preferred Shares that represent in the aggregate at least 50% of the number of common shares beneficially owned by the Investors, on an as-converted basis, as of the issuance date of the Series A Preferred Shares.
−Removed: Notwithstanding the fact that all directors will be subject to fiduciary duties to us and to applicable law, the interests of the director designated by GPC Partners for nomination may differ from the interests of our security holders as a whole or of our other directors.
+Added: Pursuant to the Investment Agreement dated February 24, 2022, as amended on November 11, 2024 (as so amended, the “Investment Agreement”) by and between the Company and GPC Partners Investments (Thames) LP (“GPC Partners”), an affiliate of Gallatin Point Capital LLC, GPC Partners has the right to designate one candidate for nomination for election to our board of directors for so long as GPC Partners and its Permitted Transferees (as defined in the Investment Agreement) continue to beneficially own Series A Preferred Shares and/or common shares issued or issuable upon conversion of such Series A Preferred Shares that represent in the aggregate at least 50% of the number of common shares beneficially owned by the Investors, on an as-converted basis, as of the issuance date of the Series A Preferred Shares.
+Added: Notwithstanding the fact that all directors are subject to fiduciary duties to us and to applicable law, the interests of the director designated by GPC Partners for nomination may differ from the interests of our security holders as a whole or of our other directors.
Additionally, holders of the Series A Preferred Shares are entitled to a separate class vote with respect to amendments to the Company’s organizational documents that have an adverse effect on the Series A Preferred Shares, including authorizations or issuances by the Company of securities that are senior to or pari passu with the Series A Preferred Shares, increases or decreases in the number of authorized Series A Preferred Shares, or the issuance of any additional Series A Preferred Shares other than in payment of dividends on the outstanding Series A Preferred Shares.
2 unchanged sentences
The conversion of our Series A Preferred Shares into common shares or payment of dividends on the Series A Preferred Shares in common shares would dilute the ownership interest of existing holders of our common shares.
−Removed: Further, common shares issuable upon conversion of the Series A Preferred Shares, or as payment of dividends on the Series A Preferred Shares, may be sold by GPC Partners or its Permitted Transferees after the second anniversary of the Series A Preferred Shares issuance date.
−Removed: Any sale of common shares following conversion of the Series A Preferred Shares or payment of dividends on
−Removed: the Series A Preferred Shares in common shares, would increase the number of common shares available for public trading, and may adversely affect prevailing market prices of our common shares.
+Added: On November 11, 2024, pursuant to an amendment to the Investment Agreement, we converted 37,500 Series A Preferred Shares with a liquidation value of $37.5 million, into 5,859,375 common shares.
+Added: Any sale of these common shares, or additional common shares obtained following conversion of the Series A Preferred Shares or payment of dividends on the Series A Preferred
+Added: Shares in common shares, would increase the number of common shares available for public trading, and may adversely affect prevailing market prices of our common shares.
The Series A Preferred Shares have rights, preferences and privileges that are not held by, and are preferential to the rights of, our common shareholders, which could adversely affect our liquidity and financial condition.
1 unchanged sentence
In addition, dividends on the Series A Preferred Shares accrue and are cumulative at the initial rate of 7.0% of the $1,000 per share liquidation preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.
−Removed: On March 1, 2027 (the five-year anniversary of the issuance date of the Series A Preferred Shares), and each five-year anniversary thereafter, the dividend rate on the liquidation preference will reset to a rate equal to the five-year U.S.
−Removed: treasury rate (calculated as set forth in the Certificate of Designations designating the Series A Preferred Shares (the “Certificate of Designations”)) plus 5.2%.
+Added: Pursuant to the Amended and Restated Certificate of Designation pertaining to the Series A Preferred Shares, on October 1, 2029, and each five-year anniversary thereafter, the dividend rate on the liquidation preference will reset to a rate equal to the five-year U.S.
+Added: treasury rate (calculated as set forth in the Certificate of Designations designating the Series A Preferred Shares (the “Certificate of Designations”)) plus 5.2%, up to a maximum dividend rate of 8.0%.
The holders of the Series A Preferred Shares also have certain repurchase rights.
11 unchanged sentences
If we pay 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, we will be required to reduce the conversion price of the Series A Preferred Shares.
−Removed: 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.
+Added: 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 satisfy certain capital requirements.
Share dividends payable on the common shares also trigger a reduction of the conversion price applicable to the Series A Preferred Shares.
7 unchanged sentences
Accordingly, we rely primarily on cash dividends or distributions from our operating subsidiaries to pay our operating expenses and any dividends that we may pay to shareholders.
−Removed: The payment of dividends by our insurance and reinsurance subsidiaries is limited under the laws and regulations of the applicable domicile.
+Added: The payment of dividends by our insurance subsidiaries is limited under the laws and regulations of the applicable domicile.
These regulations stipulate the maximum amount of annual dividends or other distributions available to shareholders without prior approval of the relevant regulatory authorities.
3 unchanged sentences
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.
−Removed: In Ohio, the domiciliary state of Falls Lake National, James River Insurance and James River Casualty, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of earned surplus of each of the companies, without obtaining regulatory approval.
−Removed: In North Carolina, the domiciliary state of Stonewood Insurance, respectively, this limitation is the greater of statutory net income excluding realized capital gains for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.
−Removed: In California, the domiciliary state of Falls Lake Fire and Casualty Compan y, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.
+Added: In Ohio, the domiciliary state of Falls Lake National, Stonewood Insurance, James River Insurance and James River Casualty, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of earned surplus of each of the companies, without obtaining regulatory approval.
+Added: In California, the domiciliary state of Falls Lake Fire and Casualty , this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.
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.
−Removed: Business — Regulation — U.S.
+Added: Business — U.S.
Insurance Regulation — State Regulation” for more information.
4 unchanged sentences
tax resident companies.
−Removed: JRG Re, which is domiciled in Bermuda, is registered as a Class 3B insurer under the Insurance Act.
−Removed: The Insurance Act, the conditions listed in the insurance license and the applicable approvals issued by the BMA provide that JRG Re is required to maintain a minimum statutory solvency margin of approximately $31.1 million as of December 31, 2023.
−Removed: Business — Regulation — Bermuda Insurance Regulation — Minimum Solvency Margin and Enhanced Capital Requirements” for more information.
−Removed: A Class 3B insurer is prohibited from declaring or paying a dividend if it fails to meet, before or after declaration or payment of such dividend, its:
−Removed: (i) requirements under the Companies Act, (ii) minimum solvency margin, (iii) enhanced capital requirement or (iv) minimum liquidity ratio.
−Removed: If a Class 3B insurer fails to meet its minimum solvency margin or minimum liquidity ratio on the last day of any financial year, it is prohibited from declaring or paying any dividends during the next financial year without the approval of the BMA.
−Removed: In addition, JRG Re, as a Class 3B insurer, is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files (at least seven days before payment of such dividends) with the BMA an affidavit signed by at least two directors (one of whom must be a Bermuda resident director if any of the insurer’s directors are resident in Bermuda) and the principal representative stating that it will continue to meet its solvency margin and minimum liquidity ratio.
−Removed: Where such an affidavit is filed, it shall be available for public inspection at the offices of the BMA.
−Removed: S ee “Item 1.
−Removed: Business — Regulation — Bermuda Insurance Regulation — Restrictions on Dividends and Distributions” for more information.
The inability of our subsidiaries to pay dividends or make distributions to us, including as a result of regulatory or other restrictions or capital needs, may prevent us from paying our expenses or paying dividends to our shareholders.
8 unchanged sentences
Were the IRS to contend successfully that James River UK is not eligible for benefits under the U.K.
−Removed: Treaty, any dividends paid by James River Group, Inc., our U.S.
+Added: Treaty, any dividends paid by James River Group, our U.S.
holding company, to James River UK would be subject to the 30% withholding tax.
14 unchanged sentences
• there are advance notice requirements for shareholders with respect to director nominations and actions to be taken at annual meetings.
−Removed: • under Bermuda law, for so long as JRG Re is registered under the Insurance Act, the BMA may object to a person holding more than 10%, 20%, 33% or 50% of our common shares if it appears to the BMA that the person is not or is no longer fit and proper to be such a holder (See “ There are regulatory limitations on the ownership and transfer of our common shares .” risk factor herein) .
The foregoing factors could impede a merger, takeover or other business combination, which could reduce the market value of our shares.
22 unchanged sentences
In connection with the IPO, we received consent from the BMA to issue and transfer freely any of our shares, options, warrants, depository receipts, rights loan notes, debt instruments or other securities to and among persons who are either residents or non-residents of Bermuda for exchange control purposes.
−Removed: The Insurance Act requires that where the shares of the registered insurer, or the shares of its parent company, are traded on a recognized stock exchange, and a person becomes a 10%, 20%, 33% or 50% shareholder controller of the insurer, that person shall, within 45 days, notify the BMA in writing that he has become such a controller.
−Removed: In addition, a person who is a shareholder controller of a Class 3B insurer whose shares or the shares of its parent company (if any) are traded on a recognized stock exchange must serve on the BMA a notice in writing that he has reduced or disposed of his holding in the insurer where the proportion of voting rights in the insurer held by him will have reached or has fallen below 10%, 20%, 33% or 50% as the case may be, not later than 45 days after such disposal.
−Removed: This requirement will apply to us as long as our shares are listed on the NASDAQ Stock Market or another stock exchange recognized by the BMA.
−Removed: The BMA may, by written notice, object to a person holding 10%, 20%, 33% or 50% of our common shares if it appears to the BMA that the person is not fit and proper to be such a holder.
−Removed: The BMA may require the holder to reduce its shareholding in us and may direct, among other things, that the voting rights attaching to its shares shall not be exercisable.
−Removed: A person that does not comply with such a notice or direction from the BMA will be guilty of an offense.
−Removed: JRG Re is also required to notify the BMA in writing in the event any person has become or has ceased to be a controller or an officer of it (an officer includes a director, chief executive or senior executive performing duties of underwriting, actuarial, risk management, compliance, internal audit, finance or investment matters).
Except in connection with the settlement of trades or transactions entered into through the facilities of the NASDAQ Stock Market, our board of directors may generally require any shareholder or any person proposing to acquire our common shares to provide the information required under our bye-laws.
27 unchanged sentences
In addition, our computer systems and network infrastructure present security risks and could be susceptible to hacking, computer viruses, data breaches, or ransomware attacks.
−Removed: Any such failure or security incident could affect our operations and could materially adversely affect our results of operations by requiring us to expend significant resources to correct the defect or incident, as well as by exposing us to litigation or losses not covered by insurance.
+Added: Any such failure or security incident could affect our
+Added: operations and could materially adversely affect our results of operations by requiring us to expend significant resources to correct the defect or incident, as well as by exposing us to litigation or losses not covered by insurance.
Although we have disaster recovery plans and other safeguards in place, our business operations may be materially adversely affected by significant and widespread disruption to our physical infrastructure or operating systems and those of third-party service providers that support our business.
4 unchanged sentences
While we make efforts to maintain the security and integrity of our information technology networks and related systems, and we have implemented various measures and an incident response protocol to manage the risk of, or respond to, a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
−Removed: In addition, our results of operations could be materially adversely affected if one of our business partners, such as brokers, general agents, third party claims administrators or vendors, experiences disruptions to their operating systems and/or a cybersecurity breach, as such disruption
−Removed: or breach could reduce submission flow, policy issuance, claims settlement, and/or make us more vulnerable to a cybersecurity breach ourselves.
+Added: In addition, our results of operations could be materially adversely affected if one of our business partners, such as brokers, general agents, third party claims administrators or vendors, experiences disruptions to their operating systems and/or a cybersecurity breach, as such disruption or breach could reduce submission flow, policy issuance, claims settlement, and/or make us more vulnerable to a cybersecurity breach ourselves.
Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats and the outsourcing of some of our business operations.
9 unchanged sentences
We may not be able to manage our growth or other changes effectively.
−Removed: We intend to continue to grow our excess and surplus and specialty admitted businesses, may attempt to enter new business lines, and may also face changes from market, legal or regulatory developments.
+Added: We intend to continue to grow our excess and surplus business, may attempt to enter new business lines, and may also face changes from market, legal or regulatory developments.
Such growth, new business lines, and changes could require additional capital, systems development and skilled personnel.
2 unchanged sentences
Changes in accounting practices and future pronouncements may materially affect our reported financial results.
−Removed: Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements retroactively.
+Added: Developments in accounting practices may require us to incur considerable additional expenses to comply, particularly if we are required to prepare information relating to prior periods for comparative purposes or to apply the new requirements
+Added: retroactively.
The impact of changes in current accounting practices and future pronouncements cannot be predicted but may affect the calculation of net income, shareholders’ equity and other relevant financial statement line items.
−Removed: Further, our U.S.
−Removed: insurance subsidiaries are required to comply with statutory accounting principles (“SAP”).
+Added: Further, our insurance subsidiaries are required to comply with statutory accounting principles (“SAP”).
SAP and various components of SAP (such as actuarial reserving methodology) are subject to constant review by the NAIC and its task forces and committees, as well as state insurance departments, in an effort to address emerging issues and otherwise improve financial reporting.
3 unchanged sentences
In addition, the NAIC Accounting Practices and Procedures manual provides that state insurance departments may permit insurance companies domiciled in their jurisdiction to depart from SAP by granting them permitted accounting practices.
−Removed: We cannot predict whether or when the insurance departments of the states of domicile of our competitors may permit them to utilize advantageous accounting practices that depart from SAP, the use of which may not be permitted by the insurance departments of the states of domicile of our U.S.
−Removed: insurance subsidiaries.
+Added: We cannot predict whether or when the insurance departments of the states of domicile of our competitors may permit them to utilize advantageous accounting practices that depart from SAP, the use of which may not be permitted by the insurance departments of the states of domicile of our insurance subsidiaries.
Further, we cannot assure that future changes to SAP or components of SAP or the grant of permitted accounting practices to our competitors will not have a negative impact on us.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.