Why Bermuda-Based Insurance Firm James River's Shares Are Diving Today

James River Group Holdings Ltd JRVR shares are trading lower by around 30% on continued downward momentum after it reported worse-than-expected Q3 FY23 results on Wednesday. 

The company reported EPS of $0.48, beating the consensus of $0.47, and net earned premiums of $202.63 million missed the street view of $226.47 million.

JRVR also identified an error in accounting for reinstatement premium on a specialty casualty reinsurance treaty in its E&S segment. This led to understatements of ceded written premium and overstatements of net written premium and net earned premium of $9.4 million and $12.3 million, respectively, in Q2. 

Apart from this, the company disclosed an agreement with Fleming Intermediate Holdings to sell casualty reinsurance business for $277 million. 

Following this, analysts downgraded the stock and lowered their respective price targets.

Truist Securities downgraded the rating to Hold from Buy and reduced the price target from $32 to $15.

Analyst Mark Hughes is concerned about JRVR being at above-average risk of further adverse reserve development in the core Excess and Surplus Lines (E&S) segment. 

The analyst says casualty reinsurance divestiture is a strong positive for JRVR as the unit had been in run-off and was the source of considerable adverse development in several quarters.

Consequently, Hughes is reducing EPS estimates to $2.00 from $2.11 (vs. cons. $2.10) for FY23 and $1.75 from $2.45 (vs. $2.38 street view) for FY24.

The estimate cut mainly reflects lost investment income following the casualty reinsurance business sale, writes the analyst. 

Also, Keefe, Bruyette & Woods lowered the rating to Market Perform from Outperform and cut the price target to $14 from $22.

Barclays reduced the rating to Underweight from Equal-Weight and lowered the price target to $12 from $15.

Price Action: JRVR shares are trading down by 29.89% at $9.22 on the last check Thursday.