By Michael Loney

March 14 - (The Insurer) - Two James River shareholders have sent a letter to the carrier’s board stating the pair were left “shocked” by a decision to increase discretionary bonuses to the insurer’s management.

Gregory and Scott Fortunoff, who together with their affiliates hold almost 2% of James River’s common stock, sent a letter to the board of the Bermuda-based carrier on March 10.

“As we write this letter, the share price of the company is down approximately 59% over the last year, and the book value of the company has also dropped approximately 30% during this time,” the letter said.

“Therefore, we were shocked by the company's announcement on Friday of discretionary bonuses awarded by the board of directors of the company…and are writing due to the urgent nature of this matter,” it continued.

The board said it had decided to use its discretion "to increase the cash incentive award amounts for the 2024 performance period”.

This bonus totalled approximately $2.12 million, according to the Fortunoffs’ letter.

“While we are hopeful that the company's long and costly restricting will bear fruit, we believe this discretionary bonus rewards company personnel for efforts to rectify problems which they created,” the letter said.

The letter noted that James River in 2024 decreased its annual cash dividend from $0.20 per share to $0.05 per share.

“We find it shocking that the current board would reward management with the equivalent of almost $0.05 per share in performance bonuses instead of offering shareholders an increase in their dividend,” it said.

The letter asked the board to explain to shareholders their decision to use their discretion to offer bonuses to management based on James River’s performance.

It also suggested that if the board insists on providing management with some type of bonus, it should only award bonuses in the form of incentive stock options.

“We expect your prompt response and a clear public commitment from the board to prioritize the preservation of capital. We are prepared to take further steps to ensure the board remains accountable and acts in the best interests of shareholders,” the letter concludes.

Nasdaq-listed James River’s share price closed at $4.01 on Friday, down 0.3% from the previous day’s close.

James River earlier this month reported that its consolidated combined ratio deteriorated to 117.6% in 2024, up from 96.5% in 2023. Gross written premium fell 5.1% to $1.43 billion in 2024 from $1.51 billion the year before.

For the fourth quarter, James River swung to a $40.8 million net operating loss. Its combined ratio deteriorated by 57 percentage points to 155.1% as a result of a previously announced excess and surplus lines adverse development reinsurance contract with Enstar.

The Fortunoffs have previously criticised the performance of U.S. northeast regional insurer Kingstone Companies.

In March 2023, Gregory Fortunoff was added as an observer to Kingstone’s board on an unpaid basis. At that time he was Kingstone’s largest individual shareholder, owning along with his brother and other family members more than 9% of its shares.

In December last year, Gregory Fortunoff relinquished his right to serve as an observer on the Kingstone board, indicating he believed there was no need for its continuation based on the recent performance of the company.

James River had not responded to a request for comment at the time of publication.