JRVR James River

Kevin Copeland Head, IR and CIO
Robert Myron CEO
Sarah Doran CFO
Adam Abram -
Randy Binner B. Riley FBR
Matthew Carletti JMP
Mark Hughes SunTrust
Meyer Shields KBW
Brian Meredith UBS
Call transcript
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Good day, ladies and gentlemen, and welcome to the James River Second Quarter 2019 Earnings Conference Call. [Operator instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference, Mr. Kevin Copeland, Head of Investor Relations.

You may begin.

Kevin Copeland

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

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

most Form discussion a regarding and statements. Risk statements not and yesterday's in risks update section forward-looking to make and and Factors see filings the any XX-K, We any undertake please and with For uncertainties, such recent of reports other the forward-looking duty our do earnings XX-Qs Exchange of language the Form release we cautionary Commission. Securities

River the over Chief now Group. Bob turn will I call of to Myron, James Executive Officer

Robert Myron

James and quarter Good second to XXXX call. morning, everyone, River's investor welcome

Bob role as I'll going me and Adam, your role. the Copeland, for Abram, CIO are and our talking specifics about and Doran, some also take of to back with over who's our time our spend get they'll Sarah again Sarah Adam CFO; each Investor today I CEO results of and Relations; quarter move to and Kevin over Head into the shortly Myron, I'm today I'll on then the call segments. questions. our turn and to overall some the COO

the We had a year. of first second quarter months very good six and

XX% in gross the growth release. core core modest that and highlight highlighted in a results with growth QX E&S QX, ratio The strong the a expectations quarter. exceeded were in in our our After underwriting premiums group the combined start business. Our our press with substantially certainly in quarter growth XX.X% of in we written pricing our our in is across

production million Every division core business alone, XX% which had E&S represented core grew, new of $XX segment our the within in quarter. in we business of core and our

manage to expenses as out leverage and this XX.X% of to Our decline get our carefully of continue groupwide expense we in franchise. great market-leading continued ratio

from on $XX.XX months, the about continuing tangible am growing I a return pleased with of in three X.X%. about same dividend particularly $XX.XX at a to value per a time, great yield producing equity and the share pay to last tangible book while

talk our three segments Let each about now me of individually.

segment, were XX% XX% year In our largest up from the over quarter submissions QX. E&S in up in year,

to - carriers the So U.S. amounts and reflects and economy; and meaningful submission in have continues other excellent and importantly, flowing market. lastly we This continued the relationships brokers from flow growing admitted E&S both accelerate. wholesale to most the us with our strong market brokers; business of whole the

on have X.X% variety Pricing have business. We're decreased line was seeing business. including performed classes renewing been other and sizes carriers on whole core in and/or lines do accounts not of underpriced that quarter the - not things, discontinue a underpriced, of and up our well renewals E&S

as quarter, business, and with last renewal pricing like higher On retentions times five well. or deductibles the increases binding doesn't pricing price tell story. that three the expiring with larger accounts we to oftentimes But are are self-insured certain whole new

casualty While and manufacturers we different as and hardening in traction broad, risks, the contractors habitational seeing is energy. casualty of classes, a general accounts, market most number the across are excess such

July the to based now current see and preliminary right well are We upon incredibly positioned on production. it don't down capitalize of slowing market we conditions indications

in a is underwriting quarter, and large segment I submission and large staff the through turning growing the mentioned growing we have As last volume. that the

is system underwriting scalable efficient. and Our

notable year we larger have time, trends business. E&S are loss in given saw fairly of a which now this ago relative have as dollar that we core quarter, as the the is being down benign losses amount a book of in Also, reported to - at

trend. loss and increases rate outpacing the So we our see definitely rate the getting we're

due the comments a majority written auto on for business. quarter, quota placed behind premiums, of written our this within only but that commercial for us premiums we reinsurance XX% Now the X% commercial gross net In division auto E&S. few to grew the share about contract

in quarter, $XX shifting million approximately to During XXXX and well where the accident while our we're This accident accident loss booking changes the loss this XXXX about higher-than-expected estimates the reserve address years, from resulted year and XXXX the emergence XXXX feel year in run good 'XX and from XXXX the the we to year in reserves ratio was accident XXXX accident line. years. to of loss continues

premium XXXX years and as will written standpoint. worth the combined, question XXXX XXXX in the commercial from the large It's was as again premium, and as XXXX were be size written net auto nearly was. reiterating of as large XXXX

in we've XXXX mentioned we in price be elaborate reserves. had Sarah in prepared on XXXX. in than past, segment, in and rate. When substantial a caused rate The the largest our account run E&S to comfortable between accident loss this are look As carried years higher the estimates the our I'll to rate with change the on this. tax increase our this quarter our over at reserve we we remarks in let line,

we line said we've before, XXXX, even rate of trends. that will future. had E&S and did loss we've the specialty nine many segment, resume in growth down in In core temporary was we year As admitted loss quarters I is business above are in this our XXXX we picks top can been accident but in of though XXXX higher making our have increases, consecutive X%, and than and which believe our

program, in workers' California to writing in classes This is than The year profitability decline rate business few a less due a gross was of year. premiums not declines decrease from met expectation. in largest we principally comp, over as where well as written a Atlas, have such our year our classes did XX% ago,

up reflects our in individual gross by risk loss grew business, emergence continues the were we written our account XX% individual well, but in see to which a risk down XX% other workers' modest as relative Rates specifically expansion very cost and, continued in comp, comp expectations. run to continue growth margin. compensation economic In of workers' states. premium few in The book, and to result, in terms quarter. Submissions decline didn't risk agency individual our about be a into we workers' strong X.X% relationships, continued were benign a loss

because was premiums the outside deals This written I'm our relationship, were new front we that XX%, division, - because the of grew were this deals not not that fronting Atlas fronted year books on new sorry, gross in a ago. was on of by of

count transactions. fronting to continuing both premium, other grow, and are in We

QX, property $X new will income expect in deliver that transaction As two mentioned than we call, more our last we in in fee million wrote annum. quarterly per

fee they income QX. given rollags, border when a these of However, incepted much book didn't in natural we into

premium. also bind million more robust, a July written car that of and program, gross rate in other than garage expected and the have to We deals run pipeline effective that X, bound annual the months. remains coming $XX dealers we we have hope of new to Otherwise, is an meaningful several

in for quarter. longer in year. the re our amount and did expectations, The with reinsurance modest In of casualty XXX.X% be combined with in continues our the only amount quarter company development segment, ratio the in modest that classes a we which line top line the resulted to writes, no have of of growth types from a adverse

X.X% casualty business great be book business in The in saw to over the books about the our re, we E&S underlying business in some have business the several increases put E&S did segment. XXXX, XX% expected in In increase rate the the we casualty and got years. feel X.X%, pricing. in underlying meaningful a price like we last increases core this of reinsurance We about quarter, is we on just saw and

turn the to let that, over With me Sarah. call

Sarah Doran

good morning, everyone. and Bob, Thanks,

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

prior-year improvement an is is The have X.X improvement XX.X% and of this mix quarter. efforts the of growth ratio expense concentrated we points to where our due year. from Our

grew to group over our reinsurance and almost our segment XX% our earned E&S premium The has X% E&S represented quarter, Net this in net earned continued of shrink. segment in premiums. third-party business premium

quarter, external commission This reduced proportion quarter. the again and, has This a from also from from net considerable this it scale increased expense reinsurance. sequential segment benefited

future flow continue earn as million from was quarters. $XX.X This our year-to-date. to this million is our strong the cash segment E&S the in shrinkage from businesses of $XX.X operating segment quarter down recent re to casualty as due most year cash we flow and and in lag enjoy growth We our over year time the

with this portfolio. The of increase an from in in investment expected earned the quarter, largely of net investment performed the million prior-year $XX.X as growth quarter as we portfolio income, X% our line we

and to quarter year. investment other quarter, the the is this of the While during sequential our energy difference the of due outperformance down renewable portfolios first is this from private

are tangible our portfolio Those more two operating X% equity an our net market of annualized volatility. year-to-date. of on is per ago we grew strongest generally while highlights tangible adjusted equity and quarter greater from that susceptible XX.X% Once dividend, share parts before year, a this also to delivering again, of one XX.X% return average

equity, net with quarter time written the tangible million. and year. meaningfully last was was $XXX this to last Operating X.XX:X, to leverage, ended trailing XX our quarter equal We it shareholders' where down premiums months tangible equity from of

capital us we is very generate opportunities have growth shows high book put tangible ROTE our Our great ability work. to value to to strong a to and important and

And taxes. finally, on

effective XX.X%. Our tax for quarter was the rate

As until a XXXX. was our reminder, a seeded U.S. to internal January taxpayer treaty of share not quota

XXXX million years. which offset quarter, favorable the This the XXXX accident of in largely was XXXX we had development and from year, by development adverse $XX

internal was this a XXXX the taxpayer rate. 'XX, quota to increase tax As the contributed U.S. effective seeded not our but in XXXX, and in was share treaty in to

XXXX be year-to-date of the expect to we XX.X%. to likely time, the range this at But rate close

colleagues a these leadership XX back welcome led thanks He's I to insight, Lastly, success, and we're strategic of our express to we when and and ahead, CEO. forward months. my I my collaboration path very Adam as for us on admiration speak know look more excited for Bob's I and last

the to a that, turn I'll with over comments. So Abram for call Adam few


Adam Abram

Bob. Sarah. you, Thank Thank you,

company is people, company River a joy of has it. other terrific with of a Sarah leaders and the a leaders us great in it part our strong be have and Bob and position. always been to a James and

the effective over wonderful worked Our earnings as Sarah to integral before, I'm and he's comfortable I'd their and reflect growth and last more a job Bob, back done Bob And so. together team. looking member or CEO very And thank for of being scope XX and I the and like strong it's arrangement, the months leadership. to of have our forward

on changing a on economy to to always, while and going underwriting maintaining for growing adapt our to shareholders. equity As our innovating strong the be company clients, continuing to returns insured we're protecting focused deliver discipline,

ready for for everybody. Operator, we're think open questions? you. please I Thank you your questions. the And lines Thank that, with you, could


[Operator question Instructions] And with our B. first Randy Binner Riley comes FBR. from

line Your is open.

Randy Binner

about ask to the book I wanted to start. couple auto a commercial

accident So adverse management 'XX, characterize what the so kind development in revision? perspective the the that prior years, can changed caused 'XX you with from claims a of and

Robert Myron

that don't that was Yes. there lot think I Randy. a changed,

I think had loss we quarter, emergence. higher-than-expected we the in had, just

in Florida. before think, I from XXXX, where an had and places it we've on was with it emphasis

it broader a really XXXX, was that. - and more so think, wasn't I And any wasn't it it bit little than really just

$XXX to that increased which premium. expect the remarks, that do in are a like I build in prepared about think up important years, I it's combined substantially 'XX 'XX and have total the emphasize, million, the net to did written on $XXX and million pricing we

commercial feel So fine. book, the when at the performance auto look of aggregate we we

Randy Binner

Can loss then business E&S, to E&S around reflect core risk in kind the pick reward loss - picks, loss I in book you then and environment that commercial around at change pick lower. correct the of has commercial for is Uber you and general, auto, we size of And pick if auto kind look think higher the presume the that in is on XXXX? the that can seen size I the

Sarah Doran

higher up right original commensurately than where our Randy. - have we our and pick 'XX it's there No, is certainly now, still

in adjusting pricing, of conservatism have the in for a in we terms pick, XXXX. what we got of, beginning fair think, increase Bob said amount that loss that has obviously, pricing we So

Randy Binner

- - the within then And quarter. alternatives - on I I guess yields in seeing - the of lot where of we're seeing what seeing understanding guess obviously, new kind fixed normal money deployed. were had and of we're are yield just a lot But one Where a how lot pressure, companies, and can of the the book. income the volatility core that I on investment income, their band I you a are be cover in insurance

that work is you XXXX? all be you where able now for put in do to expect So to to and money where

Kevin Copeland

Kevin here. it's Randy,

portfolio, seen to the basis from we've an book rather about yields. yield really portfolio, than your that the and points now. question, below income answer net of right investment are changing yields So, market in core average that's increase the due in size growth to yes, But XX our

So it and as so the work way three into will about a maturities. duration slowly now, of half reinvest we the stay its - the portfolio if that is will are where of portfolio they rates kind years,

Randy Binner

And then just income perspective, today? yield from of new new do blended as a fixed have money money a yield you core

Kevin Copeland

for the book? core Just

Randy Binner


Kevin Copeland

you. - to we that we'll have number, that don't have about - I tell that Sure. lower now. up follow it's have probably with basis than but right We'll I can up you, that what XX don't I follow one XX points


comes JMP. question from with Carletti next Our Matthew

Matthew Carletti

on auto accident 'XX chance pieces XX, where can question. follow-up Any so through June after progression? can 'XX, for all commercial are, developed moving loss a Just commercial auto feel you the a the we us, at Randy's picks give year get

Robert Myron

not that by quarter of quarter. - that's Matt, out that we've something broken Yes, not sort we something that's

broken because other no, But, to, we've relates client. a things, particular out Just we not something - standpoint. a of this-quarter it it's from among a lot that

Matthew Carletti

casualty to shift I'll re.

at So development lines got low-XXs segment, of have of risks. anymore, we improved average small But you accident-year on combined level a those look aren't risk those back. kind ratio, keep writing of substantially, you that since I while out taking business, if little results of new the

So is, feel on development those you they're keep able risks to are believe in my for be the when you might expect we tail us kind we we older question help of a get that where of can that developed? substantially taking and

Robert Myron


I there years the we excess excess liability substantially where been well. some a book moved had larger on we've to in where more since and little think it's of some auto general commercial moved more treaties, nonstandard was we and - and proportion a traditional of this as had surplus we the when So lines, in bit several business of and development and seen auto book proportional, adverse our

so that's in we're good this at the very loss a our behind recent time, And merchants years seeing point of trends few from and us, more in years.

with you. along like on that, be to So we're it far feels pretty honest

tail from a get I sometimes have And standpoint, sort I a book. much practical you the line for that claim, treaty, - business on XXXX is proportional the naturally year right? to think didn't don't have react is notice amount. XXXX that and loss a unfortunately, stuff you that and But excess have from of of to up you what you excess to and specific going on - And it's of reported that material think have the it, loss and IBNR had longer than or that a provisional does. of

years behind them particular, this of been much the about but much structure several the that in being of business, more stability is better fact the of so recent us loss line the the we - feel much, - underlying is in seeing just And it the now, of they're so proportional we're years, it's where and - - merchants. - and

Matthew Carletti

of of light it feel And it to we E&S, the And a I feel growth little core position? described, you in like don't if it's on the have - the then I that asked you kind or support term. and characterize about pieces near of this you think capital. in that how more, kind can, place capital in abate How you growth do your seems as the continuing in stronger-than-expected capital kind one just is that it tighter? should expect puzzle to you I Do of

Sarah Doran

good a for asking No. really question. you - It's our position. that thank feel We capital about

lot run gives supporting terms know, the of little us growth core you pause times ago, we As special to in a operating had in the to of our a X.X dividend leverage E&S. moving room to while and

at We earn the strong doing in look really within our we see that to as now, we conditions well positioned least think business, that. as immediacy, our of XX% market take year very ideally ahead it's that on of and core in commercial auto the to Right advantage So in we're keep auto. we XXXX, segment, just and ended reliance here XX-XX, well. E&S to that and we're XX% and so commercial reduce as


comes Our from next question SunTrust. with Hughes Mark

Your now line open. is

Mark Hughes

your talk you underwrite more little you and policy average you talk effectively the XX%. were in lot market if On size, new wonder up on touch were about capacity finding maybe up a Could better. book, Submissions core Clearly, success was much to about could hit the growth your that rate your bit, success. business perhaps? a I moving

Robert Myron

that's great Yes, question. a

up yes, little ratios are I hit so, think bit. And the a

that The bit is other little size average thing premium the is up a as well.

XX,XXX, looked 'XX - I I the we're 'XX or when or 'XX we're think report, and so. sort of around at or been we've around

is work and up are think loss expected and very so we're the fact technical XX relative on, - driven are a that are cost the And mark and do on individual What the the getting those - actual we definitely individual pricing to up pricing by to that often up some then of or doing up we're level. pricing underlying work that when being good do very, seeing we - XX% accounts. so we that's XX% work I is accounts we times, larger lot that and

perfectly even expertise comfortable in we ratio holding, not bit. new going that don't it's $X taking only anything have we down treaties is we a with only that writing bit, larger a limited have average we're policy excess are to is that's if it size do, think to we're a in account, because I So a level account still reinsuring improving - and of whether we we're up million or the are able be are retentions it's And to and the renewal net, but basically, - hit-rate little whether effect still the that place.

Mark Hughes

in growth? there more the recent property Is

Robert Myron

have increases also seen pricing We of a well. seen we've in bit as growth in property little property and

bit $XX they've don't a $XX I a - approximately is big lot the excess because a on a only. book that. of approximately have little book mean it's rate bit million little - think it's or of we I - that grown run million, and as

as the bit our shortages written a has team and that think across competitive bit stepped we've little capacity I of into a landscape, seen little more that. more

seen increases thereof, XX-ish, And to we've also of, so pricing sort speak.

So meaningfully business. higher renewals, has on on was - been casualty than higher our it

written more have little that. they a So of bit

the business, heavily reminder I just that say everybody. we thing, last think I would though, to reinsured that that is a

- treaty share we treaty facultative have that of a a - and we in catastrophe have that We place, have we period. surplus a high-return very buy to then, course, reinsures very a reinsurance,

a us. opportunistic and think of being but don't additional amount they're - I volatility there So it's to tremendous adding

Sarah Doran

thing but is the rest to that the of to growing, in book. it's only it's proportion I'd it's the and add No, growing,

So outweighing mix the it's not book. in the E&S


Robert Myron

Yes. Right, point. very that's That's right. good a

Mark Hughes

A final reinsurance question segment. on the

maybe think about If capital? longer we some should more good you're in what with E&S do and seeing latest about very your there? what to thinking you What's Just reinsurance? growth term, posture want your

Robert Myron

you're and/or getting at? that Are perspective? you a Is talking what from growth about production

Mark Hughes

Or perhaps? Yes. opposite, the

Robert Myron

all modestly like the grow any plans to real we terms core significant conditions, only change And still We in re for or in segment. right? no our pricing. like and - casualty we be the flat think underlying there, I Yes, expect

we getting ratio this a actually generally team doing really combined the know, right? on as and basis, sure of But picking is a basis, on budgeted of and you being opportunities great a the a they're business, don't - They're - swings has lot in group, lot job. carefully our different So spots. planned expected highest their I'm

steady, lower We don't two segments. but ratio to That's have trying - have grow now. U.S. an U.S. because to focusing I in the the re strategically firm combined We're on the just fact expectation writing right re. business expectation of capital. that hold where don't casualty in our right shrinking we an casualty now of of hold we're a of and book the


Our next with KBW. question Shields comes from Meyer

line now open. Your is

Meyer Shields

by Adam, start back. best Bob I'm glad the going saying, and to wishing you're

- little Sorry, thank we're this strategy, you E&S? is claims a the bit growth Bob, can talk about staffing you. in seeing really why given the strong

Robert Myron

last-quarter's of increased rolled underwriting Yes, we've absolutely. have months significant we offices, the Virginia, Scottsdale, I in headcount of six in all, underwriters Alpharetta, outside in Georgia and last - remarks, sort and We've Atlanta prepared of first our in Richmond, significantly various Arizona. through it

working from remotely, in home. people some in, having Houston. shortly We have person may We a or be two

a submission hire to perspective, actively then, to from And through growth. - lot, like claims looking actively to feel - the And to core. we've so looking and hired underwriting we I'll we we're a continue staff with I start are think, the more with turn

Someone the question a other is good asking day about this.

a with that growth, big With core core necessarily core people but about a lower that claims. have then claims about auto XX we folks do the don't there's handle severity, frequency, it's commercial a you you who XXX see given claims staffing, in growth, and see E&S - need generally handle and of lot immediate higher don't

particularly client. of decline are that - and staffed with we've had, right now. also of largest And I both course, feel And our think those mild because state well we a

well would we claims. handle think well staffed to anything submissions, so that? is And as volume add And of I to feel Sarah, as you underwriting very there

Sarah Doran

comprehensive. great. That's very No. That's

Meyer Shields

should Bermuda. bit flowed looking rate so that that XXXX I above what so, That's the expectation of questions helpful. this the that XXXX I this guess, little is One, a Two lower? assets a as to Should rate quick that assume after that's premium-less flow be tax Yes, before tax if general, would little drift or there for the quarter, - asset I can. less up was year we year small slowly for. sort Sarah, - in was average,

Sarah Doran

reserve question, there, mentioned. of being would that the That assumption you be because move thank above average for we the my

- think these rate absent a double-digit low low tax moves. single-digit I of So

be So kind that still up mid-teens behind would slightly, if a of that tax picks rate.

changes. that. little future a ahead to I years absent of expect be that we're these would So bit lower in

Meyer Shields

And then, reinsurance. casualty within finally,

So that we the is are you're I'm reserve leases accident offsetting on net seeing? have net the really number recent any years more or development, there wondering, all

Sarah Doran

some had in re, the there... we in on seniors offsets more well casualty of but No, some that as

Robert Myron

All of modest. that was

Sarah Doran

But Yes. there number. - that, going much say, I was to just of it terms but just adverse was in wasn't wasn't the there


[Operator Instructions] UBS. Meredith next question Our Brian comes with from

Your line now is open.

Brian Meredith

of quick Sarah, questions 'XX A to favorable give adverse was possible just here on I'm for to what you. adverse couple is the curious, commercial the the in year? it 'XX us could development, 'XX the the - back then auto going year development and and reserve

Robert Myron

'XX the 'XX. 'XX, year Well, the majority mentioned, then and the the to in and that and it then of 'XX favorable I got XX to allocated went that was

Brian Meredith

that of you, then your, your 'XX. business, we Great. down? and Got curious, better to core more the I next E&S a should your driving majority of more than core is call your mix just see it, my could auto commercial And business. combined imagine shifts question, segment within carries ratios And of as E&S margin kind what the business underwriting underlying

Sarah Doran

Brian. fair. That's Yes,

Brian Meredith

move up? expect also or or should then ratios bit stabilize we of a maybe will expense little that, sort ratios loss within kind probably trending also of And downwards

Sarah Doran

more in I auto think commercial reason business expense on I'm the but business. up and to pretty there a seeing that's is the move there it for is - them core right not reasonable. is now,


over further remarks. showing time, questions. any this to I'd at no for call closing like Bob Myron turn to I'm And back the

Robert Myron

Well, quarter. we thank to you today to forward look participation and for again everyone talking next your you


your the gentlemen, today's for participation you does conclude program. This conference. Ladies in and thank

great a may Everyone You now have disconnect. day.