JRVR - Earnings call transcript Q4 2020 | James River Group Holdings, Ltd.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the James River Group Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. Instructions]. [Operator like conference now speaker to hand Mr. today, to would over the your I of Investor Head Copeland, Kevin Relations. you. Thank go Please ahead.

Kevin Copeland

Thank you, conference River Group Chelsie. the fourth to Good quarter morning, everyone, XXXX earnings call. and welcome James

be actual During the based current materially. results and subject to intentions, beliefs, uncertainties, forward-looking are These and that various statements differ on assumptions making expectations to call, are statements. which will we risks may cause

to uncertainties, release please statements For the see cautionary reports a risks discussion filings undertake of D'Orazio, forward-looking of Officer earnings River the any of Securities statements. Chief with and language Form Group. we update XX-Qs James section in Factors to and yesterday's recent XX-K, Exchange over any and such forward-looking Risk make turn regarding Commission. Frank most not and duty now the our Form I other Executive We do will and call the

Frank D'Orazio

Good call. first to welcome that And for and as Myron. everyone with morning I'm you the here as President time you the on James join Sarah our COO, of today and CEO introduction, River Thank well Doran, CFO, the Bob Group. pleasure my for Kevin. our It's as the

distraction River the James position financial market that processes, respond to ensure any and underwriting to I'd our introductory appetite, to tenure or best-in-class hand to our our necessary quickly we to I first the resources absolutely on cover bandwidth been capability. income us, my for prevent have reserve business we My opportunity the future, our the the To it's has in laser-focused three share remarks like any a the creating primary of and remains emerging the to with carrier keep reprofiled of on a and over fee company's strength at focused front months E&S casualty expanding as strengthening company ultimately prospects of that you. critical our adjustments Before to the with mission. performance Sarah organization to call fronting making reinsurance trends and quarter, the an for few loss focus over

the strengthened $XX.X acted unit. quarter, These previously our assumptions, changed in and emergence position adding our As during reserves casualty million for portfolio, overall and our Group. quarter, to reserve nearly by to immediately to XXXX several charges both million in reserves, full-year our Auto in bolster Commercial ultimately net our instances, we runoff X% drove reinsurance ratio for fourth $XX.X In saw the XXX.X%. announced, we combined our

front combined XX.X% further light the a year was in attractive of to These the runoff business responded of and where in opportunities years prospective very the heightened we've and for ratio to relates Auto XX% quarter, portfolio, year. increase a XXXX us. reserve primarily XXXX to a The credence losses to data on give accident focus Commercial cast Our reported for points the the our quarter. this our

season, to quarter since weeks as two and fourth this trend unemployment driven see delays COVID this commercial rates. losses paid and of the continued and the into runoff started year-ago. The auto third year-end We as quarter. the accelerated believe during the the reflects settlement higher exacerbated trend well by possibly on reported book a account some higher putting down last context, trended had For large company this losses reported in

January after at on and new our runoff portfolio. XXXX very ratio this XX.X% the Admitted our total year, receiving approximately now completed fourth and made of $XXX that the case also portfolio, point. charge, even a E&S for claims ratio million quarter are of increased claims at opened large claims reserves this quarter. almost worth net XX.X%. combined that Of XX% rapidly billion to and the group-wide We've a producing and Specialty the meaningfully in our review block profit our of of approximately reported have supports continued an claims few segment close quarter-end, detailed noting runoff We were unit closed a the reserves fourth $X.X of claims in combined underwriting It's a

company's Our results corporate not consistent with are disappointing and overall clearly profits. focus on underwriting the unwavering

on Our underlie significant enthusiastic for fundamentals XXXX. otherwise our the was our fourth very remain quarter of ongoing positive for I both charge business; year that the understates a what about accomplishment and organization. bullish prospects

prior-year Specialty and our $X.XX growth increase the quarter, XX.X%. XXth in of over Auto impact runoff XX% throughout GWP rate portfolio, both the in straight our by more prior Over benefiting company our the company, by and in on Commercial than expansion E&S our compounded while billion grew over rate the fourth from Excluding segments, those positive of E&S XX and Admitted to renewable aggregated quarter XX.X% quarters, quarter driving book strong change. been fourth margin has core with

optimistic policy XX% carry into perspective, momentum in XXXX. for year, From a hit major our GWP stride XXXX. across and year-end as rose E&S XXXX, the count segment submission on and segment increased the count XX.X% the ability growth core rate its all XX.X% renewal our experienced to in indicators We feel positive rate including portfolio. quarter, Our XXXX, truly over fourth as metrics, growth positive XX% to the about change this particularly XX.X% for

rate point QX more indicators QX to actually was as rate XXXX. early a January continuation and of than significant change the Our environment our full-year both buoyant XXXX

are exposure we XXXX to frequency frequency our market temporary, continues segment measures opportunities also that as growth claims growth mention achieved were basis of exciting plan, embedded further gain to of the should metrics very GWP XXXX these GWP next a XXXX policy ensuring our throughout these unit revert new note programs programs that gain count a the fee core signal of new in and that in dream XXXX. XXXX reduction our their on new also the to in experienced also major scale that I as enjoying that over We combined pleased year. based premium. year. while XX%, course will over year, as underwriters income eight Admitted about. normalcy and seeing earned the for Lake robust should pipeline course have as I'm assumes makes down XX% onboarded They in the announce unit submission on the for reduction and traction XX.X% partner. XXXX, budget preferred on opportunities fee we XX% our an I claims income by which of a or E&S the continue increased adjusted XXXX month in in to these We're XX% this based XX.X% a also increased that see These ratio and more of name remain for in in in seem over program Falls over XXXX, momentum itself as attractive in a million. as activity, to larger space, $XX.X fronting while increased to Specially January

Of the challenges position of specialty their a course, the a for proud River our backdrop of I'm this pandemic, James majority despite happened to all accomplishments premier and very remotely. workforce global against River of as James continue E&S carrier. unprecedented the working efforts vast to resiliency of staff and dedication with the

invest continue create commitment technology, grow renewing in consistently and plans returns. top-tier company, in for profitable people, to effort to us to the more a for our underwriting processes, specialty the our producing Our our call an to continuing culture, profitably larger, XXXX our to carrier, while

on let double-digit XXXX make to return we as the Our produce underwriting call for the in Doran. With as low aim and turn profit is expectation me of a Group, introduction, for over that year. each tangible Sarah an to an to a our as segments, equity

Sarah Doran

Thanks Frank.

Let for $XX for an in tangible a the reserve of quarter of of loss a quarter. million the X.X% equity the $X.X quarter We from return year. year. $XX.X operating for and year, million highlight for given night, few points we the and on charges financial income net me the reported of million the $XX.X the million of the resulting net a Last income loss operating for operating had

dividend tangible share For the value X% per before payments. book we year, of grew

reflects segment Auto the book year in ratios reserve our for income by strong improved investment performance and Re. our in performance for were our runoff XX% E&S, this advantage. for quarter year. the E&S attractive remain growth reporting Market offset and and business charges Commercial extremely Our We accelerating our for and conditions largest we segment took loss core smallest most almost accident Casualty on recent quarter

no manage development in expense of closely our million But Reinsurance sliding Frank to are through we response, segment. Casualty continue reinsurance adjusted loss by much Of adversely. was reserves expected run during a the of that treaties on This loss approximately our the longer We scale million few offset we that quarter, adverse on Auto ratio development than we adverse commission many performed the those factors. experienced contracts Commercial third development, adjustments our write, in and also development strengthening. of and was the our $X.X of treaties higher experienced expenses. emergence our $XX.X a that covered

profitable, adverse dynamic the brought these this While of contracts on remain some development.

with favorable three This claims the we decrease of frequency core prior. the due XX% E&S saw XX.X%. expectations. year four core development loss to reviewed, XXXX, the emanating our in that our And along reduced $XX.X our at most have years current book which cited, the We the business rate from core XX% Frank quarter, he substantially our increases almost pick of we E&S million from business years loss recent also points during with ratio we in and E&S to exceeded hold XXXX as a

below trend expect claims We're reporting. loss XXXX in XX catch-up activity to going we points mentioned, losses reported the believe fewer fewer that from people permanent, frequency fall will as and XXXX frequency fewer COVID and in paid XX a available accidents, counting and years, and we vaccine to But the more a restaurants, to reduction XX% result do on becomes Examples delayed not points be decrease for Our in XXXX, of people core reported or XXXX. of remained continue slip not E&S in low widely and future continues as to for the at would ratios work. in be this increase. Frank from as of

Our modest from a primary Federal year-ago. strengthened our a redundancy adequate, Reserve strong that reserves and indicates with and are study

year, XX% premiums XX% net of For reserves. it last the XX% full-year, of compared the our as also written up made to for billion makes of $X.X E&S company's approximately core approximately net up

Moving on expenses. to

XX.X% compared XX.X% expense There in expense first expect of quarter, decreased to ratio this year's repeat. offsets Our and to a this that not quarter this ratio XX.X% few we would as year, XXXX. to to for full-year the the were

in lowered and First, our ratio XXXX performance-based savings, the for XX%. point. will the that travel scale reduction as do points additional in of expense ratio as be other the year, and We our the lowered two closer then commissions outset COVID-related an about compensation casualty a sliding to reduced expect ratio re by well significant and expense

net income from our energy from portfolio. to similar in Finally, second quarters quantum million, compared last not moving One due We portfolio alone the to exceeded targets. quarter higher of an accelerated quarter same and as repeat this for income quarter income investments, the at regularly that performance fourth on to to investment increase expect the and third in largely be net prior matured $XX.X year, investment recent investment and renewable to XXXX. do this the will

X% gross quarter XXXX. of reduced the was about or quarter fourth basis our from yield about XX points This

hand back with that, I'll So to it Frank.

Frank D'Orazio

the open Sarah. you, kindly Thank you line to would questions? Operator,

Operator

[Operator Instructions].

from comes of of -- the JMP. question first Matt Your line JPM Carletti

Matt Carletti

Uber put the question provide color it. I additional on or you confidence wanted Thanks, minds were color to such have is reacted that can charge very it able appreciate won't what there you kind think also into good color that and I that is, be to I to can a I what reaction your potential the getting that lot dose actual expected increased to you it, process say comments reserve Frank, ask you of around guess, a that on a with of of just your to minds the investors' level give we morning. that one behind it the you if and you was you? any there's than large hopefully, conservatism was that but data and Right, revisited. wasn't worse investors

Frank D'Orazio

Thanks the Matt. question, for

and kind feel now. thought how Let walk our process through you I me we're where try to right about of

claims addressed leadership we number. We audit review time. large loss a the with files. case open boosted senior by claims of clearly a files And a for to at So, we of sampling reserves our call on emergence portion those team a our healthy

the and the position, and the of quarter the from overall we're with study, claims were ultimate indications losses than booked the data indications ended to. from comfortable group today were the off where definitely were the I'm quarter-ago. we took reserve quarter, our in actuaries insights with that for Our audit given the particular, higher a external we materially now reserve better

So your question, reserves up year-over-year QX. in since and open Commercial Auto roughly XXXX. experience quarter reflects closed its these XXX% as the We've XX% bulk runoff of at about I actuarial up closing the open learned in case in are election of to the per beginning XX% And the had the what claim we latest since our feel well of of as we've out claims. new claims,

So taken. I'm we've comfortable with the actions

book format range don't the then want business. the ongoing full of opportunity option future makes tail this Core said, viable, completely the and in fronting for possibility runoff lines emergence open scale market, there's to I or to outcomes, and that on exploring organization. move distraction or in a the if the a to focused higher-end be profitably, to I Now to company E&S grow we're an of being economically an our resource a risk, that our any us because reduce opportunities of continue want drag of sense, in further to that

Matt Carletti

of kind whether Core of The think anniversarying kind Great, the press growth a should of ratio that change the year, the We to at, we of in good start question. be is in question ended-up XXXX sustainable another segment just start? had January being loss the think sense I talked or at should E&S frequency will of maybe gone about And about some as confirm, and question then point, release that, reporting? kind around of the took just starting two-part what guess, that in really I then commentary top-line, Core of, in XX to question, -- quoted in focus to XXXX not are as we that XXXX in place about thank we're E&S. benefit of oranges sorts off on about as the numbers the a you. that for being terms transferable and a the thinking I at you to one thinking And to be rate it's quarter we Uber twofold just some part look a I of kind that of you apples or accident be least that the a those of is,

Frank D'Orazio

Okay.

So there's a lot there, Matt.

last the of your with start me part Let question --

Matt Carletti

with done I'm that.

Frank D'Orazio

Okay.

start how to relative your the XXXX Let year accident try me ratio a which just pick. last the part loss is question, about to think of with to

with reductions along So listen, significant we of had claims I rate mentioned, in in increases as in XXXX, expectations. frequency excess

to for the same a So in forward. XXXX. going we're claims assuming picks taking And frequency conservative not fairly approach reduction we're loss our

how QX, on month and going to backend rate rate, me I asked maybe I you and and that. year. I ago, our tell market, our the QX that's a moderation on question you're some XXXX. of And But for higher, E&S this some would what rate I with you it would in thesis XXXX, to about January you we on report gives of thought tell but a just I was environment for if the year-end of by QX much blend saw think where Look continuation and there. think you, not in So the some that was think hopefully that sense your just the relative color top-line our

in rates seeing Casualty, opportunities saw are business portfolio. like So average than I'm seeing of the some me Excess of are that maybe composite lines, we're overall there Allied that we're the professional -- Excess Property, higher have there that of tells lines Health, where business lines lot in than sorry, higher a the we

overhang be the has growth. optimism. So market, live mix legs market regional the classes, we'll the XXXX. market standard of some Lloyd's some pleased over continue the monitor Decile retrenchment between think out that Review we And witnessing on the have size those years. But dynamics the this would business we're still number But a additional limitations thesis of in of to size across year. certainly, course our the where limitation think to growth recent and where rates reason stamp accident be just and with can play over will We relative continued we we for of the

Operator

Truist. comes question next Your Hughes with of the line Mark from

Mark Hughes

Good you. morning. Thank Yes.

Frank D'Orazio

Good morning.

Mark Hughes

comments, you about the Were back-end XXXX. the losses near reported claims in your you of giving either numbers or talked for decline some

Core business. if think E&S I'm number I clear I'm the me if was that Could -- on you refresh this in enough?

Sarah Doran

Mark. to. Happy Thanks, Sure.

XX% So and E&S ratios there. a Core in were ratios decrease where we in XXXX from loss and at a a XXXX, it's I reported in I we E&S loss Core all XXXX. points and think or of points for XX reported And were pretty were from was below and because that just reflects say to paid just that, where reviewing of decrease paid story in of XX core strong

Mark Hughes

that. Reinsurance for there's where treaties of you at when commonality, business, the wonder, I then, where any might the you you how profitability confidence in you look you is any What emergence? Casualty basis? positioned your particular bring Thank loss sort saw business? if market go-forward lines talk on business that think do do if a And returns in give about competitive which you are the that to to And and advantages? then the future What us Frank,

Frank D'Orazio

Sure.

development to let address your me try So the on questions first.

roughly we of longer development from that no were that the third Re, Casualty on. a saw treaties in comes So

development the XXXX that of saw development was contractors most to The from lines pared our charge most a of we still recent So some We longer the years. on some saw the treaties in for TL the liability. XXXX But write, years. and from our treaties, larger loss But factors no auto been few on. ended-up business were commercial historical and back we changing development on of books XXXX are XXXX. really

or auto, volatile any workers significant eliminations non-standard So elements, of compensation, some exposure. property reductions

unit But came charge of it quarterly from emergence actuarial terms support. the has the that we're chose recommendation gives roughly the to ever treaties more So no some of taken. one-third a we in you we significant that from. the that where seeing sense in largest longer hopefully, take And XX.X, charge the ultimately,

good very of reprofiling the about feel profit just likelihood an on the of underlying feel accident transactional terms of steps I relative the even and book. years, So lift in just rate, and then that based making underwriting I in about at the And underlying took the we there. improvements better terms the made and recent improvements in The the business. conditions, level, and current

Mark Hughes

So that's there. color some

Just --

Frank D'Orazio

I'm go ahead. sorry,

Mark Hughes

outlook cut didn't but I the E&S. in to about been you should Yes, about growth definitely the the Casualty Re trying I was very mean Core to steady? ask to hold off, that you are grow book, we think What optimistic going you

Frank D'Orazio

think ability years do so in round than I to spent expect XX market. market, positioned more access and States, the say efficiencies in strategic historically And I been that maybe has see But on to the I footprint would the modest I growth. the expansion we we've like Bermuda market I opportunities having having distribution us we the out it's would Bermuda us. for got Bermuda growth. listen, standpoint, question. the some focused provided margin good Yes, there like from a

over think I there ways that further And know market well. see we I explore if I'll the results continue So optimize to time. can to

Mark Hughes

the Excess any Core trend before thoughts the that? lines in quite that performing described you the you saw premium asked premium Property sounds were E&S, And ceded you're Casualty then, this Excess I've some and ratio there. should on well, Core? think Sarah, the the that directional it How within growing like I ceded you ratio

Sarah Doran

a Yes, in of E&S in. drives great that for really our premium third this year. that's a what Core asking was question, is Thank Mark. that Casualty about you Excess

most growing its that's Core all brought book down the consistent environment. really E&S that it the fastest, the has was that's of level. So and best kind in to current ratio what of rate And ceded throughout

that specific have certainly one that, on when, to which still but has grow roll-up significant all a would lag. ball So don't I to is that say a crystal line going

pretty E&S So comfortable forward well I as pretty ratio about would quarter Core to we'll as that well. ceded in expand, is with moving think and last that, feel similar this quarter

as We we as as very think to year profitable, well. fair books be something going could, the a levers are look thinking on, manage external certainly we're things, there goes ways that about we'd buy different amount could that been about that of always reinsurance, here. I but forward different capital consider have our to

we're market give taking pure current moving But looking ceded just a for of right assumption, you a modeling of things of So thinking and now. current that kind is of and the a kind ratio. I other for to sense about rate question one we think we're this just dial the where sit advantage enough fair

Operator

from comes with Randy question Riley. line next B. Your the of Binner

Randy Binner

the Commercial out Good I and XX-K I just wanted morning. out think ask around, is to on reserve looking Thanks. was charge, the you could yet. lay Auto don't I

have -- for So is was can a what is development helpful understand be year kind the if losses number but each of developing? accident GAAP accident the years now, that, of to basis in, you of don't XXXX then we where a how kind so on what kind adverse that net the incurred have would

Bob Myron

Hey, Randy.

Frank D'Orazio

Yes, you us? do Bob want to help

Bob Myron

that Yes, Randy, let answer me question.

got full-year data I've me. with here So

reserves we $XX and added $XX million XXXX, million XXXX, year and for calendar the million, of XXXX XXXX $XX During respectively.

want XXXX. and of XXXX. January significant what's I XX% sorry above to remaining mention that that from of are of open of remaining in amount outstanding to accident here a XXXX progress -- the would was what of The that as think, Frank XX% closed and we've had, the closing we claims XX% years relative made we've again peak we've as did, I

I as that a large both the where book, there's lot of that rate We commercial XXXX year renewal You'll got remember change in underwriting the we account material six consistently the number moving rate the wasn't throughout Auto and rate the mix us. that for into pieces especially that continued years increased Commercial of to ensured XXXX got XXXX, also increases states are exposure and significant in portfolio of like which limitations and had type more mix lot states XXXX. change Florida, a that or the XXXX the -- The of performance shifted problematic as also, UMUIM wasn't shrunk, state states and the some the away was mentioned, to as state longer of went the statutes book we the state this reduction in meaningful of in well. the

So of I that I XXX% the that claims increases reiterate above to made continue slowed it's increase think a there. lot. we a new to just reserves year-ago, a relative but XX% a -- it's in get trickle down would in case And we've material

Randy Binner

Okay.

-- was for said $XX -- $XX $XX can million, that just million and it those and added then XXXX, for added you XXXX, I is confirm you for numbers added you right? XXXX million, Just you then

Bob Myron

XX. -- -- million $XX million $XX

Randy Binner

get that does $XX the to XXXX back mean took to you down Well, million?

Bob Myron

significant. No

Sarah Doran

say. just was just Randy, Those citing enough out. to numbers year, were the for quarter to the point Bob, for

Randy Binner

million But Right. summed no those question million? now -- to take stays there's $XXX is, so the offline, change maybe guess $XXX XXXX, this like numbers for should -- material but around I that right we XXXX a those

Bob Myron

that before and mean, we at with talked So And sort think I where it's it at pretty that look Auto still about to down year. expect claims it's now pared far. Commercial performing where where year significantly close of of profitable I a we we've around we so year, look our when this refocus how business, we was. when we to cancelled, -- handling it's we'll we think the can

Randy Binner

the the said Thanks you correct? Bob. other XX%, And and this, all then accident one years, XXXX just for from claims remaining are The of follow-up. XXXX

Bob Myron

XXXX and XXXX.

Randy Binner

and XXXX, XXXX Got okay. you.

Bob Myron

we We was quickly, just closure. have worked. very worked any don't everyone you how don't -- have it's reminding that -- any well, Yes, -- -- this don’t we closure have

for any on accidents that on So was cut-off happened we're basis. after not a done It XX/XX/XX. risk

XXXX. have So we from claims don't any

Operator

KBW. of comes Meyer Your line next the from Shields with question

Meyer Shields

Good morning. Thanks.

Frank D'Orazio

morning. Good

Meyer Shields

for is this Sarah. guess I

You asking the talked happen. general and frequency clearly XXXX trends growth how update of both for in claims you are we about of typically year didn't higher? Excess thinking hoping of would the I imagine diminished in because on I'm accident that was us severity you're severity and Casualty where could

Sarah Doran

second; that cut-off -- a I I apologize. I I full you're got XXXX, about up Meyer, question. XXXX asking didn't for the versus pick

Meyer Shields

onboard -- seeing because asking the is going underlying I accident is with loss frequency to holdup a -- benefits the how XXXX idea severity the want No. frequency rate? these that I'm completely get as just actually to year you're things didn't itself assumptions for is the sense But XXXX happen. to

Bob Myron

Yes.

So Meyer, so this is Bob.

account in individually seen casualty So we've this that's small book, underwritten.

We have look seen severity not really it, has benign. pretty backwards, been when we

things important I it's to of think bifurcate a couple here.

year, in stats in, looked it. the when First in at quoted of terms accident the of really frequency that decline all, XXXX we've here this is related we've the to

really we to claims. emergence overall, received the in business, that right. related of year but book XXXX benign loss the accident of in that back to referencing the year of dollars particular stats So just specifically But this claims the been in Sarah quoted, not some have

our picks that are trend, that, loss hoping get so in bigger of has assumption be think probably I been feel it's just benign. assumption mid-single-digits. forward, it's look and really seeing think think prudent we're what cautious more we're we're I inflation we issue that where we're exposure loss and how social just around But into, and there. loss sort when making I are data think incurred we're of that we're probably account around paid a of to we're that, redundancy assumption continuing our to a it dollars I the really But conservative great about And so because I been areas And build less some that about like making the mid-single-digits. business while and probably we in low-single-digits, don't an think actual that, cautious with trend assurance raising to we larger

clear. hopefully, that So was

Meyer Shields

it's It definitely, also right the call. was exactly

Commissions Ceding Can of hear. to Re? good that's changing the how industry. sort around about are different So messages you Getting in Casualty talk

Frank D'Orazio

are more we don't Why roughly I would I point-ish in at how some we that Commissions, part, as look terms rate significant, in least The portfolio to There in Maybe really say Sure. there. the it, in the significant Ceding in is the improvements improvement improvements some not that? underlying well, the seeing for at call of the start write, the that most there. we're margin we're lift relative seeing terms business. but expansion

Meyer Shields

worried then so in that. And Okay, seen weather up I examples, week? down, finally, growth going guess there haven't with last There not the of Commissions Ceding any exposure Texas good. ago material the Property, couple a it of some instead about weeks are sounds related to are or Excess is you like

Frank D'Orazio

fair Property, obviously question, don't we with constant heavily for last Excess touch modest but expect weeks the sized the event couple closely of organization. So, in fairly reinsured. Obviously, folks, and over we it monitoring portfolio of watching to it's events a be material a our the have claims

Operator

There I'd call Frank are questions. to D'Orazio. no the to further Mr. now over like turn

Frank D'Orazio

on to thank in your look We And quarter. next you forward our reporting operator. call interest to River. for Okay, you James everyone to

Operator

for conference Thank call. participating. and Ladies gentlemen, this you concludes today's

You disconnect. may now

James River (JRVR) 26 Feb 212020 Q4 Earnings call transcript