James River Group Holdings Ltd. announced it has entered into a definitive agreement to sell JRG Reinsurance Co. Ltd., its casualty reinsurance business, to Fleming Intermediate Holdings.

The total estimated transaction value is $277 million, inclusive of a $139 million pre-closing dividend and a $138 million cash payment from Fleming at close. Under the terms of the transaction, valued as of Sept. 30, 2023, James River would receive 0.75 times the book value of JRG Re at closing.

The transaction includes the full insurance entity supporting the company’s casualty reinsurance segment, including the remaining assets and liabilities, as well as the staff supporting the business. The segment produced $85.2 million of gross written premiums in 2022.

“Today’s announcement represents a key milestone for James River and is strategically significant for both our company and Fleming,” commented Frank D’Orazio, James River’s CEO.

“The transaction aligns with James River’s strategy to focus our resources on core businesses where we have meaningful scale, including our E&S and fronting businesses. We are excited about the new partnership with Fleming, which we believe will be a great new home for the staff of JRG Re,” he added.

Fleming is a portfolio company of Altamont Capital Partners, a private equity firm with over $4 billion of capital under management and significant experience investing in the insurance sector.

The transaction has been unanimously approved by the board of directors of both companies. Subject to customary closing conditions including receipt of required regulatory approvals, the deal is expected to close during the first quarter of 2024.

On Nov. 13, AM Best commented that the credit rating of JRG Holdings and its subsidiaries remain unchanged at this time, following the announcement that its board of directors will explore strategic business alternatives. As part of this process, the board stated that it will consider a wide range of options including, among other things, a potential sale, merger or other strategic action.

AM Best plans to conclude the analysis of JRG Holdings’ ratings in November and will consider the group’s recent announcement that it has entered into a stock purchase agreement to sell JRG Re, as well as the error in accounting for reinstatement premium in the company’s previously issued results through June 30, 2023. AM Best said company’s second quarter 10Q/A and the third quarter 10Q results are expected to be filed during the week commencing Nov. 13.

Founded in 2007, JRG Re is focused on underwriting property/casualty reinsurance for small-to-medium-size specialty companies, specialty divisions of larger companies and regional carriers with defined competitive advantages and consistent results, the company said on its website, noting that its portfolio is heavily weighted toward short-to-intermediate-tail casualty lines. JRG Re targets working layer excess of loss and proportional treaty reinsurance. Currently, the client base consists of insurance companies writing business in the United States.

Bermuda-based James River Group Holdings owns and operates a group of specialty insurance and reinsurance companies in three specialty property/casualty insurance and reinsurance segments: excess and surplus lines, specialty admitted insurance, and casualty reinsurance.

Citi and Howden Tiger Capital Markets & Advisory acted as financial advisers and Debevoise & Plimpton LLP acted as legal counsel for James River.

Source: James River Group Holdings