James River (US:JRVR)2020-05-03 13:38Financial Data and Key Metrics Changes - The company reported first quarter operating earnings of $0.50 per share and an annualized adjusted net operating return on average tangible equity of 11.6% [35] - The group combined ratio was 100.6%, with a 91.9% combined ratio in the E&S segment, a 107.4% combined ratio in Specialty Admitted, and a 99.4% combined ratio in the Reinsurance segment [16][41] - The expense ratio increased to 34.2% compared to 22.6% in the first quarter of the previous year [45] Business Line Data and Key Metrics Changes - The E&S division grew 37% in core lines, with a rate increase of 12.9% in the most recent quarter, marking the second highest sequential period [10] - The Specialty Admitted segment reported stable gross written premiums compared to the first quarter of last year, despite a reduction in the largest fronting program [13] - The Reinsurance segment wrote more gross written premium than in the first quarter of last year, but net written and earned premium declined as expected [15] Market Data and Key Metrics Changes - Submissions in the E&S segment grew by 20% in the first quarter, with April submissions exceeding those from April 2019 [11] - The company noted a significant decline in claims, with 30% fewer claims received in April compared to the previous year [30] Company Strategy and Development Direction - The company is focused on reducing expenses and expects the full-year expense ratio to fall into the low 30% range [33] - The management anticipates a significant decline in workers' compensation and general liability accounts due to the economic impact of COVID-19 [31] - The company believes it is well-positioned to benefit from a recovery, similar to the experience following the 2008 financial crisis [32] Management's Comments on Operating Environment and Future Outlook - Management expressed that while the insurance industry is exposed to economic consequences from COVID-19, the company is better positioned than many property casualty insurers [19] - The company expects to maintain a positive rate structure despite a weak economy, aiming for a high single-digit to low double-digit return on tangible equity [54] - Management acknowledged the potential for claims related to COVID-19 but emphasized the strength of their policy exclusions [20][22] Other Important Information - The company experienced unrealized losses of $43.9 million in its investment portfolio for the quarter, but the portfolio had recovered $6.4 million since quarter-end [38] - The company drew down most of its unsecured bank facility capacity as a precautionary measure due to market volatility [46] Q&A Session Summary Question: Can you provide more detail on premium growth in April? - Management noted that submissions and premiums in April exceeded those of the previous year, but they do not anticipate this trend continuing throughout the year [53] Question: What is the anticipated ceded premium ratio in the E&S book? - The ceded premium ratio is expected to remain between 20% to 30%, consistent with previous quarters [58] Question: How is the commercial auto runoff book performing? - The company has reduced outstanding claims from the commercial auto account by 25% and is committed to settling claims at fair value [64][68] Question: What is the impact of lower short-term rates on investment income? - Investment income is expected to decline due to lower short-term rates, with current returns significantly lower than at the beginning of the year [109] Question: How will pricing be affected for businesses that have been closed? - Pricing will be based on expected revenues, and while there may be lower revenue numbers, it is not expected to impact the price per unit of exposure significantly [115]