James River Group Holdings, Inc. Q2 FY2025 earnings call

• Portfolio positioning: Focuses on U.S.-based small and medium enterprises in third-party lines. Over the last 2 years, has improved performance monitoring to adjust underwriting and risk management. The portfolio is positioned to limit exposure to commoditized sectors. • People: Unveiled new energy and leadership structure in E&S segment. Divisions rolled up into 5 primary business segments with empowered leaders. Appointed Val Langenburg as Group Chief Information Officer, Justin Zaharris as Group Chief Claims Officer, and Joel Cavaness joined the Board. • Expense management: Corporate expenses declined, with expectations of a 5%-10% decline in the corporate expense line this year. G&A expenses in the Specialty Admitted segment were reduced over 20% year-to-date. • Reinsurance: Successfully renewed a large E&S reinsurance treaty effective July 1 with improved rate and more diverse participants, and slightly reduced quota share due to confidence in business written since 2023.

The E&S segment grew 3% over the same comparable period. Gross written premium for casualty E&S increased 4% compared to the prior year quarter, and it marked the first time the E&S segment surpassed $300 million in gross written premiums in a single quarter. The E&S segment had an underwriting profit of $11.7 million with a combined ratio of 91.7%, nearly 4 points lower than the prior year quarter. In the Specialty Admitted segment, it remains opportunistically positioned with very deliberate low net retentions across its fronted programs business, having called commercial auto components that didn't meet profitability or reinsurance security hurdles.

• Expect the corporate expense line to decline by 5% to 10% this year. • The G&A expenses in the Specialty Admitted segment are expected to remain reduced for the full year. • Plan to redomicile from Bermuda to Delaware likely later this year, which is expected to bring operational efficiencies and cost savings, including a one-time tax benefit of $10 million to $13 million and an ongoing annual benefit of $3 million to $6 million.

• Market dynamics that could affect underwriting and pricing. • Changes in the reinsurance market impacting treaty terms. • Regulatory uncertainties related to business operations and the redomiciling process.

Q: The excess casualty growth in the quarter, the price increase is obviously very strong. And I think you talked about moving a little more down market or smaller policies. What end markets are you targeting there? Kind of what industries?

A: Frank N. D’Orazio talked about the rate process, with the excess casualty portfolio broken into silos like auto-driven GL or OL&T driven. Targets include manufacturers, premises risk, hospitality risk, etc., moving from larger accounts to smaller midsized accounts.

Q: Sarah, you're making a good case for solid expense management, but we're also seeing net earned premiums on specialty admitted coming down. So I just want to clarify, are you saying that you expect the expense ratio to level off at 31%? Or is there some more room as we get into 2026 to bring that down further?

A: Sarah Casey Doran said there could be more room in 2026, with 31% for this year being the immediate line of sight but more opportunities in 2026 to bring the expense ratio down further.

Q: I may have missed this, but is there any other changes or to, call it, terms and conditions from the quota share? I understand that you're retaining a little bit more, but like ceding commission change, loss quarters, all those types of things.

A: Frank N. D’Orazio said there were no changes relative to terms, ceding commission was fairly flat, and the reinsurance market agreed with the underwriting actions taken.