[By David Marino-Nachison]
Shares of a small insurance company got crushed Wednesday morning, erasing most of their year-to-date gains, after the company said it would cancel policies issued to an Uber Technologies subsidiary that is its largest customer.
James River Group (ticker: JRVR) stock, up 24% in 2019 through Tuesday’s close, was off 22.5% to $37.95 near midday Wednesday. The S&P 500 was up 0.9%. The Bermuda-based company said it was terminating all policies issued to Uber Technologies (UBER) subsidiary Rasier as of the end of December, two months early.
“This account has not met our expectations for profitability, and we think it best to terminate the underwriting relationship as of year-end,” James River CEO J. Adam Abram said in a statement.
Uber, shares of which were off 0.7% to $29.08, didn’t immediately respond to arequest for comment. A spokesperson told The Wall Street Journal that James River insures its drivers in Washington, D.C., Puerto Rico, and 20 U.S. states, and it would likely bring on another insurer to replace James River.
Rasier accounted for about $294 million in James River’s gross written premiums in 2018, or a quarter of its total; the segment into which that business falls grew 24% year over year.
James River said that segment increased its noncommercial auto gross written premiums by 72% in the third quarter. Meanwhile, it also announced a “pretax adverse development” of $55 million to $60 million for the third quarter, mainly in connection with the 2016 and 2017 underwriting years of its commercial auto business.
James River didn’t immediately respond to a request for further comment. B. Riley analyst Randy Binner downgraded James River to Sell from Neutral on he news, cutting his price target by $5 to $40, below FactSet’s four-analyst $45 average.
And SunTrust Robinson Humphrey’s Mark Hughes cut his rating to Hold from Buy, lowering his price target by $15 to $40.
“The magnitude of the volatility in losses—and, we would assume, concern about their future trajectory—have contributed to management’s decision to end the relationship,” Hughes wrote. “It is this implied uncertainty, even in the face of seemingly profitable recent results, that is the principal catalyst for our downgrade.”