By Michael Loney

March 4 - (The Insurer) - James River on Monday reported a $40.8 million Q4 net operating loss while its combined ratio deteriorated by 57 percentage points to 155.1% as a result of the previously announced excess and surplus lines adverse development reinsurance contract with Enstar.

• Q4 operating loss of $0.99 misses $0.46 consensus loss estimate (Q4 2023: $0.33 income)

• Combined ratio worsens to 155.1% from 98.1% (159.8% E&S, 95.3% specialty admitted)

• Q4 GWP drops 8.0% to $358.3 million; E&S up 1.2%, specialty admitted down 31.7%

• Full-year combined ratio deteriorates to 117.6% from 96.5%; GWP down 5.1% to $1.43 billion

• CEO D’Orazio notes 2024 “a costly but transformational year for James River”

The adjusted net operating loss of $40.8 million for the fourth quarter compared with adjusted operating income of $12.4 million in the same period of 2023.

The adjusted operating loss of $0.99 per diluted share missed the consensus estimate of a $0.46 loss per share as per six analysts tracked by MarketWatch, and compared with income per share of $0.33 in Q4 2023.

James River said the Q4 loss was largely attributable to the previously announced $52.8 million of consideration paid in connection with the E&S adverse development reinsurance contract with Enstar’s Cavello Bay Reinsurance Limited that closed on December 23.

The combined ratio for the quarter deteriorated to 155.1% from 98.1% in Q4 2023.

The E&S combined ratio of 159.8% was a deterioration from 94.2% in the prior-year period while the specialty admitted insurance combined ratio deteriorated to 95.3% from 92.2%.

James River’s gross written premium of $358.3 million for the fourth quarter was down 8.0% year on year from $389.3 million.

The E&S segment grew gross written premium by 1.9% to $280.3 million compared to the prior-year quarter. Excluding excess casualty, where James River noted “we have been cautious”, the segment grew by 11.2%.

Total E&S submissions grew 9% in the quarter compared to the prior-year period.

The E&S segment received more than 80,000 new and renewal policy submissions for the fourth consecutive quarter, and recorded its third consecutive quarter of 9% submission growth.

The specialty admitted insurance segment’s gross written premium fell 31.7% to $78.0 million.

Excluding the impact of James River’s large workers’ compensation program and individual risk workers’ compensation book, gross written premium for the fronting and program business declined 11.1%.

The workers’ compensation program and individual risk book were non-renewed in Q2 2023 and sold via a renewal rights transaction in Q3 2023, respectively.

FULL-YEAR COMBINED RATIO WORSENS TO 117.6%

For the full year, the consolidated combined ratio deteriorated to 117.6% from 96.5% in 2023.

Gross written premium fell 5.1% to $1.43 billion in 2024 from $1.51 billion the year before.

James River highlighted that E&S gross written premium exceeded $1.0 billion for a second consecutive year, with “a slight increase compared to the prior year as the company continued to focus on its leading, wholesale driven franchise".

The company had its highest levels of both new and renewal annual submission growth in five years, and positive renewal rate change of 9.0% for 2024, as compared to 9.3% for 2023.

The E&S combined ratio deteriorated to 115.1% from 91.1% in 2023 while the specialty admitted insurance combined ratio improved to 92.2% from 95.9%.

“2024 was a costly but transformational year for James River,” CEO Frank D'Orazio said. “We have meaningfully de-risked the organization and concluded an extensive strategic review, emerging with a renewed focus.

“The E&S market remains very healthy, and we believe that 2025 will provide significant opportunities to responsibly grow while taking advantage of the attractive rate environment.”

James River noted that during the year it completed several strategic actions including closing the sale of JRG Reinsurance, entering into a $160.0 million combined loss portfolio transfer and ADC for the E&S business, and initiating a new strategic partnership with Enstar which included a $12.5 million equity investment in the company and an additional $75.0 million E&S top-up ADC.

The company also said it does not expect any meaningful losses associated with the California wildfires.

In addition, it announced that non-executive chairman Ollie Sherman has chosen to retire from his leadership role and that the board has appointed Christine LaSala as its next non-executive chairperson.

Following a period of transition, former Towers Watson executive Sherman, who has served on the board since May 2016, will also retire from the board on April 30, 2025.

LaSala joined the board in July 2024, and currently serves as a director of Sedgwick.

The Q4 operating loss follows James River for the third quarter reporting an operating loss of $28.2 million, which compared with operating income of $18.9 million in Q3 2023.

That loss was largely attributable to $52.2 million of excess consideration paid over reserves ceded in connection with an E&S combined loss portfolio transfer ADC with Markel’s State National that closed in July.