James River Group Holdings, Inc.JRVR
James River Group Holdings, Inc. Fair Value Disclosure
Fair Value Measurements
Three levels of inputs are used to measure fair value of financial instruments: (1) Level 1: quoted price (unadjusted) in active markets for identical assets, (2) Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument, and (3) Level 3: inputs to the valuation methodology are unobservable for the asset or liability.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date.
The fair values of fixed maturity securities, equity securities, and bank loan participations have been determined using fair value prices provided by the Company's investment accounting services provider or investment managers, who utilize internationally recognized independent pricing services. The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g. broker quotes and prices observed for comparable securities). Values for U.S. Treasury and publicly-traded equity securities are generally based on Level 1 inputs which use the market approach valuation technique. The values for all other fixed maturity securities (including state and municipal securities and obligations of U.S. government corporations and agencies) and bank loan participations generally incorporate significant Level 2 inputs, and in some cases, Level 3 inputs, using the market approach and income approach valuation techniques. There have been no changes in the Company’s use of valuation techniques since December 31, 2022.
The Company reviews fair value prices provided by its outside investment accounting service provider or investment managers for reasonableness by comparing the fair values provided by the managers to those provided by its investment custodian. The Company also reviews and monitors changes in unrealized gains and losses. The Company has not historically adjusted security prices. The Company obtains an understanding of the methods, models and inputs used by the investment managers and independent pricing services, and controls are in place to validate that prices provided represent fair values. The Company’s control process includes, but is not limited to, initial and ongoing evaluation of the methodologies used, a review of specific securities and an assessment for proper classification within the fair value hierarchy, and obtaining and reviewing internal control reports for the investment manager that obtains fair values from independent pricing services.
Assets measured at fair value on a recurring basis as of December 31, 2024 are summarized below:
| Fair Value Measurements Using | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Fixed maturity securities, available-for-sale: | |||||||||||||||||||||||
| State and municipal | $ | — | $ | 196,564 | $ | — | $ | 196,564 | |||||||||||||||
| Residential mortgage-backed | — | 326,227 | — | 326,227 | |||||||||||||||||||
| Corporate | — | 475,485 | — | 475,485 | |||||||||||||||||||
| Commercial mortgage and asset-backed | — | 170,458 | — | 170,458 | |||||||||||||||||||
U.S. Treasury securities and obligations guaranteed by the U.S. government | 20,999 | — | — | 20,999 | |||||||||||||||||||
| Total fixed maturity securities, available-for-sale | $ | 20,999 | $ | 1,168,734 | $ | — | $ | 1,189,733 | |||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Preferred stock | $ | — | $ | 71,245 | $ | — | $ | 71,245 | |||||||||||||||
| Common stock | 12,693 | 2,536 | 5 | 15,234 | |||||||||||||||||||
| Total equity securities | $ | 12,693 | $ | 73,781 | $ | 5 | $ | 86,479 | |||||||||||||||
| Bank loan participations | $ | — | $ | 142,410 | $ | — | $ | 142,410 | |||||||||||||||
| Short-term investments | $ | — | $ | 97,074 | $ | — | $ | 97,074 | |||||||||||||||
Assets measured at fair value on a recurring basis as of December 31, 2023 are summarized below:
| Fair Value Measurements Using | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Fixed maturity securities, available-for-sale: | |||||||||||||||||||||||
| State and municipal | $ | — | $ | 248,837 | $ | — | $ | 248,837 | |||||||||||||||
| Residential mortgage-backed | — | 317,928 | — | 317,928 | |||||||||||||||||||
| Corporate | — | 505,728 | — | 505,728 | |||||||||||||||||||
| Commercial mortgage and asset-backed | — | 222,853 | — | 222,853 | |||||||||||||||||||
U.S. Treasury securities and obligations guaranteed by the U.S. government | 29,130 | — | — | 29,130 | |||||||||||||||||||
| Total fixed maturity securities, available-for-sale | $ | 29,130 | $ | 1,295,346 | $ | — | $ | 1,324,476 | |||||||||||||||
| Equity securities: | |||||||||||||||||||||||
| Preferred stock | $ | — | $ | 69,310 | $ | — | $ | 69,310 | |||||||||||||||
| Common stock | 48,370 | 2,254 | 11 | 50,635 | |||||||||||||||||||
| Total equity securities | $ | 48,370 | $ | 71,564 | $ | 11 | $ | 119,945 | |||||||||||||||
| Bank loan participations | $ | — | $ | 156,169 | $ | — | $ | 156,169 | |||||||||||||||
| Short-term investments | $ | — | $ | 72,137 | $ | — | $ | 72,137 | |||||||||||||||
A reconciliation of the beginning and ending balances of available-for-sale fixed maturity securities, equity securities, and bank loan participations measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is shown below:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Beginning balance | $ | 11 | $ | 7 | $ | 39 | |||||||||||
| Transfers in to Level 3 | — | — | — | ||||||||||||||
| Transfers out of Level 3 | — | — | — | ||||||||||||||
| Purchases | — | — | — | ||||||||||||||
| Sales | — | — | (35) | ||||||||||||||
| Maturities, calls and paydowns | — | — | — | ||||||||||||||
| Amortization of discount | — | — | — | ||||||||||||||
| Total gains or losses (realized/unrealized): | |||||||||||||||||
| Included in earnings | (6) | 4 | 3 | ||||||||||||||
| Included in other comprehensive income | — | — | — | ||||||||||||||
| Ending balance | $ | 5 | $ | 11 | $ | 7 | |||||||||||
The Company held one equity security at December 31, 2024 for which the fair value was determined using significant unobservable inputs (Level 3). The fair value of $5,000 for the equity security was obtained from our asset manager and was derived from an internal model.
The Company held one equity security at December 31, 2023 for which the fair value was determined using significant unobservable inputs (Level 3). The fair value of $11,000 for the equity security was obtained from our asset manager and was derived from an internal model.
The Company held one equity security at December 31, 2022 for which the fair value was determined using significant unobservable inputs (Level 3). The fair value of $7,000 for the equity security was obtained from our asset manager and was derived from an internal model.
Transfers out of Level 3 occur when the Company is able to obtain reliable prices from pricing vendors for which the Company was previously unable to obtain reliable prices. Transfers in to Level 3 occur when the Company is unable to obtain reliable prices for securities from pricing vendors and instead must use broker price quotes.
There were no transfers between Level 1 and Level 2 during 2024, 2023 or 2022. The Company recognizes transfers between levels at the beginning of the reporting period.
In the determination of the fair value for bank loan participations and certain high yield bonds, the Company’s investment manager endeavors to obtain data from multiple external pricing sources. External pricing sources may include brokers, dealers and price data vendors that provide a composite price based on prices from multiple dealers. Such external pricing sources typically provide valuations for normal institutional size trading units of such securities using methods based on market transactions for comparable securities, and various relationships between securities, as generally recognized by institutional dealers. For investments in which the investment manager determines that only one external pricing source is appropriate or if only one external price is available, the relevant investment is generally recorded at fair value based on such price.
Investments for which external sources are not available or are determined by the investment manager not to be representative of fair value are recorded at fair value as determined by the Company, with input from its investment managers and valuation specialists as considered necessary. In determining the fair value of such investments, the Company considers one or more of the following factors: type of security held, convertibility or exchangeability of the security, redeemability of the security (including the timing of redemptions), application of industry accepted valuation models, recent trading activity, liquidity, estimates of liquidation value, purchase cost, and prices received for securities with similar terms of the same issuer or similar issuers. There were no investments for which external sources were unavailable to determine fair value as of December 31, 2024 and 2023.
The carrying values and fair values of financial instruments are summarized below:
| December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Fixed maturity securities, available-for-sale | $ | 1,189,733 | $ | 1,189,733 | $ | 1,324,476 | $ | 1,324,476 | |||||||||||||||
| Equity securities | 86,479 | 86,479 | 119,945 | 119,945 | |||||||||||||||||||
| Bank loan participations | 142,410 | 142,410 | 156,169 | 156,169 | |||||||||||||||||||
| Cash and cash equivalents | 362,345 | 362,345 | 274,298 | 274,298 | |||||||||||||||||||
| Restricted cash equivalents | 28,705 | 28,705 | 72,449 | 72,449 | |||||||||||||||||||
| Short-term investments | 97,074 | 97,074 | 72,137 | 72,137 | |||||||||||||||||||
| Other invested assets – notes receivable | 13,902 | 12,877 | 12,174 | 11,702 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Senior debt | 200,800 | 201,787 | 222,300 | 223,408 | |||||||||||||||||||
| Junior subordinated debt | 104,055 | 121,766 | 104,055 | 138,264 | |||||||||||||||||||
The fair values of fixed maturity securities, equity securities, and bank loan participations have been determined using quoted market prices for securities traded in the public market or prices using bid or closing prices for securities not traded in the public marketplace. The fair values of cash and cash equivalents and short-term investments approximate their carrying values due to their short-term maturity.
The fair values of other invested assets-notes receivable, senior debt, and junior subordinated debt at December 31, 2024 and 2023 were determined by calculating the present value of expected future cash flows under the terms of the note agreements or debt agreements, as applicable, discounted at an estimated market rate of interest at December 31, 2024 and 2023, respectively. The Company also utilized an internally developed valuation model based on the spread of a comparable market index to determine the fair value of certain other invested assets-notes receivable at December 31, 2024 and 2023.
The fair values of senior debt and junior subordinated debt at December 31, 2024 and 2023 were determined using inputs to the valuation methodology that are unobservable (Level 3).
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.