Fleming completes $277m purchase of JRG Re

Bermuda-based Fleming Intermediate Holdings has completed its acquisition of JRG Reinsurance company from James River Group.

The sale, which had ended up in court when Fleming tried to alter the terms of the $277 million purchase, was completed at the previously agreed terms, James River said.

Fleming was ordered to complete its pending acquisition of Bermuda-based JRG Re, with a US court ruling that there were no valid grounds to delay the closing.

Frank D’Orazio, the company’s chief executive officer, said: “We are pleased to have successfully completed our sale of JRG Re to Fleming in accordance with the stock purchase agreement that the parties negotiated together and executed on November 8, 2023.”

James River agreed to sell the Bermuda-based casualty reinsurer after losing $152.8 million for the most recent quarter, and in January it dissolved its Bermuda-based subsidiary, Carolina Re.

In December 2023, AM Best lowered the financial strength rating (FSR) of JRG Reinsurance Company from A- to B++ and placed its credit ratings under review with negative ratings. Last year, the company said it had misstated some details of its earnings.

In his announcement, D’Orazio said: “James River will continue to focus its resources on its core US insurance businesses where we have meaningful scale, including our E&S and fronting businesses.”

The dispute between James River and Fleming went to litigation in the New York County Supreme Court last month. The court ruled that Fleming had no valid grounds to delay the closing, stating that “there is no breach” to justify its claim against James River.

The court ordered Fleming to complete its acquisition of third-party casualty reinsurer JRG Re by April 16, 2024.

The Stock Purchase Agreement (SPA) between the two companies was executed on November 8, 2023, under which Fleming was to acquire JRG Re for $277 million, consisting of a $139 million pre-closing dividend and a $138 million cash payment.

However, Fleming failed to appear at the closing and instead sent a letter on March 2, 2024 demanding a $78 million concession as a condition to close, according to the court document. Fleming argued that JRG Re’s reserves were below historical levels, requiring JRGH to inject additional funds for liquidity to cover three months of claim payments and operating expenses.

Judge Andrea Masley stated that the breaches alleged by Fleming were “contrived and contrary” to the clear terms of the SPA.

“There is no breach for Fleming to rely on to delay the closing,” she ruled. “Based on the SPA, the court finds that the breaches Fleming asserts against JRGH are not breaches at all. Rather, in the absence of a breach by JRGH, Fleming is in breach.”

Consequently, Masley granted James River’s motion for a mandatory injunction directing Fleming to close the deal immediately at the contract price specified in the SPA, without any concession in price.

“JRGH has more than satisfied the traditional elements and established the additional requirements for a mandatory injunction: a clear right under the traditional criteria and extraordinary circumstances,” she said.

In her ruling, Masley noted that Fleming had the opportunity to negotiate a certain level of reserves but failed to do so.

“Fleming could have, but did not, negotiate a certain level of reserves. Fleming cannot use this court to rewrite the SPA,” she said.

There was no comment from Fleming, which is led by chief executive officer Eric Haller and is a portfolio company of Altamont Capital Partners.

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