Earnings call transcript Q4 2022

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Operator

Thank you for standing by, and welcome to the James River Group Fourth Quarter 2022 Conference Call. [Operator Instructions]

I would now like to turn the conference 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 Fourth 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 release Form language the most of factors and in have risks our the Securities uncertainties, and other filings such discussion and and regarding a please Exchange the of risk reports Commission. see XX-Qs we with yesterday's recent and made

not undertake do forward-looking update any statements. We duty any to

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

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

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

Frank D’Orazio

the as you color as call. full morning, Thank everyone to the to Brett. well continued be results, while I'm future. XXXX for today year on on additional joining conditions you our pleased commentary Good and provide our market on fourth to and for introduction, that welcome quarter repositioning offering also company's

demonstrated the progress for a of we've by in the results last financial this quarter number we organization. as James in an that evidenced As a strong released meaningful which made year a across night, was we River very metrics

around sheet, River. the into significant its been in years core a continuing and gain organization operations. while actively turnaround scale has our balance at profitability We've James to We to now the insurance are are strengths, repositioning now two repaired returned what

of the share moments into to Before our past XX take like few of drilling each down the some a achievements months. highlights segment's to over I'd performance,

income For since million, ratio the record combined ratio the a underwriting first for XXXX of $XX.X we performance XX.X% and best combined our XXXX. and XXXX, full combined a sub-XXX underwriting The year since produced represents our ratio of company.

most E&S a to premium net and for focus premium billion on we rate segments for year, approaching profitable achieved and in growth in XX.X% while premiums growing $X We our growth written gross the full the segment. also continue XX.X%

XXXX. core Our business over has E&S XX% year-end now increased since

X of When total to highest million we fourth the grew reported quarter. income operating return XX% during and XXXX Additionally, our taken in adjusted resulted investment quarterly concert, $XX in the investment income our in ever sum an net accomplishments these XX.X% the XXXX last and actions on would common our annualized over quarter, for narrative the for the outstanding results earnings average the that equity tangible of power of fourth strategic directly XX.X% that support the unburden organization. simply years

feedback, shareholder risk in or financial actions that number to positive shared notable I've changes underwriting made of better the actuarial the with management, with continue well James And is you, governance that we investments take engagement, metrics whether to resonated Responding even an to have Beyond make company. we progress pointing River resources, technology enterprise our to investors. necessary employee also oversight. a have

creating at organization our all of These shareholder throughout shareholder driving and initiatives have been engagement levels ownership aimed and while new value base.

our compounding to during that tremendous the we are believe quarters period. gross and in to premiums segment, our over positive I we of each first conditions of quarter consecutive In the market platform our carrying basis. on net momentum specifically now experienced a segments. increases, have as Now to XX and rate XX.X% XX.X% by fourth increased the quarter, E&S turning XX.X% more progress

of all in own fourth quarter year. with and of remains environment the excess for trend robust expectations our rates of up renewal our The XX% up for X.X% remaining during the XXXX, loss very nearly view and cost

a the we will new rate renewal vary pleased accomplished our limited with year, XXXX composite line longer. remain And change for belief and firm effective to our favorable from quite While although conditions increases, that had size thus have I'm is quarter-to-quarter, possibly quite we XXXX. what sample year full throughout data will rate seen that far, continue underwriting we the over in have of

premiums a In the high where business we we quarter. best, experience segment us income steady fourth policy. helping $XX,XXX on our these in renewal the we generating in where combination growth continue average growth terms to targeted activity, that conversion know business continue count increase per $XX submission of of the SME in submissions our for the ratio The to to approximately policy million underwriting are aided classes factors in maintain

history year, our and for year ratio the For income, all excellent level underwriting $XX E&S an the platform full the company's highest the an told, E&S XX.X% in underwriting produced of combined million income for segment and platform. the of

business and program. achieve segment Specialty to This despite combined X% a in the an Overall, quarter, growth while our modest Moving XX.X% workers' also premium nonworkers' favorably for X.X%. growing risk this contributed workers' by premium compensation ratio, was segment the combined compensation producing Admitted. reduction compensation individual focused able business of to

fee ratio the For XX.X%, by the combined full and income was grew we X.X%. year,

years, the the we've remains workers' market for very competitive. last compensation several As reported

of accident and new declines loss We the diligently again year our reduced segment, proactively also as and and accident remains favorable renewal team have in experienced premium reflecting the driven disciplined this development production XXXX ratios. years. by for We business XXXX our our rate in this largely line

business. breadth have and to fronting of our depth the continued program grow and We also

look have pipeline XXXX healthy of opportunities added we new see during as forward. a new programs So and we

the to Turning Reinsurance Casualty segment.

the declined for segment for by writings $XX aligns the For our to This gross with plans shrink top previously written XXXX. by in million in full reduction premium fourth written premiums premium quarter, year, declined or the and significantly announced line XX.X%. XX.X% directly

on the Fortitude an fourth in activity, also the Re the quarter, both subject transfer to to portfolio loss not treaties select experienced well During as we Legacy claims as treaty unexpected increase transaction. subject

to by million treaties XXXX. LPT. totaled underwritten limit from by subject $X.X totaled the was Reserve development subject covered the construction during XXXX the XXXX, separate the quarter, not $X.X $X.X X million on that two general treaties losses treaties underwritten we The LPT to primarily on including fully driven by liquor and impacted on to the and portfolio. clash in purchased million claim fourth and XXXX between in losses liability was claims LPT liability primarily driven the large treaties defect Development

view as an rare related segment, development the indication this been have in not broader business. trends and of losses clash Historically, occurrences necessarily to we do this

As ratio a fourth segment quarter for this of recorded claims result the of activity, a XXX.X%. combined the

we'll for organization, line-focused we As I we previously, attractive shareholders. capital have stated confidence in most and where continue a our deploy are profitability to have returns generating the bottom and consistent

in casualty that James the well Since the our E&S Admitted demonstrated in in we believe most have reductions workers' our we notably, we in the in to commitment writings my drastically I repeatedly the underwriting River, compensation at alluded targeted reduce XXXX. segment decision year that to that reinsurance as Specialty made and platform, actions arrival this I our as through took earlier

All and lead they future volatility. of stronger but we actions will our to line believe profitability prospective these top have less results, impacted

writing organization theme, we market the prior higher process, can Prudent we better, in capital areas for our we conditions Reinsurance profitability. returns have we the or to that scale suspend our decided portfolio and keeping meaningful to segment, of where drive with allocate management have business is a our In shareholders. continuous irrespective as Casualty and for believe

income represent major performance initiatives around To shareholders underwriting market capital culture. our our of summarize, well confident attractive XXXX potential to the value fourth returns and presented our full very we the as strategic markets. strength step and I'm and E&S to franchise these of now marketplace are throughout resources a strengths. and our year we fronting fee with feel forward, I'm execution feel strength pleased on our the demonstrating results deliver believe and have company repositioned I quarter we opportunities by the and the focus positioned XXXX very earnings compelling on and capture and in core and

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

Sarah Doran

an share share of net quarter to into and of This reporting strong return carrying year $X.XX, tangible our another equity for morning concluded common continuation quarter, $X.XX momentum Thanks of X.X% year. increased all XX.X%. adjusted annualized XXXX. common per everyone. income operating fourth the with James momentum very per a operating us on powerful book River value to joining in solid for is Tangible Frank, today. net Thanks much, good quarter

the of our we've an also and a highlighted, XXXX. organization executing made in going provide level. overview outlook and I'm at forward a for high commentary spend very the the around is on moving year the minute believe the some Frank of progress performance to As group and appreciable quarter

and First, the the quarter year.

net We on pretax operating this includes net income $XX.X quarter, are investment basis. million $XX.X each and of delivering of underwriting income million adjusted a profit $XX.X million of which

For company's years, only the the not a last significant tangible equity the XX.X%, full net but improvement adjusted annual the return an year, was for period. on common operating few from history highest in

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

and Our a reasons. expense primary higher X year quarter ratio for the ago year are from for

the second, Reinsurance commissions had last performance company's last from and year. sliding we First, given scale year, we incentive a Casualty offset expenses reduced meaningful in compensation our segment,

Taken year's group annual together, these reduced points. expense ratio X.X about items last by

quarter. million a quarter. benefited cash the we of quarter opportunistic income of flow moved earlier, from was $XX.X renewable interest had mentioned sale XX% this rates We've grew from strong Reinvestment portfolio. and rates. As prior the with It investment from XX% the energy higher year sequential the portion and also

the from during Reinvestment million by strongest of cash far very flow far full income quarter above year. for investment million since to Cash operating strong moved although income continued they've at carrying annual year. XXXX. back X This quarter, sale this a our value. and bit energy yields investments operations about X.X% portfolio related of $XX our the is million is X.XX% $XXX the $X in flow Approximately averaged core fixed to this of so our the to quarter figure renewable net be

investment combination rate well net to floating income. of The rate exposure level invested rising environment in of our an portfolio deliver of positions assets, and base increasing to a turnover natural to continue assets growing us

XXXX. AOCI. wanted little about mid-teen a to Next, tangible return bit common equity, drive speak I on to we're well We believe positioned a excluding

particular, to in in the growth to robust segment. benefit profitable conditions E&S continue expect We market, which should drive from that for

Admitted. expect conditions similar within Specialty for fronting We business the

Frank expect we as premium to did Reinsurance segment, nature of underwriting activities suspending we the we're business, XXXX. as earn during mentioned, the the much given half but As in still Casualty about

our manage And to We in to break not team support profit. in we segment or expect the from in operations so of this fairly a accident year much make do the the suspend underwriting savings needed move combined expect to forward. the ratio the Bermuda going is due liabilities way even expense small to lean,

opportunities underwriting due to activities written of Overall, year to grow our business will expense to mix closer our and we we've group in to our retention X we moving see enable be us in during change to as on mentioned. despite expect XX% our total the gross And ratio, suspension it XXXX premium strategy, the that segment. in

the received points for keep had which we E&S our in given This the underwriting desire from profit. as underwriting segment X.X reducing the quarter. about increased seen in has we've impact mentioned we past prior quarters, up to our of is retention As ceding in expense few of ratio, our the the commitment E&S more particular,

We to expect And years we ahead. The with our in yield change rate benefits regard results finally, XXXX, produced rate this we of approximate in higher will strategy that firmly the statutory U.S. believe the tax retention strategy, our to to were expense by capital deliberate across execution most where we businesses focused the risk management. a underwriting our by prudent have a profitable scale thoughtful through year and achieved this and and of advantage allocating operations XX%.

opportunities continue company. XXXX attractive to and off to start a in see and scale very to We're our invest great

open to line And the it so to turn me let for back moderator with that, questions. the

Operator

with Truist. Hughes Mark Instructions] [Operator

Mark Hughes

You fourth the it think XX.X%, market? I that -- Does of Sarah, that tangible be reflect think end upbeat. your year, full seem should return that guidance mid-teens. in mid-teen the quarter, pretty range? of as your to different of some low we the on view XX%, Is was these on

Sarah Doran

Mark, that, out, excludes called I AOCI. No. that

out year trying full to to our of be it little easy AOCI. bit inclusive obviously I'm a back numbers follow. that So wouldn't more to make

inclusion delta middle that and on the is a the down also I So think between to hand, point out one guidance, AOCI. regard it's I fairly would assumption numbers the exclusion those the but with of

Mark Hughes

I'm Okay. mentioned think Excess this you on Frank, curious may I any how Good. clarification. also at here don't you the something you've that point. into whether lean of look lines days? specifics, good but Thank these market, property think different you that's for thoughts is the looking that your and sort might

Frank D’Orazio

Sure.

been the So risk not it's cat cat probably us to I property last Mark, couple it's never that our a the know, -- ambition would change major to never losses that in as you tempting suggest weather-related our player, be years, of appetite, much. all and

terms it our portfolio. just attachment business at of average cat just in there. moved Excess of and changes I point has So I X% kind property major mean of is even gross E&S don't is year-over-year, about see how portfolio similar looking our fairly limit. that

growth in But by consistency earnings that, line across, broadly, most that though, are renewal as there. our fourth of E&S rate up see rate of continue again, business the positive on volatility organization in the I just terms as, the quarter. much not growth we platform renewal an We during would strong quarter, as we saw to submissions in changes, are of X% the quarter. growth, presents. opportunities healthy tempted More in majority think, and seeing I reported the divisions say, necessarily focused underwriting solid significant of The

significant casualty, I continue underwriting both well healthy But to double-digit and we across I that changes the noted growth the think the any Casualty XXXX. in XXXX, set of see in the relative seen actions as premium We'd as increases all trends to what premium for really quarter. back is business. results third expect again, we've very question our of well we last during see and look quarter I your our overall the opportunity which think And discrete don't quarter. as I general increases portfolio. E&S fourth impacted in growth of there at these But on double-digit Excess into some took saw from rate I portfolio, results the for our healthy terms divisions, to

Operator

Brian Meredith UBS. with

Brian Meredith

when quickly, underwriting and some the going maybe know you Any get of sure to or Just noise ADC Frank, because see decision in just of just lot on any things that run casualty LPT? going an Sarah, cease on of go actually we make type runoff a don't to reinsurance. more finding development. thoughts I to out the forward from on and off, times the adverse a book

Frank D’Orazio

Yes.

our So in reserve we're servicing options infrastructure focused right balance now, keeping to sheet open regulatory we and are our primarily confident themselves. they overall bolster consider requirements, on always staff I if our think the in-force but present portfolio, in place, meeting the to position

Brian Meredith

just basis the to clarify, Great. should the business in And I ratio wanted did say flat then, you be sorry, a reinsurance casualty year-over-year total expenses? relatively that on expense or

Sarah Doran

expenses. I said total

will slightly, get be XX% ratio to the expense So up overall. to the Brian,

Brian Meredith

Okay.

write you E&S know little don't loss bit on just there am And particularly could is seeing professional in liability that then other seeing know to business? Frank, comment maybe helpful. business, wondering pricing lot which D&O you of of trends where X more side. is we're I you're a kind Are pressure, if relative some the I That's area on Okay. on? I lastly, pressure the whole where a areas

Frank D’Orazio

our really, just from little the environment. proven that and fourth quarter. jump positive see place E&S to our rates rate mean, But of relative our the may at for has you rate, I looked deceleration the there, if bit I from quarter-to-quarter. think you segment history at around a good third We still, I produce results think, are a the we rate quarter

look quarters to couple an like of at at time we it annual basis. at a really on a or So

we And so for and year, after the in both 'XX. produced 'XX XX% producing XX%,

uncertainty really also the push than I still I push between to of just years maybe rate seeing is certainly mentioned losses of reinsurance think continue of there's know I'm inflation, actually of overhang to tightening from market, overhang the tied last relative soft a you and rate. where the marketplace, property opportunities I seeing which to business great lines to see pressure. mean seeing a broader opportunity some I some to you're the rate. cat some property, some

rate want a our it of comment analyzing broadly and good loss constantly cost trends Now analyze just do see I view relative quarterly and as actuaries movement trends for cost the our on to year. to duration loss I we And do liabilities. loss our we speaking, discuss trend of on a coming think job the and basis,

high again, cost of we closer and and ahead, year raised uncertainty our a the single-digit given the loss our trend view feels, the just slightly environment viewpoint, the to business. to Looking which inflationary prudent of nature

view recall as also from to exposure overall You with of in of more the couple view after continues rate believe taking be that gap trend, were conservative some to trend trend for many of product less compare that caution still slightly our average mid-single-digit adjusted clear, trend, points of loss a a trend. the or favorably loss exists, exposure view out the lines even moved and closer portfolio the we may on our coming cost this to on coming the But to year. portfolio. we net basis view hundred or portfolio, on change premium we've And we've loss And costs. but of by overall conservatism, higher as up

Brian Meredith

you. Got

to you're to? stable-ish expect moving up, So they're exposures getting and given we actually kind underlying shouldn't also of loss ratios the

Frank D’Orazio

right. about that's No,

Operator

Meyer KBW. with Shields

Meyer Shields

questions, I numbers quick of couple can. A if

XXXX XXXX. in under Is premium done then? that Casualty you should half there earned the by maybe anything of should Sarah, overhang First, expect be the we in material we premium Re or mentioned with of level

Sarah Doran

Thanks, Meyer, for question. the

going relative of material but be bit little be the there'll not think a group top to it's 'XX, line. to the total in I balance

Meyer Shields

Okay. [XX%], want in I the ratio, make That's was XX% just about that when right number And helpful. right? a starting that, to I'm corresponding you expense from talk XXXX side. the sure

Sarah Doran

That's correct. Yes, that's correct.

earning change to in biggest right, delta causing of the in it. there, the piece more the in less biggest what's is business But so, Casualty the bit retention delta Re, With due little through. strategy the E&S

Meyer Shields

time, to guess, quarter. happens, this And when development Or of unusual the in adverse of is a expect the reserves. this establish on items? then, sort the little of in understand this I goal I should at nature Okay. bit we the question the incorporate losses point clash reserves you completely unusual When have a it philosophical periodically?

Frank D’Orazio

Well, by Meyer, just let this odd defining kind me of start how of first scenario is. kind

So they are rare.

I I They're described them. how think nonexistent, though. that's not

the we've in segment, reinsurance losses hands. And seen obviously, X count X, that I amount history on think this of we of I So in maybe times you can writing think the clash had again, that in involve of X the the in multiple liquor X insurers multiple one, the underlying cedings and a quarter space coming insureds GL liability business. then and out claim involved

I rare, a handful have involved as you expecting fairly say, variety where insureds you're of occurrence. in a generally think single they're as would individual the speaking, don't So I many

Operator

[Operator Benguigui. Instructions] Tracy

Tracy Benguigui

a few Just follow-up already questions on questions asked.

accident So those scope re entire share are LPT balance the just and the XXXX. of liabilities. transaction can you reserves about out bulk, at now? not and part the a years are are those reserve of that the you Can million, ago, of type duration reserve $XXX of year balances but is your casualty what million Casualty represented of Re LPT what of XXXX to frame those And inception, that businesses $XXX

Sarah Doran

Sure.

say, it writing we line call get what reasonably together, we the the Tracy. let's our with could business contracts. to thanks very I contracts it time a on -- got of would wanted question, the where since down did saw quick We've When the for LPT part in and riskiest been sized we XXXX, of it, So the we very, put focus number business, over XXX the in portfolio a to, having XXXX.

impossible it's work. whole these the to the LPT to any way really put going be segment So with into

So when majority the put design it. we of the this, in we reserves

longer risk in speak. tail the We our kind trickier so are, of it majority again, put lines, construction and of also to our

that remains into outside bodily clash, that of losses So that i.e., seen injury is within that portfolio, risks why didn't we've million $X.X characterized that go the quarter by portfolio. this the the which portfolio,

So that remains the case.

million those over reserves our have of additional business the the there. rest $XXX million from out would remains And balance our be reserve moved the of in bulk again, time reserves with balance to still in we've in the of that now the frame there. $X.X are definition, So still That $XXX the construction of reserve longer going to portfolio. slightly and tail majority million longer a there. paid than By are

X be years as upwards well. we expect it, X years, to let's of, to X long So call would that perhaps as as

a going bit to be longer So well. the there tail is little as

Tracy Benguigui

Great. year, income your low from targeting I'll from is ratio if you the year. your I'm year wondering just mid-teen you mid-teen how contribution This a Okay. that expense could the target. investment target ROE. that targeting Last ROE. ended point ROE share points under double-digit were you out X up

Sarah Doran

NII Well, our look of be to through expect $X that 'XX it, we commensurate rolling how a the quarter would call year NII. gain absent let's million, over Yes. that's it pretty this

rate would a you pretty upwards reasonable would of take if a be out, quarter. run million think I So $XX that that

contributor good a that's there. So

Operator

are turn for the closing comments. over I call now There the no at further time. to back questions presenters this

Frank D’Orazio

like I QX to received acknowledge forward River XXXX with also and delivering everyone look job the call on morning. our done few discuss and to speaking Thank day. you well just months today enjoy you a a James our the their for your in again employees to listening results. to in results. Okay. We this want we I'd questions time of thank the for for

Operator

today's your for disconnect. may you thank participation. concludes We now Participants call. This

James River (JRVR) 28 Feb 232022 Q4 Earnings call transcript