James River (US:JRVR)2020-02-21 18:22Financial Data and Key Metrics Changes - The company reported fourth quarter operating earnings of $0.76 per share, an increase of 35% over the prior year quarter [21] - Net earned premium grew over 16% in the Excess and Surplus Lines segment this quarter, with about 40% growth in the core E&S business alone [22] - The E&S segment represented over 76% of the total group net earned premium [22] - The company increased tangible equity over 14% for the full year, despite paying almost $40 million in dividends [28] Business Line Data and Key Metrics Changes - The Excess and Surplus (E&S) segment entertained 23% more submissions for business in 2019 than in 2018, and 27% more in the fourth quarter than in the prior fourth quarter [14] - The Specialty Admitted segment grew by 3.6%, with the Individual Risk Workers' Compensation business growing by 15.1% [17][18] - The Reinsurance segment wrote $160.8 million in premium and anticipates remaining flat to possibly down in 2020 [19] Market Data and Key Metrics Changes - Excess and surplus lines rates on renewal accounts were up 6.6%, marking the 12th consecutive quarter of rate increases [6] - The E&S renewal book proved stickier than in the past, with almost 65% of policies renewing [15] Company Strategy and Development Direction - The company expects to earn a low double-digit return on tangible equity in 2020 and anticipates making an underwriting profit in each segment [12] - The management is focused on managing claims effectively, particularly in the runoff of the canceled ride-share account [9][10] - The company is seeing more opportunities in the Specialty Admitted segment, particularly in fronting and program areas [7] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the positive market environment and strong submission growth in core businesses [5] - The company is actively managing expenses and expects a higher expense ratio in 2020 without the large account concentration [28] - Management noted that they are not seeing social inflation in their reported claims development, which is a positive sign for future claims handling [45][46] Other Important Information - The company had adverse loss development of about $9.8 million in the Casualty Reinsurance book, but this was partially offset by sliding scale commission adjustments [25] - The company continues to enjoy strong cash flow, with operating cash flow of $76 million this quarter and about $290 million year-to-date [26] Q&A Session Summary Question: What sort of risk was the adverse development from the 2010 treaty? - The adverse development was attributed to a large account casualty risk [32] Question: How might the Casualty Re segment shape over the year? - The management indicated that they are managing growth carefully and expect to see opportunities in small account casualty [34][36] Question: What is a good benchmark for investment income in Q1? - A reasonable expectation for Q1 investment income is around $20 million [40][41] Question: What is the expected seated premium ratio for 2020? - The seated premium ratio for the core books is expected to be between 20% to 30% [42] Question: Is the current market environment indicative of a hard market? - The management believes the current environment feels like a traditional hard market, with capacity challenges and significant rate increases [55]