Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen, and welcome to the James River Group Q2, 2023 Earnings Call. I would now like to introduce you to your host for today's call, Brett Shirreffs, Investor Relations at James River Group. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. [Operator Instructions]. you. Thank begin may conference. your you Brett,

Brett Shirreffs

and Good Group the River to quarter morning, XXXX everyone, second earnings James welcome conference call.

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

recent earnings Securities For Form made of regarding forward-looking language a the see cautionary factors reports other of discussion and Commission. with risk in XX-K such release yesterday's and please our have the risks most and and uncertainties, we and statements filings Exchange the

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

equity we A on common release as addition, operating numbers tangible for to income, Please this presentation, financial common operating to www.jrvrgroup.com. these GAAP. non-GAAP profit, refer which press our be adjusted website adjusted on return of may and In equity. our net tangible net a such measures earnings found underwriting of can during tangible copy at reconciliation reference equity,

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

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

Frank D’Orazio

today for Thank also you and James conditions while quarter to introduction, welcome thoughts results, provide XXXX our opportunities you and color second to Brett. some second quarter joining for additional River. the to on earnings pleased future our Good everyone, morning, be call. strong sharing I'm market on

common excluding a return consistent strong, yet row, AOCI. quarter, in positive sixth Our momentum, equity, results tangible as another reflect mid-teens released of on the deliver last our night we

attractive as conditions robust for performance our results E&S and hard our shareholders. portfolio, investment continue to strong growth contributing in to We market see from our persist segment

the XX% dividends our of quarter we ex-AOCI Consistent return For net for quarter, income Tangible first year-to-date. common was common on and delivered share tangible equity, the adjusted has with of the $XX.X before and underwriting investment reported operating we for guidance, more XX.X% equity as strong prior per profit than the operating second year, million. adjusted XX.X% net increased returns. half

alluded year X.X% I XX% year XXth experienced we an attractive rate quarter change and rate since increase been growth, of since increase The recorded rate quarter, year renewal quarter we XX% as remain renewal conditions the effective the as E&S second very for as XXXX. in in XX.X% As for this it XX.X% we pricing consecutive rate to compounded reported bringing market the the the is for and to, XX.X% our positive exceeds change of last full the strong quarter has our XXXX.

our casualty core expectations above excess to loss lines E&S division our excess plan. energy, continue change, our of Beyond in trends property, as environmental, assumptions way view rate the our in our business led meaningfully XXXX rate to achieve in levels and relative and of the product excess

attractive Conditions in XX.X% division, an largest our for as rate the especially we E&S remain excess casualty, underwriting increase quarter. achieved

very a from totaling opportune environment, year-to-date of strength and premium growth the for midpoint quarter Additionally, growth trading change the the unit enjoy year premium the property nearly excess at to XX.X%. of rate experiencing our continues XX% XX.X%

overall that our posting our taking of past, E&S strategy the while have writing market we clearly results. advantage to are property the believe As appetite for account still risk production changed healthy experiencing premium premium. of these growth, I excess reported in we conditions less attachment property favorable will and while not than our or segment's continue underwriters rate-driven have XX% And

opportunities for results that the support our for future business and continued we for outlook favorable underwriting profitable our we Taken see growth in conditions River. believe and for across our division, our in pricing trends the E&S James market concert

quarter, divisions casualty, the larger growth In growth for XX% accelerating of in segment excess During opportunities. overall, our rates and submission saw new from quarter the the in some trends quarters. X% second submission continued last first strong few improved quarter. premium general experienced submission renewal relative quarter, XX% in And second and we to to we the the growth to second supporting increase casualty, saw in growth the submission

general commercial Core gross and and property. contractors, driven E&S, in the grew strong second in premium quarter, by quarter. excess XX.X% which segment division, second for excludes growth the excess earned X% auto in Net casualty, written premiums casualty, growth our the was by manufacturers

portfolio prudent XX% to auto pushing declined risk Commercial been demonstrate sector, have factors rates and more certain for premiums segment. reduced Additionally, the our we management appetite in by aggressively. the continue we as within

over We entrant follow in renewed now choosing million primary to of also premiums, not aggression liability $X habitational space. this new

preserve noted a our are As that our future. for maintaining margins we're and organization, underwriting actions we line focus have to we believe before, as underwriting bottom taking the needed discipline

standpoint, the for ratio profitability in E&S was digit million year, and but carry the second the into nearly a half half segment a double $XX growth Overall, underwriting XXXX. quarter, increases, to expect combined earned of had strong not this as we momentum premiums, first only million tremendous the well of our rate of XX.X% underwriting $XX XX% income, generated into we with E&S From as profit. in of year, the

written premiums increased Admitted, net to XX%. XX% premiums increasing Turning for second the gross with Specialty quarter,

rates grew the basis, fronted our declined programs new scale on Our programs while traction, a our existing large and gained build program, workers' have to premiums, fronting X% compensation quarter. business remaining including XX.X%, in as gross achieve and continue

quarter, for compensation as workers' California our in book, nearly risk rates XX% now we've California continued modest individual declined now, largely years with workers' moderated compensation. improvement as account, in discussing in since have trends the in decline our well been in program. our rates several XXXX, By The rate compensation workers'

challenged program opportunity during California future for portfolio quarter. the rate capacity tighter the on this led compensation profitability result, the to us pressure renew workers' program, have As we our made a underwriting and decision and not management to disciplined Persistent and our significantly decision. large reinsurance

written accounted net last approximately earned quarters. of X% premiums, program point four the gross of company-wide for a of over premiums X% reference, As and the

to confirmed Our us the conservative the credit has the extends which advise pleased fronted issuing and successfully approach of that amidst exposure and of industry allegations plaguing of security well served to to all respective collateral investigations direct facets fraudulent allegations, requirements, letters have sector. I'm we including business, with programs no managing banks. in have parties to our the involved collateral our all and the of

prior the the higher expense a combined in due in the increase for compensation The to structure quarter our year the the ratio primarily to XX.X%, segment's was of risk year. that related workers' at beginning ratio change individual reinsurance incepted a with from business

all Casualty reflects of turning the on Lastly, continue premium underwriting or segment to earned $X JRG $XX.X premium a to the to treaties, perform expected. about able million Re, segment the at expect to produce quarter continues Reinsurance and were adjustments. of profit, million to including premium in Earned enforced small breakeven. as We operate

X, treaties limit transfer segment's The subject $XX $X as on retroactive million in the well included reinsurance business million the on not to results place segment's LPT. prior is XXXX development year million. remaining LPT, $X.X covered put or as now that on portfolio of of loss effective development the October was by The

our of pleased commitment here James remain with extremely Overall, all the dedication and the River. quarter of at second results, appreciative and employees I'm

market. the We power attractive E&S strong take the trading continue and earnings to in and franchise, the well resolute to conditions advantage demonstrate the of positioned remain of

I'm Our for on on the for excited of consistent focus remains deploying the the achieve returns where half second confident we're company's momentum. we year, to as shareholders. we capital can strong continue and attractive build

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

Sarah Doran

morning today. Frank, good and for to very Thanks us much, everyone. Thanks joining

dividends, we're adjusted net or quarter, share book of This from increased per of start share. the XX.X% operating the income XX.X% year $X.XX $XX.XX. after, value common reporting to per Tangible before

quarter a investment continued underwriting contribution This income, net a growth. solid performance, and reflected meaningful from

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

this ratio was a quarter basis. XX.X%, on and identical combined Our largely year-to-date

equity, XX.X% return our quarter, the on including net was return Including For from tangible annualized common XX.X%. AOCI, AOCI, adjusted to moved operating XX.X%.

quarter ratio earlier with consistent previously ratio set certainly around communicated, a Our reinsurance up this year kicked for was XX.X%, out year. ago, what our the expectations we had structures. The the expense with consistent

quarter On of our investment energy in we largely million to we last level million, a had income quarter. of investments the at renewable investment. of The was above very sale $XX.X carrying value. $X.X million from again two contribution comparable that the Recall prior $XX.X strong reported to

the we strong growing our core with continue of of and invested during the to prior average year to floating excess the quarter. NII. rate book of cash quarter. in we grew well Reinvestment to strong rates natural X.X% The income yields flow. to in continue income our rates us yield see from averaged investment interest base rates exposure portfolio and portfolio moved positions reinvestment deliver have turnover, assets, continue to and X% Net XX% fixed higher Reinvestment assets, combination

Our came four. duration to down slightly

few credit, collateral ago. respect following comments on from With Frank mentioned what to reinsurance, minutes a and a few

pricing to how quality, approach business, recent reinsurance overall. collateral thought would our a on helpful it heightened weeks, organization attention few we we in the has thoughts especially As seated received for in share be

active management of approach approved We've list. long had practices a includes an best that reinsurer

public the certainly around partnered reinsurance our or collateral. with from As you we either disclosures, reinsurers can have meaningful require see recoverables, high-quality

the both we requirements. I'd to rating is require on better minimum end, if not AM ratings support and A- are recoverables. To met, we have those or front, and that Best surplus a rating note collateral

of include each are collateral annually. with Many Frank reconfirmed the balance certainly our as quarterly, these the Our and of calculations we banks. collateral mentioned, issuing and does credit, updated letters of recently select

tax Finally, with and tax impacted our always, geographic rate, is the of is across to business. location rate our our year-to-date by as regard XX.X%, profits

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

Operator

[Operator Instructions].

line the open. from comes Hughes from of question Mark, first your Our Securities. is now Truist line Mark

Mark Hughes

morning. Yes, thank you. Good

Frank D’Orazio

Mark. morning, Good

Mark Hughes

expense California to of expense that Program, overall or a impact you going anything on stranded is there forward? have With say like the the any costs of any non-renewal ratio Workers' And the will kind that Comp if be impact near in notable fee going the term. income, the in ratio, drop,

Sarah Doran

Yes, Mark. that's a great question,

of quarters. profitability I that this, the size overall program lack on last to say, few think minimal the know over had the I also relative influences the was in of highlight, of one especially few would organization. the I you would the some say non-renewal that, had, to to that a Frank relative stats profit,

I see the couple a also last quarters given the of of where the kind I impact meaningful fully been But for ratio of been the expect don't overall, performing we as had that us will few to for a paper. on late. program of had the expense don't that, see think lack how the program impact take that the we profitability It a through the business overall just year, coming So see on over given rest just quarters. to meaningful of go on

Mark Hughes

you momentum durability do had gives market mentioned at positive to you out into described see you XQ. and Frank, confidence? you you? what What or in the cycle, XXXX. You in the the continue submissions inflection about some of expect the the jumps you When pricing think that

Frank D’Orazio

Yes, thanks Mark.

remainder So, any beyond. change perceive for our the and what haven't the I seen year of opportunity I really to in set be

reporting healthy very again quarter, solid with of underlying across the we broad-based majority of our really the platform second saw growth. So the during divisions much growth opportunities,

renewal positive Nearly changes. all very reporting divisions rate

We up departments also XX% X%, in some new in general growth growth up casualty, trends in second in saw the in significantly, overall with submissions of larger submissions in fairly XX% casualty. submission quarter, strong excess our continue

healthy increases, trends, certainly favorable that me to submission rate for strong dynamics, these should persist market suggest conditions So XXXX.

Mark Hughes

some continuing And to the subject you just you how being rate limit, process, million that's adequacy can how that claims Anything $XX remaining these $XX is long closing then tell been the resolved within of and sense reinsurance. have us the seeing like, what million. the the claims are give book us in or of about, on close to the

Frank D’Orazio

Sure.

through with the first each we start process So that let me quarter. go

year what to respond seeing. So treaty our every and are actuaries treaty and review single they

So we're looking We're doing not at annually a at it very it granular semi-annually. or level.

the about saw portfolio to And construction surprisingly by written LPT, construction XXXX to claims, the not million driven and during development, of we defect particularly you're specifically underwriting so subject for policies talking years. XXXX is that the $X.X if

we LPT just feel the And in terms of mean, the in and our position I confident that remaining, limit $XX is limit million very under that adequate. reserve the

mean business think In terms for your having subject terms of, to payout That's that the specifically the relative a the of LPT. LPT in guess to payout, approximately business of I subject years. question we to about seven

five bit to shorter, portfolio, remainder four of closer payout of probably the the to a mean For a years.

Mark Hughes

Thank you.

Operator

is comes from from open. question next the Meyer of Shields Meyer line Your KBW. now your line

Meyer Shields

on morning. or quarterly factors. Good if trend non, charges, give casualty I of were whether the were loss maybe thanks. us Great, I want can. changes emergence shouldn't reserve Can the changing both changing, terms loss on to of just, some or and just or in LPT say other stick you assumptions topic I color

Frank D’Orazio

So the again, I relative the this that to go subject just terms some is detail through seeing. the to actuaries just terms of in we saw what quarterly our talked of part LPT. in of in process to what they responding portfolio are

XX number to LPT, of years. premises-based. to are not back portfolio subject small GL-based, and across the hospitality the so the These to of basically amounts XX saw treaties a we For development

stands a quarterly seeing. them looking like said, notable what Again, reacting amounts. out. small I to on very at basis and Nothing They're they're

necessarily. change in no So methodology

Meyer Shields

No, you are what I they're understand seeing, actual that. claim those say When payments?

Frank D’Orazio

Responding border sure, roads payments [ph]. activity coming the on and to, through claim the

Meyer Shields

That's helpful. thanks. Okay,

a ratio, second quarter reinsurance question, deadline. that. at it's active about year what loss the first. better underpinned Second long the us the When hoping talk guess. X.X it could than we through points I'm I I'm in was look you casualty assuming relatively

Sarah Doran

of high had we Sure, at seen year-to-date some historically, we've with IBNR of points We look Meyer. Sarah. number basis, the just XXX some number. to where XXX is of as This which within I to movement treaties booking is more that a premiums individual auto were it's that basis been regard on XXs would year-to-date.

wouldn't that saw additional I we accounted of in booked coming dynamics and premium early what's just in year. on some and as about had the a number, terms but way focus we that, the So quarterly the think that's more some year-to-date driving in it IBNR for auto of

Meyer Shields

fantastic. you Okay, Thank very much.

Operator

Tracy, the of your open. Benguigui Tracy Your Barclays. from line next now question is from comes line

Tracy Benguigui

you. you've Good morning. a been especially compounded getting Within on Thank E&S, pricing nice basis. increases,

changes your aren't me like ratio? in some improvements accident loss to less business habitational your You've your also positive understand, and E&S Help some why auto mix, we made non-renewing, year seeing premiums. commercial

Frank D’Orazio

Thanks, Tracy. Good morning.

second compared So less year year the to a quarter our accident loss our compared quarter, more full a little prior than up was the a then ratio point one during year point to than little XXXX. and

believe, raised environment, cost which the paid. trend that claims I slightly periods loss to our uncertainty portfolio in mentioned, future the view earlier well had relative year we the inflationary on current are So in single these into on the as the we high when as unknown given digits, felt actually the the prudent

we the just nature that longer was thought of So casualty business, given tail prudent.

excess which themselves, largest line normal in be we're cautious, this we I on to you're states our casualty. mix, some and So to evidence what seeing conservatism continue of took business just the loss retention call in the would the along includes higher going with that fluctuations

a So you to. significant the initially for ratio just profitable It of given allude of us. on lines. very our higher rate it excess than the at product a loss casualty line nature other as historically has has taken some looks But product, been

posture. So to we retaining type of it's just But there as the experience, over reserves take believe will own impactful our given overall, as that prove today's recent well prudent this we environment, we're time. think

Tracy Benguigui

year picks? should about to feel helpful if loss be trend, year like loss loss That's have prior your about Okay. should or in picks? understand holding of a picks. they we the you view up current loss think different What conservatism how you prior Do

Frank D’Orazio

in I years. better we've we're Again, taken the you we've of being as of some to, You're last most those and relative years. at or increases, allude the accident years, XX% just say patient, good point. significant three midway taken prior practically to talking would rate about recent the each XXXX looking

are and going I margin, approach. to a trends but loss think we outpacing building cautious we're take

Tracy Benguigui

income fixed of what percentage quick, And real is Okay. floating rate? your portfolio

Sarah Doran

you've back portfolio other the portfolio, in XX% XX% got obviously you're rate the to say the to come and loan to overall was including if I then going floating securities Tracy. I'll bank you.

Tracy Benguigui

you. Thank Okay.

Operator

[Operator Instructions] Brian, line comes Your Brian line next open. from the Meredith of your is now from question UBS.

Brian Meredith

a what's I about Frank, hoping was bit Specialty talk left thanks. little Admitted in Yes, business. you the could

you're what's guess premium California left losing a the I of so talk from around program. is but bit comp XX% what I it? program this was Is So funding about little business? there there treaty, traditional comp it a there. know Maybe

Frank D’Orazio

Brian. thanks Yes,

individual is our has and workers our then Admitted of remainder the Specialty have of not capital. program we We additional provides by to comp The for consisted unit, diversification always fronting and organization, away, overall the program. we continue much business. impacted have which favorable a the going that So risk the it outlook balance business. consuming believe to And is long-term fronting without

the to reason do certainly who should that Falls an think issues the optimistic. stands think partners operational context, will recently we're a will simply the fronting be space, in that that seeking but sector months. NGAs, the issues so carriers for And in just we’re be provides I real the winner not carriers that had out – competitors be space operational set responsible increased in program well-publicized of opportunity several I significantly managers, coming that opportunity, the has a possibility It that Lake plagued reinsurance and the have in

Brian Meredith

Treaty the right. I unprofitable, then it was – about And – it I'm that the now Great. your was why trying understand curious just business, was California it reviewing. assume treaty I'm just to given fronting

taking don't that, you? risk You business. fronting your are on So any risk take on you're any not

from hard just it to much servicing down the just that it more was make is were just profitable perspective. So so a it premiums

Frank D’Orazio

stretched some risk. some retained space our the two Brian. actually our business, things, to. I we just of fronting beyond of points completely several for years nearly thin, was fronted, some off We come market together. to business program in Being XX because of very rate but just is that Well, retain reinsurance and rate I'd here, difficult that, did some risk it environment of the say very the last the made the alluded over One,

perceive to for of isn't the another partners It's you clear, money just a program this, that way know move somewhere be the be. no just it that make based going forward And on on where the to to we this profitability all else, there's to business just program.

Brian Meredith

sense. one other And one here. makes just then quick It

business, about plus in premium guess only but get line is E&S auto. the of going rate, XX% a premium excess that's in or that's Is growth there talking ex-commercial on? shift there On growth What's you I on actually not letting X% running going rate? mix

Frank D’Orazio

that's question. challenge you good No, in this environment. can isn't a sure But market that the appreciate growing I'm

I risk of really ensuring we the pulling monitoring on internally that can reputable managing we that. accelerating think do we're see. acceptable sure It's at that your while appetite. based profit back the that growing of time most performance make based our growth trends you're to of divisions, lot a spend underwriting volatility on And or carriers accordingly hurdles, profitably each

second produced prepared growth. strong beyond energy in division great on strong So remarks, speaking growth reported specifically that, quarter. general from to quarter all the E&S rate larger casualty, premium some like with first manufacturing our underwriting increases driven growth during contractors, results double quarter, in so XX% had my the I digit very building growth. ex-casualty, property of quarter, a mentioned as And the divisions excess they our And

just I earlier, set be So the continues But some a aggressively I within we've opportunity more E&S as to the growth don't significant division, this auto to results a push any portfolio in impacted business, where and for based. reduction we've which comments changes our alluded decision overall taken taken selective my action. commercial we've think segment broad management to seen in rate by were for

about So two XX% resulted prior result, were our what to on a mean? a does which E&S drag the down that compared point auto as year, QX growth rate. in Commercial premiums in

willing habitational but something primary to also of was liability get where couldn't just delegate not that very willing underwriting There we pricing pricing, just terms weren't large to now We terms. required a do. ability, our in renewed account, competitor a we

the So that impacted quarter the in growth well. as

management underwriting our But really, these entire And the term. routine organization. of attractive long on it producing aligns a margins for part are are we focus underwriting portfolio the actions across believe that

Brian Meredith

Great. Thank you.

Operator

I There Frank Frank, like to would at back no over you. to call are further the turn over questions this to D'Orazio. time.

Frank D’Orazio

Thank you.

Founder, for thank and I years Michael We Ollie stand company, not I them forward do Adam well want service Directors we longstanding at members Sherman both them and And from our future. have Oakes personally, board, of their our the to close, chose our of the to wish new that capacity Before retired to Chairman. for AGM James working as acknowledge XX I'm and two as certainly month Board. last re-election Abram, and our his River, in the Board Executives with in of know looking to

with Okay, time I want to quarter today everyone few for on listening speaking forward morning. certainly again remainder the we you third enjoy discuss you to of for hope and received a to the our summer. the months We in call in And results. their questions your thank look this we

Operator

today's conference call. This concludes

You may you. disconnect. now Thank

James River (JRVR) 8 Aug 232023 Q2 Earnings call transcript