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JRVR James River

Participants
Kevin Copeland Chief Investment Officer, Head of Investor Relations
Bob Myron Chief Executive Officer
Sarah Doran Chief Financial Officer
Randy Binner B. Riley FBR
Mark Hughes SunTrust Bank
Matt Carletti JMP Securities
Meyer Shields KBW
Call transcript
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Operator

Good day ladies and gentlemen. Thank you for standing by and welcome to Q2 2018 James River Group Holdings, Ltd Earnings Conference Call [Operator Instructions].

As a reminder, this conference may be recorded. At this time, I would like turn the conference call over to Mr. Kevin Copeland, Head of Investor Relations.

begin. may You

Kevin Copeland

Good River Olivia. and to welcome Thank Second morning, Quarter James Group Call. XXXX the you, everyone, Earnings Conference

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

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

Bob Myron

is Chief morning, and Copeland, our good Our and with Kevin for who today us. everyone. CFO are me CEO Thanks, Myron, Doran, Investment leads also Sarah This President IR and Kevin Officer and Bob

had line a of highlighted then X on to our We've top segments we questions. underwriting as in your quarter look another showing have XX%. few bottom each overall press and solid taking of We an equity a an ago and posted year annualized results prepared tangible performance generating release. return from in forward We good remarks with our improvement

market continues great the XX.X. and expense quarter in our because expect a and in book. our at development segments. Our conditions a to reserve of Pricing had decrease combined didn't adverse We amount ratio attractive level on small underwriting XX.X will combined continue it in we move a net at ratios the but impact in direction. for in came be E&S to I ratio right all our have had absolute group And at part good is result at X the significant to continues loss

strong. very was performance investment Our

about and talk few Sarah in more things detail the me same. Let some ask I'll do a then these of to

Commercial our in XX% than modest in auto grow core had casualty in contract submission increased XX E&S, more general up grew growth gross the XX%. to workers previously year in the the a by moderating core largest In up was back The insuring largest last for expect did XX% This excess we XX% and ago. XX it in segment, rate segment, growing risk growth, fronted we largest commercial quarter strong of assisted up pace XX%, by states casually specialty the was and and we're year. individual states in a E&S continued which economy The in the our saw division. is XX% our was flow, growth grew book, XX%, underlying March. on is substantially which E&S strong account you written comp our with growth deal. increased Fronting In growth we strong increases in still overall up environmental, for down division Submissions which in were our in premiums XX admitted we just grew from the In overall over in and we obtained a Auto last contract. E&S growth segment the due of at Regarding X as previous current in division. quarter. account the mentioned We to Auto period this call Commercial We our XX.X%.

income quarters. X deals we have months more in coming attract few additional importantly which should and added last the new written premium Over fee gross generate fronted growth a the

past. the and workers line we expectations and risk In marketing to the several refine quarter. up the the reinsurance addition in our was due This submissions our segment underwriters of we in recent as was shrunk XX% for by which book were XX% accounts. individual casualty on business new focus profitable with New comp staff segment, the in more

Now business the X% Auto, was Commercial in excluding pricing. all which quarter. the in respect core pricing renewal is E&S segment to with up In

drop While the some this of from histories. the is with amount in renewals large a off was decline reported driven the we loss of by QX, pricing favorable

material we our rates large and up X X%. price were divisions, Energy renewals Excluding that core booked in Environmental E&S in declines

this was for renewals the quarter. of of a first the in million achieved health allied accounts about health amount reason much Another dollar versus we XX% $X allied larger the We QX decline quarter. in renewing had only

approximate seek forward, rates in always underlying pricing an current there segment, were our was marketplace contracts impacting for cost the, we the X% held retention X% compensation not for reinsurance materially loss while in margin believe rate the can net In the increases best we Admitted down segment, Specialty index As workers approximate improved. we increase or will but of In the an casualty X% changes, going achieve steady on treaty the increase in primary reinsurance underlying quarter. and rate rates.

of accident from our in as of This the waiting and loss more on the me making development as our Also approach on our basis, This division earned highlight was of that accident segment, a year In year ago the quarter year that books we loss deliver increased reinsurance both loss Let on development prudent was we reserve it XX.X% group ratio written on year a X.X loss I'd several segment we put loss a in wide are quarter is accessible segment loss line well emergence E&S year. segment. negligible. point excess and XX.X% this from less combined loss our now commercial reserve reinsurance. recent the conservative loss we amount approximately in year same showed X of ago basis, from this book. in to reasons. about for casualty-re our and the loss to with a sequential quarter nearly of well from all of is type business our Or that was because The emergents. prior as points of at development year expected bit slight running the like books adverse of for put business was did year picks than were year-to-date ongoing respect show accident a loss segment, increased loss the business. have we first first quarter this years this auto a this some even while improvement the picks which able On speak expectations, proportional segment the due a pick so ratio and basis. in With above E&S is adverse accident premium loss about reserve in well up in the reserves to had core emergence loss as to business

Within loss ago the at year-to-date looking specialty than admitted basis. ratios. segment, was has a emergence Loss year reported lower been on it materially

it that in segment, loss adverse than in of less the E&S lines a this emergence Specialty favorable E&S, admitted reported $X than the was expected on have materially core had were $X ratio segment year development last Commercial X loss and million was of E&F, a the our year is was casualty-re in year-to-date $X worth were million lower had flat a QX in In development segments largest while price X we In on basically more loss offset that did auto we Within by in bit little substantial amount adverse in flat. quarter, to book core million basically million increases in $X a to we is Like the reserve had ago. the but years. expected Auto. QX a division, development. basis, year-to-date commercial account over small on we in in again that It of we commercial a basis, we water it development mentioning the and

a and for booking a and auto Doran, start XXXX particular accident level a segment reserves the CFO. me whole. the conservative that emergence year our to year off prudent let our With in loss the division from are overall loss we perspective. highly of to turn call commercial over both positive as The Sarah pick that a thus is the in confident are and division We accident

Sarah Doran

morning, Thanks good Bob, everyone.

an million. $XX the For made profits $X.X generated underwriting million, of $XX.X of we of profit million income of operating XXXX, quarter second net reporting our and

our low mentioned, combined prior the improved ratio Bob has ratio. expense as, As our compared to given modestly in part quarter,

quarter the and of this While quarter our as expense first the compared to ratio year. last improved of both second year

portfolio, rising XX%, This and our been our due has believe that a Complementing a and for income ratio alternatives performance the continue our strong principally investment performance, the franchise second portfolio mix as of larger to quarter mid-XXs attractive to our compared investment to through was is XXXX. extremely case underwriting We business. was from of yields expense history. as

cash cash about second of businesses grow year-to-date. have quarter was $XX in flow our are continued million $XXX.X last compared the We to as as X% In cash continue from to investments to year. enjoy with quarter operating flow strong this, line and million, up this

growth While to last growth to to of in of business which has the been beneficiary lines certain at in in significant expand external growth we levels, to strong second reinsurance our in our of many able the our would continue change pleased match renewals few coverage no renew not note at A coverage We these were to our the quarter. expect to occurred brief during and quarters. this current little portfolio business. our pricing be

on use key We taxes. finally a tool. our And as strategy continue capital reinsurance to management

Our effective with tax this rate quarter X.X%.

tangible XXXX. or XX this points and over tangible believe was times $XXX.X that to ended at the similar With rate, are the million million, rate written tax of averages leverage X. let of full of an few equity likely quarter it a therefore net was premiums of Bob. impact than year the X.X Operating to to quarter higher We months our to will increase the $XXX.X me with back it we points there turn equity to first to many While shareholders' the be end trailing continue that quarter. historical

Bob Myron

feel call In Sarah. prospects are it Pricing we economy We're positive are concludes great ready about reasonable. for costs drive to growth open expansion I where growth. to we submissions targeting our continue forward. are and economic our the Loss the of continued U.S. you will up getting Operator now closing exposure the is prepared questions. up, up. going Thank remarks. strong are This

Operator

first B. from Riley FBR. of with line [Operator Randy the question Instructions] Binner coming Our is

Randy Binner

just commercial relatively action on modest year the it Bob, think and it is that you, in I about Good -- had was you was call morning. a side the off I the XXXX start. the couple to the mentioned in reserve quarter. Thank questions that auto activity positive

what just size auto of if kind So the is years year dynamic if there offset your E&S the that's other past a of, and versus way kind move from is question, auto. curious then in because looking came in is good, that from adverse commercial commercial for X accident 'XX the if seen wise where one to a -- we've was

Bob Myron

Yes.

I -- to the in understand your positive I we lines. about commercial if question in million we E&S million million development in part -- think said, first adverse offset $X of $X auto was I -- core this of of to the this said by other I that frankly $X So $X is million development think there your about said,

very is ratio would ended booking loss in the in that a I good are we was -- small current are mostly XXXX very but pointed seeing reported substantially as of where we accident how a that's you loss be what a than So from, it a it reported it lower And just was year premium pick on And ago. number as reiterate this we're think the and out division underlying we under current would earning overall contract. came we year I X from terms flat. very, up

Randy Binner

Okay, that's same thing…

Bob Myron

good division. in we level feel feel -- reserves We about about of the overall that good

Randy Binner

What that developing. improvement -- in would so are be how reserves dramatic a pretty

'XX that number million move was that's maybe year like and in 'XX roughly. I think accident a $XX

a just small quarter comments is this still and it obviously seems are positive. much but smaller. is So This your

of you but loss that, thinking better supported -- that's about improvement that, what pricing significant mentioned have category better a kind exposure? that of such in so So that activities has risk. just you What

Bob Myron

it's of Well I number things. think I -- it's think a

actions substantial highlighted we've actually as getting over of both There last getting the specifically insuring to and and as related renewal. that years share booked respect may handling up the been that we premium. from in what ends terms up with that rate a states fees it's increases take perspective risk, perform. that paid has 'XX states think 'XX we're re-underwriting how the some The aren't price I we're claim for two the to those

state that a and so factors. we've some states talked number different specific of relatively there's -- there's before have Some about performance a

Randy Binner

geographies there in think it aspect on continue that is in you lock of shed I to And would a you Is block? book. expect you're the that as lot certain profitable more of to covering geographies

Bob Myron

I this contract. we're that Randy. X would wouldn't new I just say at we the point into time, in mean months

have XX across U.S. number. largest of a And their the insurer see of now states the so a that don't any driven a any as of start they into right of we significant risk -- And But have that. obviously terms of Obviously the United majority when and the about is is in still we're renewal States. expectation into -- these get guys there, winter as we discussions we'll the mileage changes. we're we

So I be right mean don't could I turn now. right some any could we there don't be we down now. see changes some don't but expect it

Operator

next of Mark the And from coming Hughes question SunTrust line with Bank.

Mark Hughes

you putting morning. to you, is when financially of that Thank opposed I frequency up reported reported experience as good and book actually you are are loss making clarify you're bit? to there you reserves. what referring you're Could for distinction losses? the talk or -- the underlying kind between you about think versus when a talk lawsuit your good, severity Bob,

Bob Myron

across -- specialty think admitted, I in Commercial We're you When look obviously E&S -- we of division. right. sort you're what quarter. Well booked we the and casualty-re, when core then did exactly you Yes. Auto the talking

I adding incurred and change year-to-date outstanding, reported loss reported plus to ago just at the were ratio color was really activity a ratios in those which that I around that quoting. So some be what underlying year looking relative statistics loss paid case was would

year we basically flat were that is core loss Commercial running that, seeing cost E&S question not well gotten particular this ago. we're trend. admitted I that basically in as a another answers X is down well. well big And maybe anticipating and change have in very Core So getting specialty is because is measurement relative people other to auto flat. casualty-re in is, is and the best really underlying which think

a Now book seeing year-to-date a year we're pick we're case conservative not really trying but prudent basis, in accident that. and to happens that on

Mark Hughes

XXXX auto. How comment emergence Right, that's year you loss accident commercial helpful. about about the on for Can the that?

Bob Myron

negligible a not number big all. is minimus, It de at

Mark Hughes

coming so with expectations? in Okay line

Bob Myron

Yes.

Mark Hughes

You down pricing said in workers’ comp your is X%.

Or cost you Now is loss that that on an absolutely the plus basis X% it's terms? account it taking well if it or is absolute follow Is on down is cost X% as X%? me? into loss

Bob Myron

on No it's terms. absolute

are the even we should that is but on basically underlying -- expanding holding of do I premium it's comp. So -- pure or at that a think we're what think is what looking margin in and also we down And we sort at I as as we basis trend there cost so think look loss the there. perhaps

So think margin just there. positive a even price there's I decline, with

Mark Hughes

particular staff, Or you, you finding some I kind Is some thing? pricing? expansion folks of that mentioned think is that marketing that sort you're that good in this of niche

Bob Myron

focused think I years we, the rates up business that was very number don't larger that classes. getting, in point certainly of on XX% classes is for than it particular. several pretty say but in general and I we're and diverse ago. pretty, now think here us. was was are lot I'd The state one came would other a more contractors holding contractors I it that a of anything it there's several, when there's broad we It book was to is don't one

Sarah Doran

like most a still X to for example, focused regionally largely state exposure for California, book. have don't the still part a we states But

Bob Myron

comp For that individual workers' risk book, yes.

Sarah Doran

Yes that for book.

Mark Hughes

some And then like new the admitted, is picking of pipeline finally How sounds up that is behind in activity specialty looking? agreements. in terms

Bob Myron

and get would then as we're, it's two definitely is. pointed million quarter good. one think I say is you this and I always until is $XX that lumpy you a right but booked guess nothing deal. I I or bound, anything do Nothing, for don't it's new Sarah out think has Nothing

a of we robust. So made we always going think I fee gross but I in the been on quarters pretty to difficult X that growth coming the some mention pipelines little we're, in think to year-over-year that continue to year we rate are is forecast to ago. It's put think premium and growth drive income a relative

Operator

the JMP coming question from with our Securities. Matt Carletti And next of line

Matt Carletti

the go looking like to number. just the the the quarter? just changes did, of did I did it think seeing just kind it X% therefore the because Can kind bit it cooling about levels to Or of business mean impacted line, you at a increase in off? just forgetting of and Did in number of absolute of commentary was is core aggregate of where written business sounds in that. and E&S it I XX the them. see you pricing say wanted little at and a had those I looking of lines what shift, kind we're how and would Bob, each is mix rates of on a you kind mix back hold of the it of slowdown at individual the levels kind at characterize this line mix you little largely

Bob Myron

to about at I QX got of course of ex Yes bit pricing QX, Allied We renewals, so was gotten, we're but which let's normalize always to that's one say It had seen basically about of changes was was is many renewals and I Allied $X would increases normalized million lot market it lot to of bit the right you what have that that X%. this think that, that a we it's a be. and ex pricing only divisions have renewals. then bit and a not I in, and Health good did that Health, say Allied again to had on flux out is basically basis. little increases trying the, upon normalize I say would say And which of, little ones There that of of talking X% while a were tried trying we're price in now try based a and more the in more and would also Healthcare in but we compelling, one little are X% substantial And question look and that, of has going right. on a XX% division about. know new that figure of

collateral insured and Some the retentions been, that response from SIR retention the do because for pay claim coverage we love perspective is credit the recover you want that here risk our a take way trying then this up let's has from an of thing. because, get it and SIR have works self-insured the that a materially [indiscernible] access not right the type of and to is whatever And to the Well oftentimes standpoint to perhaps insured. like more we large first got of business

we that. haven't -- with we love So doing in not we're --

low did on we level increase the but we Allied in division overall lot renewals was So that smaller. a was what renewed Healthcare get rate the rate and of

So have think to -- going we're where goes. going to see I that we're to

mid-single-digits sort the broadly in more up think divisions were of I other general.

seek and with that. going to pleased continue to -- going we're that So to we're we're

Matt Carletti

ex it kind of past rate kind of reached a -- hold seen near in of as and markets July we know of in bit generally Health you the of little kind the you number may of days those that see have equilibrium in have Allied a has few sustainable is that increase just that term. a but I be And

Bob Myron

business sustainable on usually it's rate the that quarter after well. did we I last on And month least, question don't get we get think end the asked but days, we call at -- this get the right. we the of the -- really several as information

actually more think it's that. getting I anecdotal we anything I still there than so But we're concrete still I in don't respect. out have that think are And

Matt Carletti

you're specialty only should -- in position you're and while of I muted capital my you How other casually year balancing, the admitted. in that to line top still think putting we about the How as and I'm shown the we question. wanting it. your kind thinking so is should about end? talk of they're kind just to about is just good Obviously expectations then of capital think my growth the management that year overall we guys how And we get kind approach shrinking back growth have specials about E&S have think as re work your and capital shrunk. half

Sarah Doran

I Matt, Sarah. So think, it's

yield are. decently we that folks way just about We peers is we're is and our -- many of in access as to the thinking that, the that the of ordinary at this think where I many in dividend. looking other space feel that

to So point year book, like obviously balancing capital individual insurance of us seen the risk on earlier. the just see and that of better given in mean getting the rate of that even a the opportunities of in that. businesses. we're in make the we've our workers to on look and want both feel but we importantly a both helpful to business in in businesses you'll that's opportunities pocket insurance for that at for of a keep E&S I different balance grow comp We the shrink to reinsurance these but our return some I the think been fronting spot we've that and comments more get in

but a special a and So special year about rethink mean about I less special probably dividend times half we're from the think and surplus that definition point we X.X where ordinary been is has which that's a if this decision we're episodic. by more the a our like I given a over we year. when churn heavily is last up we'd pipeline have a -- and this now to of just kind at

it. about thinking about it guess that's how think I I how and we're So would

Matt Carletti

best Great, luck. sense. and makes for thanks color That of the

Sarah Doran

you. Thank

Operator

next the line [Operator Meyer Shields coming Instructions] from of KBW. our with And question

line is open. now Your

Meyer Shields

quick give a new two, I'm sheet? X And on So morning Good been on the excess the the thanks. questions balance deploying rate? investment income. cash One, can built that's for it us money timeline Great, you calling is up there

Kevin Copeland

here. it's Hey, Meyer, Kevin

So question. to first your answer

as roughly We the higher are reinvesting XX funding at new basis during Carolina timing maturing that'll the for in this then Re, reinvesting rates of than points and reinsurance levels happen quarter. vehicle our

next the it'll fully or over So month X, be invested.

Meyer Shields

the as of as us Casualty Re you guess to down. sense sustainable I sequentially year went ratio a like expense a maybe shrinks? Can give rest level for the the topline

Sarah Doran

I XX-ish% -- amount through of expense know move XX% that are to a you where stretch that things think caution of there not and that This of lot the unreasonable is the fair there quarter the I rest a things are kind ratio was of Yes, this can to around. the year.

way ratio. rationalization commissions We But and with amount the a have attached certainly expense looking and a the push that generic that's we're at book profit assumption. up the well net your think business to of I would reasonable do particular of the fair fairly contract that should that things or book

top So question was Meyer, was it on your second line?

Meyer Shields

ratio No of line. it of the was expense light top direction the in

Sarah Doran

it the I would this was think ratio kind expense forward. going of quarter Yes, about where

Operator

Mr. [Operator back would the no further turn I'm question. like to At over Instructions] showing time, Myron. call this to Bob I

Bob Myron

you, look forward next to time for Thank today speaking quarter. your with and everyone we you

Operator

disconnect. day. have participation This the great program your today's Thank in conference. now you. a Ladies concludes may thank for gentlemen, Everyone you you and