Specialty insurance company James River Group Holdings has quietly re-emerged as a publicly traded company that has won favor on Wall Street.
The company, which was founded in Chapel Hill in 2002, also continues to have a significant local presence despite its new corporate address in Bermuda. The headquarters of the U.S. holding company is based in Raleigh and employs a staff of seven on Glenwood Avenue; in addition, its Falls Lake insurance business has about 60 employees in offices on Raleigh’s Falls of Neuse Road.
“Our folks are insuring thousands and thousands of small and mid-sized businesses all over the country and have paid well over $1 billion in claims since we started this company,” said CEO Adam Abram. Abram founded James River and has led it as either chairman or CEO ever since.
James River fell below the radar in 2007 when the business, which was publicly traded at the time, was acquired for $575 million. The new owner, giant hedge fund D.E. Shaw, moved the holding company’s headquarters to Bermuda, a country well-known for its insurance companies because it doesn’t tax corporate profits. James River also established a reinsurance business that is based in Bermuda.
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But in December, James River went public once more by selling 11 million shares at $21 per share. All of the shares were sold by Shaw and Goldman Sachs. James River shares closed Thursday at $23.04, down 14 cents. Shares have risen 10 percent since its initial public offering.
“The company had achieved a lot of the things that we had set out to achieve when we started with the Bermuda operations,” said Abram. “This was a way to get liquidity for some of our shareholders and continue to build the company.”
Abram previously founded another insurance holding company, Front Royal, that sold for $167 million. He also was the founder of Piedmont Community Bank Holdings, a bank holding company that through a series of acquisitions created what is now Raleigh-based Yadkin Bank.
The company generated $439 million in revenue in 2014, up 14 percent. Net income totaled $44.7 million, down from $67.3 million in 2013. The 2014 results included $13.2 million in after-tax costs related to the IPO; net operating income in 2014 was essentially flat compared to 2013.
Five of the six analysts who track James River rate its stock a “buy” or its equivalent.
“We believe that James River has a high-quality specialty business … and a strong management team with a superb record of delivering shareholder value,” Meyer Shields, an analyst with Keefe, Bruyette & Woods, wrote in a research note after the company went public.
Going forward, Shields noted, “despite the near-term outlook of intensifying price competition, we believe that James River’s focus on profitability over volume will sustain strong margins.”
The company’s bread-and-butter is liability insurance for small and mid-sized businesses, which Shields pointed out is “less exposed to the most competitive areas of the current market.”
James River’s primary competition is other specialty insurers.
The company offers a broad range of liability insurance, such as product liability for manufacturers and covering restaurants for problems such as slip-and-fall and food poisoning.
“Then we write odd kinds of things,” said Abram, who noted that, in states where medical marijuana is legal, it writes liability policies for marijuana dispensaries.
“We tend to write insurance for businesses that can’t get it, generally, through the standard (insurance) market” because, for example, they are in a particularly risky business or because they are new companies that haven’t yet established a track record, Abram said.
“The core of our company,” Abrams said, “is a relatively large group of very experienced underwriters who are in Richmond and Raleigh and Atlanta and Scottsdale (Ariz.) and in Hamilton, Bermuda, too.”
The upswing in the U.S. economy has helped to boost James River’s performance because growing customers pay larger premiums when they renew their policies.
“When the economy does well and we retain customers, it’s good for the customers and it’s good for us,” Abram said.
In addition, the company’s workers’ compensation insurance business, which contracted in the wake of the recession because it focused largely on residential homebuilders in North Carolina, has rebounded as the company has expanded to other industries and moved into more states.
Abram is upbeat about the company’s future.
“We said during the IPO process that we thought premiums would grow in 2015 over 2014 by the low to mid double-digits,” percentage-wise, he said.