Shares of insurance company James River Group Holdings Ltd. fell 22% on Wednesday, setting them on track for its biggest one-day percentage decline since February 2018, after the insurer said it plans to cancel all policies issued to its largest customer, Uber's commercial auto business Raiser LLC.
"This account has not met our expectations of profitability, and we think it is best to end the insurance year-end," CEO J. Adam Abram said in a statement late Tuesday.
Pembroke, Bermuda-based James River, said it expects to increase its third-quarter reserves by $ 55 million to $ 60 million net of reinsurance recoveries, mainly related to its commercial auto line with the Profit and Profit Lines segment for 201
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expects to report a 72% growth in core E&S lines gross written premiums from the previous year. Earnings are expected to report earnings after the market was close on November 6.
B. Riley analyst Randy Binner downgraded the stock to sell from neutral news and cut its stock price target to $ 40 from $ 45.
The Raiser account is about 20% of James River's subsequent 12-month premium and about 35% of the subsequent 12-month premium in the E&S segment, Binner wrote in a note to customers. The insurance company announced about $ 2 a reserve charge related to the Uber risk, which is about 3% of the total reserve.
"Although we do not have the full 3Q19 economy, the expected top-line reduction from the fall of the Uber, reduced-scale margin compression and increased conservatism on reserve adequacy, 2019 estimated EPS moved from $ 2.60 to $ 1.00, and 2020 estimated EPS from $ 2.65 to $ 2.25, ”the analyst wrote.
SunTrust Robinson Humphrey analyst Mark Hughes downgraded the stock to hold off purchases.
"Commercial car has been a very challenging line for the industry as a whole and probably more for Uber, perhaps a feature of its high profile," Hughes wrote. "We recently commented on the growing concern about the phenomenon of" social inflation "that often shows up in higher jury prices, making it challenging for insurance companies to accurately predict future payments."
was down 1% on Wednesday, and has fallen 35% over the past three months amid growing concern for a path to profitability.
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James River has fallen 18%, while the S&P 500
SPX, + 0.91%
has fallen 2.3% and Dow Jones industrial average
DJIA, + 0.70%
has fallen about 2%.
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