Earnings call transcript Q3 2022

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Operator

Thank you for holding, and welcome everyone, to the James River Group Third Quarter 2022 Earnings Call. [Operator Instructions].

It is now my pleasure to turn the call over to Brett Shirreffs, Head of Investor Relations. Mr. Shirreffs, please go ahead.

Brett Shirreffs

welcome Conference James Call. and Quarter Group everyone, Earnings XXXX morning, to River the Third Good

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

XX-K, For cautionary and statements Form forward-looking earnings not release XX-Qs language the update most statements. to of factors Form in with risks our any and duty Exchange uncertainties, and reports we've such discussion Commission. other regarding a please We the of risk and do see and made any forward-looking Securities yesterday's undertake recent filings the

adjusted on during net we In this these net for common to tangible may income presentation, GAAP. non-GAAP of reconciliation and release Please numbers earnings operating press reference to our adjusted refer such a to return addition, make operating equity. as financial measures

earnings the that Lastly, all is unless business accounting for to ratios specified not our underwriting for otherwise in subject reasons transfers. retroactive press to for portfolio performance reinsurance release, referred are loss our described

I the will to Group. over D'Orazio, Executive now Officer River James call Chief of Frank turn

Frank D’Orazio

continues of of Brett. focus losses on the net on as introduction, today XX.X% underwriting the the profitability be return the our that basis. drive on and adjusted tangible for months disciplined growing combined a everyone additional a results margins and XX% quarter investment morning, to for and and The year-to-date color operating management on our common first income excluding provide strong to X you Thank with all ratio in of to catastrophe third an quarter as third quarter equity call. underwriting as of results of welcome resulted XX.X% group impact to pleased well year. combination XX.X% through you I'm Good back of on the risk our and

broadly attractive in much last is results. in segment increases market in we rate our and line industry X.X%, enviable during renewal the rate E&S we've period ultimate our On Overall, XX.X% renewal returns than compelling marked rates XX.X%. over quarter through basis, significant to for quarter ratio volatile up rate the E&S the repeated a of this generating before, remain shareholders for markets, at with very increases our expense our a In very results. focus activity stand investment posted quarters, XX%. And shine conditions we believe change I've have As with consistent same greater catastrophe last by year. and to recorded year-to-date our XX positive compounded continues

ahead changes well low and quarter-to-quarter headline the would inflation double protection. from providing vast in continued the majority noted casualty, of E&S be I rate based of underwriting rate rated, increases us & factors, figures rate that but plan of change loss other our trends our and or of continue note our the As view of to will on me, headline portfolio. past, and mix cost vary excuse the and high that the to quarter formulas general most units, in achieve excess digits revenue are majority Sports property, including excess Allied Environmental meaningful Health, Entertainment single premium casualty, during third our our across

highly for line certainly margins, focused. future rate well disciplined While positive bode bottom trend underwriting versus dynamics and loss and remains our remain culture

our risks trucking and directives quarter, general states areas new casualty transportation in we second increased the discrete underwriting portfolio, excess auto primarily strategies unit. aimed our and at introduced of and end certain and in large our the in commercial underwriting During of pricing in casualty portfolios

continued very meet premium conversion has those strong from dollar accounts not thresholds. particularly remained we our several in nonrenewed gross prior on to these quarter result E&S We've the of our that as submissions and actions, submission a portfolio our strong. did renewal declined X.X% As ratio new experience activity, large year profitability our

increased by actions despite rate standpoint, our in in our replacing increase quarter. compounded portfolio net decision standpoint, to third XX.X% have River underwriting a XXX% for count that slight still quarter items, Also the historically by of XX notable few insurers premiums, segment policy profitable insureds partially casualty premium larger the aimed our written I've in a is points percentage good Despite the profitability our the smaller the referenced, by generally last ex and our From very the primarily a at over renewal X.X% where accounts, from lifeblood net increases increased business, I segment retention James E&S line driven River trade. larger believe a during with premium gross our reduction on excess E&S years. midyear an management

third the the during in Notably, ratio E&S catastrophes, combined or was both the results. quarter XX.X% impressive excluding and consistent segment XX.X%,

our of Net were segment. to retention segments for certain $X property excess the on the primarily during our a we were industry property million have E&S again will our event and as portfolio. losses exposure to our under from the the catastrophe managing Ian small treaty volatility lasting Hurricane related a related have While that significant catastrophe limited portion of quarter carefully benefited catastrophe remains property market, was division the and third of effects

third losses from in contained expect quarter. the event As the to be we such,

value during executed commercial loss focus adverse highlighting trends, enterprise this shown the our our shareholders on claims management. actions Also benefited for risk has drove recent transfer Recent auto from which and data loss loss last transaction in an September. paid expectations, portfolio we quarter, the that strategic of legacy increase portfolio gross the

expect gross coverage as And LPT have a the the we provides not the increase unlimited reminder, do to result, economic subject from a reserves. portfolio. impact any for As in

In reserve releases was create more favorable, remainder Specialty were the from Casualty Sarah While portfolio. that overall line in the transferred the driven development administration while accounting our explain some future on Admitted by the and this E&S existence business, LPT our does bottom segment, intermediate is and modestly generally of LPT will Re the flat. detail, of volatility that covers development

to in Specialty Admitted. Turning results

X.X% a reported growth gross in of combined we quarter, third the and premium ratio XX.X%. For

feel with to to continue prior or last portfolio premium and compared down competitive year of risk workers' X% few the acquired growth in of the business large and $X.X XX.X%, year. a quarters. over quarter. is the quarter last compared The up program was Fee trends program approximately million compensation a income year, the the the X.X% in partner California program that We late line combined prior X.X% as excluding for of which was of reported fronting to were our individual compensation workers' market premium our remainder effects

sure and accident increased accident We portfolio year year-to-date quarter for pick activity. representative The developing is compensation also react both our make trends year loss recent we to in of strong the the quickly of current loss corporate how individual maintaining pick loss reserve recognition the rate view pressures business of of position. to is a example and in another risk we're yet

experienced industry development our several accident in modest primarily workers' favorable from XXXX the reserve back consistent for favorable We the years with period. compensation and to experience quarter, also dating business across

to resulting remain we in reserve income. optimize we I'm of underwriting the plan to combined ratio on segment Reinsurance, year million earlier Casualty again the the pleased size. in discussed and In XX.X% its significantly with movement, deliver $X reported was that no reducing profitable the of on portfolio while a track

premium year-over-year increased was adjustments for the to While the date this client. existing basis, significantly largely another gross quarter premium and the on of effective on due treaties a extension

grow pleased by top we $XXX full produced quarter, continued once I'm growth the line to We extremely anticipate focus well approximately risk opportunities year, take advantage investment the the our up and markets maintaining our for strong again pace. to relative our of very still profit reducing positioned For a remain on segments all an sum that and our underwriting management. X in core XXXX. to discipline To income our while at results, of have million

is strong. Our is for and earnings outlook believe we potential River very James clear, the

that, the let over with call turn to me Sarah. And

Sarah Doran

overview our accelerated a quarter everyone. operating this of I'm back annualized to quarter loss solid numbers. we and then of from Thanks, how return XX%. year-to-date first reporting James return going portfolio restructured meaningfully Once transfer very equity the tangible net of XX of significant is to adjusted and on Frank, spend our this our year. commercial moment performance good and consistent characterized come highlight benefit the common a River another about quarter the ago and again, the high-level months realized auto providing by from in materializes morning, the

Net investment of first quarter, sequential $XX.X further This and moving to grew $XX.X operating from quarter. $XX.X million on XX% adjusted XXXX. net back the But net income the delivering of included profit income million million basis. strong the pretax and a investment half underwriting of the of income we're

that compared to a ratio to generally. expense as Our quarter and our and the meaningful competitive from sector improved peers continues last of enjoy advantage XX.X% we be

As mentioned million was earlier, income this investment quarter. $XX.X

continue both maturities improved higher including rates in base portfolio. the benefit portfolio, money fixed bank on from our We yields higher new and yields in to loan

approximately investments other on our duration approximately portfolio excluding prior during book X.X third year XX Overall, $XX.X Portfolio Income, compared is and private remained was yield quarter. and $XX.X improved renewable was years, points X.X% and as to million stable. the it's the energy the million basis sequentially quarter. in

combination Cash our for $X.X flow million and going stock reinvestment positions losses averaged have or to reinvestment quarter were to of operations X.XX% from hold. in continued third quarter the Realized our cash strong $XXX XX% $XX to this fixed maturity which high-grade core expect largely year. of quarter, million year-to-date. yields us flow reset income the during moved operating above over at rising The about that We Reinvestment during million preferred X% due will forward. next about and existing portfolio, strong this October. have the and be the continue portfolio well opportunity we yields portfolio

third equity, loan about and cash. during including the $XX.X our total, million on with the represent par portfolios others, which rate portfolio, second moves. that largely XX% declined the preferred our Like AOCI quarter, interest is bank during of given largely quarter, just In

includes to we our million, the We during our representation particularly reminder, the with this loss capital the in remains long excluding But and maturities position. the the the average was a quarter. income substantially quarter, a tangible by which and they of of our at of all the fixed $XXX A we $XXX unrealized feel AOCI, portfolio of the we more equity equity impact driven meaningful tangible representative $XXX Series quarter income equity end mature curve. A+. tend third until preferred issued million of intangible ended fixed credit of quarter the of end interest rise the first is The decline towards rates, common in million, an position As of hold quality totaled

second we have so trends, commercial on to more year to quickly. the wanted on on, this we And been meaningful on auto $XX.X experienced a the benefits commercial These fairly completed time. runoff of current subject very arguably Recall moving paying importantly, portfolio reinsurance and the company economic loss the reserves So the adverse of in Taking and in transfer, step no way given of substantial back, quarter. fully million prior book a I are September claims quarter. auto portfolio that we'll paid came have off very transaction impact runoff on review the the negotiated to bear over these loss XXXX. development

also agreement potential agreement a impact. the be would cap, Also, similarly have not any loss unlimited because no is and reserves to subject future would does have economic and increase in the

retroactive In our volatility in does GAAP GAAP net the adverse the we and to are accounting, results, to create under terms income. create GAAP statement. liabilities any covered financial XXX% This required related of some of in recognize our development will

pace remaining portfolio, on statement increase the quarter, That reserve will in This losses development through was additional financials the have $XX.X this of sheet. recovery. quarter, the offset on of to given that an of create consolidated liability balance the flow loss off the expenses at an by and been adjustment that the million without and income offsetting recovery paid $XX.X million claims a which adverse the leaves

claims Importantly, line is deferred financials the $XX.X on moment is reasonably gain short our which, million a this I most importantly, sheet are ago, The a or earn into to which balance as risk. type time this paid time according the for is of will line temporary. mentioned our impact at

referred to income reverse out referred this period's as subject over of effectively meaningful will earlier, profitability to periods. operating not that component to loss Brett as So all I figures GAAP future retroactive accounting. and are a the ratios above, But reinsurance and also

to invest position. strategic current the risk very capital have our and continue very importantly, we a And We're quarter in most ended to financial reinsurance the to opportunities excellent management River environment. continue an of In and James ample conclusion, in third we well and point operate company. see positioned and attractive view, scale to from

that, to to moderator back with it the turn open line So questions. for the I'll up

Operator

[Operator Instructions]. Mark Hughes Truist Securities. with

Michael Ramirez

for Hughes. Michael Mark Ramirez on is This

what on be certain decision First this your to on will pressure quarters, not the more will businesses? there future impact include And quarters that be growth? renew

Brett Shirreffs

of Mike, I'm was part what? last question your the sorry,

Michael Ramirez

And apologize. include that I there on Sure. will more quarters be growth? pressure

Brett Shirreffs

Sure. Okay.

So let me for you of all, the thank first question.

Let me did little getting talk a future and to can step talk at about we about is back I relative we what a think impact. take and just then what bit you're

line focused. is of So really first a company. strength we bottom will And James and at foremost, remain the the underwriting River culture

remain strong this period to vigilant. So even market need conditions, you in of

underwrite foolproof You because a business. not to need it's

regularly we as see sure our to emerging landscape. we that in broader in well make trends the portfolio any might changes react that loss review we as see the competitive to So data we quickly any

trucking E&S Again, premium a to, we we policy actually decline in but in the grew auto of end general renewing items the over that commercial auto of count a result well. some exposures, in in not referring that larger the actions or Most took primarily impacting them large gross underwriting primarily X%, parts pricing resulted you're underwriting us few our increased those primarily The in E&S result actions underwriting excess of I some both casualty, was variety. general the by and XX%. think casualty by it of actions casualty. of discrete select net dollar X-figure units, and We as premiums

about actions more Let took. me bit we talk little the that a

identified we the addressed and So in we claims feedback actuarial. we we loss drivers strengthened the as and saw have loops them. what We some between have that place underwriting, sectors, really in

tactical we biggest we quarter items, accounts, So portfolio. of or the we'll trucking to in and premium ongoing just project. we happen of the again, took, for were We acted continue underwriting And now upon some what be accounts actions casualty, in a perspective some handful impact trucking the we additional long-term monitor moved you of less but transportation excess on. large on a that to made the vigilant. and saw It's not and to than GWP X% overall casualty X-figure adjustments give remain excess all

And are rare very million premiums the segment. $X in

gets only to in-force million. for. few across of you what looking kind it than got greater We've of think I a have were roughly clients XX,XXX all $X and premiums E&S dozen

talking So we're X% that range. our of XX of kind premium about to in counter

margin insurers. and these we're the to of the policy the conditions with the to at end and all oversimplifying maintain from we this you continue we very of the rate that At count We us in the smaller And market our is grew should us. believe day will really matters, really the expense environment. took cases, comfortable discipline expect the So strong in action help that segment.

just in a tougher large of couple about, that these a And by of not I up areas we ended renewing talked few a accounts. trucker taking stance

items growth? the in Again, So the from looked concentration were our to relative in these large terms at quarter. took see what's of we that large Or current do dollar we that had changing. of by QX. carryover a premium I actions underwriting items impacted I've that future the

trucking for and We've book. in write I force a less don't got sector really premium the don't entire see commercial than of $X million And accounts we casualty our less same of auto greater overall, segment. the accounts X% the than type for concentration. risk that excess than in unit in large XX

we've what more appreciate terms but a of the start we've view fourth a production good So this. very the that line I'll leave please quarter with you limited rest experienced much with like, to off in October looks gotten got in production of year. and the has

Michael Ramirez

line based business end to just quick much Okay. just versus of the that on nonrenew the lines How Thanks underwriting? market sort of on the conditions the about evaluation that. your of past on detail internal you of expected. your Maybe the businesses, extra was these are own spoke follow-up market ones for decision a

Brett Shirreffs

Mike. in Yes. of in to In steps about between about underwriting, others, respects, department underwriting we're down time data guidelines Again, breaking back we loops group and our prudent. what and activity I'll thought what COO, and feedback up No, that just it's and and my changing were our claims terms picking a the pricing good of it's of spending some loss some of our trends kind it's earlier changes. actuarial come some actions the and question, comment seeing drivers are your

So long we this implemented and pretty something say ongoing. we it's would a the what And quickly saw them. process steps to based we expect we in like that be the point, I out that on gone we saw market, we did. took to isn't reacted earlier my and to it, We

Michael Ramirez

we'll one That's us, We updated X sequentially. up the ratio All of was point in loss attractiveness E&S go these in up reserves back in of one of writing? light year the evaluation been noticed helpful. business right. last more accident and you about lines Are you've Maybe for your queue. the putting current

Sarah Doran

a Sarah that's that's is just really really Mike, Doran mix. this No,

going to quarter. renewing given in we're I points think move and we look E&S business things of within any XXX on basis taking around that are at that as

pick. of point coming So that E&S, really loss picks there's basis accident kind as through mix out year our XXX in different current It's year proving data. look no just regards our and

Operator

[Operator with Bach KBW. Instructions]. James

James Bach

is XXX or loss in basis E&S. core the just kind describe of last specialty core the causing that points ratios? you it the in at that kind question. of admitted, what's off also time, working And kind saw which Can of of worsening ratio you in what same XX erosion of a kind causing within So loss kind in

Sarah Doran

Sure.

E&S, Certain just certain Just we renewal kind loss lines for different picks it's going to have the lines paces grow at on of largely repeat myself for and go quarter. through how the certain mix. over budget any

to this during is portion what's as in a nothing specific line put as question I with ratio both is we regard admitted, what With segment a our regard fairly So related there's and really well in renewed changing specialty clear of quarter. again, just comp that PICCs workers' of on what we the the loss and market. think to It's is to E&S. top decent the the

this in we small others, have fairly but mostly the book, concentrated in risk current handful particular, quarter. And quarter, in a comp a up we and in workers' concentrated states of pick Southeastern year loss individual took the and

taking the quarter. in to the a more by year, it little So bit over full reflecting quarter, it feel in the up you're going

that's So see accident that you the ratios delta where in loss the and or segment.

did haven't that why do at we there we're in at think states that? of kind I seen through Really, comp line. we to workers' same increases. so come how the have the regard alone I And rate pricing time, think looked just with don't

seen obviously, the of business. some we've fairly our top our in year And outlook there. course of even the the we've over shrinkage manage So that terms line conditions tried of in to small has and as growth been

James Bach

onetime was meaningful E&S, increase know any that All a reflects also, and to wanted I right. if Perfect. items. to in net in the And of ratio net pretty gross there

Sarah Doran

prepared to place in the had and Frank that to reinsurers many comments our casualty our we underwriting good enjoyed retention treaty. midyear high that always referred attractive strong many, the in commission, in appetite That's casualty as excess that and color his treaty changed renews in our for business had It's It's ceding years. underwriting really our excess the his treaty us. is reinsurance for the in what a a very benefits particular. It of has on company have

on we we portfolio, business in really the given our same performance, But consistent retention that particular opportunity So had we there. underwriting the pricing our that, conditions. the and increase to renew of just and wanted in performance, outlook the to terms

midyear retention XX renewal. E&S really So And that bumped in points you again, that that the quarter-over-quarter. was see a

So right just next the now given will for quarters. treaty, that I that retention and that is think that would likely E&S continue premium in XX%. about That's the carries through, number the about change few

has underwriting is and we given that income performed. So just to more the conditions trade that think good the attractive really keep way book

James Bach

speaking, premium And net rising? which broadly are retentions lines

Sarah Doran

Like casualty. book. years. over business few casualty. we our just excess X/X in fastest. is excess excess it's It's it's last of grown relates a the in that to the Yes, a just had that of E&S. treaty It's increase It said, It's casualty rate XXX%

in you've years, excess few down has grow again casualty and the retention seen So which that come you've seen as stable always been treaty, of last in because that place.

Now keep better retention of more a we're basically profits underwriting changing it, our to to there. our that's way describe

so the to impacted, will as line and history to rate the be And that. do strength decided the that's that's why and that we

James Bach

And right. how kind medical how kind then currently being All And has River of loss evolved? inflation? James concerning are picks, of has the you that

Sarah Doran

It's very much. watching certainly very, something we're that

But that think way to lines. seeing trends across big workers' not And it would or more that's theme bit certainly a cost our a this we business personal of on costs other our not writers, really have personal loss been potentially and up to a So in right lines. of for a there. dynamic delta focus some it's some in little the for comp obviously, lines changing point, be Hard concentrated more it the we're that at presence our think now, a think business, shows regard I with loss

Brett Shirreffs

maybe some to additional comments there. tack on just And Yes.

couple of COVID. coming probably view it. what concerned That's of seen. about issue, kind of terms And maybe in or out directly be I months so our as we've that it proven hasn't think we as of were to significant a an on more

are that cost are It's the just dynamic medical technology made to the some surviving folks is monitor medical a fact it's fantastic improvements brutal accidents. more comp workers' less field in think inflation. being and that in pretty as I the the impact about of

a that with closely, but that's something more that obviously concern inflation. an watch versus probably seeing cost issue we're medical So we

James Bach

wanted get some behind this last just of I just just explanation have elevated quarter. tax one I rate kind question. to the

Sarah Doran

Happy given think you is you're company on the focused where the income earn and But income, operating down day, based on implied income. significant I like operating the piece you we our Yes. And think look it's we there to a gain take complicated would most on probably little XX% tax rate, obviously, highlight rate, income. a we what's operating of pay any tax through important excluded I which net transcript, multinational there. back end focus at income, And is obviously deferred taxes the that if the it's through at is as in well but year-to-date. I the piece about just

We expect year to up end way. that the

of Why because of -in the so Bermuda, kind tips to casualty that loss speak. quarter, we reinsurance the impact first LPT. is rates than structuring as in really that kind we've that's over, statutory did of it the and have higher were We a

on So how about rate a income net basis. our that's I tax think

helps think you you we a tax is That tax is reason calculation XX% calculated, implied if And that, which out math reported. that is operating it's that have earnings, to the it project how we a falls from compared anything just forward. income. I abnormal think net the to that kind of rate going don't actually quarter of think I number that not rate again on but do it the math,

Operator

with Alexander Point. Compass Casey

Casey Alexander

I'm slowdown fronting underwriting what rate. of specialty there's growth? and for the growth the mentioned, curious of accelerate sort could bit of in admitted sort a been improve accelerate you additional the As opportunities that little income arrangements fee ratios the potentially a are

Brett Shirreffs

question, for Thanks Casey. the

terms We've still a great we've opportunities. we a new got no, pipeline got in So that opportunity. feel robust of

over new We've of the across next different of remainder programs through the programs the course of that different this lines. year. But product traction full year pipeline get a our is and will added number several year into of

imagine, As these you downstream conditions of creation one impacts market of might is the MGAs. of favorable the

well programs and see so the both as as opportunities that MGAs existing new represent. for they And we

think partners still as appreciate, some I by that growth probably last the impacted particulate some the we growth runway year. So we've fronting got there. of prior, mean of fact over the you one is was

maybe as to plenty number. feel got that's up so there grow not opportunities the And otherwise, business. of But true we've coming a we growth

Operator

no now further like at the turn this I for are Frank There comments. to call D'Orazio closing questions to time. would back

Frank D’Orazio

thank today results. morning. Thanks want time you enjoy day. we for listening in this few forward for the our and you, their your again everyone the We call very much, to a to on QX received to look and operator. questions Thank months I with speaking discuss

Operator

This Earnings XXXX your you Third Quarter Call. concludes thank James River the for Group We participation.

now may You disconnect.

James River (JRVR) 2 Nov 222022 Q3 Earnings call transcript