“This isn’t a case of purchaser’s regret” – Fleming on JRG Re lawsuit

Fleming Insurance coverage Holdings has mounted a authorized protection towards the lawsuit introduced by James River Group (JRG) associated to the stalled acquisition of JRG’s reinsurance division, JRG Re.

Paperwork filed by Fleming’s authorized workforce, together with sworn statements from firm executives, counter JRG’s request for a preliminary injunction within the wake of the deal’s failure.

Fleming’s authorized filings define the corporate’s stance, asserting that the dispute shouldn’t be about reconsideration of the acquisition however stems from what Fleming describes as misleading practices by James River after the preliminary settlement.

“This isn’t a case of purchaser’s regret. It’s a bait and change,” the corporate mentioned in its filings. “Fleming was excited to purchase JRG Reinsurance and stays prepared to take action.”

Nevertheless, in response to Fleming, following the signing of the Inventory Buy Settlement in November 2023, James River allegedly engaged in actions that breached the settlement’s stipulations, notably involving reserve practices and liquidity changes that deviated from established norms.

These actions, Fleming contends, not solely contravened particular prohibitions within the settlement but in addition failed to fulfill a number of situations obligatory for the transaction’s closure.

“Not simply drastic”

Fleming argued towards the issuance of a preliminary injunction, suggesting that such authorized cures shouldn’t be used to implement particular efficiency of a merger and acquisition deal, particularly when alleged violations by the vendor stay unresolved.

“A preliminary injunction is… not a device to power particular efficiency of an M&A transaction, notably when the vendor has violated specific situations and shutting situations are unhappy…  The aid Plaintiff seeks isn’t just drastic, it’s unprecedented,” Fleming mentioned.

Moreover, Fleming outlined allegd particular breaches by James River, together with deviations from prior reserving practices and the improper administration of an intercompany receivable, which, in Fleming’s view, absolves it from fulfilling the obligations below the present phrases.

The filings additionally element how James River’s administration of the reinsurer post-agreement purportedly altered the transaction’s monetary dynamics considerably. Within the filings, Fleming accuses James River of concealing adjustments to the reinsurer’s reserving practices and liquidity administration till it was too late for these to be factored into the acquisition negotiations.

Notably, Fleming factors to a shift in James River’s reserves and liquidity practices as materially impacting the agreed buy value and violating each the signed settlement and Bermuda regulation. These allegations had been additionally identified in a category motion introduced up by a regulation agency in December, citing “lack of efficient inner controls over reinsurance.”

Fleming stays “prepared”

In response to James River’s swimsuit, Fleming has sought remediation from the insurance coverage group to appropriate the recognized breaches, suggesting changes to reserves and liquidity to facilitate the transaction’s completion.

“On Saturday, March 2, nonetheless searching for a path to closing, Fleming defined the steps it will contemplate ample to remedy James River’s breaches and allow closing: particularly a correction to the reserves and an infusion of liquidity such that [the reinsurer] had liquid property to pay three months’ value of bills,” Fleming mentioned.

Nevertheless, communication between the businesses has to this point not yielded a decision, with Fleming alleging that James River’s response to remediation requests had been notably terse.

“This week’s submitting outlines in painstaking element the steps James River Group took in its try to ship JRG Reinsurance to Fleming in a situation that dramatically violated the events’ settlement. Whereas Fleming will proceed to defend itself towards this meritless lawsuit, we stay prepared to amass JRG Reinsurance if James River cures its breaches of the settlement,” Fleming CEO Eric Haller mentioned.

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