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NEW YORK - Shareholders of James River Group Holdings, Ltd. (NASDAQ: JRVR) have expressed concern over the Board of Directors’ decision to award significant cash incentives to the company’s management for the 2024 performance period. According to InvestingPro data, the company’s financial health score stands at a concerning WEAK level, with the stock currently trading at just $4.02, down from its 52-week high of $9.56. This decision comes at a time when the company has witnessed a 59% decline in share price and a 30% drop in book value over the past year.
Gregory and Scott Fortunoff, along with their affiliates, who collectively own nearly 2% of James River’s common stock, addressed a letter to the Board demanding an explanation for the bonuses, which they view as a reward for subpar performance. The Fortunoffs highlighted the company’s decision to reduce its annual cash dividend from $0.20 to $0.05 per share in 2024 to bolster finances amidst deteriorating financial results. InvestingPro analysis reveals the company’s revenue declined by 12.62% in the last twelve months, with negative EBITDA of $46.09 million, supporting shareholders’ concerns about the company’s performance.
The shareholder letter criticizes the Board for using discretionary powers to approve approximately $2,115,000 in cash incentive awards, which they equate to almost $0.05 per share, arguing that bonuses should be reserved for periods of outperformance and excellence. The shareholders suggest that instead of bonuses, the funds could have been used to increase dividends or invest in the company’s growth. With a market capitalization of just $183.49 million and trading at 0.4 times book value, InvestingPro analysis suggests the stock is currently undervalued, though investors should note that 12 additional key insights about JRVR’s valuation and performance are available through InvestingPro’s comprehensive research reports.
The Fortunoffs also pointed out the lack of significant share ownership by the Board, with the exception of Mr. Matthew Botein, and questioned the Board’s incentive to improve company performance. The letter proposes that if bonuses are to be awarded, they should be in the form of incentive stock options, aligning management’s interests with the company’s stock price and book value performance.
In response to the Board’s actions, the shareholders have called for a public commitment to prioritize capital preservation and have indicated their readiness to take further steps to ensure the Board’s accountability to shareholder interests. This statement is based on a press release issued by Gregory Fortunoff.
In other recent news, James River Group Holdings reported a significant earnings miss for the fourth quarter of 2024. The company experienced a net loss of $94.04 million, or $2.28 per diluted share, compared to a net income of $17.43 million in the same quarter of the previous year. Revenue also fell short of expectations, totaling $126.71 million against a projected $140.58 million. The shortfall was largely attributed to a $52.8 million payment related to an adverse development reinsurance contract and a $27 million deemed dividend from an amendment to the Series A Preferred Shares. Additionally, the company increased executive compensation payouts despite not fully meeting performance targets, with CEO Frank N. D’Orazio receiving $745,268, among other executives. Analysts have also revised their outlook for James River Group, with Keefe, Bruyette & Woods cutting the stock’s price target to $5.00 from $6.00, maintaining a Market Perform rating. Similarly, Truist Securities adjusted the price target to $5.00 while maintaining a Hold rating, citing uncertainties around the company’s reserves. These developments reflect ongoing challenges and strategic adjustments as the company navigates a complex financial landscape.
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