SEC Company Response from James River Group, INC (CIK 0001325177) — Jun 17, 2005
James River Group, INC (CIK 0001325177)
Date: June 17, 2005 · CIK: 0001325177 · Accession: 0000950136-05-003566
AI Filing Summary & Sentiment
File numbers found in text: 333-124605
Referenced dates: June 3, 2005
Letter
Heather R. Badami Direct: (202) 508-6082 hrbadami@bryancave.com June 17, 2005 Mr. Jeffery P. Riedler Assistant Director Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549
RE: JAMES RIVER GROUP, INC. FORM S-1 REGISTRATION STATEMENT FILE NO. 333-124605
Dear Mr. Riedler:
This letter sets forth the responses of James River Group, Inc. (the "Company") to the comments of the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Staff") dated June 3, 2005, with respect to the above-referenced Registration Statement on Form S-1 (the "Form S-1"). We have duplicated below the comments set forth in the comment letter and have provided responses to each comment following the Staff's related comment. In response to these comments, we have filed today with the SEC Amendment No. 1 to the Registration Statement on Form S-1 (the "Amended S-1").
Unless otherwise set forth herein, references to page numbers in response to the Staff's comments refer to page numbers of the prospectus included in the Amended S-1.
Comments Applicable to the Entire Document
1. We note that your filing contains numerous omissions throughout the prospectus which relate to the offering price range or the number of shares you will sell. These omissions include but are not limited to:
o Summary Financial Data o The Option Grants Table o Use Of Proceeds o Shares Eligible For Future Sale o Capitalization o The Principal Stockholders Table o Dilution o Description of Capital Stock
Rule 430A requires you to include this information in your filing based upon an estimate of the offering price within a bona fide range you disclose on the cover page and based upon an estimate of the number of shares you will sell. We consider a bona fide range to be $2 if
Mr. Jeffery P. Riedler June 17, 2005 Page 2
the price is under $20 and 10% if it is above $20. You should include the required information in an amendment prior to circulating a "red herring" prospectus.
The Company notes the Staff's comment and will complete the above-referenced sections in a pre-effective amendment to the Form S-1. Prior to circulating a "red herring" prospectus, the Company will include a price range in a pre-effective amendment to the Form S-1 that will comply with the Staff's interpretation of a bona fide range.
2. Provide us with copies of all the graphic, photographic or artistic materials you intend to include in the prospectus prior to its printing and use. Please note that we may have comments. Please also note that all textual information in the graphic material should be brief and comply with the plain English guidelines regarding jargon and technical language.
The Company does not intend to include graphic, photographic or artistic materials in the prospectus.
Prospectus Summary - page 1
3. In the first paragraph under "Who We Are," please explain what you mean when you say that you "capitalize" specialty property/casualty insurance companies.
The Company has revised the first paragraph under "Who We Are" by changing "capitalizes" to "owns" on pages 1, 27 and 59 in response to this comment. The Company believes the word "owns" accurately describes the Company's activity.
4. In the second paragraph under "Who We Are," please explain what a combined ratio of less than 100% means.
The Company has revised the disclosure on pages 1 and 59 in response to this comment.
5. In the first paragraph under "Our Products," please explain what "excess and surplus lines" insurance is.
The Company has revised the disclosure on pages 1 and 59 in response to this comment.
6. Please briefly describe the potential drawbacks of the approach you are following in developing your products.
The Company has revised the disclosure on pages 1, 2 and 59 in response to this comment.
7. Please expand the discussion of A.M. Best ratings in the first full paragraph on page 2 to disclose how many rating levels there are and where yours ranks in that list.
The Company has revised the disclosure on page 2 and 59 in response to this comment.
Mr. Jeffery P. Riedler June 17, 2005 Page 3
Selected Operating History, page 5
1. The use of the measure "Underwriting profit (loss)" is a non-GAAP measure, please provide the disclosures required by Item 10(e)(1)(i)(C) of Regulation S-K. We believe the disclosure could be improved by including a statement disclosing the reasons why management believes that the presentation of this measure provides useful information to investors regarding the company's financial condition and results of its operations. Further, we note that you use this measure as a performance measure that appears to eliminate recurring charges and expenditures, which is inconsistent with the existing guidance regarding non-GAAP measures. Please refer to "Frequently Asked Questions Regarding the Use of Non-GAAP Financial Measures" on our website at www.sec.gov/divisions/corpfin/fags/nongaapfaq.htm issued on June 13, 2003, specifically question 8.
The Company has revised the disclosure on page 5 in response to this comment.
There are no recurring charges eliminated from the calculation of underwriting profit (loss) of insurance segments. Underwriting profit (loss) of insurance segments is defined as net earned premiums minus losses and loss adjustment expenses and other operating expenses of the Company's insurance segments. Other operating expenses of the Company's insurance segments prior to the dates that they commenced underwriting activities are excluded from the definition of underwriting profit (loss) of insurance segments as non-recurring because there will not be another period of time during which operating expenses are incurred by these segments in order to prepare for the initial commencement of underwriting activities. Company management believes that there will be no financial impact of these other operating expenses subsequent to the dates these insurance segments initially commenced underwriting activities.
The Offering - page 6
8. Please refer to the four bullets under "Assumptions in this Prospectus." When you file your first amendment to the registration statement, please present the information in the document so that it reflects the automatic conversion of the outstanding securities and the stock split referenced in the second and third bullets. Investors need to see how the company will actually look at the time they make their investment.
In response to this comment, the Company has revised the disclosures throughout the Amended S-1 to reflect the automatic conversion of the outstanding Series A and Series B shares and a ten-for-one stock split to be effected prior to the completion of the offering. The share information in the Company's audited consolidated financial statements and unaudited consolidated financial statements and related notes included in the Amended S-1 has not been restated to reflect the stock split, as that event will occur after effectiveness of the Form S-1 and prior to completion of the offering.
Mr. Jeffery P. Riedler June 17, 2005 Page 4
Risk Factors - page 9
9. Throughout this section you repeatedly state in the subheadings and bodies of the risk factors that various things "could have a material adverse effect on our financial condition or our results of operations," "may adversely affect our performance," and "could have a material adverse effect onus." In many instances, you do not explain what the adverse effects might be. For example:
o Please revise "The failure of any of the loss limitations or exclusions we employ...could have a material adverse effect on our financial condition or results of operations" on page 9 to explain that nullifying or voiding an exclusion or legislations that modifies the use of a limitation could result in higher than expected payouts.
Please revise your risk factors to ensure that the specific adverse effects you refer to are clear.
The Company has revised risk factors on pages 9, 10, 11, 12, 14, 16 and 17 in response to this comment.
Changes in our operating environment may adversely affect our performance. - page 9
10. The information included in this risk factor is too vague and generic to be meaningful to an investor. The information also applies to every insurance company. Please revise the risk factor to address your specific situation and your specific lines of business.
The Company has determined that this risk factor does not present risks specific to its situation or lines of business and, accordingly, has deleted this risk factor from page 9 in response to this comment.
The failure of any of the loss limitations or exclusions we employ, or changes in other claim or coverage issues, could have a material adverse effect on our financial condition or our results of operations. -- page 9
11. Please clarify the potential adverse consequence arising from the fact that your policies contain provisions restricting the period during which a policyholder may bring a breach of contract or other claim against your company which are shorter than the statutes of limitations contained in state laws.
The Company has revised the risk factor on page 9 in response to this comment.
We distribute our products through a select group of brokers and agents, three of which account for a significant part of our business, and there can be no assurance that such relationships will continue." Page 9
Mr. Jeffery P. Riedler June 17, 2005 Page 6
12. We note your statement that there can be no assurance that your relationships with the select group of brokers and agents will continue. Please revise to explain why you cannot provide such assurance. For example, if you do not have any agreements with these broker or agents or if your agreement with these parties are relatively short term agreements, please revise to explain.
The Company has revised the risk factor on page 9 in response to this comment.
13. Identify the brokers and agent that you have referenced.
The Company has revised the risk factor on page 9 in response to this comment.
Since we have a limited operating history, it is difficult to predict our future performance. -- page 11
14. Please revise to describe the risks and difficulties frequently encountered by early stage companies.
The Company has revised the risk factor on page 11 in response to this comment.
Our directors, executive officers and principal stockholders will own a large percentage of our common stock after this offering, which will allow them to control substantially all matters requiring stockholder approval.
15. Please revise to specifically state that these shareholders may be able to control the election of directors.
The Company has revised the risk factor on page 18 in response to this comment.
Sources of Certain Statistical and Other Information -- page 20
16. Please revise to delete the last paragraph. It is not appropriate to disclaim responsibility for information you have included in your registration statement.
The Company has deleted the last sentence of the final paragraph on page 21 in response to this comment.
Use of Proceeds -- page 21
17. Please revise to clarify that the capital contributed to your subsidiaries will enable them to discontinue or operate without the reinsurance agreement.
The Company has revised the disclosure on pages 22 and 57 to update the Company's anticipated contributions of offering proceeds to the capital of its insurance subsidiaries. In addition, the Company has revised the disclosure on page 58 to reflect its current expectation with respect to renewal of the quota share reinsurance agreement.
Mr. Jeffery P. Riedler June 17, 2005 Page 6
Dilution -- page 23
18. Please revise this discussion and the supporting table to begin with actual net tangible book value instead of "pro forma net tangible book value."
The Company has revised the discussion on page 24 in response to this comment. The Company believes that, because it only had one common share outstanding at December 31, 2004 and the Company's outstanding Series A and Series B shares will automatically convert into common stock immediately prior to effectiveness of the offering, actual tangible book value per share of $76,511,000.00 would not be meaningful to investors.
Selected Historical Consolidated Financial and Other Data -- page 24
19. Please limit your presentation of "Pro forma diluted" EPS to only the most recent annual period reported.
The Company has revised the disclosure on pages 8 and 26 in response to this comment to omit presentation of pro forma diluted EPS. The Company has added a presentation of "diluted-as adjusted" EPS on those pages to give effect to the stock split for the most recent annual and two interim periods reported, which also reflects the conversion of the preferred stock, including shares representing accrued but unpaid dividends through the respective balance sheet date presented.
Management's Discussion and Analysis -- page 26
Critical Accounting Policies
Reserve for Losses and Loss Adjustment Expenses -- page 27
20. We believe your disclosure in Management's Discussion and Analysis regarding the reserve for loss and loss adjustment expenses could be improved to better explain the judgments and uncertainties surrounding this estimate and the potential impact on your financial statements. We believe that disclosures explaining the likelihood that materially different amounts would be reported under different conditions or using different assumptions is consistent with the objective of Management's Discussion and Analysis. Accordingly, please revise MD&A to include the following information for each of your lines of business.
The Company has revised the disclosure on pages 29 to 35 in response to this comment.
o Please disclose, by major line of business, the reserves accrued as of t
Show Raw Text
CORRESP
1
filename1.htm
Heather R. Badami
Direct: (202) 508-6082
hrbadami@bryancave.com
June 17, 2005
Mr. Jeffery P. Riedler
Assistant Director
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
RE: JAMES RIVER GROUP, INC.
FORM S-1 REGISTRATION STATEMENT
FILE NO. 333-124605
Dear Mr. Riedler:
This letter sets forth the responses of James River Group, Inc. (the "Company")
to the comments of the Staff of the Division of Corporation Finance of the
Securities and Exchange Commission (the "Staff") dated June 3, 2005, with
respect to the above-referenced Registration Statement on Form S-1 (the "Form
S-1"). We have duplicated below the comments set forth in the comment letter and
have provided responses to each comment following the Staff's related comment.
In response to these comments, we have filed today with the SEC Amendment No. 1
to the Registration Statement on Form S-1 (the "Amended S-1").
Unless otherwise set forth herein, references to page numbers in response to the
Staff's comments refer to page numbers of the prospectus included in the Amended
S-1.
Comments Applicable to the Entire Document
1. We note that your filing contains numerous omissions throughout the
prospectus which relate to the offering price range or the number of
shares you will sell. These omissions include but are not limited to:
o Summary Financial Data o The Option Grants Table
o Use Of Proceeds o Shares Eligible For Future Sale
o Capitalization o The Principal Stockholders Table
o Dilution o Description of Capital Stock
Rule 430A requires you to include this information in your filing based
upon an estimate of the offering price within a bona fide range you
disclose on the cover page and based upon an estimate of the number of
shares you will sell. We consider a bona fide range to be $2 if
Mr. Jeffery P. Riedler
June 17, 2005
Page 2
the price is under $20 and 10% if it is above $20. You should include
the required information in an amendment prior to circulating a "red
herring" prospectus.
The Company notes the Staff's comment and will complete the
above-referenced sections in a pre-effective amendment to the Form S-1.
Prior to circulating a "red herring" prospectus, the Company will
include a price range in a pre-effective amendment to the Form S-1 that
will comply with the Staff's interpretation of a bona fide range.
2. Provide us with copies of all the graphic, photographic or artistic
materials you intend to include in the prospectus prior to its printing
and use. Please note that we may have comments. Please also note that
all textual information in the graphic material should be brief and
comply with the plain English guidelines regarding jargon and technical
language.
The Company does not intend to include graphic, photographic or
artistic materials in the prospectus.
Prospectus Summary - page 1
3. In the first paragraph under "Who We Are," please explain what you mean
when you say that you "capitalize" specialty property/casualty
insurance companies.
The Company has revised the first paragraph under "Who We Are" by
changing "capitalizes" to "owns" on pages 1, 27 and 59 in response to
this comment. The Company believes the word "owns" accurately describes
the Company's activity.
4. In the second paragraph under "Who We Are," please explain what a
combined ratio of less than 100% means.
The Company has revised the disclosure on pages 1 and 59 in response to
this comment.
5. In the first paragraph under "Our Products," please explain what
"excess and surplus lines" insurance is.
The Company has revised the disclosure on pages 1 and 59 in response to
this comment.
6. Please briefly describe the potential drawbacks of the approach you are
following in developing your products.
The Company has revised the disclosure on pages 1, 2 and 59 in response
to this comment.
7. Please expand the discussion of A.M. Best ratings in the first full
paragraph on page 2 to disclose how many rating levels there are and
where yours ranks in that list.
The Company has revised the disclosure on page 2 and 59 in response to
this comment.
Mr. Jeffery P. Riedler
June 17, 2005
Page 3
Selected Operating History, page 5
1. The use of the measure "Underwriting profit (loss)" is a non-GAAP
measure, please provide the disclosures required by Item
10(e)(1)(i)(C) of Regulation S-K. We believe the disclosure could
be improved by including a statement disclosing the reasons why
management believes that the presentation of this measure provides
useful information to investors regarding the company's financial
condition and results of its operations. Further, we note that you
use this measure as a performance measure that appears to
eliminate recurring charges and expenditures, which is
inconsistent with the existing guidance regarding non-GAAP
measures. Please refer to "Frequently Asked Questions Regarding
the Use of Non-GAAP Financial Measures" on our website at
www.sec.gov/divisions/corpfin/fags/nongaapfaq.htm issued on June
13, 2003, specifically question 8.
The Company has revised the disclosure on page 5 in response to this
comment.
There are no recurring charges eliminated from the calculation of
underwriting profit (loss) of insurance segments. Underwriting profit
(loss) of insurance segments is defined as net earned premiums minus
losses and loss adjustment expenses and other operating expenses of the
Company's insurance segments. Other operating expenses of the Company's
insurance segments prior to the dates that they commenced underwriting
activities are excluded from the definition of underwriting profit
(loss) of insurance segments as non-recurring because there will not be
another period of time during which operating expenses are incurred by
these segments in order to prepare for the initial commencement of
underwriting activities. Company management believes that there will be
no financial impact of these other operating expenses subsequent to the
dates these insurance segments initially commenced underwriting
activities.
The Offering - page 6
8. Please refer to the four bullets under "Assumptions in this
Prospectus." When you file your first amendment to the registration
statement, please present the information in the document so that it
reflects the automatic conversion of the outstanding securities and the
stock split referenced in the second and third bullets. Investors need
to see how the company will actually look at the time they make their
investment.
In response to this comment, the Company has revised the disclosures
throughout the Amended S-1 to reflect the automatic conversion of the
outstanding Series A and Series B shares and a ten-for-one stock split
to be effected prior to the completion of the offering. The share
information in the Company's audited consolidated financial statements
and unaudited consolidated financial statements and related notes
included in the Amended S-1 has not been restated to reflect the stock
split, as that event will occur after effectiveness of the Form S-1 and
prior to completion of the offering.
Mr. Jeffery P. Riedler
June 17, 2005
Page 4
Risk Factors - page 9
9. Throughout this section you repeatedly state in the subheadings and
bodies of the risk factors that various things "could have a material
adverse effect on our financial condition or our results of
operations," "may adversely affect our performance," and "could have a
material adverse effect onus." In many instances, you do not explain
what the adverse effects might be. For example:
o Please revise "The failure of any of the loss limitations or
exclusions we employ...could have a material adverse effect on
our financial condition or results of operations" on page 9 to
explain that nullifying or voiding an exclusion or
legislations that modifies the use of a limitation could
result in higher than expected payouts.
Please revise your risk factors to ensure that the specific adverse
effects you refer to are clear.
The Company has revised risk factors on pages 9, 10, 11, 12, 14, 16 and
17 in response to this comment.
Changes in our operating environment may adversely affect our performance. -
page 9
10. The information included in this risk factor is too vague and generic
to be meaningful to an investor. The information also applies to every
insurance company. Please revise the risk factor to address your
specific situation and your specific lines of business.
The Company has determined that this risk factor does not present risks
specific to its situation or lines of business and, accordingly, has
deleted this risk factor from page 9 in response to this comment.
The failure of any of the loss limitations or exclusions we employ, or changes
in other claim or coverage issues, could have a material adverse effect on our
financial condition or our results of operations. -- page 9
11. Please clarify the potential adverse consequence arising from the fact
that your policies contain provisions restricting the period during
which a policyholder may bring a breach of contract or other claim
against your company which are shorter than the statutes of limitations
contained in state laws.
The Company has revised the risk factor on page 9 in response to this
comment.
We distribute our products through a select group of brokers and agents, three
of which account for a significant part of our business, and there can be no
assurance that such relationships will continue." Page 9
Mr. Jeffery P. Riedler
June 17, 2005
Page 6
12. We note your statement that there can be no assurance that your
relationships with the select group of brokers and agents will
continue. Please revise to explain why you cannot provide such
assurance. For example, if you do not have any agreements with these
broker or agents or if your agreement with these parties are relatively
short term agreements, please revise to explain.
The Company has revised the risk factor on page 9 in response to this
comment.
13. Identify the brokers and agent that you have referenced.
The Company has revised the risk factor on page 9 in response to this
comment.
Since we have a limited operating history, it is difficult to predict our future
performance. -- page 11
14. Please revise to describe the risks and difficulties frequently
encountered by early stage companies.
The Company has revised the risk factor on page 11 in response to this
comment.
Our directors, executive officers and principal stockholders will own a large
percentage of our common stock after this offering, which will allow them to
control substantially all matters requiring stockholder approval.
15. Please revise to specifically state that these shareholders may be able
to control the election of directors.
The Company has revised the risk factor on page 18 in response to this
comment.
Sources of Certain Statistical and Other Information -- page 20
16. Please revise to delete the last paragraph. It is not appropriate to
disclaim responsibility for information you have included in your
registration statement.
The Company has deleted the last sentence of the final paragraph on
page 21 in response to this comment.
Use of Proceeds -- page 21
17. Please revise to clarify that the capital contributed to your
subsidiaries will enable them to discontinue or operate without the
reinsurance agreement.
The Company has revised the disclosure on pages 22 and 57 to update the
Company's anticipated contributions of offering proceeds to the capital
of its insurance subsidiaries. In addition, the Company has revised the
disclosure on page 58 to reflect its current expectation with respect
to renewal of the quota share reinsurance agreement.
Mr. Jeffery P. Riedler
June 17, 2005
Page 6
Dilution -- page 23
18. Please revise this discussion and the supporting table to begin with
actual net tangible book value instead of "pro forma net tangible book
value."
The Company has revised the discussion on page 24 in response to this
comment. The Company believes that, because it only had one common
share outstanding at December 31, 2004 and the Company's outstanding
Series A and Series B shares will automatically convert into common
stock immediately prior to effectiveness of the offering, actual
tangible book value per share of $76,511,000.00 would not be meaningful
to investors.
Selected Historical Consolidated Financial and Other Data -- page 24
19. Please limit your presentation of "Pro forma diluted" EPS to only the
most recent annual period reported.
The Company has revised the disclosure on pages 8 and 26 in response to
this comment to omit presentation of pro forma diluted EPS. The Company
has added a presentation of "diluted-as adjusted" EPS on those pages to
give effect to the stock split for the most recent annual and two
interim periods reported, which also reflects the conversion of the
preferred stock, including shares representing accrued but unpaid
dividends through the respective balance sheet date presented.
Management's Discussion and Analysis -- page 26
Critical Accounting Policies
Reserve for Losses and Loss Adjustment Expenses -- page 27
20. We believe your disclosure in Management's Discussion and Analysis
regarding the reserve for loss and loss adjustment expenses could be
improved to better explain the judgments and uncertainties surrounding
this estimate and the potential impact on your financial statements. We
believe that disclosures explaining the likelihood that materially
different amounts would be reported under different conditions or using
different assumptions is consistent with the objective of Management's
Discussion and Analysis. Accordingly, please revise MD&A to include the
following information for each of your lines of business.
The Company has revised the disclosure on pages 29 to 35 in response to
this comment.
o Please disclose, by major line of business, the reserves
accrued as of t