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Item 7. Management’s Discussion and Analysis

2025-03-04 compared with 2024-02-29 · 329 added, 310 removed, 786 unchanged (45% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under the heading “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

The following discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under the heading “Item 1A.

Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements.

You should read this discussion and analysis together with our audited consolidated financial statements and related notes included elsewhere in this Form 10-K.

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The Excess and Surplus Lines segment produced 71.0% of our gross written premiums and 87.5% of our net written premiums for the year ended December 31, 2024.

The Specialty Admitted Insurance segment focuses on niche classes within the standard insurance markets with a primary focus on fronting business, where we retain a minority share of the risk and seek to earn fee income by allowing other carriers and producers to use our licensure, ratings, expertise and infrastructure.

The Specialty Admitted Insurance segment focuses on niche classes within the standard insurance markets through its fronting business, where we retain a minority share of the risk and seek to earn fee income by allowing other carriers and producers to use our licensure, ratings, expertise and infrastructure.

Through Falls Lake National and its subsidiaries, this segment has admitted licenses and the authority to write excess and surplus lines insurance in 50 states and the District of Columbia and distributes through a variety of sources, including program administrators and MGAs.

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The Corporate and Other segment consists of the management and treasury activities of our holding companies, equity compensation for the group, and interest expense associated with our debt.

Our discontinued operations include JRG Re, which comprises the remaining operations of the former Casualty Reinsurance segment, and which, prior to the suspension of its underwriting activities in 2023, provided proportional and working layer casualty reinsurance to third parties and, through December 31, 2021, to our U.S.-based insurance subsidiaries.

Our discontinued operations include JRG Reinsurance Company Ltd.

(“JRG Re”), which comprised the remaining operations of the former Casualty Reinsurance segment, and which, prior to the suspension of its underwriting activities in 2023, provided proportional and working layer casualty reinsurance to third parties.

On November 8, 2023, the Company entered into a definitive agreement to sell JRG Re.

The sale transaction is expected to close in the first quarter of 2024.

The sale of JRG Re, which closed on April 16, 2024, resulted in the Company’s disposition of its casualty reinsurance business and related assets.

All of the Company’s U.S.-domiciled insurance subsidiaries are party to an intercompany pooling agreement that distributes the net underwriting results among the group companies based on their approximate pro-rata level of statutory capital and surplus to the total Company statutory capital and surplus.

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During 2023, JRG Re commuted the outstanding obligations ceded under the intercompany quota share reinsurance agreements back to the Company's U.S.-based insurance subsidiaries with effect from January 1, 2023.

We report all segment information in this ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ prior to the effects of intercompany reinsurance, consistent with the manner in which we evaluate the operating performance of our reportable segments.

Best Company (“A.M.

Best”) financial strength rating for our group’s regulated U.S.

insurance subsidiaries is “A-” (Excellent) with a negative outlook.

We report all segment information in this ‘‘Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ prior to the effects of intercompany reinsurance, consistent with the manner in which we evaluate the operating performance of our reportable segments.

Best Company financial strength rating for our group’s regulated insurance subsidiaries is “A-” (Excellent) with a negative outlook.

This rating reflects A.M.

Best’s evaluation of our U.S.

insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

The rating for our U.S.

operating insurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M.

Best’s evaluation of our insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

The rating for our operating insurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M.

Best and is assigned to insurers that have, in A.M.

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The financial strength ratings assigned by A.M.

Best have an impact on the ability of our regulated subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.

Best have an impact on the ability of our insurance subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.

We believe the “A-” (Excellent) ratings assigned to our insurance subsidiaries allow our subsidiaries to actively pursue relationships with the agents and brokers identified in their marketing plans.

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We evaluate the performance of our segments and allocate resources based primarily on underwriting profit.

We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for a loss portfolio transfer (see Loss Portfolio Transfer in Strategic Actions below) and other operating expenses.

Other operating expenses include the underwriting, acquisition, and insurance expenses of the operating segments and, for consolidated underwriting profit, the expenses of the Corporate and Other segment.

Our definition of underwriting profit may not be comparable to that of other companies.

See “Reconciliation of Non-GAAP Measures” for a reconciliation of underwriting profit to income before taxes and for additional information.

Loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for a loss portfolio transfer to net earned premiums.

See “Reconciliation of Non-GAAP Measures” for a reconciliation of underwriting profit to income from continuing operations before taxes and for additional information.

Our definition of loss ratio may not be comparable to that of other companies.

See “Underwriting Performance Ratios” for a reconciliation of underwriting ratios.

Accident year loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses for the current accident year (excluding development on prior accident year reserves) to net earned premiums for the current year (excluding net earned premium adjustments on reinstatement premiums associated with prior years).

Accident year loss ratio , expressed as a percentage, is the ratio of losses and loss adjustment expenses for the current accident year (excluding development on prior accident year reserves) to net earned premiums for the current year (excluding ceded earned premium associated adverse development covers covering prior accident years and net earned premium adjustments on certain reinsurance treaties with reinstatement premiums associated with prior years).

Expense ratio , expressed as a percentage, is the ratio of other operating expenses net of gross fee income included in other income to net earned premiums.

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We believe it gives our management and other users of our financial information useful insight into our results of operations and our underlying business performance.

Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations b) the impact of retroactive reinsurance accounting for a loss portfolio transfer, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to a purported class action lawsuit, various strategic initiatives, and the filing of registration statements for the offering of securities, and e) severance costs associated with terminated employees.

Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations b) the impact of retroactive reinsurance accounting, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to certain lawsuits, various strategic initiatives, and the filing of registration statements for the offering of securities, e) severance costs associated with terminated employees, and f) deemed dividends recorded with the amendment of the Series A Preferred Shares.

Adjusted net operating income is a non-GAAP measure and should not be viewed as a substitute for net income calculated in accordance with GAAP.

Our definition of

adjusted net operating income may not be comparable to that of other companies.

See “Reconciliation of Non-GAAP Measures” for a reconciliation of income available to common shareholders to adjusted net operating income.

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares (as defined below) and the unrecognized deferred retroactive reinsurance gain on loss portfolio transfers less goodwill and intangible assets, net of amortization.

Our definition of adjusted net operating income may not be comparable to that of other companies.

“Reconciliation of Non-GAAP Measures” for a reconciliation of income available to common shareholders to adjusted net operating income.

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares (as defined below) and the unrecognized deferred retroactive reinsurance gain less goodwill and intangible assets, net of amortization.

We believe tangible equity is a good measure to evaluate the strength of our balance sheet and to compare returns relative to this measure.

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Adjusted net operating return on tangible equity is defined as annualized adjusted net operating income expressed as a percentage of the average quarterly tangible equity balances in the respective period.

Tangible equity per share represents tangible equity divided by the sum of total common shares outstanding plus the common shares resulting from an assumed conversion of the outstanding Series A Preferred Shares into common shares (at the current conversion price).

Net retention is defined as the ratio of net written premiums to gross written premiums.

Gross investment yield is annualized investment income before any deductions for fees and expenses, expressed as a percentage of the average beginning and ending carrying values of those investments during the period.

Unless specified otherwise, all references to our defined metrics above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are for our business from continuing operations that is not subject to retroactive reinsurance accounting for a loss portfolio transfer.

Unless specified otherwise, all references to our defined metrics above in this “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” are for our business from continuing operations that is not subject to retroactive reinsurance accounting.

Management believes that the lack of economic impact of retroactive reinsurance accounting makes the presentation of our key metrics on business not subject to retroactive reinsurance accounting helpful to the users of our financial information.

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We evaluate our estimates regularly using information that we believe to be relevant.

For a detailed discussion of our accounting policies, see the Notes to Consolidated Financial Statements included in this Form 10-K.

For a detailed discussion of our accounting policies, see “Notes to Consolidated Financial Statements” included in this Form 10-K.

Reserve for Losses and Loss Adjustment Expenses

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We estimate the reserve using individual case-basis valuations of reported claims and statistical analysis.

We believe that the use of judgment is necessary to arrive at a best estimate for the reserve for losses and loss adjustment expenses given the long-tailed nature of the business generally written by the Company and the limited operating experience of the fronting and program business in the Specialty Admitted Insurance segment and the commercial auto business in the Excess and Surplus Lines segment.

In applying this judgment, we may establish reserves that differ from our internal actuaries’ estimate.

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Total $ 824,441 $ 2,259,965 $ 3,084,406 73.3 %

The Company’s net reserve for losses and loss adjustment expenses prior to the $660,000 allowance for credit losses on reinsurance recoverables at December 31, 2023 was $1,247.0 million.

The Company’s net reserve for losses and loss adjustment expenses prior to the $1.2 million allowance for credit losses on reinsurance recoverables at December 31, 2024 was $1,086.3 million.

Of this amount, 63.5% relates to IBNR.

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In our Excess and Surplus Lines segment and for our Workers’ Compensation book in the Specialty Admitted Insurance segment, the initial expected loss ratio is estimated based on adjusting book of business prior year experience to current cost and rate level.

In our Programs business within the Specialty Admitted Insurance segment, the expected loss ratio is based on the actuarial pricing of the individual

In our programs business within the Specialty Admitted Insurance segment, the expected loss ratio is based on the actuarial pricing of the individual account.

Alternatively, when company experience lacks historical depth, initial expected loss ratios can be determined using loss ratios implied by industry loss costs for the class or reported industry loss ratios.

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The table below quantifies the impact of extreme reserve deviations from our expected value at December 31, 2024.

The total carried net reserve for losses and loss adjustment expenses for our continuing operations is displayed alongside 5th, 50th

and 95th percentiles of likely ultimate net reserve outcomes.

The total carried net reserve for losses and loss adjustment expenses for our continuing operations is displayed alongside 5th and 95th percentiles of likely ultimate net reserve outcomes.

The carried reserve represents the Company's best estimate and approximates the 50th percentile.

The estimates of these percentiles are a result of a reserve variability analysis which is part of our internal capital modeling efforts using a simulation approach.

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In determining the amount of prior accident year development to recognize each year, we consider actual loss emergence (reported and paid) versus expected loss emergence, as well as our internal actuaries’ indications and the prior year development indicated in the actuarial analysis prepared by our independent third-party actuary.

We look at these different data

points with the goal of disclosing prior accident year development that is representative of loss emergence on prior accident years during the year, while also recording the Company’s best estimate of the aggregate reserve for losses and loss adjustment expenses on the Company’s Consolidated Balance Sheet.

We look at these different data points with the goal of disclosing prior accident year development that is representative of loss emergence on prior accident years during the year, while also recording the Company’s best estimate of the aggregate reserve for losses and loss adjustment

expenses on the Company’s Consolidated Balance Sheet.

At a high level, actual loss emergence on prior accident years in excess of actuarial expectations implies adverse development, while actual loss emergence less than expected emergence implies favorable development.

We experienced $31.6 million of net adverse development in 2023 on the reserve for losses and loss adjustment expenses held at December 31, 2022 (excluding adverse prior year development on the commercial auto loss portfolio transfer subject to retroactive reinsurance accounting - see Loss Portfolio Transfers and Impact of Retroactive Reinsurance below).

This net adverse reserve development included $32.6 million of net adverse development in the Excess and Surplus Lines segment, with adverse development in accident years 2020 and prior exceeding favorable development on accident years 2022 and 2021, and $972,000 of net favorable development in the Specialty Admitted Insurance segment.

We experienced $4.4 million of net favorable development in 2022 on the reserve for losses and loss adjustment expenses held at December 31, 2021 (excluding adverse prior year development on the commercial auto loss portfolio transfer subject to retroactive reinsurance accounting - see Loss Portfolio Transfers and Impact of Retroactive Reinsurance below).

This net favorable reserve development included $210,000 of net favorable development in the Excess and Surplus Lines segment and $4.2 million of net favorable development in the Specialty Admitted Insurance segment.

We experienced $76.1 million of net adverse development in 2024 on the reserve for losses and loss adjustment expenses held at December 31, 2023 (excluding adverse prior year development subject to retroactive reinsurance accounting - see “ Retroactive Reinsurance Accounting ” below).

This reserve development included $76.7 million of net adverse development in the Excess and Surplus Lines segment and $607,000 of net favorable development in the Specialty Admitted Insurance segment.

We experienced $31.6 million of net adverse development in 2023 on the reserve for losses and loss adjustment expenses held at December 31, 2022 (excluding adverse prior year development subject to retroactive reinsurance accounting - see “ Retroactive Reinsurance Accounting ” below).

This reserve development included $32.6 million of net adverse development in the Excess and Surplus Lines segment and $972,000 of net favorable development in the Specialty Admitted Insurance segment.

Investment Valuation and Impairment

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As a result of this review, management concluded that there were no credit-related impairments of fixed maturity securities at December 31, 2024, 2023, or 2022.

Management does not intend to sell the securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.

During the year ended December 31, 2024, management recognized an impairment loss of $207,000 for one fixed maturity security due to the Company's inability to hold the security until a recovery in its value to the amortized cost basis.

For the remainder of securities in an unrealized loss position, management does not intend to sell the securities and it is not "more likely than not" that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.

The Company elected the fair value option to account for bank loan participations.

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Losses due to credit-related impairments on bank loan participations are determined based upon consultations and advice from the Company's specialized investment manager and consideration of any adverse situations that could affect the borrower's ability to repay, the estimated value of underlying collateral, and other relevant factors.

For the years ended December 31, 2023 and 2022, management concluded that $946,000 and $592,000 of the unrealized losses were due to credit-related impairments, respectively.

Management concluded that none of the unrealized losses were due to credit-related impairments for the year ended December 31, 2021.

For the years ended December 31, 2024, 2023, and 2022, management concluded that $3.3 million, $397,000, and $574,000 of the net realized and unrealized gains (losses) were due to credit-related impairments, respectively.

Fair values are measured in accordance with ASC 820, Fair Value Measurements.

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The fair values of fixed maturity securities and equity securities have been determined using fair value prices provided by our investment accounting services provider or investment managers, who utilize internationally recognized independent pricing services.

The prices provided by the independent pricing services are generally based on observable market data in active markets ( e.g.

The prices provided by the independent pricing services are generally based on observable market data in

active markets ( e.g.

broker quotes and prices observed for comparable securities).

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Recent Accounting Pronouncements

Adopted Accounting Standards

The guidance in ASU 2023-07 —Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures was designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company adopted the new standard effective with this Form 10-K by providing additional segment disclosures in Note 20.

The new standard did not have a material impact on the Company's financial statements.

No accounting standards were adopted during the year ended December 31, 2024 that had a material impact on our financial statements.

There are no prospective accounting standards which are expected to have a material impact on our financial statements subsequent to December 31, 2023 .

Prospective Accounting Standards

The guidance in ASU 2023-09 —Income Taxes (Topic 740):

Improvements to Income Tax Disclosures was designed to increase transparency about income tax information through improvements to the rate reconciliation and disclosure of income taxes paid.

This ASU is effective for fiscal years beginning after December 15, 2024.

Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and are not expected to have a material impact on the Company's financial statements.

The guidance in ASU 2024-03 , Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses requires additional, disaggregated disclosure around certain income statement expense line items.

This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027, although early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on the disclosures in its financial statements.

There are no other prospective accounting standards which are expected to have a material impact on our financial statements subsequent to December 31, 2024 .

Recent Strategic Actions

James River Group Holdings, Ltd.

On November 10, 2023, the Company announced that its board of directors has initiated an exploration of strategic alternatives.

In the fourth quarter of 2024, the Board of Directors concluded the strategic review process announced in November of 2023.

While the strategic review process has been completed, in the ordinary course of business the Company and Board of Directors expect to consider opportunities consistent with its fiduciary duty.

Combined Loss Portfolio Transfer and Adverse Development Cover

On July 2, 2024, James River Insurance and James River Casualty (together, “James River”), entered into a Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract (the “E&S ADC”) with State National Insurance Company, Inc.

(“State National”).

The transaction closed upon signing.

The E&S ADC was effective January 1, 2024 (the “Effective Date”) and applies to James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial auto policies issued to a former large insured or its affiliates (the “Subject Business”).

Pursuant to the E&S ADC, (a) State National reinsures 85% of losses paid on and after the Effective Date in respect of the Subject Business in excess of $716.6 million up to an aggregate limit of $467.1 million (with State National’s share of the aggregate limit being $397.0 million) in exchange for a reinsurance premium paid by James River equal to $313.2 million, (b) James River continues to manage claims and to manage and collect the benefit of other existing third-party reinsurance on the Subject Business, which third-party reinsurance inures to the benefit of the E&S ADC, and (c) James River is entitled to a profit commission of 50% of any favorable development on the business ceded to State National below 104.5% of carried reserves, which profit commission shall not exceed $87.0 million in total.

The Company has $41.2 million of aggregate limit remaining on the E&S ADC at December 31, 2024.

Enstar Strategic Partnership

The Company commenced a multi-pronged strategic partnership with Enstar Group Limited (“Enstar”).

As part of this, on November 11, 2024, Enstar, through its subsidiary Cavello Bay Reinsurance Limited (“Cavello Bay”), entered into (i) a subscription agreement to purchase $12.5 million of the Company’s common shares at a share price of $6.40, which shares are in addition to 637,640 shares Enstar previously purchased in the open market, and (ii) an adverse development cover agreement with James River (“E&S Top Up ADC”), such transactions together, the “Enstar Transactions”.

Pursuant to the E&S Top Up ADC, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium), Cavello Bay reinsures, effective January 1, 2024, 100% of the losses associated with James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive).

This agreement excludes losses related to commercial auto policies issued to a former large insured or its affiliates.

It is subject to a retention by James River of $1,183.7 million (the limit of the E&S ADC) and up to an aggregate limit of $75.0 million.

The Enstar Transactions closed on December 23, 2024.

The Company recognized a $52.8 million reduction in pre-tax income in connection with the E&S Top Up ADC upon closing.

Series A Preferred Share Amendment

On November 11, 2024, the Company amended the Certificate of Designations held by GPC Partners to, among other things, (i) convert $37.5 million of the outstanding Series A Preferred Shares to common stock at a per share price of $6.40 (the “Minimum Price”), (ii) increase the voluntary conversion price from 127.5% to 130% of the Minimum Price, (iii) increase the mandatory conversion price from 130% to 200% of the voluntary conversion price, (iv) delay the first date on which the dividend rate re-sets from March 1, 2027 to October 1, 2029, (v) cap the dividend rate at 8%, (vi) eliminate the adverse development anti-dilution adjustment provision, and (vii) limit transfers of the Series A Preferred Shares without the Company’s consent if, after the transfer, the transferee would hold 9.9% or more of the voting equity of the Company or, in the event of an A.M.

Best downgrade of James River Insurance below A- (Excellent), 19.9% of the voting equity.

Sale of JRG Re

On November 8, 2023, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Fleming Intermediate Holdings LLC, a Cayman Islands limited liability company (the “Buyer”).

Pursuant to the Stock Purchase Agreement, and on the terms and subject to the conditions therein, the Buyer agreed to purchase from the Company all of the common shares of JRG Re (the “Transaction”).

JRG Re comprises the remaining operations of the former Casualty Reinsurance segment, and the Transaction, which is expected to close in the first quarter of 2024, will result in the Company’s disposition of its casualty reinsurance business and related assets.

Total consideration to the Company for the sale of JRG Re includes (A) $277 million (the “Purchase Price”), which is comprised of (i) $138 million payable by the Buyer to the Company on the closing date in cash, subject to final closing adjustments based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing date, and (ii) a $139 million dividend or return of capital or surplus by JRG Re to the Company prior to the closing date, which dividend or return of capital or surplus is subject to the availability of unencumbered assets on the closing date, and (B) $2.5 million to be paid by the

Buyer to the Company in the event that certain conditions outlined in the Stock Purchase Agreement are met on the date that is nine months following the closing date.

The Purchase Price is subject to adjustment based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing date.

We have determined that the sale of JRG Re meets the criteria to be classified as held for sale and that the sale represents a strategic shift that will have a major effect on our operations.

Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re have been classified as held for sale and segregated for all periods presented in the Annual Report on Form 10-K.

In the fourth quarter of 2023, we recorded an estimated loss on sale of $80.4 million to write down the carrying value of JRG Re to its estimated fair value based upon the estimated sales price of the transaction less costs to sell and other adjustments in accordance with the Stock Purchase Agreement.

Actions to Reduce Workers' Compensation Book

In June 2023, the Company non-renewed its large California workers' compensation program in the Specialty Admitted Insurance segment.

This action was taken due to persistent rate pressure and tighter reinsurance capacity.

Gross written premiums for the program were $96.5 million, $110.9 million, and $124.1 million for the years ended December 31, 2023, 2022, and 2021, respectively.

On September 25, 2023, the Company announced that certain of its subsidiaries entered into an agreement to sell the renewal rights to the Individual Risk Workers’ Compensation (“IRWC”) business in the Specialty Admitted Insurance segment.

The transaction includes the full operations of the business, including underwriting, loss control and claims, and transfer of the employees supporting the business.

The transaction, which closed on September 29, 2023, was aligned with our strategy to focus our resources on core businesses where we have meaningful scale.

Gross written premiums for IRWC were $45.5 million, $53.0 million, and $57.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Upon closing of the transaction, the Company recognized a $2.2 million gain on sale included in other income for the year ended December 31, 2023 representing the minimum guaranteed consideration to be received in the transaction.

The Company also recognized an impairment charge of $2.5 million related to the trademark intangible asset associated with the IRWC business.

Pursuant to the Stock Purchase Agreement, and on the terms and subject to the conditions therein, the Buyer agreed to purchase from the Company all of the common shares of JRG Re.

JRG Re comprised the remaining operations of the former Casualty Reinsurance segment, and the sale of JRG Re, which closed on April 16, 2024, resulted in the Company’s disposition of its casualty reinsurance business and related assets.

Pursuant to the terms of the Stock Purchase Agreement, the aggregate purchase price received by the Company, after giving effect to estimated adjustments based on changes in JRG Re’s adjusted net worth between March 31, 2023 and the closing, totaled approximately $291.4 million (the “Closing Date Purchase Price”).

The aggregate Closing Date Purchase Price was comprised of (i) $152.4 million paid in cash by the Buyer and (ii) an aggregate $139.0 million dividend and distribution from contributed surplus by JRG Re to the Company.

In accordance with the Stock Purchase Agreement, the cash portion of the purchase price was calculated based on an estimated balance sheet of JRG Re as of the date of closing.

The estimated balance sheet is subject to final post-closing adjustments, which resulted in the downward adjustment to the purchase price discussed below.

The Buyer delivered a closing statement to the Company, and pursuant to the procedures in the Stock Purchase Agreement, the Company has given its notice of disagreement with the Buyer’s closing statement.

In its notice of disagreement, the Company (i) agreed with an $11.4 million downward adjustment to the Closing Date Purchase Price due to losses from 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 paid to the Buyer on October 18, 2024, and (ii) disputed $54.1 million in aggregate downward adjustments to the Closing Date Purchase Price claimed by the Buyer, which the Company believes are unsupported by the facts known to the Company and the terms of the Stock Purchase Agreement.

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.

We have determined that the sale of JRG Re met the criteria to be classified as held for sale at December 31, 2023 and that the sale represented a strategic shift that will have a major effect on the Company's operations.

Accordingly, the results of JRG Re's operations have been presented as discontinued operations, and the assets and liabilities of JRG Re at December 31, 2023 have been classified as held for sale and segregated for all periods presented in this Annual Report on Form 10-K.

The $139.0 million pre-closing dividend was completed in the first quarter of 2024.

It included the forgiveness of $133.2 million owed from JRG Holdings to JRG Re and $5.8 million paid in cash to JRG Holdings.

In the fourth quarter of 2023, after giving effect to the pre-closing dividend, we recorded an estimated loss on sale of $80.4 million to write down the carrying value of JRG Re to its estimated fair value based upon the estimated sales price of the transaction less costs to sell and other adjustments in accordance with the Stock Purchase Agreement.

For the year ended December 31, 2024, the estimated loss on the sale was revised to $78.3 million.

The loss on disposal for the year ended December 31, 2024 of $4.1 million includes the $2.1 million gain for the change in the estimated loss on sale and expenses incurred of $6.2 million.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

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Other operating expenses (188,613) (188,355) 0.1 %

Underwriting profit (1), (2)

Underwriting (loss) profit (1), (2)

(105,554) 24,484 —

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Net investment income 93,089 84,046 10.8 %

Net realized and unrealized investment gains (losses) 10,441 (15,720) —

Other income (expense) 424 (244) —

Net realized and unrealized gains on investments 3,625 10,441 (65.3) %

Other income and expense (14) 424 —

Interest expense (24,666) (24,627) 0.2 %

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Impairment of intangible assets — (2,500) —

Income from continuing operations before taxes 86,914 53,272 63.2 %

Income tax expense on continuing operations 25,705 18,414 39.6 %

Net income from continuing operations 61,209 34,858 75.6 %

(Loss) income from continuing operations before taxes (71,120) 86,914 —

Income tax (benefit) expense on continuing operations (7,634) 25,705 —

Net (loss) income from continuing operations (63,486) 61,209 —

Net loss from discontinued operations (17,634) (168,893) (89.6) %

Net (loss) income (107,684) 30,973 —

Net loss (81,120) (107,684) (24.7) %

Dividends on Series A Preferred Shares (37,149) (10,500) 253.8 %

Net (loss) income available to common shareholders $ (118,184) $ 22,223 —

Adjusted net operating income (1)

Net loss available to common shareholders $ (118,269) $ (118,184) 0.1 %

Adjusted net operating (loss) income (1)

$ (41,503) $ 50,317 —

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Accident year loss ratio 66.2 % 64.0 %

Accident year loss ratio ex-cat (3)

64.0 % 67.4 %

(1) Underwriting profit and adjusted net operating income are non-GAAP measures.

(1) Underwriting (loss) profit and adjusted net operating (loss) income are non-GAAP measures.

See “Reconciliation of Non-GAAP Measures.”

(2) Underwriting results include gross fee income of $21.0 million and $24.2 million for the years ended December 31, 2024 and 2023, respectively.

(3) Accident year loss ratio excluding $5.0 million of net catastrophe losses related to Hurricane Ian in the year ended December 31, 2022.

The Company produced net income from continuing operations of $61.2 million for the year ended December 31, 2023, an increase of 75.6% over the prior year.

Adjusted net operating income was $50.3 million for the year ended December 31, 2023 compared to $51.7 million for the year ended December 31, 2022.

Underwriting profits were $24.5 million and $56.0 million (combined ratios of 96.5% and 91.1%) for the years ended December 31, 2023 and 2022, respectively.

Underwriting results for the current year were negatively impacted by $16.4 million of reinstatement premium in the Excess and Surplus Lines segment.

The reinstatement premium, triggered by claims on the 2020 and 2021 years of an excess of loss reinsurance treaty, reduced net written and net earned premiums, and underwriting profit.

The reinstatement premium resulted in a 2.1 percentage point increase in our combined ratio for the current year.

Net earned premiums grew by $78.3 million or 12.4% reflecting growth in both operating segments.

Net earned premiums for the Excess and Surplus Lines segment grew by $54.0 million or 9.7% driven primarily by growth in our larger underwriting divisions, in particular Excess Casualty, General Casualty, and Manufacturers and Contractors.

Segment renewal rate increases continue to be strong and broad based across underwriting divisions (+10.0% over the prior year).

Net earned premiums for the Specialty Admitted Insurance segment increased by $24.3 million or 32.8% due to higher retentions of individual risk workers compensation business following the termination of a quota share treaty effective January 1, 2023 and the growth in fronting with the mix of business and changes in reinsurance coverages contributing to higher retentions and higher earned premium.

Our loss ratio was 69.9% in the current year compared to 67.5% in the prior year.

The impact of the reinstatement premium was a 1.5 percentage point increase in our loss ratio for the current year.

Net reserve development on prior accident years was $31.6 million or 4.5 percentage points adverse for the year ended December 31, 2023 and included $32.6 million of net adverse development from the Excess and Surplus Lines segment, with adverse development in accident years 2020 and prior exceeding favorable development on accident years 2022 and 2021, and $972,000 of net favorable development from the Specialty Admitted Insurance segment.

For the year ended December 31, 2022, net reserve development on prior accident years was $4.4 million or 0.7 percentage points favorable including $210,000 of net favorable reserve development from the Excess and Surplus Lines segment and $4.2 million of net favorable development from the Specialty Admitted Insurance segment.

Current accident year losses for the year ended December 31, 2022 include $5.0 million or 0.8 percentage points of net catastrophe losses related to Hurricane Ian in our Excess Property book within the Excess and Surplus Lines segment.

Our expense ratio increased from 23.6% to 26.6% with the reinstatement premium impact on net earned premium in the current year contributing 0.6 percentage points of the increase.

Other contributors include lower reinsurance cessions that resulted in lower ceding commissions in the aggregate and higher net commissions and higher general and administrative expenses due to higher compensation, bad debts, and taxes, licenses and fees.

Investment income grew by $40.9 million or 94.6% over the prior year primarily driven by higher yields on fixed maturities, bank loans, and cash equivalents.

The higher yields reflect the rise in interest rates in the current year.

Net realized and unrealized gains and losses on investments include the impact of market volatility in the respective periods on the fair values of equity securities and bank loan participations (see Investing Results below).

Interest expense was $10.8 million higher in the current year largely driven by higher interest rates on our variable rate senior and trust preferred debt.

The applicable rates on our debt reset periodically and are structured as SOFR plus a margin or spread.

Our average rate of interest increased from 4.3% in the prior year to 7.5% in the current year.

As disclosed above, on September 29, 2023, the Company completed the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

Upon closing of the transaction, the Company recognized a $2.2 million gain on sale included in other income in the current year representing the minimum guaranteed consideration to be received in the transaction.

The Company reported a net loss from continuing operations of $63.5 million for the year ended December 31, 2024 compared to net income from continuing operations of $61.2 million for the year ended December 31, 2023.

The net loss from continuing operations in the current year was largely attributable to the Excess and Surplus Lines segment which was impacted by $76.7 million of net adverse reserve development (including a $52.2 million reserve charge upon execution of the E&S ADC in the third quarter) and $52.8 million of ceded premium recorded upon execution of the E&S Top Up ADC in the fourth quarter.

Adjusted net operating loss was $41.5 million for the year ended December 31, 2024 compared to adjusted net operating income of $50.3 million for the year ended December 31, 2023.

Underwriting results were a loss of $105.6 million (combined ratio of 117.6%) for the year ended December 31, 2024 compared to profit of $24.5 million (combined ratio of 96.5%) for the year ended December 31, 2023.

The underwriting loss in the current year was largely driven by net adverse reserve development (see loss ratio discussion below) and the $52.8 million of ceded premium associated with the E&S Top Up ADC which increased our combined ratio by 9.5 points.

Underwriting results for the years ended December 31, 2024 and 2023 also include $13.7 million and $16.4 million, respectively, of premium

adjustments associated with prior years including reinstatement premium in the Excess and Surplus Lines segment which reduced net written and net earned premiums, and underwriting profit.

The impact of the premium adjustments was a 2.6 and 2.1 percentage point increase in our combined ratios in the respective years.

Our loss ratio increased from 69.9% in the prior year to 86.2% in the current year primarily driven by higher net adverse reserve development and the impact of the ceded premium associated with the E&S Top Up ADC (+7.0 points).

Net adverse reserve development on prior accident years (excluding adverse prior year development from continuing operations that is subject to retroactive reinsurance accounting - see discussion below) was $76.1 million or 12.7 percentage points adverse for the year ended December 31, 2024 compared to $31.6 million or 4.5 percentage points adverse for the year ended December 31, 2023.

The adverse reserve development for the year ended December 31, 2024 included $76.7 million of net adverse development in the Excess and Surplus Lines segment, including the $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves), and $607,000 of net favorable development in the Specialty Admitted Insurance segment.

The adverse reserve development for the year ended December 31, 2023 included $32.6 million of net adverse reserve development in the Excess and Surplus Lines segment and $1.0 million of net favorable development in the Specialty Admitted Insurance segment.

Our expense ratio increased from 26.6% in the prior year to 31.4% in the current year largely driven by higher compensation and bad debt expenses, and lower net earned premiums in the Excess and Surplus Lines segment which was impacted by the $52.8 million of ceded premium on the E&S Top Up ADC (+2.5 point impact on consolidated expense ratio), partially offset by a lower current year expense ratio for the Specialty Admitted Insurance segment driven by lower commissions and lower expenses for compensation and taxes, licenses, and fees.

Investment income grew by $9.0 million or 10.8% over the prior year principally driven by higher yields and higher invested assets in our continuing operations following the commutation of an internal quota share arrangement with JRG Re in the second and third quarters of 2023.

Net realized and unrealized gains on investments for the year ended December 31, 2024 include $1.5 million of unfavorable mark-to-market adjustments on our equity securities and bank loan participations reflecting decreases in their fair values in the period compared to $12.8 million of favorable mark-to-market adjustments on equity securities and bank loan participations in the prior year (see “ Investing Results ” below).

On September 29, 2023, the Company completed the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

Upon closing of the transaction, the Company recognized a $2.2 million gain on sale included in other income in the prior year representing the minimum guaranteed consideration to be received in the transaction.

The Company also recognized an impairment charge of $2.5 million related to the trademark intangible asset associated with the IRWC business.

The Company entered into a definitive agreement on November 8, 2023 to sell JRG Re.

The sale is expected to close in the first quarter of 2024 and discontinued operations includes the operating results of JRG Re for the respective periods as well as certain transaction-related expenses in the current year.

The current year transaction-related expenses include $53.2 million of losses recognized on JRG Re's fixed maturity investments as 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, $1.4 million of professional services and other costs to sell, and an $80.4 million loss on the held-for sale classification of JRG Re's net assets adjusting them down to the anticipated closing price in the transaction.

Excluding the transaction-related expenses, JRG Re's operating results were a loss of $33.9 million compared to a $3.9 million loss in the prior year.

The operating results include net adverse development of $35.5 million on treaties not subject to the Casualty Re LPT for the year ended December 31, 2023 compared to $13.4 million of net adverse development in the prior year.

Adjusted net operating income decreased 2.7% from the prior year due to lower underwriting results and higher interest expense, partially offset by higher investment income.

Tangible equity and tangible equity per share decreased by 3.1% and 4.2%, respectively, in the current year mainly due to the loss from discontinued operations, partially offset by the positive results from continuing operations and unrealized gains on fixed maturities in other comprehensive income.

Our 9.6% adjusted net operating return on tangible equity for the year ended December 31, 2023 compares to a 10.0% return in the prior year.

Loss Portfolio Transfers and Impact of Retroactive Reinsurance

The Company has entered into two loss portfolio transfers, which are a form of reinsurance utilized by the Company to transfer losses and loss adjustment expenses and associated risk of adverse development on covered subject business, as defined in the respective agreements, to an assuming reinsurer in exchange for a reinsurance premium.

Loss portfolio transfers can bring economic finality on the subject risks as long as any additional losses are within the limit of the loss portfolio transfer and the counterparty performs under the contract.

On September 27, 2021, James River Insurance Company and James River Casualty Company (together, “James River”) entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc.

The sale closed on April 16, 2024 and discontinued operations for both periods include the operating results of JRG Re which were a loss of $13.6 million for the year ended December 31, 2024 compared to a loss of $33.9 million in the prior year.

The losses from discontinued operations primarily reflect net adverse development of $7.1 million and $35.5 million in the respective years on treaties not subject to the loss portfolio transfer agreement previously entered into by JRG Re.

The current year loss also reflects $9.5 million of realized and unrealized losses on fixed maturity securities.

Discontinued operations in the current year also includes $6.2 million of certain transaction-related expenses associated with the sale and a change in the estimate of the loss on sale which together resulted in a $4.1 million loss on disposal in the current year.

In the prior year, discontinued operations included $53.2 million of losses recognized on JRG Re's fixed maturity investments (the Company no longer had the intent or ability to hold securities in an unrealized loss position until a recovery of their fair value could occur), $1.4 million of professional services and other costs to sell JRG Re, and an $80.4 million loss on the held-for sale classification of JRG Re's net assets adjusting them down to the anticipated closing price in the transaction.

The Company accounted for the amendment of the Series A Preferred Shares on November 11, 2024 as an extinguishment of the pre-amendment Series A Preferred Shares due to the significance of qualitative and quantitative changes to the shares.

The Company estimated the fair value of the new Series A Preferred Shares to be $133.1 million on the date of issuance and classified the new Series A Preferred Shares as mezzanine equity.

The Company recorded deemed dividends of $27.0 million within retained deficit for the difference between the $144.9 million carrying value of the extinguished pre-amendment Series A preferred shares and the combined $133.1 million estimated fair value of the new Series A Preferred Shares and the $38.8 million fair value of the new common shares issued through conversion of Series A Preferred Shares in the amendment.

Also included in the dividends on Series A Preferred Shares were declared dividends of $10.1 million and $10.5 million for the years ended December 31, 2024 and 2023, respectively.

Adjusted net operating results declined from the prior year primarily reflecting lower underwriting results with a partial offset for higher investment income.

Tangible equity decreased by 9.9% mainly due to the net loss in 2024.

Tangible equity per share decreased 33.6% reflecting the net loss and dilution from the Enstar common share investment and the Series A Preferred Share amendment in the current year.

Loss Portfolio Transfers and Adverse Development Covers

Loss portfolio transfers and adverse development covers are forms of reinsurance utilized by the Company to transfer losses and loss adjustment expenses and associated risk of adverse development on covered subject business, as defined in the respective agreements, to an assuming reinsurer in exchange for a reinsurance premium.

This reinsurance can bring economic finality (up to the limit of such agreements, if applicable) on the subject risks when they no longer meet the Company's risk appetite or are no longer aligned with the Company's risk management guidelines.

Commercial Auto Loss Portfolio Transfer

On September 27, 2021, James River entered into a loss portfolio transfer transaction (the “Commercial Auto LPT”) with Aleka Insurance, Inc.

(“Aleka”), a captive insurance company affiliate of Rasier LLC, to reinsure substantially all of the Excess and Surplus Lines segment's legacy portfolio of commercial auto policies previously issued to Rasier LLC and its affiliates (collectively, “Rasier”) for which James River is not otherwise indemnified by Rasier.

The reinsurance coverage is structured to be fully collateralized, is not subject to an aggregate limit, and is subject to certain exclusions.

On February 23, 2022, JRG Re entered into a loss portfolio transfer retrocession agreement (the “Casualty Re LPT”) with Fortitude Reinsurance Company Ltd.

(“FRL”) under which FRL reinsures the majority of JRG Re's reserves.

Under the terms of the transaction, which closed on March 31, 2022 (the “Retrocession Closing Date”), JRG Re (a) ceded to FRL all existing and future claims for losses arising under certain casualty reinsurance agreements with underlying insurance companies with treaty inception dates ranging from 2011 to 2020 (the “Subject Business”), in each case net of third-party reinsurance and other recoveries, up to an aggregate limit of $400.0 million;

(b) continues to manage and retain the benefit of other third-party reinsurance on the Subject Business;

(c) paid FRL a reinsurance premium of $335.0 million, $310.0 million of which JRG Re credited to a notional funds withheld account (the “Funds Withheld Account”) and $25.0 million of which was paid in cash to FRL;

and (d) pays FRL a 2% per annum crediting rate on the Funds Withheld Account balance on a quarterly basis.

The total premium, initial Funds Withheld Account credit, and aggregate limit was adjusted for claims paid from October 1, 2021 to the Retrocession Closing Date.

JRG Re incurred $6.8 million of net adverse reserve development in the three months ended March 31, 2022 associated with the Casualty Re LPT.

The Funds Withheld Account balance was $137.8 million and $213.6 million at December 31, 2023 and December 31, 2022, respectively.

Funds Withheld Account crediting fees of $3.6 million and $3.7 million are included in the loss from discontinued operations in our Consolidated Statements of (Loss) Income and Comprehensive Loss for the years ended December 31, 2023 and 2022, respectively.

The Company periodically reevaluates the remaining reserves subject to the Commercial Auto LPT and the Casualty Re LPT.

For the year ended December 31, 2023, due to adverse paid and reported loss trends on the business subject to the loss portfolio transfers, the Company recognized adverse prior year development of $117.3 million on the reserves subject to the Commercial Auto LPT ($64.4 million) and Casualty Re LPT ($52.9 million), resulting in corresponding additional amounts ceded under the respective loss portfolio transfers.

For the year ended December 31, 2022, the Company recognized adverse prior year development of $46.7 million on the reserves subject to the Commercial Auto LPT and $6.1 million on the reserves subject to the Casualty Re LPT.

Both loss portfolio transfers are in gain positions as the cumulative amounts ceded under the loss portfolio transfers exceed the consideration paid, requiring the application of retroactive reinsurance accounting.

Under retroactive reinsurance accounting, gains are deferred and recognized in earnings in proportion to actual paid recoveries under the loss portfolio transfers using the recovery method.

Over the life of the contracts, we would expect no economic impact to the Company as long as any additional losses are within the limit of the loss portfolio transfer and the counterparty performs under the contract.

In periods where the Company recognizes a change in the estimate of the reserves subject to the loss portfolio transfers that increases or decreases the amounts ceded under the loss portfolio transfers, the proportion of actual paid recoveries to total ceded losses is affected and the change in deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the loss portfolio transfer.

The effect of the deferred retroactive reinsurance benefit is recorded in losses and loss adjustment expenses on the Consolidated Statements of (Loss) Income and Comprehensive Loss.

Retroactive reinsurance benefits totaling $83.5 million including $59.4 million for the Commercial Auto LPT and $24.0 million for the Casualty Re LPT were recorded in losses and loss adjustment expenses for the year ended December 31, 2023 using the recovery method, resulting in a net impact of $33.8 million within our net losses and loss adjustment expenses for the year ended December 31, 2023.

For the year ended December 31, 2022, retroactive reinsurance benefits of $31.0 million and $1.7 million were recorded in losses and loss adjustment expenses for the Commercial Auto LPT and Casualty Re LPT, respectively, resulting in a net impact of $20.1 million within our net losses and loss adjustment expenses.

As of December 31, 2023, the cumulative amounts ceded under the loss portfolio transfers was $850.2 million ($456.2 million under the Commercial Auto LPT and $393.9 million under the Casualty Re LPT).

The total deferred retroactive reinsurance gain of $53.9 million at December 31, 2023 under the loss portfolio transfers includes $20.7 million related to the Commercial Auto LPT separately presented on the Company's Consolidated Balance Sheets, and $33.2 million related to the Casualty Re LPT which is included within the assets held-for sale of JRG Re on the Company's Consolidated Balance Sheets.

At December 31, 2023, the Company has $6.1 million of aggregate limit remaining under the Casualty Re LPT.

The cumulative amounts ceded under the loss portfolio transfer were $459.3 million, $456.2 million and $391.8 million as of December 31, 2024, 2023, and 2022, respectively.

Combined Loss Portfolio Transfer and Adverse Development Cover

On July 2, 2024, James River entered into a Combined Loss Portfolio Transfer and Adverse Development Cover Reinsurance Contract (the “E&S ADC”) with State National Insurance Company, Inc.

(“State National”).

The transaction closed upon signing.

The Company has $41.2 million of aggregate limit remaining on the E&S ADC at December 31, 2024.

Adverse Development Cover

On November 11, 2024, Enstar, through its subsidiary Cavello Bay Reinsurance Limited, entered into an adverse development cover agreement with James River (the “E&S Top Up ADC”), pursuant to which, in exchange for a premium of $52.8 million (less an amount equal to the federal excise tax payable on the premium), Cavello Bay reinsures, effective January 1, 2024, 100% of the losses associated with James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive).

The E&S Top Up ADC excludes losses related to commercial auto policies issued to a former large insured or its affiliates and is subject to a retention by James River of $1,183.7 million (the limit of the E&S ADC) and up to an aggregate limit of $75.0 million.

The E&S Top Up ADC closed on December 23, 2024.

The Company recognized a $52.8 million reduction in pre-tax income in connection with the adverse development cover upon closing.

The Company has $75.0 million of aggregate limit remaining on the E&S Top Up ADC at December 31, 2024.

Retroactive Reinsurance Accounting

The Company periodically reevaluates the remaining reserves subject to the Commercial Auto LPT, the E&S ADC, and the E&S Top Up ADC, and when recognized adverse prior year development on the subject business causes the cumulative amounts ceded under the agreements to exceed the consideration paid, the agreements move into a gain position subject to retroactive reinsurance accounting under GAAP.

Gains are deferred under retroactive reinsurance accounting and recognized in earnings in proportion to actual paid recoveries under the agreements using the recovery method.

While the deferral of gains can introduce volatility in our results in the short-term, over the life of the contract, we would expect no economic impact to the Company as long as the counterparty performs under the contract and losses are within the limit.

The impact of retroactive reinsurance accounting is not indicative of our current and ongoing operations.

The following tables summarize the retroactive reinsurance accounting for the Commercial Auto LPT and the E&S ADC for the years ended December 31, 2024, 2023, and 2022.

Year Ended December 31,

2024 2023 2022

(in thousands)

Commercial Auto LPT

Deferred retroactive reinsurance gain at beginning of period $ 20,733 $ 15,742 $ —

Adverse prior year development on subject business 3,051 64,403 46,697

Retroactive reinsurance benefits under the recovery method (14,562) (59,412) (30,955)

Deferred retroactive reinsurance gain at end of period $ 9,222 $ 20,733 $ 15,742

Deferred retroactive reinsurance gain at beginning of period $ — $ — $ —

Adverse prior year development on subject business 48,748 — —

Retroactive reinsurance benefits under the recovery method — — —

Deferred retroactive reinsurance gain at end of period $ 48,748 $ — $ —

Deferred retroactive reinsurance gain at beginning of period $ 20,733 $ 15,742 $ —

Adverse prior year development on subject business 51,799 64,403 46,697

Retroactive reinsurance benefits under the recovery method (14,562) (59,412) (30,955)

Deferred retroactive reinsurance gain at end of period $ 57,970 $ 20,733 $ 15,742

Insurance premiums are earned ratably over the terms of our insurance policies, generally twelve months.

15 unchanged sentences

$ 600,196 $ 708,005 (15.2) %

Gross written premiums for the Excess and Surplus Lines segment (which represents 66.8% of our consolidated gross written premiums from continuing operations in 2023) increased 9.4% from the prior year.

The growth was driven by our Core E&S lines, as we continue to de-emphasize commercial auto.

Total policy submissions for Core E&S lines (excluding commercial auto) increased 10.3% from the prior year in 2023 largely due to a 10.9% increase in new business submissions as the segment focused on growing new business with smaller account sizes.

Renewal rates for the Excess and Surplus Lines segment were up 10.0% compared to 2022.

Gross written premiums for the Excess and Surplus Lines segment (which represents 71.0% of our consolidated gross written premiums from continuing operations in 2024) increased 1.0% from the prior year reflecting growth in our casualty underwriting divisions, partially offset by a decline in Excess Property.

Amid moderating rate increases and increased competition, we are remaining selective in our Excess Property portfolio.

Total policy submissions for Core E&S lines (excluding commercial auto) in 2024 increased 7.5% from the prior year largely due to a 7.7% increase in new business submissions as the segment focused on growing new business with smaller account sizes.

Renewal rates for the Excess and

Surplus Lines segment were up 9.0% compared to 2023.

The change in gross written premiums was notable in several divisions as shown below:

5 unchanged sentences

Excess Property 53,254 64,574 (17.5) %

Environmental 20,096 13,832 45.3 %

All other Core E&S divisions 176,717 176,761 — %

9 unchanged sentences

Specialty Admitted gross written premium $ 414,743 $ 501,309 (17.3) %

Our fronting written premium increased 4.2% over the prior year driven primarily by the continued expansion of existing fronting relationships.

Our fronting written premium decreased from the prior year driven by the June 2023 non-renewal of a large California workers' compensation program which represented $21.3 million and $96.5 million of gross written premiums for the years ended December 31, 2024 and 2023, respectively.

Excluding the non-renewed program, our fronting written premium increased 8.3% over the prior year driven primarily by the continued expansion of existing fronting relationships.

Our largest fronting relationship represented $175.7 million or 42.4% of segment gross written premium in 2024 compared to $163.1 million or 32.5% in 2023.

In June 2023, the Company non-renewed its large California workers' compensation program in the Specialty Admitted Insurance segment, which represented $96.5 million and $110.9 million of gross written premiums for the years ended December 31, 2023 and 2022, respectively.

This action was taken due to persistent rate pressure and tighter reinsurance capacity.

On September 29, 2023, the Company completed the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

The transaction is aligned with our strategy to focus our resources on core businesses where we have meaningful scale.

The Company has received notifications of non-renewal of the programs with this agent which will decrease future written premiums over time, and result in a run-off of the account beginning July 1, 2025.

Individual risk workers' compensation premium declined due to the September 2023 sale of the renewal rights to that business.

Net Retention

5 unchanged sentences

Total 40.6 % 46.0 %

The net premium retention for the Excess and Surplus Lines segment decreased in 2023 driven by $16.4 million of reinstatement premium, which reduced the 2023 net retention ratio by 1.7%, and the renewal of a quota share treaty, effective July 1, 2023, that increased premium cessions across all underwriting divisions other than Excess Casualty and resulted in lower retentions for the segment.

The net premium retention for the Specialty Admitted Insurance segment increased in 2023 primarily due to the termination of an individual risk workers' compensation quota share treaty effective January 1, 2023.

The net retention on the workers’ compensation business was 76.0% and 29.8% for the years ended December 31, 2023 and 2022, respectively.

The net retention on the segment’s fronting business, which reflects the mix of business and changes in reinsurance coverage as treaties renew, was 15.3% and 13.9% for the years ended December 31, 2023 and 2022, respectively.

The lower net premium retention for the Excess and Surplus Lines segment in 2024 reflects the $52.8 million of ceded premium recorded upon execution of the E&S Top Up ADC in the fourth quarter of 2024 and premium adjustments associated with prior years including reinstatement premium which reduced net written premiums and the net retention ratios.

The premium adjustments totaled $13.7 million and $16.4 million in the years ended December 31, 2024 and 2023, respectively.

In addition, the renewal of a quota share treaty, effective July 1, 2023, increased premium cessions across all underwriting divisions other than Excess Casualty and resulted in lower retentions for the segment.

The net premium retention for the Specialty Admitted Insurance segment decreased in 2024 as fronting business, where we retain a much smaller percentage, represents a greater portion of the book following the sale of the renewal rights to the individual risk workers' compensation business in the prior year third quarter.

The net retention on the fronting business was

17.0% for the year ended December 31, 2024, up from 15.3% for the year ended December 31, 2023 due to the mix of business and changes in reinsurance as coverages renew.

Segment Results

14 unchanged sentences

Underwriting expenses (140,978) (135,175) 4.3 %

Underwriting profit (1)

Underwriting (loss) profit (1)

$ (77,455) $ 54,347 —

3 unchanged sentences

Accident year loss ratio 64.3 % 61.9 %

Accident year loss ratio ex-cat (2)

61.9 % 65.1 %

(1) Underwriting Profit is a non-GAAP Measure.

(1) Underwriting (Loss) Profit is a non-GAAP Measure.

See “Reconciliation of Non-GAAP Measures.”

(2) Accident year loss ratio excluding $5.0 million of net catastrophe losses related to Hurricane Ian in the year ended December 31, 2022.

The Excess and Surplus Lines segment produced underwriting profits of $54.3 million and $83.1 million (combined ratios of 91.1% and 85.1%) for the years ended December 31, 2023 and 2022, respectively.

Underwriting results for the year ended December 31, 2023 include $16.4 million of reinstatement premium.

The reinstatement premium, triggered by claims on the 2020 and 2021 years of an excess of loss reinsurance treaty, reduced net written and net earned premiums, and underwriting profit for the current year.

Segment underwriting ratios were also impacted by the reinstatement premium, attributing to a 2.4 percentage point increase in the segment combined ratio for the year ended December 31, 2023.

Excluding the reinstatement premium, net earned premiums increased by $70.4 million or 12.7% for the year ended December 31, 2023 due to growth in our larger underwriting divisions and broad based renewal rate increases of 10.0% compared to the prior year.

The loss ratio of 68.9% for the year ended December 31, 2023 includes $32.6 million or 5.3 percentage points of net adverse reserve development (excluding adverse prior year development on the legacy Rasier business and the impact of retroactive reinsurance - see Commercial Auto Loss Portfolio Transfer in Strategic Actions ) in our loss estimates for prior accident years, with adverse development in accident years 2020 and prior exceeding favorable development on accident years 2022 and 2021.

The $16.4 million of reinstatement premium, which reduced net earned premiums in 2023, resulted in a 1.8 percentage point increase in our loss ratio for the year ended December 31, 2023.

The loss ratio of 65.9% for the year ended December 31, 2022 included $210,000 of net favorable reserve development in our loss estimates for prior accident years, including $9.1 million of net favorable development in Core E&S lines and $8.9 million of net adverse reserve development on our commercial auto business.

The 2022 loss ratio includes 0.9 percentage points related to $5.0 million of catastrophe losses for Hurricane Ian in the prior year.

The higher current year expense ratio was partially due to the $16.4 million of reinstatement premium, which reduced net earned premiums and contributed 0.6 percentage points of the expense ratio increase relative to the prior year.

The expense ratios also increased over the prior year due to the mix of business and reinsurance changes which resulted in higher net commissions expense, as well as higher compensation costs and bad debt expenses.

The Excess and Surplus Lines segment produced an underwriting loss of $77.5 million (combined ratio of 115.1%) in 2024 compared to an underwriting profit of $54.3 million (combined ratio of 91.1%) in 2023.

Underwriting results for the year ended December 31, 2024 were impacted by $76.7 million or 15.0 percentage points of net adverse reserve development, including a $52.2 million reserve charge upon execution of the E&S ADC (consideration paid in excess of initial reserves).

The underwriting loss also reflects $52.8 million of ceded premium recorded upon execution of the E&S Top Up ADC in the fourth quarter of 2024.

The E&S Top Up ADC ceded premium increased the segment combined ratio by 10.7 points.

Underwriting results for the year ended December 31, 2023 included $32.6 million or 5.3 percentage points of net adverse reserve development in our loss estimates for prior accident years.

Underwriting results for the years ended December 31, 2024 and 2023 also include $13.7 million and $16.4 million, respectively, of premium adjustments associated with prior years including reinstatement premium which reduced net written and net earned premiums, and underwriting profit.

The impact of the premium adjustments was a 3.0 and 2.4 percentage point increase in the segment combined ratios in the respective years.

The higher loss ratio of 87.6% for the year ended December 31, 2024 as compared to the 68.9% loss ratio for the year ended December 31, 2023 primarily reflects the higher net adverse reserve development (15.0 percentage points in 2024 compared to 5.3 percentage points in 2023), and an 8.2 point increase in 2024's ratio due to the E&S Top Up ADC ceded premium.

The impact of the premium adjustments was a 2.3 and 1.8 percentage point increase in the segment loss ratios in the respective years.

The expense ratio increased from 22.2% in 2023 to 27.5% in 2024 reflecting higher compensation and bad debt expenses, and lower net earned premiums including a 2.5 point increase in the 2024 expense ratio due to the E&S Top Up ADC ceded premium of $52.8 million.

Specialty Admitted Insurance Segment

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The Specialty Admitted Insurance segment generated underwriting profits of $6.9 million and $4.1 million (combined ratios of 92.2% and 95.9%) for the years ended December 31, 2024 and 2023, respectively.

Net earned premiums increased by $24.3 million or 32.8% due to higher retentions of individual risk workers compensation business following the termination of a

quota share treaty effective January 1, 2023 and the growth in fronting with the mix of business and changes in reinsurance coverages contributing to higher retentions and higher earned premium.

The growth in fronting business produced a 2.5% increase in segment fee income.

The loss ratio improvement in the current year primarily reflects changes in the mix of business and improved loss trends which helped to produce a lower current accident year loss ratio, partially offset by lower net favorable development in our loss estimates for prior accident years.

Lower written and earned premium volumes in 2024 reflect the Company's actions to reduce the workers' compensation book of business in the segment, including the non-renewal of a large California workers' compensation program and the sale of the renewal rights to the individual risk workers’ compensation business in the prior year.

Net favorable development in our loss estimates for prior accident years was $607,000 and $1.0 million (0.7 and 1.0 percentage points) for the years ended December 31, 2024 and 2023, respectively.

The favorable development in both 2023 and 2022 reflects the fact that actual loss emergence of the workers’ compensation book for prior accident years has been better than expected.

The segment expense ratio increased over the prior year driven by higher net commission expense due to the January 1, 2023 termination of the individual risk workers' compensation quota share treaty as well as higher taxes, licenses, and fees in the current year due to adjustments to tax and assessment accruals in the prior year.

The favorable development in both 2024 and 2023 was attributable to lower than expected loss emergence in the workers’ compensation book for prior accident years.

The higher current accident year loss ratio in 2024 was primarily driven by changes in the mix of business for the segment.

The segment expense ratio for 2024 benefited from lower commissions driven by sliding scale and other adjustments on certain programs, as well as lower expenses for compensation and taxes, licenses, and fees following the reductions to our workers' compensation book in the prior year.

The sale of the renewal rights to the individual risk workers' compensation business included the transfer of employees associated with the business.

Corporate and Other Segment

Other operating expenses for the Corporate and Other segment include personnel costs associated with the Bermuda and U.S.

holding companies, professional fees, and various other corporate expenses that were not reimbursed by our subsidiaries, including costs associated with our internal quota share, rating agencies and strategic initiatives.

holding companies, professional fees, share based compensation for the full Company, and various other corporate expenses that were not reimbursed by our subsidiaries, including costs associated with rating agencies and strategic initiatives.

The expenses are included in our calculation of consolidated underwriting profit, and in our consolidated expense ratio and combined ratio.

Total operating expenses of the Corporate and Other segment were $35.0 million and $33.9 million for the years ended December 31, 2024 and 2023, respectively.

The higher current year expenses as compared to the prior year were largely driven by higher compensation expenses due to the hiring of additional employees and included share-based compensation ($9.1 million and $8.1 million for the years ended December 31, 2023 and 2022, respectively), as well as higher audit fees.

The higher current year expenses as compared to the prior year were largely driven by higher compensation and insurance costs.

Investing Results

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The Company's private investments generated income of $4.9 million and $5.0 million for the years ended December 31, 2024 and 2023, respectively.

Excluding private investments, our net investment income for the year ended December 31, 2023 increased 98.6% over the prior year principally due to higher yields on fixed maturities, bank loan participations, short-term investments, and cash and cash equivalents.

Excluding private investments, our net investment income for the year ended December 31, 2024 increased 11.7% over the prior year principally due to higher yields on cash, cash equivalents, restricted cash equivalents, and short-term investments.

Major categories of the Company’s net investment income are summarized as follows:

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Average fixed maturity securities 4.5 % 4.4 %

Of our total cash and invested assets of $1,980.1 million at December 31, 2023 (excluding restricted cash equivalents and cash and invested assets of JRG Re included in assets held for sale), $274.3 million represents the cash and cash equivalents portion of the portfolio.

Of our total cash and invested assets of $1,914.7 million at December 31, 2024 (excluding restricted cash equivalents), $362.3 million represents the cash and cash equivalents portion of the portfolio.

The majority of the portfolio, or $1,189.7 million, is comprised of fixed maturity securities that are classified as available-for-sale and carried at fair value with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of accumulated comprehensive income or loss.

The fair values of our fixed maturity securities were negatively impacted in 2022 by a heightened inflationary environment and rate actions of the Federal Reserve, which led to higher interest rates and lower fair values of our fixed maturity securities.

Unrealized losses on fixed maturities recognized in other comprehensive (loss) income in 2022 resulted in a $193.0 million reduction in accumulated other comprehensive (loss) income in the year ended December 31, 2022.

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.

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.

The Company entered into a definitive agreement on November 8, 2023 to sell JRG Re.

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.

Also included in our investments are $142.4 million of bank loan participations, $86.5 million of equity securities, $97.1 million of short-term investments, and $36.7 million of other invested assets.

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Bank loan participations are measured at fair value pursuant to the Company's election of the fair value option, and changes in unrealized gains and losses in bank loan participations are reported in our income statement as net realized and unrealized gains (losses) on investments.

At December 31, 2023 and 2022, the fair value of these securities was $156.2 million and $54.3 million, respectively.

At December 31, 2024 and 2023, the fair value of these securities was $142.4 million (aggregate unpaid principal balance of $149.4 million) and $156.2 million (aggregate unpaid principal balance of $164.3 million), respectively.

The Company invests selectively in private debt and equity opportunities.

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Equity interests in various renewable energy LLCs generated investment income of $1.7 million and $2.9 million for the years ended December 31, 2024 and 2023, respectively.

The Company’s former Non-Executive Chairman has invested in certain of these LLCs.

The Company’s former Non-Executive Chairman invested in certain of these LLCs.

During the fourth quarter of 2022, the underlying projects in two of our LLCs were sold at the manager's discretion.

We received proceeds of $2.0 million and $3.6 million from these sales during the years ended December 31, 2024 and 2023.

We could receive additional contingent payments in the future according to terms of the transaction.

The remaining investments had a carrying value of $7.7 million at December 31, 2024.

Investments in loans for renewable energy projects had investment income of $138,000 and $244,000 for the years ended December 31, 2024 and 2023, respectively.

During 2023, the Company received principal repayments of $1.3 million on the notes receivable.

These investments had a carrying value of $1.4 million at December 31, 2023.

During 2024, the Company received the remaining principal of $1.4 million on the notes receivable.

The Company owns investments in limited partnerships that invest in concentrated portfolios including publicly-traded small cap equities, loans of middle market private equity sponsored companies, private equity general partnership interests, commercial mortgage-backed securities, specialty private credit, and tranches of distressed home loans.

Investment income from these partnerships was $1.6 million in 2023 compared to losses of $1.3 million in 2022.

Investment income from these partnerships was $2.4 million and $1.6 million for the years ended December 31, 2024 and 2023,

respectively .

Together, these limited partnerships had a carrying value of $15.1 million at December 31, 2024.

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Interest income from both notes was $584,000 and $340,000 for the years ended December 31, 2024 and 2023, respectively.

For the year ended December 31, 2023, the Company recognized net realized and unrealized investment gains of $10.4 million, including $339,000 of net realized investment losses on the sale of fixed maturity securities, $3.5 million of net realized investment losses on the sale of bank loans securities, $1.5 million of net realized investment gains on the sale of equity securities, $9.0 million of gains for the change in fair value of bank loans, and $3.7 million of gains for the change in fair value of equity securities.

For the year ended December 31, 2022, the Company recognized net realized and unrealized investment losses of $15.7 million, including $1.2 million of net realized investment gains on the sale of fixed maturity securities, $365,000 of net realized investment losses on the sale of bank loans, $563,000 of net realized investment gains on the sale of equity securities, $5.4

million of losses for the change in fair value of bank loans, and $11.7 million of losses for the change in fair value of equity securities.

For the year ended December 31, 2024, the Company recognized net realized and unrealized investment gains of $3.6 million, including $1.1 million of net realized investment losses on the sale of fixed maturity securities, $3.2 million of net realized investment losses on the sale of bank loans securities, $9.6 million of net realized investment gains on the sale of equity securities, $620,000 of losses for the change in fair value of bank loans, $873,000 of losses for the change in fair value of equity securities, and an impairment loss of $207,000 for one fixed maturity security due to the Company's inability to hold the security until a recovery in its value to the amortized cost basis.

For the year ended December 31, 2023, the Company recognized net realized and unrealized investment gains of $10.4 million, including $339,000 of net realized investment losses on the sale of fixed maturity securities, $3.5 million of net realized investment losses on the sale of bank loans, $1.5 million of net realized investment gains on the sale of equity securities, $9.0 million of gains for the change in fair value of bank loans, and $3.7 million of gains for the change in fair value of equity securities.

In conjunction with its outside investment managers, the Company performs quarterly reviews of all securities within its investment portfolio to determine whether any impairment has occurred.

Management concluded that none of the fixed maturity securities with an unrealized loss at December 31, 2023 or 2022 experienced an other-than-temporary impairment.

Management does not intend to sell available-for-sale securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs.

Management concluded that none of the fixed maturity securities with an unrealized loss at December 31, 2024 or 2023 experienced an other-than-temporary credit related impairment.

At December 31, 2024, our available-for-sale fixed maturity securities had net unrealized losses of $88.6 million representing 6.9% of the amortized cost of the portfolio.

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Total $ 1,278,337 $ 1,189,733 100.0 %

Other Income (Expense)

Other income and expense items netted to income of $424,000 and expense of $244,000 for the years ended December 31, 2023 and 2022, respectively.

I ncluded in 2023 are a $2.2 million gain on the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment, $1.3 million of broker incentive rebates in the Excess and Surplus Lines segment, and $693,000 of income related to interest income from trust preferred securities and distributions from a joint venture interest, partially offset by non-operating expenses of $3.8 million in the current year primarily consisting of legal fees related to a purported class action lawsuit and legal and other professional fees and other expenses related to various strategic initiatives including the sale of renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

For 2022, the expense of $244,000 included non-operating expenses of $797,000 primarily consisting of legal fees related to a purported class action lawsuit and $553,000 of income primarily related to interest income from trust preferred securities and distributions from a joint venture interest.

Other Income and Expense

Other income and expense items netted to expense of $14,000 and income of $424,000 for the years ended December 31, 2024 and 2023, respectively.

Included in 2024 are non-operating expenses of $6.1 million primarily consisting of legal and other professional fees and other expenses related to various strategic initiatives, partially offset by $5.4 million of broker incentive rebates in the Excess and Surplus Lines segment and $660,000 of income related to interest income from trust preferred securities and distributions from a joint venture interest.

I ncluded in 2023 are a $2.2 million gain on the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment, $1.3 million of broker incentive rebates in the Excess and Surplus Lines segment, and $693,000 of income related to interest income from trust preferred securities and distributions from a joint venture interest, partially offset by non-operating expenses of $3.8 million primarily consisting of legal fees related to a purported class action lawsuit and legal and other professional fees and other expenses related to various strategic initiatives including the sale of renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

Interest Expense

Interest expense was $24.7 million and $24.6 million for the years ended December 31, 2024 and 2023, respectively.

The increase reflects the impact of rising interest rates on our variable rate senior and trust preferred debt.

See “—Liquidity and Capital Resources—Sources and Uses of Funds” for information regarding our senior debt facilities and trust preferred securities.

See “—Liquidity and Capital Resources—Sources and Uses of Funds” below for information regarding our senior debt facilities and trust preferred securities.

Amortization of Intangibles

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On September 29, 2023, the Company completed the sale of the renewal rights to the IRWC business in the Specialty Admitted Insurance segment.

Upon closing of the transaction, the Company recognized an impairment charge of $2.5 million related to the trademark intangible asset associated with the IRWC business.

Upon closing of the transaction, the Company recognized an impairment charge of $2.5 million related to the trademark intangible asset in 2023 associated with the IRWC business.

The Company completed its impairment tests and fair value analysis for goodwill and other intangible assets during the fourth quarter of 2024 and 2023.

No impairment was present for the years ended December 31, 2023 or 2022 except for the $2.5 million related to the trademark intangible asset as mentioned above.

No impairment was present for the years ended December 31, 2024 or 2023 except for the $2.5 million related to the trademark intangible asset in 2023 as mentioned above.

Income Tax Expense

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The Company has a deferred tax asset of $18.6 million at December 31, 2024 associated with unrealized losses in the Company’s available-for-sale fixed maturity securities portfolio.

The unrealized losses are attributable to rising market interest rates and other economic factors rather than credit-related factors of the issuers.

The unrealized losses are attributable to changes in market interest rates and other economic factors rather than credit-related factors of the issuers.

The Company does not intend to sell available-for-sale debt securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their fair value to their amortized cost basis occurs.

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Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

For a discussion of our results for the year ended December 31, 2022 as compared to year ended December 31, 2021, please refer to our 2021 Form 10-K filed with the SEC on March 1, 2022.

For a discussion of our results for the year ended December 31, 2023 as compared to year ended December 31, 2022, please refer to our 2023 Form 10-K filed with the SEC on February 29, 2024.

Liquidity and Capital Resources

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Cash flow from operations may differ substantially from net income.

The potential for a large claim under an insurance or reinsurance contract means that substantial and unpredictable payments may need to be made within relatively short periods of time.

The potential for a large claim under an insurance contract means that substantial and unpredictable payments may need to be made within relatively short periods of time.

The following table summarizes our total cash flows including both continuing and discontinued operations, consistent with the presentation in our Consolidated Statements of Cash Flows:

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Change in cash, cash equivalents, and restricted cash equivalents $ 31,101 $ 83,570 $ (15,749)

Cash used in operating activities excluding restricted cash equivalents of $203.3 million for the year ended December 31, 2024 principally reflects $313.2 million and $52.8 million of reinsurance premium paid in 2024 related to the E&S ADC and E&S Top Up ADC, respectively.

Cash provided by operating activities excluding restricted cash equivalents of $118.7 million and $221.5 million for the years ended December 31, 2023 and 2022, respectively, was driven by the growth in our U.S.

segments and the collection of premiums receivable at a quicker rate than payments of loss and loss adjustment expenses.

The cash provided by operating activities declined in 2023 relative to the prior year due to the suspension of underwriting activities of JRG Re in 2023.

Cash used in operating activities excluding restricted cash equivalents of $155.6 million for the year ended December 31, 2021 primarily reflects the outflow of funds to effect the Commercial Auto LPT in the third quarter of that year.

Cash provided by (used in) operating activities from continuing operations excluding restricted cash equivalents was $234.6 million, $246.6 million, and $(134.4) million for the years ended December 31, 2023, 2022, and 2021, respectively, compared to cash used in operating activities of discontinued operations of $115.9 million, $25.1 million, and $21.2 million in the respective years.

Because JRG Re is currently in run off, we believe that its sale, expected to be completed in the first quarter of 2024, will increase our future cash flows from operations relative to 2023.

Proceeds from the sale of JRG Re will support additional growth in our U.S.

continuing operations.

The cash provided by operating activities declined in 2023 relative to 2022 due to the suspension of underwriting activities of JRG Re in 2023.

Cash (used in) provided by operating activities from continuing operations excluding restricted cash equivalents was $(178.2) million, $234.6 million, and $246.6 million for the years ended December 31, 2024, 2023, and 2022, respectively, compared to cash used in operating activities of discontinued operations of $25.1 million, $115.9 million, and $25.1 million in the respective years.

Cash provided by investing activities of $307.0 million in 2024 reflects the $96.4 million of proceeds from the sale of JRG Re and the sale of investments to fund the reinsurance premiums for the E&S ADC and E&S Top Up ADC.

In 2023, cash provided by investing activities of $16.7 million was driven by the suspension of underwriting activities of JRG Re and the withdrawal of invested assets in that company to fund claims and operating expenses.

Cash used in investing activities for 2022 of $328.2 million reflects our efforts to enhance the yield in our investment portfolio by investing available cash and cash equivalents into higher yielding investments.

Cash provided by investing activities of $35.8 million for the year ended December 31, 2021 was primarily due to the investments sold and funds withdrawn from our investment portfolio to effect the Commercial Auto LPT in the third quarter of that year.

Cash and cash equivalents (excluding restricted cash equivalents) comprised 18.9%, 13.9%, and 7.3% of total cash and invested assets at December 31, 2024, 2023, and 2022, respectively.

Cash (used in) provided by investing activities from continuing operations was $(98.4) million, $(336.7) million, and $8.1 million for the years ended December 31, 2023, 2022, and 2021, respectively, compared to cash provided by investing activities of discontinued operations of $115.1 million, $8.5 million, and $27.7 million in the respective years.

Because JRG Re is currently in run off, we believe that its sale, expected to be completed in the first quarter of 2024, will increase our future cash flows from operations relative to 2023 which will lead to higher amounts invested and more cash used in investing activities.

Proceeds from the sale of JRG Re supporting additional growth in our U.S.

continuing operations are expected to be invested and will increase the invested assets of our continuing operations.

Cash provided by (used in) investing activities from continuing operations was $243.9 million, $(98.4) million, and $(336.7) million for the years ended December 31, 2024, 2023, and 2022, respectively, compared to cash provided by investing activities of discontinued operations of $63.1 million, $115.1 million, and $8.5 million in the respective years.

Cash (used in) provided by financing activities above relate entirely to continuing operations for all years.

Cash used in financing activities of $28.8 million for the year ended December 31, 2024 includes a $21.5 million repayment of an unsecured loan under the 2017 facility, $12.5 million received for the common share investment by Enstar, $12.8 million of dividends paid on the Series A Preferred Shares, $6.2 million of dividends paid to common shareholders, and $847,000 of payroll taxes withheld and remitted on net settlement of restricted share units (“RSUs”).

Cash used in financing activities of $21.1 million for the year ended December 31, 2023 includes $7.7 million of dividends paid to common shareholders, $10.5 million of dividends paid on the Series A Preferred Shares, $1.1 million of paid issuance costs related to the amendment of the 2013 Facility in July, 2023, and $1.7 million of payroll taxes withheld and remitted on net settlement of RSUs.

Cash provided by financing activities of $89.7 million for the year ended December 31, 2022 includes $144.9 million of net proceeds (after expenses) from the issuance and sale of 150,000 Series A Preferred Shares on March 1, 2022.

Cash provided by financing activities of $89.7 million for the year ended December 31, 2022 includes $144.9 million of net proceeds (after expenses) from the

issuance and sale of 150,000 Series A Preferred Shares on March 1, 2022.

The proceeds were used for general corporate purposes and to repay $40.0 million of loans outstanding on the 2017 Facility (as defined below) on March 28, 2022.

Financing activities for the year ended December 31, 2022 also include $7.8 million of dividends paid to common shareholders, $6.1 million of dividends paid on the Series A Preferred Shares, and $1.3 million of payroll taxes withheld and remitted on net settlement of RSUs.

Cash provided by financing activities of $147.7 million for the year ended December 31, 2021 includes $192.1 million of net proceeds (before expenses) from the May 10, 2021 public offering of common shares which was used for general corporate purposes, $43.2 million of dividends paid to common shareholders, $3.1 million of payroll taxes withheld and remitted on net settlement of RSUs, and $1.9 million of proceeds from the issuance of common shares resulting from share option exercises.

As permitted under the agreements establishing the Indemnity Trust and the LPT Trust, we have withdrawn collateral from the Indemnity Trust and the LPT Trust to fund the Loss Fund Trust as required under the Administrative Services Agreement.

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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.

See Item 1— “Regulation—U.S.

Business—U.S.

Insurance Regulation—State Regulation” for additional information.

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insurance subsidiaries during 2025 without regulatory approval is $64.3 million.

The Bermuda Insurance Act of 1978 prohibits an insurer from declaring or paying a dividend if it is in breach of its minimum solvency margin, its enhanced capital requirement, or its minimum liquidity ratio, or if the declaration or payment of such dividend would cause such a breach.

An insurer can declare or pay dividends without prior regulatory approval up to 25% of the total statutory capital and surplus (as shown on its previous financial year's statutory balance sheet).

See Item 1- “Regulation- Bermuda Insurance Regulation- Restrictions on Dividends and Distributions” for additional information.

Based on that calculation, the maximum amount of dividends available to us from JRG Re without regulatory approval in 2023 is calculated to be approximately $90.3 million.

However, any dividend payment is contingent upon continued compliance with Bermuda regulatory requirements, including but not limited to the enhanced solvency requirement calculations.

Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the $1,000 liquidation preference per share (the “Liquidation Preference”) per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.

On the five-year anniversary of the Closing Date, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S.

treasury rate plus 5.2%.

Holders of the Series A Preferred Shares are entitled to a dividend at the rate of 7% of the $1,000 liquidation preference per share (the “Liquidation Preference”) per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.

On October 1, 2029, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S.

treasury rate plus 5.2%, provided, that the dividend rate shall not exceed 8.0%.

Dividends accrue and are payable quarterly.

For the years ended December 31, 2023 and 2022, cash dividends of $10.5 million and $8.8 million were declared, respectively, of which $2.6 million was payable at December 31 of both years.

For the years ended December 31, 2024, 2023, and 2022, cash dividends of $10.1 million, $10.5 million, and $8.8 million were declared, respectively.

Cash dividends paid were $12.8 million, $10.5 million, and $6.1 million in the respective years.

At December 31, 2024, our Bermuda holding company had $64.5 million of cash and cash equivalent assets.

holding company had $15.2 million of cash and invested assets at December 31, 2023, comprised of cash and cash equivalents of $13.8 million and other invested assets of $1.4 million, which are not subject to regulatory restrictions.

holding company had $9.5 million of cash and invested assets at December 31, 2024, comprised of cash and cash equivalents of $6.0 million, preferred stock of $3.1 million, and other invested assets of $464,000, which are not subject to regulatory restrictions.

Additionally, our U.K.

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The 2013 Facility is comprised of the following at December 31, 2024:

• A $102.5 million secured revolving facility utilized by JRG Re to issue letters of credit for the benefit of third-party reinsureds.

This portion of our credit facility is secured by our investment securities.

At December 31, 2023, the Company had $42.7 million of letters of credit issued under the secured facility.

• A $212.5 million unsecured revolving facility to meet the working capital needs of the Company.

All unpaid principal on the revolver is due at maturity.

Interest accrues quarterly and is payable in arrears, currently at 1-month SOFR (the Company, per the terms of the credit agreement, can elect between one, three, or six month interest periods) plus a 0.1% SOFR index adjustment and a SOFR margin which is currently 1.75% and is subject to change according to terms in the credit agreement.

Interest accrues quarterly and is payable in arrears, currently at 1-month SOFR (the Company, per the terms of the credit agreement, can elect between one, three, or six month interest periods) plus a 0.1% SOFR index adjustment and a SOFR margin (1.75% at December 31, 2024), which is subject to change according to terms in the credit agreement.

At December 31, 2024 and 2023, the Company had a drawn balance of $185.8 million outstanding on the unsecured revolver.

The 2013 Facility has been amended from time to time since its inception in 2013.

On July 7, 2023, the Company entered into a Third Amended and Restated Credit Agreement for its $315.0 million senior revolving credit facility which, among other things, extended the maturity date of such facility until July 7, 2026 and increased the applicable interest rate and letter of credit fees.

The 2013 Facility contains certain financial and other covenants (including minimum net worth, maximum ratio of total adjusted debt outstanding to total capitalization, and financial strength ratings) with which the Company was in compliance at

December 31, 2023, with the exception of a default of the financial strength rating covenant due to the downgrade of JRG Re by A.M.

Best on December 20, 2023 from “A-” (Excellent) to “B++” (good).

The financial strength rating covenant requires that each of our regulated insurance subsidiaries maintain an A.M.

Best rating not lower than “A- ” (Excellent).

Our lenders have waived this default through March 1, 2025, and in any event, we expect it to be cured upon the closing of the sale of JRG Re, at which time we expect JRG Re to be removed as a borrower under the 2013 Facility.

On August 2, 2017, the Company, and its wholly-owned subsidiary, JRG Re, together as borrowers, entered into a credit agreement (the "2017 Facility") that provides the Company with a revolving line of credit of up to $100.0 million, which may be used for loans and letters of credit made or issued, at the borrowers' option, on a secured or unsecured basis.

Obligations under the 2017 Facility carry a variable rate of interest subject to terms in the credit agreement and will mature 30 days after notice of termination from the lender.

The 2017 Facility contains certain financial and other covenants with which we are in compliance at December 31, 2023, with the exception of a default of the financial strength rating covenant due to the downgrade of JRG Re by A.M.

Best on December 20, 2023 from “A-” (Excellent) to “B++” (good).

The financial strength rating covenant requires that each of our regulated insurance subsidiaries maintain an A.M.

Best rating not lower than “A- ” (Excellent).

The loans and letters of credit made or issued under the revolving line of credit of the 2017 Facility may be used to finance the borrowers' general corporate purposes.

The 2017 Facility has been amended from time to time since its inception in 2017, including on November 8, 2019 when the Company entered into a First Amendment to Credit Agreement which, among other things, lowered the applicable interest rate and modified certain negative covenants to be less restrictive.

Interest accrues and is payable in arrears at variable rates which are subject to change according to terms in the credit agreement.

At December 31, 2023, unsecured loans of $21.5 million and secured letters of credit totaling $25.5 million were outstanding on the 2017 Facility.

During the three months ended March 31, 2022, the Company repaid $40.0 million of loans that were outstanding under the 2017 Facility.

The Company expects to have reduced borrowing needs following the expected disposition of JRG Re (See “Recent Strategic Actions—Sale of JRG Re” above), and therefore expects to reduce the size of its 2013 Facility and its 2017 Facility in connection with the removal of JRG Re as a borrower thereunder as referenced above.

• A $45.0 million secured revolving facility to issue letters of credit for the benefit of third-party reinsureds.

At December 31, 2024, the Company had $7.5 million of letters of credit issued under the secured facility, all of which are collateralized by a back-to-back letter of credit issued by Comerica Bank on behalf of JRG Re.

On July 7, 2023, the Company entered into a Third Amended and Restated Credit Agreement for the 2013 Facility which, among other things, extended the maturity date of such facility until July 7, 2026 and increased the applicable interest rate and letter of credit fees.

The 2013 Facility has been amended from time to time, including on April 16, 2024 when the 2013 Facility was amended in connection with the closing of the sale of JRG Re by the Company to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, and (ii) decrease the secured revolving facility commitment from $102.5 million to $45.0 million.

Additionally, the Third Amended and Restated Credit Agreement provides for an accordion feature that permits the Company to request that one or more lenders (without the consent of the other lenders) or one or more financial institutions which were not previously party to the Third Amended and Restated Credit Agreement (with the consent of the administrative agent) provide it with increases in the secured or unsecured revolving credit facilities of up to an aggregate of $100.0 million, which is unchanged from the accordion feature set forth in the Second Amended and Restated Credit Agreement.

The Company’s ability to request such increases in the revolving credit facility is subject to its compliance with customary conditions set forth in the Third Amended and Restated Credit Agreement.

On August 2, 2017, the Company and its former wholly-owned subsidiary, JRG Re, together as borrowers, entered into a credit agreement (the "2017 Facility") that provided the Company with a revolving line of credit of up to $100.0 million, which was used for loans and letters of credit made or issued, at the borrowers' option, on a secured or unsecured basis.

The loans and letters of credit made or issued under the revolving line of credit were used to finance the Borrowers’ general corporate purposes.

Obligations under the 2017 Facility carried a variable rate of interest subject to terms in the credit agreement.

The 2017 Facility was amended from time to time since its inception in 2017, including on April 16, 2024 in connection with the closing of the sale of JRG Re by the Company to (i) release JRG Re as a borrower and release all collateral pledged by JRG Re thereunder, (ii) increase the applicable interest rates, (iii) eliminate the letter of credit portion of the facility, and (iv) to build in an automatic decrease of the facility amount by the amount of each letter of credit outstanding under the 2017 Facility as of the date of the amendment with effect from the date each such letter of credit is cancelled.

The 2017 Facility was terminated in November 2024.

On May 26, 2004, we issued $15.0 million of senior debt due April 29, 2034.

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Adjusted consolidated debt treats trust preferred securities as equity capital up to 15% of total capital.

Total capital is defined as total debt plus tangible equity excluding accumulated other comprehensive income.

Total capital is defined as total debt

plus tangible equity excluding accumulated other comprehensive income.

The maximum leverage ratio permitted by the agreements is 35.0%.

James River Insurance has access to certain credit products including advances through its membership in the Federal Home Loan Bank.

Any advances would be in the form of collateralized short-term borrowings not to exceed 30% of the Company's total assets.

Ceded Reinsurance

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The Commercial Auto LPT with Aleka reinsures substantially all of the Excess and Surplus Lines segment’s legacy portfolio of commercial auto policies previously issued to Rasier.

See “ Amounts Recoverable from an Indemnifying Party and Reinsurer on the Legacy Commercial Auto Book ” below for further information on this reinsurance agreement.

See “ Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book ” below for further information on this reinsurance agreement.

The E&S ADC with State National applies to James River’s Excess & Surplus Lines segment casualty portfolio losses attaching to premium earned during 2010-2023 (both years inclusive), excluding, among others, losses related to commercial

auto policies issued to a former large insured or its affiliates.

See “ Combined Loss Portfolio Transfer and Adverse Development Cover ” above for further information on this reinsurance agreement.

The E&S Top Up ADC with Enstar, through its subsidiary Cavello Bay Reinsurance Limited, reinsures 100% of the losses associated with James River’s Excess & Surplus Lines segment portfolio losses attaching to premium earned during 2010-2023 (both years inclusive).

This agreement excludes losses related to commercial auto policies issued to a former large insured or its affiliates.

It is subject to a retention by James River of $1,183.7 million (the limit of the E&S ADC) and up to an aggregate limit of $75.0 million.

See “ Enstar Strategic Partnership ” above for further information on this reinsurance agreement.

The following is a summary of our Specialty Admitted Insurance segment’s ceded reinsurance in place as of December 31, 2024:

Line of Business Coverage

Workers’ Compensation Excess of loss coverage for $29.5 million in excess of $500,000.

Auto Programs Quota share coverage for 62.5%-100% of limits up to $1.5 million liability and $1.5 million physical damage per occurrence.

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Aviation Programs Quota share coverage for 82.5% of limits up to $25 million liability, $5.0 million hull, and $5.0 million spares per occurrence, each aircraft;

and excess of loss coverage for up to $8.7M excess of $300,000 of our 20% share of the quota share each occurrence.

and excess of loss coverage for up to $7.7 million excess of $175,000 of our 17.5% share of the quota share each occurrence.

Our Specialty Admitted Insurance segment purchases reinsurance for at least 62.5% of the exposed limits on specialty admitted property-casualty business.

The segment enters into reinsurance contracts for the individual risk workers’ compensation business as well as fronting and program business.

While the segment focuses on casualty business, incidental property risk is incurred in the fronting and program business.

The segment is covered for $20.0 million in excess of $5.0 million per occurrence to manage its property exposure to an approximate 1 in 1,000 year PML.

For individual risk workers' compensation business, now in runoff, we purchased $29.5 million excess of $500,000 per occurrence.

This coverage expired on December 31, 2023.

In the aggregate, we believe our pre-tax group-wide PML from a 1 in 1,000 year property catastrophe event would not exceed 2.5% of shareholders’ equity, inclusive of reinstatement premiums payable.

On February 23, 2022, JRG Re entered into the Casualty Re LPT with FRL to reinsure the majority of the segment risk, which closed on March 31, 2022.

Under the terms of the transaction, JRG Re (a) ceded to FRL all existing and future claims for losses arising under certain casualty reinsurance agreements with underlying insurance companies with treaty inception dates ranging from 2011 to 2020 (the “Subject Business”), in each case net of third-party reinsurance and other recoveries, up to an aggregate limit of $400.0 million;

(b) continues to manage and retain the benefit of other third-party reinsurance on the Subject Business;

We also had a contingency clash reinsurance treaty to cover both the Excess and Surplus Lines and Specialty Admitted Insurance segments in the event of a claim incident involving more than one of our insureds in addition to Extra Contractual and Excess Policy Limits protection.

The treaty covered $10.0 million in excess of a $2.0 million retention for loss occurrences within the treaty term.

This coverage was put into runoff effective July 1, 2022.

Effective January 1, 2020, we purchased an additional $10.0 million in claims made coverage for excess policy limits and extra contractual obligations exposures above the clash and contingency treaty for the period 2014 to present.

This treaty had one reinstatement and expired on December 31, 2022.

The Company’s insurance segments remain liable to policyholders if its reinsurers are unable to meet their contractual obligations under applicable reinsurance agreements.

We establish an allowance for credit losses for our current estimate of uncollectible reinsurance recoverables.

At December 31, 2023, the allowance for credit losses on reinsurance recoverables was $660,000.

At December 31, 2024, the allowance for credit losses on reinsurance recoverables was $1.2 million.

To minimize exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk.

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We require collateral, in the form of a trust arrangement or letter of credit, to secure the obligations of the insurance entity for whom we are fronting.

At December 31, 2023, we had reinsurance recoverables on unpaid losses of $1,358.5 million (net of a $660,000 allowance for credit losses) and reinsurance recoverables on paid losses of $158.0 million, and all material recoverable amounts were from companies with A.M.

At December 31, 2024, we had reinsurance recoverables on unpaid losses of $1,996.9 million (net of a $1.2 million allowance for credit losses) and reinsurance recoverables on paid losses of $101.2 million, and all material recoverable amounts were from companies with A.M.

Best ratings of “A-" (Excellent) or better, or are collateralized by the reinsurer for our benefit through letters of credit or funds on deposit in trust accounts.

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Swiss Reinsurance America Corporation $ 398,482 A+

State National Insurance Company (E&S ADC) 365,549 A

Berkley Insurance Company 216,574 A+

Aleka Insurance Company (Commercial Auto LPT) 78,065 Unrated (1)

Hannover Ruck SE 88,860 A+

Peak Reinsurance Company 61,278 A-

Motors Insurance Corporation 51,389 A

Endurance Assurance Corporation 45,111 A+

American European Insurance Company 44,042 B- (2)

Munich Reinsurance America 37,024 A+

Safety National Casualty 32,919 A++

Aspen Insurance 29,397 A

Motors Insurance 29,395 A

SiriusPoint America Insurance Company 40,038 A-

Aleka Insurance Company (Commercial Auto LPT) 35,315 Unrated (1)

Top 10 Total 1,346,638

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Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book

James River previously issued a set of commercial auto insurance contracts to Rasier (the “Rasier Commercial Auto Policies”) under which James River pays losses and loss adjustment expenses on the contracts.

James River previously issued a set of commercial auto insurance contracts (the “Rasier Commercial Auto Policies”) to Rasier under which James River pays losses and loss adjustment expenses on the contracts.

James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River.

On September 27, 2021, James River entered into a loss portfolio transfer reinsurance agreement (the “Commercial Auto LPT”) with Aleka to reinsure substantially all of the Rasier Commercial Auto Policies for which James River is not otherwise indemnified by Rasier under the Indemnity Agreements.

On September 27, 2021, James River entered into the Commercial Auto LPT with Aleka to reinsure substantially all of the Rasier Commercial Auto Policies for which James River is not otherwise indemnified by Rasier under the Indemnity Agreements.

Under the terms of the Commercial Auto LPT, effective as of July 1, 2021, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to Rasier Commercial Auto Policies written in the years 2013-2019, which amount constituted the reinsurance premium.

For the years ended December 31, 2023 and 2022, due to adverse paid and reported loss trends on the legacy Rasier business, the Company recognized adverse prior year development of $64.4 million and $46.7 million, respectively, on the reserves subject to the Commercial Auto LPT, bringing the cumulative amount ceded under the Commercial Auto LPT to $456.2 million at December 31, 2023.

Since inception, due to adverse paid and reported loss trends on the legacy Rasier business, the Company has recognized adverse prior year development of $114.2 million on the reserves subject to the Commercial Auto LPT, bringing the cumulative amount ceded under the Commercial Auto LPT to $459.3 million at December 31, 2024.

Each of Rasier and Aleka are required to post collateral under the Indemnity Agreements and the Commercial Auto LPT:

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At December 31, 2024, the balance in the Indemnity Trust was $64.7 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $82.1 million.

• Pursuant to the Commercial Auto LPT, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the Commercial Auto LPT, calculated in accordance with standard actuarial principles and based on reserves recorded in our statutory financial statements.

The collateral is provided through a collateral trust arrangement (the “LPT Trust”) established in favor of James River by Aleka.

At December 31, 2023, the balance in the LPT Trust was $63.7 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Commercial Auto LPT as described below, the total balance of collateral securing Aleka’s obligations under the Commercial Auto LPT was $83.8 million.

At December 31, 2023, the total reinsurance recoverables under the Commercial Auto LPT was $84.5 million (including $78.1 million of unpaid recoverables and $6.4 million of paid recoverables).

At December 31, 2024, the balance in the LPT Trust was $30.1 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Commercial Auto LPT as described below, the total balance of collateral securing Aleka’s obligations under the Commercial

Auto LPT was $37.8 million.

At December 31, 2024, the total reinsurance recoverables under the Commercial Auto LPT was $36.6 million.

In connection with the execution of the Commercial Auto LPT, James River and Aleka entered into an administrative services agreement (the “Administrative Services Agreement”) with a third party claims administrator (the “Administrator”) pursuant to which the Administrator handles the claims on the Rasier Commercial Auto Policies for the remaining life of those claims.

The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established the Loss Fund Trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations.

The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established a loss fund trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations.

James River funds the Loss Fund Trust using funds withdrawn from the Indemnity Trust, funds withdrawn from the LPT Trust, and its own funds, in each case in an amount equal to the pro rata portion of the required Loss Fund Trust balance attributable to the Indemnity Agreements, the Commercial Auto LPT and James River’s existing third party reinsurance agreements, respectively.

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While the Commercial Auto LPT brings economic finality to substantially all of the Rasier Commercial Auto Policies, the Company has credit exposure to Rasier and Aleka under the Indemnity Agreements and the Commercial Auto LPT if the estimated losses and expenses of the Rasier Commercial Auto Policies grow at a faster pace than the growth in our collateral balances.

In addition, we have credit exposure if our estimates of future losses and loss adjustment expenses and other amounts recoverable under the Indemnity Agreements and the Commercial Auto LPT, which are the basis for establishing the collateral balances, are lower than actual amounts paid or payable.

The amount of our credit exposure in any of these instances could be material.

To mitigate these risks, we closely and frequently monitor our exposure compared to our collateral held, and we request additional collateral in accordance with the terms of the Commercial Auto LPT and Indemnity Agreements when our analysis indicates that we have uncollateralized exposure.

Best financial strength rating for our group’s regulated U.S.

insurance subsidiaries is “A-” (Excellent) with a negative outlook.

In addition, the Company has credit exposure if its estimates of future losses and loss adjustment expenses and other amounts recoverable under the Indemnity Agreements and the Commercial Auto LPT, which are the basis for establishing the collateral balances, are lower than actual amounts paid or payable.

The amount of credit exposure in any of these instances could be material.

To mitigate these risks, the Company closely and frequently monitors exposure compared to collateral held, and requests additional collateral in accordance with the terms of the Commercial Auto LPT and Indemnity Agreements when its analysis indicates that the Company has uncollateralized exposure.

Best Company financial strength rating for our group’s regulated U.S.

subsidiaries is “A-” (Excellent) with a negative outlook.

This rating reflects A.M.

Best’s opinion of our U.S.

insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

Best’s opinion of our insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

The rating for our U.S.

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Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders.

On December 20, 2023, A.M.

Best announced that it reduced the outlook on our regulated U.S.

insurance subsidiaries to negative from stable on the “A-” (Excellent) financial strength rating on such entities following 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 our announcement that James River Group's board of directors will explore strategic business alternatives.

We have since received all required regulatory approvals for the sale of JRG Re and have remediated the material weakness in our internal control over financial reporting.

The financial strength ratings assigned by A.M.

Best have an impact on the ability of our regulated U.S.

subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.

Best have an impact on the ability of our regulated subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.

We believe the “A-” (Excellent) ratings assigned to our U.S.

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The Series A Preferred Shares are convertible into the Company’s common shares at the option of the holder at any time, or at the Company’s option under certain circumstances.

Dividends on the Series A Preferred Shares accrue quarterly at the initial rate of 7% of the Liquidation Preference per annum, which may be paid in cash, in-kind in common shares or in Series A Preferred Shares, at the Company’s election.

The Company issued 171,326 common shares in the twelve months ended December 31, 2023 related to vesting of restricted share units (“RSUs”), increasing the total common shares outstanding from 37,470,237 at December 31, 2022 to 37,641,563 at December 31, 2023.

Dividends on the Series A Preferred Shares accrue quarterly at the rate of 7% of the Liquidation Preference per annum, which may be paid in cash, in-kind in common shares or in Series A Preferred Shares, at the Company’s election.

On November 11, 2024, the Company amended the Certificate of Designations setting forth the terms of the Series A Preferred Shares to, among other things, convert 37,500 outstanding Series A Preferred Shares with a liquidation value of $37.5 million to common shares at a per share price of $6.40.

Following the conversion, 112,500 Series A Preferred Shares remain outstanding.

The Company issued 8,002,755 common shares in the year ended December 31, 2024, increasing the total common shares outstanding from 37,641,563 at December 31, 2023 to 45,644,318 at December 31, 2024.

On November 11, 2024, Enstar Group Limited (“Enstar”), through its subsidiary Cavello Bay Reinsurance Limited, entered into a subscription agreement to purchase $12.5 million of the Company’s common shares at a share price of $6.40.

The Enstar investment closed on December 23, 2024, resulting in the issuance of 1,953,125 common shares.

In 2024, 190,255 of common shares were issued related to the vesting of restricted share units (“RSUs”).

Share Based Compensation Expense

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Exercisable, end of year — $ — 74,390 $ 42.17 287,974 $ 35.26

All of the outstanding options vested over three years and have a contractual life of seven years from the original date of grant.

The options outstanding at December 31, 2023 lapsed in the year ended December 31, 2024.

At December 31, 2024, no options remain outstanding.

The following table summarizes the RSU activity:

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Forfeited (101,494) $ 17.55 (51,928) $ 24.08 (39,827) $ 25.41

PRSU performance adjustment (29,679) $ 24.83 — $ — — $ —

Unvested, end of year 885,173 $ 15.30 751,254 $ 23.48 665,458 $ 25.98

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RSUs granted to non-employee directors have a one year vesting period.

The RSUs granted in 2024 and 2023 include 231,492 and 91,818 performance based restricted share units (“PRSUs”) awards, respectively.

Initial PRSU awards are granted at the 100% target performance level.

The Company projects the level of achievement for each award during the performance period and periodically adjusts the number of outstanding awards to reflect the number of awards expected to vest.

In 2024, a downward performance adjustment was made to the outstanding PRSUs granted in 2023.

Material Cash Requirements

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The reserve for losses and loss adjustment expenses represent management’s estimate of the ultimate cost of settling losses.

As more fully discussed in “—Critical Accounting Policies—Reserves for Losses and Loss Adjustment Expenses” above, the estimation of losses is based on various complex and subjective judgments.

As more fully discussed in “—Critical Accounting Policies and Estimates—Reserve for Losses and Loss Adjustment Expenses” above, the estimation of losses is based on various complex and subjective judgments.

Actual losses paid may differ, perhaps significantly, from the reserve estimates reflected in our consolidated financial statements.

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Underwriting Performance Ratios

The following table provides the underwriting performance ratios of the Company's continuing operations inclusive of the business subject to retroactive reinsurance accounting for a loss portfolio transfer.

There is no economic impact to the Company over the life of a loss portfolio transfer contract so long as any additional losses subject to the contract are within the limit of the loss portfolio transfer and the counterparty performs under the contract.

The following table provides the underwriting performance ratios of the Company's continuing operations inclusive of the business subject to retroactive reinsurance accounting.

There is no economic impact to the Company over the life of a retroactive reinsurance contract so long as any additional losses subject to the contract are within the limit of the contract and the counterparty performs under the contract.

Retroactive reinsurance accounting is not indicative of our current and ongoing operations.

Management believes that providing loss ratios and combined ratios on business not subject to retroactive reinsurance accounting for loss portfolio transfers gives the users of our financial statements useful information in evaluating our current and ongoing operations.

Management believes that providing loss ratios and combined ratios on business not subject to retroactive reinsurance accounting gives the users of our financial statements useful information in evaluating our current and ongoing operations.

Years Ended December 31,

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Reconciliation of Underwriting Profit

We define underwriting profit as net earned premiums and gross fee income (in specific instances when the Company is not retaining insurance risk) less losses and loss adjustment expenses on business from continuing operations not subject to retroactive reinsurance accounting for loss portfolio transfers and other operating expenses.

Our definition of underwriting profit may not be comparable to that of other companies.

The following table reconciles the underwriting profit (loss) of the operating segments by individual segment to consolidated income (loss) before income taxes for the years ended December 31, 2023, 2022 and 2021.

The following table reconciles the underwriting (loss) profit of the operating segments by individual segment to consolidated (loss) income before income taxes for the years ended December 31, 2024, 2023 and 2022.

Year Ended December 31,

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(in thousands)

Underwriting profit (loss) of the operating segments:

Underwriting (loss) profit of the operating segments:

Excess and Surplus Lines $ (77,455) $ 54,347 $ 83,051

Specialty Admitted Insurance 6,873 4,077 4,234

Total underwriting profit (loss) of the operating segments 58,424 87,285 (111,811)

Total underwriting (loss) profit of the operating segments (70,582) 58,424 87,285

Other operating expenses of the Corporate and Other segment (34,972) (33,940) (31,260)

Underwriting profit (loss) (1)

Underwriting (loss) profit (1)

(105,554) 24,484 56,025

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Impairment of intangible assets — (2,500) —

Income (loss) from continuing operations before income taxes $ 86,914 $ 53,272 $ (108,130)

(1) Underwriting profit (loss) includes gross fee income of $24.2 million, $23.6 million, and $22.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Reconciliation of Adjusted Net Operating Income (Loss)

(Loss) income from continuing operations before income taxes $ (71,120) $ 86,914 $ 53,272

(1) Underwriting (loss) profit includes gross fee income of $21.0 million, $24.2 million, and $23.6 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Reconciliation of Adjusted Net Operating Income

Adjusted net operating income is defined as income available to common shareholders excluding a) income (loss) from discontinued operations, b) the impact of retroactive reinsurance accounting, c) net realized and unrealized gains (losses) on investments, d) certain non-operating expenses such as professional service fees related to certain lawsuits, various strategic initiatives, and the filing of registration statements for the offering of securities, e) severance costs associated with terminated employees, and f) deemed dividends recorded with the amendment of the Series A Preferred Shares.

Adjusted net operating income should not be viewed as a substitute for net income calculated in accordance with GAAP, and our definition of adjusted net operating income may not be comparable to that of other companies.

Our (loss) income available to common shareholders for the years ended December 31, 2023, 2022 and 2021 reconciles to our adjusted net operating income (loss) as follows:

Our (loss) income available to common shareholders for the years ended December 31, 2024, 2023 and 2022 reconciles to our adjusted net operating (loss) income as follows:

Year Ended December 31,

2024 2023 2022

Taxes Net Income Loss

Taxes Net Loss (Loss) Income

(Loss) Income Income

(in thousands)

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Impairment of intangible assets — — 2,500 1,975 — —

Adjusted net operating income (loss) $ 75,052 $ 50,317 $ 76,731 $ 51,710 $ (116,734) $ (91,595)

Series A deemed dividends 27,006 27,006 — — — —

Adjusted net operating (loss) income $ (41,506) $ (41,503) $ 75,052 $ 50,317 $ 76,731 $ 51,710

Tangible Equity and Tangible Equity per Share

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares and the unrecognized deferred retroactive reinsurance gain on loss portfolio transfers less goodwill and intangible assets, net of amortization.

Tangible equity is defined as shareholders' equity plus mezzanine Series A Preferred Shares and the deferred retroactive reinsurance gain less goodwill and intangible assets, net of amortization.

Our definitions of tangible equity and tangible equity per share may not be comparable to that of other companies, and they should not be viewed as a substitute for shareholders’ equity and shareholders’ equity per share calculated in accordance with GAAP.

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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.

What changed 10-K

Item 7. Management’s Discussion and Analysis