NASDAQ:JRVR James River Group Q2 2024 Earnings Report $4.77 +0.01 (+0.21%) Closing price 05/1/2025 04:00 PM EasternExtended Trading$4.60 -0.17 (-3.65%) As of 04:45 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast James River Group EPS ResultsActual EPSN/AConsensus EPS $0.40Beat/MissN/AOne Year Ago EPS$0.53James River Group Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AJames River Group Announcement DetailsQuarterQ2 2024Date8/5/2024TimeAfter Market ClosesConference Call DateTuesday, August 6, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfilePowered by James River Group Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 6, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to James River Group Q2 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:27Thank you. I would like to turn the call over to Zachary Scheidel, Investor Relations. Please go Speaker 100:00:35ahead. Good morning, everyone, and welcome to the James River Group Second Quarter 2024 Earnings Conference Call. During the call, we will be making forward looking statements. These statements are based on current beliefs, intentions, expectations and assumptions that are subject to various risks and uncertainties, which may cause actual results to differ materially. For a discussion of such risks and uncertainties, please see the cautionary language regarding forward looking statements in yesterday's earnings release and the risk factors of our most recent Form 10 ks and 10 Q and other reports and filings we have made with the Securities and Exchange Commission. Speaker 100:01:19We do not undertake any duty to update any forward looking statements. In addition, during this presentation, we may reference non GAAP financial measures such as adjusted net operating income, underwriting profit, tangible equity, tangible common equity and adjusted net operating return on tangible common equity. Please refer to our earnings press release for a reconciliation of these numbers to GAAP, a copy of which can be found on our website at www.jrvrgroup.com. Lastly, unless otherwise specified, for the reasons described in our earnings press release, all underwriting performance ratios referred to are for our continuing operations and business that is not subject to retroactive reinsurance accounting or loss portfolio transfers. I will now turn the call over to Frank D'Orazio, Chief Executive Officer of James River Group. Speaker 200:02:21Thank you for that introduction, Zach. Good morning, everyone, and welcome to our Q2 2024 earnings call. I'm pleased to be joining you today to provide additional color on our Q2 results in addition to providing some commentary on market conditions and the future outlook for James River. Before we get into the results for the quarter, I'd like to take a moment to comment on 2 strategic items at the company. First, we executed and announced a combined adverse development cover and loss portfolio transfer for our E and S segment shortly after the end of the second quarter. Speaker 200:02:52The transaction was structured to de risk the organization while bolstering the balance sheet. The coverage will also provide a higher level of certainty for our shareholders by reducing significant reserve volatility, while allowing us to focus on the future profitable growth of James River. 2nd, the strategic review process that we began at the end of last year remains ongoing. The Board continues to consider and thoughtfully evaluate a range of options. There's no set timeline for the completion of this process. Speaker 200:03:23Now turning to our results for the quarter. The franchise has continued its strong start to 2024 reporting net income from continuing operations of $0.31 per share, adjusted net operating income of $0.33 per share and a 14.9% adjusted operating return on tangible common equity. Our flagship E and S business continues to benefit from strong submission growth and rate increases, which present optimal conditions for the underwriting and profitable growth of our heavily SME weighted platform. Submission growth was once again strong during the Q2 increasing 10% with growth in both new and renewal submissions. In total, we sold over 80,000 submissions during the 2nd quarter, a continuation of the strong trends we have experienced over the last several quarters. Speaker 200:04:11I would highlight our environmental and general casualty divisions, which saw submission growth of 37% 33% respectively, while excess casualty saw submission growth of 9%. In addition to strong submission growth, our E and S business continues to experience favorable pricing conditions across the different divisions. Renewal rates for the quarter were up 9.1% across the segment and 9.7% year to date. A majority of our underwriting divisions recorded pricing increases in the high single or low double digit range for the quarter and pricing strength continues to come from our larger underwriting divisions. Rates in energy were up more than 20%, excess casualty up more than 12% and general casualty up more than 6%. Speaker 200:04:58Rate change continues to exceed our view of loss trends as well as the pricing assumptions on our 2024 business plan. We remain confident that we are continuing to generate attractive margins on this portfolio. Our E and S casualty divisions, which exclude excess property grew by over 5% during the quarter. However, property rate increases have moderated amid a market with significantly more capacity than recent past quarters. While we believe rates remain attractive in the A and S Excess property market, we've seen increased competition on our renewal portfolio which led to the reduction in production this quarter. Speaker 200:05:35We've observed several market participants aggressively increasing limits in catastrophe exposed areas, while providing premium reductions. We've remained disciplined in our underwriting approach. And as a result of these dynamics, gross premium from our excess property unit declined 28% during the quarter. With this reduction in excess property writings, overall the E and S segment grew its premium base by 2.3% during the Q2. We've also continued our work in reunderwriting our large account exposures in our excess casualty division. Speaker 200:06:06While the premium impact was less significant than during the Q1, there were still a handful of large 6 and 7 figure accounts that we chose to non renew during the quarter. Nonetheless, we feel confident in the underwriting actions we've taken and are pleased with the overall portfolio and the opportunities we're seeing in the market. Our E and S combined ratio was strong at 95.4 percent producing $6,400,000 of underwriting income. The accident year loss ratio was 64.2% for the 2nd quarter, which was a 180 basis point improvement from the prior year. We also strengthened reserves for the E and S segment by $10,700,000 during the quarter. Speaker 200:06:46Heavily focused on other liability occurrence in general casualty and to a lesser extent excess casualty and commercial auto for the 2017 to 2020 years. Additionally, we experienced no cat losses in the quarter. As I mentioned previously, early in July, we entered into a combined adverse development cover loss portfolio transfer agreement with State National. This transaction effective as of January 1, 2024 provides the E and S segment with $160,000,000 in adverse development reinsurance coverage for accident years 2010 through 2023 and is subject to a 15% co participation by James River. As a result, the adverse development experience this quarter is expected to be recognized as a reinsurance recoverable during the next quarter. Speaker 200:07:36Turning to Specialty Admitted, gross written premiums in our fronting and programs business increased in excess of 12% compared to the prior year quarter and 17% year to date, excluding the impact of workers' compensation business that is now in runoff. Many of our existing programs continue to show substantial growth and benefit from positive renewal rate changes available in the market. The segment produced an excellent combined ratio of 85% and an underwriting profit of $3,400,000 for the 2nd quarter. We benefited from the recognition and collection of approximately $1,000,000 of boards, bureaus and taxes from prior periods in the 2nd quarter. We have experienced infrequent adjustments like this in the past and they can have an outsized impact given the size of the segment. Speaker 200:08:23Undoubtedly, we are pleased with Specialty Aemetis performance this quarter and the segment's continued execution of our objectives. Overall, we continue to see strong rate increases in excess of expected loss trend and consistent submission opportunities across James River. We look forward to the second half of twenty twenty four to provide additional opportunities to profitably expand the franchise as we remain focused on generating consistent and attractive returns for shareholders. And with that, I'll ask Sarah to provide some additional color on the quarter. Speaker 300:08:58Thank you very much, Frank. Good morning, everyone, and thanks for joining us today. As you've seen, 2024 continues to be a strong year with net income from continuing operations available to common shareholders this quarter of $11,900,000 or $0.31 per diluted share compared to $9,500,000 or $0.25 per diluted share for the same period a year ago. On an adjusted net operating basis, we are reporting $12,700,000 of income or $0.33 per share as compared to 6,600,000 or $0.18 per diluted share for the same period a year ago. Our operating return on tangible common equity is 16.1% through the first half of the year. Speaker 300:09:50Turning to our underwriting results. The 2nd quarter combined ratio of 99.3% compares to 98 0.9% of a year ago. Our loss ratio increased to 73% from 70.7% a year ago. And as Frank mentioned, we did not experience any cat losses. There was a net impact from prior year development of $10,700,000 a majority of which we expect will be recovered under the new E and S, LPT and ADC, which closed on July 2. Speaker 300:10:27At 26.3%, our expense ratio declined from 28.2% a year ago. As mentioned previously, upon renewal last summer, we changed a key E and S Reinsurance Treaty to cover more of the portfolio, limit volatility and maximize underwriting income, while more efficiently managing reinstatement premiums. We had no significant changes at the treaty's renewal earlier this month. This has had the impact of pushing our E and S net to gross retention to 55% this quarter, down from 61% in the prior year period, but consistent with the last four quarters. As Frank mentioned, the benefit to the expense ratio this quarter originated from the Specialty Admitted segment and specifically due to the $1,000,000 board bureaus and tax true up collected and recognized in the quarter as well as a $500,000 benefit in the quarter for sliding scale commission adjustments. Speaker 300:11:34Those adjustments reduced the combined ratio in that segment by about 6 points this quarter. For the 2nd quarter, we recorded net investment income of $24,900,000 from continuing operations, an increase of 37% or $6,700,000 from the prior year quarter. Included in the net investment income is a contingent payment of $1,200,000 associated with one of our renewable energy investments, which was previously sold. Our embedded book yield was 4.6% compared to 3.6% at this time last year and 4.5% last quarter. We've been holding a fair amount of cash in our portfolio, which is returning in excess of 5% as we work to complete the LPT ADC transaction. Speaker 300:12:30As we begin to allocate some of this to our core fixed income portfolio, reinvestment rates remain attractive in the low 5% range. We experienced $2,300,000 of net realized and unrealized losses on investments, the majority of which were related to changes in fair value of our common and preferred stock and bank loan portfolios. Overall, our portfolio remains well positioned to take advantage of market dynamics. Before opening for questions, following on from Frank's comments, I did want to spend a minute on a few points of likely impact from the LPT ADC, which we will book in the Q3 given that it was signed on July 2. I would caution that our accounting work is ongoing and will be complete in the Q3. Speaker 300:13:21But first, on the underwriting side, we would expect that a little bit more than $8,000,000 of the adverse development experienced in the E and S segment this quarter will be covered by the treaty in Q3 and booked as a reinsurance recoverable as Frank mentioned. 2nd, as I alluded to in my investment comments a minute ago, we have been holding cash as we work to structure the transaction and our quarter end balance sheet included the approximately $310,000,000 in cash that we have since transferred to State National at close of the transaction in early July. As a result of the agreement, we do expect to recognize a reduction in pretax income of approximately $44,000,000 in the Q3. And finally, I just wanted to take a moment and wish our former colleague, Brett Sheriffs all the best in his new adventures. We've all benefited from your hard work and thoughtful approach and it's been a pleasure having you on the team. Speaker 300:14:22And with that, I'll turn the call back over to the operator to open the line for any questions. Speaker 400:14:29Thank you. We will now begin the question and answer session. And your first question comes from the line of Dean Cristiano of KBW. Please go ahead. Speaker 500:15:07Hi. I was hoping, if you could discuss the impact of the smaller property book on the core loss ratio. And also if you could talk about the premium growth prospects between the property book and the casualty book going forward and the implications that will have on the core loss ratio? Speaker 300:15:28Yes. I don't think thanks for the question, Dean. I don't think there is a material impact on the core loss ratio just given the historical size of that book. While it did shrink at a gross level in that kind of high 20s number, what we retain is a fairly small portion of that. So I think that's a fairly negligible impact as you look at Speaker 200:15:51the loss ratios. Yes. I might just give a little additional color, Deane, just since it's a headline for the quarter for us. So just relative to the dynamic that we experienced in the quarter. So I think like much of the rest of the industry, we saw shifts in the property market in the quarter as capacity restrictions really eased up pretty significantly. Speaker 200:16:14And we think that's probably going to continue to transition unless there's a very significant cat season this year. And just to provide some context, remember we're an excess layer writer, so we do not write primary in the property space. So when MGAs or other units carriers or other facilities that may be distribution owned offer significantly more capacity on a ground up basis and we've seen several of these entities double their capacity. Oftentimes our layers under pressure or it gets taken out by that expanding primary layer. So from a pricing standpoint, we saw renewal rates remain positive on the portfolio that we retain, but rates have moderated pretty significantly to the mid single digit range and we saw plenty of rate reductions being offered. Speaker 200:17:03So So our goal with excess property is to continue to write good business and limit volatility and we'll continue to push rate where we think an account or class needs it, but also recognizing where rates are versus technical rating. We need to strike a balance where an account can be written profitably at slightly less premium. So anyway, hopefully that gives you a little bit more color in terms of what we saw in the quarter relative to property. Speaker 600:17:32That does that. Thank you. Speaker 500:17:34And then my second one, the core loss ratio within the E and S segment ticked down year over year nicely. I was wondering, if you had any an updated view of the your current year loss fix specifically within the casualty line? Speaker 300:17:55We don't have an updated view. I don't know if you have a specific question there. I think we've maintained some premiums in those losses and that's been the similar pick that we've maintained through 2024. Speaker 500:18:07Yes. I was more curious about if that your loss pick for and your loss trend for casualty lines has material changed from the end of last year. Speaker 200:18:19No, I mean we went through that process going into the 2024 year and we start with an ISO basis when we do our analysis. Our view of loss trend changed by less than a point year over year at the end of 2024 and our refreshed view of exposure trend also changed by less than a point. Those are the trend factors that we're using on the pricing of our business right now. We're actually in the process right now. We're reviewing that as we start to put our thoughts together relative to trend going into our 2025 budget. Speaker 200:18:57So no change at this point. Speaker 400:19:07Your next question comes from the line of Brian Meredith with UBS. Please go ahead. Speaker 700:19:13Yes. Thanks. Hey, Frank. Just a quick question here. Any movements in the 2020 2023 kind of reserves at all? Speaker 700:19:24And I think you kind of talked about your view on torts and what's going on right now in the inflationary volume loss trend. But there have been many companies out there that have been kind of pushing up IBNR in 2024 just because of some concerns about what's going on toward inflation. Maybe you can give us kind of your perspective on what you see going on. Speaker 200:19:45Yes, happy to do that, Brian. So let me just start by saying where we actually had movement in the quarter and then try to add address some of your question about the current year. So during the quarter, we reacted to some dynamics that we saw in our A versus E analysis, but the reserve development is really primarily related to the 2017 to 2020 accident years within general casualty, excess casualty and commercial auto lines. Of the 10,700,000 dollars of development, it breaks down as follows. So E and S core, obviously excluding commercial auto was about $8,700,000 The majority of the adverse came from general casualty with excess casualty aligned that we heavily reinsure representing the 2nd largest amount. Speaker 200:20:36And then as typical, there's some small offsets across parts of the portfolio. And on a net basis, really the largest years were 2017, 2019 and 2020. We had another 940 $3,000 of adverse outside of core E and S in our standard commercial auto portfolio. And then we had $1,000,000 in parts of our old rideshare account that we retain. And you'll recall that at the time that we announced at LPT back in late 2021, we retained 2% of the remaining outstanding claims for various reasons. Speaker 200:21:20We now have exactly 3 open claims in that portfolio, and we decided to strengthen our position there by $1,000,000 So that's how you get to the $10,700,000 We've not changed our view of loss trend relative to the current year to your other question. Speaker 700:21:41That's helpful. Thank you. And my next question is I'm just curious with the reduction in the property book, is that having any impact on some of your kind of general casualty production just because that's a line of business maybe that some of the producers and some wholesalers may be looking at. And I don't know if you've got any stuff that kind of the property goes with the casualty. Speaker 200:22:04No, it's a good question, but less of a package dynamic in the E and S market. So much of what we see is on a monoline basis. So again, it's not like we're not offering renewals on property. We are. It's just a more competitive marketplace there. Speaker 200:22:18But actually general casualty is an area where we've seen significant increases in submission activity, healthy rate and good growth. Speaker 400:22:31Your next question comes from the line of Matthew Carletti with Citizens GMP. Please go ahead. Speaker 200:22:39Yes. Hi, good morning. This is Carl calling in for Matt. I just had a quick follow-up question to Sarah. Can you please just go over that Q3 guidance you mentioned earlier in the call? Speaker 300:22:54Yes. I don't think I provided Q3 guidance. What I was just referencing is our early view from the LPT ADC in that the $8,000,000 of adverse development would be booked as a recoverable that we saw this quarter, be booked recoverable in Q3. And that we overall, following on from what we announced in the beginning of July, we expect to recognize the reduction in pre tax income of the $44,000,000 in the 3rd quarter because we signed the transaction on July 2. So we'll book it in the Q3, if that's what you're referencing now. Speaker 300:23:31Okay. Speaker 200:23:32Yes, that's what I was referring to. Thank you so much. And that's it for me. Speaker 300:23:35Sure. Thank you. Speaker 400:23:40Your next question comes from the line of Mark Hughes with Truist. Please go Speaker 600:23:46ahead. Yes. Thank you very much. Good morning. I got on a little bit late, so I apologize if you've already addressed this. Speaker 600:23:52But when you think about the trajectory of the excess property from a seasonal standpoint and then how you might have been seeing that develop as the quarter progressed, is that going to have as meaningful an impact in Q3 as Q2? Speaker 200:24:14Thanks for the question, Mark. So Q2 is typically a larger quarter for cat exposed property because of the storm season dynamic, as I think you're alluding to. So Q3 is just generally a smaller renewal basis for, I think, the market in general and as a part of that, it's just fewer renewal opportunities for us. Speaker 600:24:40Yes. And then that's kind of the pressure that you saw in the quarter, do you feel like that's stabilized? Or is that still something that is progressing or building the increased competition more capacity? Speaker 200:24:55I think it's been building, quite frankly. And you could even see it, we're mid single digits. So still positive rates for the quarter, but I could actually see that even descending on a month to month basis. So again, it's the dynamics that I mentioned, more capacity, primary care is willing to double their limit and putting more pressure on the excess layers. Speaker 600:25:21Yes. And then any plans for adding staff? Or I guess, how are you approaching that kind of from a staff perspective or potentially new lines of business? How are you looking at the kind of investments you might be making? Speaker 200:25:42Yes. It's a good question. So first off, I would I'll just comment on staff more broadly, really kind of attribute to the resilience of our company. Staff retention as an organization has been quite good. It's virtually identical through the halfway mark of 20 24 to the same point of 2023 and it's actually improved over 2022. Speaker 200:26:12So certainly less concerning just relative to having to replace heads. We did as you know invest in management liability and started out that product line really just announced it last year. We're going slow there just kind of given market dynamics getting that kind of up to speed and probably have some more announcements relative to product expansion there before too long. As far as additional investment in resources, I mean, obviously, we take a look at where we are performing well relative to our budget and where we think that we should be adding additional resources to take advantage of this market cycle that we're in. So that's really kind of a constant evaluation that is ongoing with our segment President. Speaker 600:27:08And then last one if I might. I don't know if you touched on this, but the re underwriting effort, I think you alluded to a number of larger accounts in this quarter that also were impacted by that. When you think about the back half, particularly 3Q, are there other accounts that may be in that zone that would be reunderwritten perhaps? How should we think about 3Q? Speaker 200:27:38Yes. So we started taking a hard look at large commercial auto exposures really across our E and S segment in the middle of last year. And so I would say much of this review has been done and by and large we had a more significant number of accounts review last quarter as mentioned with less significant amount to complete this quarter. Now that being said, it's an ongoing process. So you renew many of those accounts that have exposures that you're watching and you continue to take a look at them each year. Speaker 200:28:16But I would suggest much of that work has been done and that's also at a time where we've just been focusing on growth in smaller insured sector SME business. And I think the way to demonstrate that or illustrate that best is we see it very pronounced in the average premium per policy bound in the quarter for Excess Casualty and this is Q2 data that I'm talking about now. So we've taken some underwriting actions. So during Q2 of 2023, our average premium size we bound in our excess casualty unit was almost $97,000 per policy. In Q2 this year, it was about $56,000 per policy. Speaker 200:29:01So very notable and I think also very consistent with the actions that we've talked about the last two quarters. Speaker 600:29:10Trying to sneak in one more if I might. When you think about the general casualty, general liability, how much do you think interest rates having surged over the last couple of years kind of kept a lid on price increases in these long tail lines if the carriers are able to make pretty good money on their investment portfolio, then that maybe restrained rate increases despite the inflationary environment. Do you have any view on that dynamic? And if interest rates do come down, what does that mean for casualty pricing? Speaker 200:29:52I would say probably less impact than you might think. I might feel differently 20, 30 years ago, but not in these dynamics right now. I think folks are trying to make money on their underwriting and have paid a lot of attention to it, particularly in that line of business. So I'm not necessarily seeing shift just relative to interest rate kind of movements in the general casualty or other line of occurrence line that you're talking about. Speaker 600:30:19Very good. Thank you. Appreciate it. Speaker 200:30:22Thanks, Mark. Speaker 400:30:24That concludes our Q and A session. I will now turn the conference back over to Frank DiRazio for closing remarks. Speaker 200:30:32Okay. Thank you, Benjamin. Before we end the call today, I'd like to recognize the resilience and hard work of all the employees of James River for their efforts this quarter and really over the last three and a half years in continuing to make James River an even better company, employer and trading partner. I also want to thank everyone for their time today and for the questions we received this morning. We look forward to speaking with you all again in the fall to discuss our Q3 results. Speaker 200:30:59Thank you and enjoy the rest of your day. Speaker 400:31:02Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallJames River Group Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) James River Group Earnings HeadlinesJames River Group Holdings, Ltd. Scheduled to Release Q1 2025 Earnings on May 5, 2025April 18, 2025 | quiverquant.comJames River to Hold Its First Quarter Earnings Conference Call on Tuesday, May 6, 2025April 18, 2025 | financialpost.comSilicon Valley Gold RushA new technology has sparked a modern-day gold rush in Silicon Valley. OpenAI’s Sam Altman invested $375M. Bill Gates has backed four companies in this space. The World Economic Forum calls it “the most exciting human discovery since fire.” Whitney Tilson believes this trend could mint a new class of wealthy investors—and he’s sharing one stock to watch now, for free.May 2, 2025 | Stansberry Research (Ad)James River to Hold Its First Quarter Earnings Conference Call on Tuesday, May 6, 2025April 18, 2025 | financialpost.comJames River to Hold Its First Quarter Earnings Conference Call on Tuesday, May 6, 2025April 18, 2025 | globenewswire.comJames River Announces Appointment of Senior Vice President, Investments and Investor RelationsApril 16, 2025 | globenewswire.comSee More James River Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like James River Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on James River Group and other key companies, straight to your email. Email Address About James River GroupJames River Group (NASDAQ:JRVR), through its subsidiaries, provides specialty insurance services. It operates through Excess and Surplus Lines, and Specialty Admitted Insurance segments. The Excess and Surplus Lines segment underwrites liability and property insurance in the United States Puerto Rice, and the United States Virgin Islands. This segment distributes its insurance policies primarily through wholesale insurance brokers. The Specialty Admitted Insurance segment provides insurance for fronting, program administrators, managing general agents, and independent retail agents. James River Group Holdings, Ltd. was founded in 2002 and is headquartered in Pembroke, Bermuda.View James River Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Microsoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of EarningsAmazon's Earnings Will Make or Break the Stock's Comeback CrowdStrike Stock Nears Record High, Dip Ahead of Earnings?Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock Up Upcoming Earnings Palantir Technologies (5/5/2025)Vertex Pharmaceuticals (5/5/2025)Realty Income (5/5/2025)Williams Companies (5/5/2025)CRH (5/5/2025)Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 8 speakers on the call. Operator00:00:00Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to James River Group Q2 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:27Thank you. I would like to turn the call over to Zachary Scheidel, Investor Relations. Please go Speaker 100:00:35ahead. Good morning, everyone, and welcome to the James River Group Second Quarter 2024 Earnings Conference Call. During the call, we will be making forward looking statements. These statements are based on current beliefs, intentions, expectations and assumptions that are subject to various risks and uncertainties, which may cause actual results to differ materially. For a discussion of such risks and uncertainties, please see the cautionary language regarding forward looking statements in yesterday's earnings release and the risk factors of our most recent Form 10 ks and 10 Q and other reports and filings we have made with the Securities and Exchange Commission. Speaker 100:01:19We do not undertake any duty to update any forward looking statements. In addition, during this presentation, we may reference non GAAP financial measures such as adjusted net operating income, underwriting profit, tangible equity, tangible common equity and adjusted net operating return on tangible common equity. Please refer to our earnings press release for a reconciliation of these numbers to GAAP, a copy of which can be found on our website at www.jrvrgroup.com. Lastly, unless otherwise specified, for the reasons described in our earnings press release, all underwriting performance ratios referred to are for our continuing operations and business that is not subject to retroactive reinsurance accounting or loss portfolio transfers. I will now turn the call over to Frank D'Orazio, Chief Executive Officer of James River Group. Speaker 200:02:21Thank you for that introduction, Zach. Good morning, everyone, and welcome to our Q2 2024 earnings call. I'm pleased to be joining you today to provide additional color on our Q2 results in addition to providing some commentary on market conditions and the future outlook for James River. Before we get into the results for the quarter, I'd like to take a moment to comment on 2 strategic items at the company. First, we executed and announced a combined adverse development cover and loss portfolio transfer for our E and S segment shortly after the end of the second quarter. Speaker 200:02:52The transaction was structured to de risk the organization while bolstering the balance sheet. The coverage will also provide a higher level of certainty for our shareholders by reducing significant reserve volatility, while allowing us to focus on the future profitable growth of James River. 2nd, the strategic review process that we began at the end of last year remains ongoing. The Board continues to consider and thoughtfully evaluate a range of options. There's no set timeline for the completion of this process. Speaker 200:03:23Now turning to our results for the quarter. The franchise has continued its strong start to 2024 reporting net income from continuing operations of $0.31 per share, adjusted net operating income of $0.33 per share and a 14.9% adjusted operating return on tangible common equity. Our flagship E and S business continues to benefit from strong submission growth and rate increases, which present optimal conditions for the underwriting and profitable growth of our heavily SME weighted platform. Submission growth was once again strong during the Q2 increasing 10% with growth in both new and renewal submissions. In total, we sold over 80,000 submissions during the 2nd quarter, a continuation of the strong trends we have experienced over the last several quarters. Speaker 200:04:11I would highlight our environmental and general casualty divisions, which saw submission growth of 37% 33% respectively, while excess casualty saw submission growth of 9%. In addition to strong submission growth, our E and S business continues to experience favorable pricing conditions across the different divisions. Renewal rates for the quarter were up 9.1% across the segment and 9.7% year to date. A majority of our underwriting divisions recorded pricing increases in the high single or low double digit range for the quarter and pricing strength continues to come from our larger underwriting divisions. Rates in energy were up more than 20%, excess casualty up more than 12% and general casualty up more than 6%. Speaker 200:04:58Rate change continues to exceed our view of loss trends as well as the pricing assumptions on our 2024 business plan. We remain confident that we are continuing to generate attractive margins on this portfolio. Our E and S casualty divisions, which exclude excess property grew by over 5% during the quarter. However, property rate increases have moderated amid a market with significantly more capacity than recent past quarters. While we believe rates remain attractive in the A and S Excess property market, we've seen increased competition on our renewal portfolio which led to the reduction in production this quarter. Speaker 200:05:35We've observed several market participants aggressively increasing limits in catastrophe exposed areas, while providing premium reductions. We've remained disciplined in our underwriting approach. And as a result of these dynamics, gross premium from our excess property unit declined 28% during the quarter. With this reduction in excess property writings, overall the E and S segment grew its premium base by 2.3% during the Q2. We've also continued our work in reunderwriting our large account exposures in our excess casualty division. Speaker 200:06:06While the premium impact was less significant than during the Q1, there were still a handful of large 6 and 7 figure accounts that we chose to non renew during the quarter. Nonetheless, we feel confident in the underwriting actions we've taken and are pleased with the overall portfolio and the opportunities we're seeing in the market. Our E and S combined ratio was strong at 95.4 percent producing $6,400,000 of underwriting income. The accident year loss ratio was 64.2% for the 2nd quarter, which was a 180 basis point improvement from the prior year. We also strengthened reserves for the E and S segment by $10,700,000 during the quarter. Speaker 200:06:46Heavily focused on other liability occurrence in general casualty and to a lesser extent excess casualty and commercial auto for the 2017 to 2020 years. Additionally, we experienced no cat losses in the quarter. As I mentioned previously, early in July, we entered into a combined adverse development cover loss portfolio transfer agreement with State National. This transaction effective as of January 1, 2024 provides the E and S segment with $160,000,000 in adverse development reinsurance coverage for accident years 2010 through 2023 and is subject to a 15% co participation by James River. As a result, the adverse development experience this quarter is expected to be recognized as a reinsurance recoverable during the next quarter. Speaker 200:07:36Turning to Specialty Admitted, gross written premiums in our fronting and programs business increased in excess of 12% compared to the prior year quarter and 17% year to date, excluding the impact of workers' compensation business that is now in runoff. Many of our existing programs continue to show substantial growth and benefit from positive renewal rate changes available in the market. The segment produced an excellent combined ratio of 85% and an underwriting profit of $3,400,000 for the 2nd quarter. We benefited from the recognition and collection of approximately $1,000,000 of boards, bureaus and taxes from prior periods in the 2nd quarter. We have experienced infrequent adjustments like this in the past and they can have an outsized impact given the size of the segment. Speaker 200:08:23Undoubtedly, we are pleased with Specialty Aemetis performance this quarter and the segment's continued execution of our objectives. Overall, we continue to see strong rate increases in excess of expected loss trend and consistent submission opportunities across James River. We look forward to the second half of twenty twenty four to provide additional opportunities to profitably expand the franchise as we remain focused on generating consistent and attractive returns for shareholders. And with that, I'll ask Sarah to provide some additional color on the quarter. Speaker 300:08:58Thank you very much, Frank. Good morning, everyone, and thanks for joining us today. As you've seen, 2024 continues to be a strong year with net income from continuing operations available to common shareholders this quarter of $11,900,000 or $0.31 per diluted share compared to $9,500,000 or $0.25 per diluted share for the same period a year ago. On an adjusted net operating basis, we are reporting $12,700,000 of income or $0.33 per share as compared to 6,600,000 or $0.18 per diluted share for the same period a year ago. Our operating return on tangible common equity is 16.1% through the first half of the year. Speaker 300:09:50Turning to our underwriting results. The 2nd quarter combined ratio of 99.3% compares to 98 0.9% of a year ago. Our loss ratio increased to 73% from 70.7% a year ago. And as Frank mentioned, we did not experience any cat losses. There was a net impact from prior year development of $10,700,000 a majority of which we expect will be recovered under the new E and S, LPT and ADC, which closed on July 2. Speaker 300:10:27At 26.3%, our expense ratio declined from 28.2% a year ago. As mentioned previously, upon renewal last summer, we changed a key E and S Reinsurance Treaty to cover more of the portfolio, limit volatility and maximize underwriting income, while more efficiently managing reinstatement premiums. We had no significant changes at the treaty's renewal earlier this month. This has had the impact of pushing our E and S net to gross retention to 55% this quarter, down from 61% in the prior year period, but consistent with the last four quarters. As Frank mentioned, the benefit to the expense ratio this quarter originated from the Specialty Admitted segment and specifically due to the $1,000,000 board bureaus and tax true up collected and recognized in the quarter as well as a $500,000 benefit in the quarter for sliding scale commission adjustments. Speaker 300:11:34Those adjustments reduced the combined ratio in that segment by about 6 points this quarter. For the 2nd quarter, we recorded net investment income of $24,900,000 from continuing operations, an increase of 37% or $6,700,000 from the prior year quarter. Included in the net investment income is a contingent payment of $1,200,000 associated with one of our renewable energy investments, which was previously sold. Our embedded book yield was 4.6% compared to 3.6% at this time last year and 4.5% last quarter. We've been holding a fair amount of cash in our portfolio, which is returning in excess of 5% as we work to complete the LPT ADC transaction. Speaker 300:12:30As we begin to allocate some of this to our core fixed income portfolio, reinvestment rates remain attractive in the low 5% range. We experienced $2,300,000 of net realized and unrealized losses on investments, the majority of which were related to changes in fair value of our common and preferred stock and bank loan portfolios. Overall, our portfolio remains well positioned to take advantage of market dynamics. Before opening for questions, following on from Frank's comments, I did want to spend a minute on a few points of likely impact from the LPT ADC, which we will book in the Q3 given that it was signed on July 2. I would caution that our accounting work is ongoing and will be complete in the Q3. Speaker 300:13:21But first, on the underwriting side, we would expect that a little bit more than $8,000,000 of the adverse development experienced in the E and S segment this quarter will be covered by the treaty in Q3 and booked as a reinsurance recoverable as Frank mentioned. 2nd, as I alluded to in my investment comments a minute ago, we have been holding cash as we work to structure the transaction and our quarter end balance sheet included the approximately $310,000,000 in cash that we have since transferred to State National at close of the transaction in early July. As a result of the agreement, we do expect to recognize a reduction in pretax income of approximately $44,000,000 in the Q3. And finally, I just wanted to take a moment and wish our former colleague, Brett Sheriffs all the best in his new adventures. We've all benefited from your hard work and thoughtful approach and it's been a pleasure having you on the team. Speaker 300:14:22And with that, I'll turn the call back over to the operator to open the line for any questions. Speaker 400:14:29Thank you. We will now begin the question and answer session. And your first question comes from the line of Dean Cristiano of KBW. Please go ahead. Speaker 500:15:07Hi. I was hoping, if you could discuss the impact of the smaller property book on the core loss ratio. And also if you could talk about the premium growth prospects between the property book and the casualty book going forward and the implications that will have on the core loss ratio? Speaker 300:15:28Yes. I don't think thanks for the question, Dean. I don't think there is a material impact on the core loss ratio just given the historical size of that book. While it did shrink at a gross level in that kind of high 20s number, what we retain is a fairly small portion of that. So I think that's a fairly negligible impact as you look at Speaker 200:15:51the loss ratios. Yes. I might just give a little additional color, Deane, just since it's a headline for the quarter for us. So just relative to the dynamic that we experienced in the quarter. So I think like much of the rest of the industry, we saw shifts in the property market in the quarter as capacity restrictions really eased up pretty significantly. Speaker 200:16:14And we think that's probably going to continue to transition unless there's a very significant cat season this year. And just to provide some context, remember we're an excess layer writer, so we do not write primary in the property space. So when MGAs or other units carriers or other facilities that may be distribution owned offer significantly more capacity on a ground up basis and we've seen several of these entities double their capacity. Oftentimes our layers under pressure or it gets taken out by that expanding primary layer. So from a pricing standpoint, we saw renewal rates remain positive on the portfolio that we retain, but rates have moderated pretty significantly to the mid single digit range and we saw plenty of rate reductions being offered. Speaker 200:17:03So So our goal with excess property is to continue to write good business and limit volatility and we'll continue to push rate where we think an account or class needs it, but also recognizing where rates are versus technical rating. We need to strike a balance where an account can be written profitably at slightly less premium. So anyway, hopefully that gives you a little bit more color in terms of what we saw in the quarter relative to property. Speaker 600:17:32That does that. Thank you. Speaker 500:17:34And then my second one, the core loss ratio within the E and S segment ticked down year over year nicely. I was wondering, if you had any an updated view of the your current year loss fix specifically within the casualty line? Speaker 300:17:55We don't have an updated view. I don't know if you have a specific question there. I think we've maintained some premiums in those losses and that's been the similar pick that we've maintained through 2024. Speaker 500:18:07Yes. I was more curious about if that your loss pick for and your loss trend for casualty lines has material changed from the end of last year. Speaker 200:18:19No, I mean we went through that process going into the 2024 year and we start with an ISO basis when we do our analysis. Our view of loss trend changed by less than a point year over year at the end of 2024 and our refreshed view of exposure trend also changed by less than a point. Those are the trend factors that we're using on the pricing of our business right now. We're actually in the process right now. We're reviewing that as we start to put our thoughts together relative to trend going into our 2025 budget. Speaker 200:18:57So no change at this point. Speaker 400:19:07Your next question comes from the line of Brian Meredith with UBS. Please go ahead. Speaker 700:19:13Yes. Thanks. Hey, Frank. Just a quick question here. Any movements in the 2020 2023 kind of reserves at all? Speaker 700:19:24And I think you kind of talked about your view on torts and what's going on right now in the inflationary volume loss trend. But there have been many companies out there that have been kind of pushing up IBNR in 2024 just because of some concerns about what's going on toward inflation. Maybe you can give us kind of your perspective on what you see going on. Speaker 200:19:45Yes, happy to do that, Brian. So let me just start by saying where we actually had movement in the quarter and then try to add address some of your question about the current year. So during the quarter, we reacted to some dynamics that we saw in our A versus E analysis, but the reserve development is really primarily related to the 2017 to 2020 accident years within general casualty, excess casualty and commercial auto lines. Of the 10,700,000 dollars of development, it breaks down as follows. So E and S core, obviously excluding commercial auto was about $8,700,000 The majority of the adverse came from general casualty with excess casualty aligned that we heavily reinsure representing the 2nd largest amount. Speaker 200:20:36And then as typical, there's some small offsets across parts of the portfolio. And on a net basis, really the largest years were 2017, 2019 and 2020. We had another 940 $3,000 of adverse outside of core E and S in our standard commercial auto portfolio. And then we had $1,000,000 in parts of our old rideshare account that we retain. And you'll recall that at the time that we announced at LPT back in late 2021, we retained 2% of the remaining outstanding claims for various reasons. Speaker 200:21:20We now have exactly 3 open claims in that portfolio, and we decided to strengthen our position there by $1,000,000 So that's how you get to the $10,700,000 We've not changed our view of loss trend relative to the current year to your other question. Speaker 700:21:41That's helpful. Thank you. And my next question is I'm just curious with the reduction in the property book, is that having any impact on some of your kind of general casualty production just because that's a line of business maybe that some of the producers and some wholesalers may be looking at. And I don't know if you've got any stuff that kind of the property goes with the casualty. Speaker 200:22:04No, it's a good question, but less of a package dynamic in the E and S market. So much of what we see is on a monoline basis. So again, it's not like we're not offering renewals on property. We are. It's just a more competitive marketplace there. Speaker 200:22:18But actually general casualty is an area where we've seen significant increases in submission activity, healthy rate and good growth. Speaker 400:22:31Your next question comes from the line of Matthew Carletti with Citizens GMP. Please go ahead. Speaker 200:22:39Yes. Hi, good morning. This is Carl calling in for Matt. I just had a quick follow-up question to Sarah. Can you please just go over that Q3 guidance you mentioned earlier in the call? Speaker 300:22:54Yes. I don't think I provided Q3 guidance. What I was just referencing is our early view from the LPT ADC in that the $8,000,000 of adverse development would be booked as a recoverable that we saw this quarter, be booked recoverable in Q3. And that we overall, following on from what we announced in the beginning of July, we expect to recognize the reduction in pre tax income of the $44,000,000 in the 3rd quarter because we signed the transaction on July 2. So we'll book it in the Q3, if that's what you're referencing now. Speaker 300:23:31Okay. Speaker 200:23:32Yes, that's what I was referring to. Thank you so much. And that's it for me. Speaker 300:23:35Sure. Thank you. Speaker 400:23:40Your next question comes from the line of Mark Hughes with Truist. Please go Speaker 600:23:46ahead. Yes. Thank you very much. Good morning. I got on a little bit late, so I apologize if you've already addressed this. Speaker 600:23:52But when you think about the trajectory of the excess property from a seasonal standpoint and then how you might have been seeing that develop as the quarter progressed, is that going to have as meaningful an impact in Q3 as Q2? Speaker 200:24:14Thanks for the question, Mark. So Q2 is typically a larger quarter for cat exposed property because of the storm season dynamic, as I think you're alluding to. So Q3 is just generally a smaller renewal basis for, I think, the market in general and as a part of that, it's just fewer renewal opportunities for us. Speaker 600:24:40Yes. And then that's kind of the pressure that you saw in the quarter, do you feel like that's stabilized? Or is that still something that is progressing or building the increased competition more capacity? Speaker 200:24:55I think it's been building, quite frankly. And you could even see it, we're mid single digits. So still positive rates for the quarter, but I could actually see that even descending on a month to month basis. So again, it's the dynamics that I mentioned, more capacity, primary care is willing to double their limit and putting more pressure on the excess layers. Speaker 600:25:21Yes. And then any plans for adding staff? Or I guess, how are you approaching that kind of from a staff perspective or potentially new lines of business? How are you looking at the kind of investments you might be making? Speaker 200:25:42Yes. It's a good question. So first off, I would I'll just comment on staff more broadly, really kind of attribute to the resilience of our company. Staff retention as an organization has been quite good. It's virtually identical through the halfway mark of 20 24 to the same point of 2023 and it's actually improved over 2022. Speaker 200:26:12So certainly less concerning just relative to having to replace heads. We did as you know invest in management liability and started out that product line really just announced it last year. We're going slow there just kind of given market dynamics getting that kind of up to speed and probably have some more announcements relative to product expansion there before too long. As far as additional investment in resources, I mean, obviously, we take a look at where we are performing well relative to our budget and where we think that we should be adding additional resources to take advantage of this market cycle that we're in. So that's really kind of a constant evaluation that is ongoing with our segment President. Speaker 600:27:08And then last one if I might. I don't know if you touched on this, but the re underwriting effort, I think you alluded to a number of larger accounts in this quarter that also were impacted by that. When you think about the back half, particularly 3Q, are there other accounts that may be in that zone that would be reunderwritten perhaps? How should we think about 3Q? Speaker 200:27:38Yes. So we started taking a hard look at large commercial auto exposures really across our E and S segment in the middle of last year. And so I would say much of this review has been done and by and large we had a more significant number of accounts review last quarter as mentioned with less significant amount to complete this quarter. Now that being said, it's an ongoing process. So you renew many of those accounts that have exposures that you're watching and you continue to take a look at them each year. Speaker 200:28:16But I would suggest much of that work has been done and that's also at a time where we've just been focusing on growth in smaller insured sector SME business. And I think the way to demonstrate that or illustrate that best is we see it very pronounced in the average premium per policy bound in the quarter for Excess Casualty and this is Q2 data that I'm talking about now. So we've taken some underwriting actions. So during Q2 of 2023, our average premium size we bound in our excess casualty unit was almost $97,000 per policy. In Q2 this year, it was about $56,000 per policy. Speaker 200:29:01So very notable and I think also very consistent with the actions that we've talked about the last two quarters. Speaker 600:29:10Trying to sneak in one more if I might. When you think about the general casualty, general liability, how much do you think interest rates having surged over the last couple of years kind of kept a lid on price increases in these long tail lines if the carriers are able to make pretty good money on their investment portfolio, then that maybe restrained rate increases despite the inflationary environment. Do you have any view on that dynamic? And if interest rates do come down, what does that mean for casualty pricing? Speaker 200:29:52I would say probably less impact than you might think. I might feel differently 20, 30 years ago, but not in these dynamics right now. I think folks are trying to make money on their underwriting and have paid a lot of attention to it, particularly in that line of business. So I'm not necessarily seeing shift just relative to interest rate kind of movements in the general casualty or other line of occurrence line that you're talking about. Speaker 600:30:19Very good. Thank you. Appreciate it. Speaker 200:30:22Thanks, Mark. Speaker 400:30:24That concludes our Q and A session. I will now turn the conference back over to Frank DiRazio for closing remarks. Speaker 200:30:32Okay. Thank you, Benjamin. Before we end the call today, I'd like to recognize the resilience and hard work of all the employees of James River for their efforts this quarter and really over the last three and a half years in continuing to make James River an even better company, employer and trading partner. I also want to thank everyone for their time today and for the questions we received this morning. We look forward to speaking with you all again in the fall to discuss our Q3 results. Speaker 200:30:59Thank you and enjoy the rest of your day. Speaker 400:31:02Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.Read morePowered by