UBS lowered its price target on James River Group Holdings Inc. (NASDAQ:) shares to $13 from $15 on Thursday, but maintained a buy recommendation on the stock. The adjustment comes following the insurer’s recent reinsurance deal with State National Insurance Company (SNIC) on July 2, 2024.
The reinsurance transaction will result in a significant change to James River’s financial position, reducing its cash position by $310 million and recording a corresponding reinsurance recoverable.
Additionally, the company expects to report a $52.2 million reduction in pre-tax income in the third quarter of 2024 due to excess consideration paid for reserves transferred as part of the deal. This charge is currently expected to be treated as a non-operating expense and is not included in its 2024 earnings per share (EPS) estimates.
In light of these developments, UBS has updated its EPS forecasts for James River for fiscal years 2024 and 2025. The new forecasts are set at $1.51 and $1.73, down from previous expectations of $1.65 and $2.00, respectively. The revisions reflect the expected impact of a smaller investment portfolio and lower investment income due to reinsurance contracts.
Despite the lowering of its EPS estimate and price target, UBS maintains a positive outlook on James River shares. This stance reflects the company’s board of directors’ ongoing evaluation of strategic options, which could affect the company’s future direction and financial performance.
Other recent news: James River Group Holdings reported net income from continuing operations of $0.53 per share and adjusted net operating income of $0.39 per share, with encouraging results for the first quarter of 2024.
The company reported a combined ratio of 95.3% and adjusted tangible common equity operating return of 17.4%.A key strategic development was the sale of JRG Re with a view to streamlining operations.
Similarly, the company announced the expansion of its board of directors with the appointment of Christine LaSala, an industry veteran with more than 45 years of experience. This appointment increases the board’s size from seven to eight members.
In analyst comments, Compass Point raised its target price on James River Group Holdings to $13.00 from its previous target price of $12.00, but maintained its buy recommendation on the stock.
The adjustment was impacted by two significant adverse developments since 2021 and significant events that occurred within the company, including the sale of its Casualty Re business.
InvestingPro Insights
Following UBS’ revision of its target price for James River Group Holdings, InvestingPro’s latest metrics provide a broader financial perspective on the company. As highlighted in one of InvestingPro’s tips, James River boasts a high free cash flow yield, suggesting it has the ability to generate cash and return value to shareholders. Additionally, the company trades at an attractive trailing 12-month earnings multiple with a trailing 12-month P/E ratio (adjusted) of 4.5 as of Q1 2024, suggesting the stock may be undervalued relative to earnings.
InvestingPro Data also reveals robust earnings growth of 25.78% over the trailing 12 months through Q1 2024, which could be a sign of underlying business strength despite recent financial adjustments. Additionally, the company’s commitment to shareholder returns is evident from its consistent dividend payments over the past decade and current dividend yield of 2.54%.
For investors looking for a more comprehensive analysis, InvestingPro offers additional tips on James River Group Holdings, including insights into its liquidity position and long-term price movement. To explore these in more detail, consider using a coupon code. ProNews 24 Save up to 10% on annual Pro and annual or biennial Pro+ subscriptions, unlocking a total of nine additional InvestingPro tips for deeper analysis of a company’s financial health and future prospects.
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