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JRVR James River

Participants
Kevin Copeland Head, IR & CIO
Robert Myron Director & CEO
Sarah Doran CFO
Mark Hughes SunTrust
Brian Meredith UBS
Meyer Shields KBW
Randolph Binner B. Riley FBR
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 James River Group Ltd. Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Kevin Copeland, Head of Investor Relations.

You may begin, sir.

Kevin Copeland

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

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

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

Robert Myron

Investment Kevin, you, Doran, Copeland, This CFO; Myron, President and CEO, is heard who Sarah also Bob Chief everyone. who good me Kevin leads our are and Thank us Investor from today Officer, and Relations. you and with just and morning, our

forward a look and few remarks your taking then prepared we have questions. We to

the in as We showing an We well of quarter, results improvement another line we've for generated overall a have each segments above annualized on had greater. tangible of of highlighted XX.X% XX% bottom ago, posted our return or good top guidance in and performance three underwriting with year equity an solid our year-to-date, and press our release. from

underwriting events losses quarter currently property otherwise, in I segments. the market two in the fourth we from anticipate our continue had didn't didn't conditions book, good significant and to be ratios three combined be group in our events combined We have development We a date. forward. noteworthy of do adverse any our Our expect the positive impact nor had in net ratio on Pricing material any at the attractive quarter at material in results. catastrophic any XX.X, we from came or continues and E&S going for but reserve have segments, of it to loss to will all losses

segment ratio generated to it's it date, XX.X%, business as emergence recent lowest to combined fronting quarter a meaningful and segment. as in Our see now favorable continued of this has is to our contributor Specialty Admitted loss a the year memory,

investment performance very again strong. Our was

Sarah. talk a about Let of I'll some things then in and me to more these few hand it detail, over

XX%; addition was and which ago, up for line the last a meaningful was increases on This the our largest substantially strong been in Casualty, the grew was E&S right is which quarter Commercial had XXX%, our growth Regarding In was grew with division quarter. X.X%. growth to X XX%, growth per renewals. in segment, X% account characterized Excess Submissions year was we new we Auto substantially up in March. in growing segment years, premium both but increases over in in overall our were on we've book, of assisted in overall, rate obtained which Casualty, divisions. underlying the in core strong a by three significant our up where E&S XX% up E&S across and The of XX accounts rate small previously X% in Growth the XX%; driven by Environmental, all on which base. two by General back we

economy and last division. comp Submissions up fine In is risk segment This individual the get marketing we XX% our third discussed walk we and XX% few in we're gross last the quarter quarter. the of years. the new workers' addition increased is several individual about comp from the new grew submission also written for due fronting That's can we happy This risk been the the away over year deals quarter. think staff of underwriters workers' fronting of in was don't and we shrink premiums renewal in to average this to more premium were strong $XX Specialty due by flow, with in year inception continued or quarter a in a lowest we just the XX% the fourth which premium segment, Reinsurance from if expectations, segment, creating did was good above lumpy book Our the with them comparison. are per means the to growth so. to pushed that In million it of becoming while the Casualty larger It us. data the account out has the line the was pricing. of Admitted accounts the in $XX,XXX, and competitive,

down X.X%, on Reinsurance In underlying X.X% Casualty held segment, quarter. rate underlying primary Now And the quarter. pricing core approximate was in the in X% X% Workers' Admitted contracts, of with segment, X.X% but reinsurance treaty segment, pricing E&S, which were renewal this up all in the only rates net the in loss believe was renewal changes When the respect the there cost is quarter. pricing to our for business in auto, $XXX,XXX margins steady. increase commercial increase at accounts excluding under in premium, was we and Compensation approximate then up Specialty index an pricing; looking

we our me year basically approximately loss state XXXX. was In reserves the of a separately Auto division, share the of had $XX.X our million, picks. development year we XXXX loss write state. this we also In large accident bit adverse E&S and now lower a reserve that did and account from in the all risk principally from XXXX, one longer we on Let about no which state. In Commercial segment, speak accident had and and loss one our priced XXXX,

in we XXXX takedown contract adverse a in case developing which notable the year very that our segment. given our IBNR approximately and strong of comfortable and well conservative the account in current overall the of significant On underwriting in two accident year is me result in taken is business in resulted loss let which year contract. loss last as are few accident IBNR are XXXX the have accident With group-wide very Xx year Auto the this current loss that that, loss from basis, basis, Commercial overall, loss call a other size reduction from the the reserves XX%, is CFO, offset to in year commercial quarter is and the of years. The in Now, waiting auto tail as division Sarah pricing Doran. a down reserve principally still we our casualty was turn increases XXXX years. ratio have year as reserves the total and the well, current a the a the accident in prudent, is pick. with a ratio year few XXXX from level development reduction in is last pick pick of loss our ago, On our at the group-wide our A this comfortable percentage an XX.X%, in the last of We're division year. shorter points XX.X% reserves substantially over been actions

Sarah Doran

everyone. morning, Bob. Thanks, Good

quarter generated are profit of fourth income of $X.X million operating and $XX.X the of million. XXXX, million, net made of For underwriting strong reporting we profits $XX.X

improved attractive ratios compared our very of expense book-to-loss that and mid-XX and continue both is the compared ratio of the ratio quarter quarter have declined. last year to second as improved prior for business. as Our combined to the year, a our while we mix And expense is expense franchise to and as third ratio this of believe our quarter

portfolio due and sequential This has ratio larger compared income rate even core Renewable and that grew performance, our on quarter certain our ceding about a the the Energy than floating in to about benefited the a prior to as from business as loan attractive offset X% portfolio, Complementing rising our more commissions. growth of rates principally well XX% E&S as quarter. investment portfolio. our Specialty to Admitted quarter, was This lines continued which decline as investment underwriting within compared entail the

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

actively While expect this not our the been we third-party have to has business, And in portfolio our would our growth reduced taxes. last reinsurance finally, growth our the we in these continue strong current few quarters. levels, business of given at beneficiary

this rate XX.X%. tax effective quarter was Our

tangible We that many points of rate to this continue historical of at second year. our leverage net increase While will to XX similar equity over an end with of believe tangible the the ended full there shareholders' written premiums impact we the quarter tax $XXX.X the rate, million the was for be months quarter of to X.X:X. are the year averages. equity $XXX.X Operating million, on trailing

As have the turn mentioned work Bob? to that, quarters, special our in continue insurance year to it opportunities we pay back to businesses. And prior given a our attractive capital not this see, elected with to in dividend including we we Bob. growing I'll

Robert Myron

book. performance for Thank be for the and to the questions. years We're we most we we're you, our be Pricing change to of our to the about in great I about for our Auto prepared call ready Sarah. growth are and up, is This up. getting the concludes so at, open year-to-date up that. our targeting guidance submissions no feel to where feel Operator, remarks. great closing, continue now year, In continues there Commercial recent strong performance

Operator

from comes from Instructions] question Mark SunTrust. And Hughes first [Operator our

Mark Hughes

I development the wonder if the in talk about you could quarter. adverse

higher curious just very in little sort sort continue develop? level, process would still Just on going could in detail or claims of settlements be many what Are be practical some severity? bit detail. helpful. these to through whatever expected? than How seeing good or you're some given cases are may of I'm more still You've they the more lingering it little payouts adjudication

Robert Myron

you're Mark, about the And year XXXX Sure. specifically? talking

Mark Hughes

exactly. Yes,

Robert Myron

as severity underinsured say what it's to on around its or just more absolute UM, in It's would Florida, value really those it's not concentrated claims. uninsured settlement motors and related necessarily issue the and really really it's there a of I are. obviously and And the litigation. mentioned prepared it's in remarks, related that's Yes, UIM claims of that really

not and thing Florida, environment really severity upon regulatory frequency-driven. a really it's in So the based

Mark Hughes

claims some have that Anything open could you how just potentially many the of can sense about are at more magnitude there? of adverse? Or the say you risk least

Robert Myron

Yes, sure.

Florida, don't I for specifically accident I year the the on for aggregate, year of the claims have for closed. can So have tell been you statistics but accident XX% the

it's substantial pretty number. So a

our of proactive claims casualty our business. and times given it's and of shorter said that think shorter than I also number business, we've handling this a given tail book of the it here, is duration what rest meaningfully

Mark Hughes

leverage, all? And then underwriting Are growth being light your the of business a you will in capital little final your outlook question, in at that is situation? our take you selective influencing more

Sarah Doran

that No. say the rather reinsurance wouldn't are than that we are. Only we insurance business. focused businesses I the on

that and growth last of insurance changes up is be so, say to year, but So the that's all that the capital where in made discussing influencing will continue Mark. And some we've changes been line growth the throughout we at that with year tax structural it end wouldn't I of the showing the of year-to-date, the the is came in for our down that and businesses. we that's

Operator

Meredith question And from next UBS. from our comes Brian

Brian Meredith

you. A questions of for couple

loss on in is I that elevated? on the Just felt aren't seeing also wouldn't 'XX, and much kind you're 'XX have a the of if your also that's why getting that the an different but it's XXXX curious, higher, loss Bob business trends rate trends impact Sarah, year 'XX understand year impacting diversely,

Robert Myron

Yes.

mean, I of So couple a things.

a increases of had of of made done separate quarter, as things. this problematic that's and -- leak of outsiders has other that third-party XXXX we the and thing all, pricing for pricing been worker well, significant along -- by of in comp seen reduced but -- -- thing past, were risks whereby of of that -- really the year, principally was that state, year, a reason increases around of the was that regard But into the for 'XX, underwriting then, in other think that had given that as business. a XXXX, we in on and that and in group actuarial was we and I of the quarter is for third with had example, reunderwriting smaller workers' took so materially commercial Florida, in And so in we've XXXX in quarter pricing done the 'XX year, specifically held. shares latter is has risk fourth it has state. why take we And another actions so in That the pricing share this actuarial generally we this fourth some course, and we auto haven't might the 'XX the First the top some in action work some the important XXXX. around work third-party that done of half lines year and last the the done whole, by

So the reflected work is of in results. results quarter's that this

Brian Meredith

workers' environment. compensation And this low very as noted second compensation workers' insurance; large then insurance writer there question of rising very, out on frequency employment a one very result

a keeping seeing eye Just in are curious something what your like your you're thoughts on? it but that? it is you're Doesn't book, that watchful sound on

Robert Myron

is workers' This compensation? in

Brian Meredith

your in Specialty business? individual Correct. comp Workers' Admitted compensation,

Robert Myron

nothing increase particular don't year. this change some some last I into they the accident it since and policies there's at year maybe I'll -- just again. actually of a the the severity some that ended quota the to to there is in then reason appear increases And effective We put a of XX, last frequency. time, me why year. higher accident -- low started in right We were we've reported years in XXXX. though low, -- the but real frequency September in number in And in activity And Yes, they've through that October to year as ratios getting number enforced of are And seen loss point that's it having workforce, the loss loss saw prior first appear of several There elevated started a we've in in weave loss ratios, share we place the XX% reported last were people excuse a as meaningfully seen been back level prior though as we months materially well. pick. X -- X on and current to up pick. the think XXXX, year-to-date

not So four the the last really compensation in severity we're seeing issues book quarters. frequency workers' in and

Sarah Doran

keeping and absolutely us to. an did eye we're expect they And that on

Robert Myron

Yes.

Sarah Doran

we remarks, of that close cyclical. is powerful, to want XX% mentioned certainly and and has keep the growth count compared And around as it, submission pretty increased nice that prepared been a be but eye Bob moderate, in his as is our to selective comp

Robert Myron

Right. a pricing obviously are from cyclical. peak Comp off We is perspective. a

so the And take as a -- commission getting comp ceding some the really top share And as $XXX,XXX a buying then think think well the as to excess quota that well with of we share on XX.X I yet. to excess not meaningful I that will workers' the there. of we're what think, got it that And we inflation we're should equation lost cost so sits we point, well. lost it's and of million protected that book we to it issues of watch carefully treaty do, Sarah says, extent quota any we're out tower we're severity at but I see, that XX% just seeing start

good think, be I So haven't in yet. to We shape what it coming. weather we're just seen might

Operator

And our question comes KBW. Shields from next Meyer from

Meyer Shields

to don't I how know, look was and the I average of per, possible it's quantify, we X,XXX in compares outside Florida guess, incurred whether accident loss by 'XX 'XX accident accident I wondering Commercial 'XX? year Auto, to year, miles, year

Robert Myron

incurred -- I talking absolute that rates a you're excluding guess, average about you're about The loss, from right, talking just dollars? perspective

Meyer Shields

Exactly.

Robert Myron

better it's volatile with down some have on and bit also little higher, increases. we a mix states been our that, given less modest some And of XX fact of there that's think price we've significant less safety drivers and good states driver in that terms frequency terms there but like and/or course, with the improving drivers we heads they've for some and pool. but of they a and also of had call, the of division negative normally accidents the the in who have gotten I that And reviews been are top Yes, taken And in then things very of complaints I then, has would has our done on in are because there. driver as work say And there declines. that actions the folks that and/or they what of screening The lot client there well. that insurance, deal calling that.

so And itself in manifested numbers that has as well. we've seen frequency the that

Meyer Shields

shift. investment the I million Reinsurance Casualty shrinkage -- any Second $XX question; in timing on impact aside the the Reinsurance or portfolio Casualty translate as setting premiums to duration? Should have guess,

Sarah Doran

of mean, to even retain I and it's duration we what the is I business the that re E&S -- in No. business. think Meyer. the Specialty not so in we write business Admitted little casualty our the don't dissimilar

I will If if think duration the it matching investment that's different are that So P&C least. I about not just of a the business, think, that I Obviously about absolutely answering liability given either. be but wouldn't way question dynamics we yes. the at think asset -- that's it's your

Operator

[Operator And from B. Binner Riley. Randy comes our Instructions] question next from

Randolph Binner

came ratio in quarter? Commercial statutory but including Auto share apologize in P this for the been loss you I XXXX, this or what and late, XXXX I has line if your can is Schedule developed asked,

Robert Myron

But year given year. of good then that would the we the underwriting very all booking are than of is a about year 'XX too pick Well, that the perspective. a then ratio have information been from magnitude where year not position the materially to specific it changes. to individual it's providing pricing feel accident conservative is different we loss a XXXX want be I and end And the year -- careful about 'XX significant And think the client. at I that's I think an obviously on last still

booked resulting are profits. we And and still years. good 'XX about feel so levels And that at in 'XX those are underwriting

Randolph Binner

leverage. covered I have on -- what company, understand like the XX because way total it we I then that but use. different but offshore premiums capital, And it's over written net before, seems guess it's that's operating think we may around last measure, GAAP it this so an is ways months -- measure I been X.Xx, there's of

good the that -- leverage operating pretty right the would think, What X. beyond? leverage? operating operating expect from conservative right special general, this an operating outlook XXXX, and a perspective, kind in for just, we but it So XXXX should I would be the to of closer here, the leverage Is without business, in what's be

Sarah Doran

there that bit is from think to was X.X:Xx, we and I last quarter, little X.X:Xx. a measure room, differently, a little it we it bit that's get down

I above room we think the that X.X:X. have likely

have leverage. an we So room operating from

We have leverage a safe a well. room as perspective financial from

that is And of paying like of whole as of room a so. we've there this of just in opportunities So insurance a was like growth next felt given fair look we that the credit run year for a than at the a quite for to better businesses or the our amount that over capital. we been couple use year been we we've years. lot saying it paying that special feel get only don't candidly We

this and XX% of that out to So blow the that our we've paying kind quarters capital the of that year-to-date gotten next operating year. on than the rather capital we with couple well kind over special get as business wanted on of return

Randolph Binner

How calculation work? is your

Sarah Doran

net which is capital remarks, what my in just -- tangible XX to prepared written get Randy, is said capital. X.X:Xx months to we I Yes, which

Randolph Binner

capital, it. Tangible got

Sarah Doran

Yes, and delta. might the be

Operator

and time. Myron, for showing further back CEO now no the turn at any to remarks. I'm would questions this like call President to And Bob further I

Robert Myron

this to we for your talking three to in quarter forward you you, again everyone, and Thank time months. look

Operator

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