Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Tuesday, March 3, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Frank D’Orazio
  • Chief Financial Officer — Sarah Doran
  • Operator

Need a quote from a Motley Fool analyst? Email [email protected]

TAKEAWAYS

  • Net Income -- $47.4 million for the year, up from a net loss of $81.1 million in 2024.
  • Net Income to Common Shareholders -- $39.6 million for the year.
  • Operating Earnings -- $54.1 million for the year, or $0.79 per diluted share.
  • Combined Ratio -- 96.6% for the year, improved from 117.6% in 2024.
  • Annualized Adjusted Net Operating Return on Tangible Common Equity -- 15.3% for the year.
  • Tangible Common Book Value per Share -- Increased 34% to $8.94.
  • Fourth Quarter Operating Earnings -- $16 million, compared to a loss of $40.8 million in the prior year quarter.
  • Fourth Quarter Annualized Return on Tangible Common Equity -- 16.2%.
  • Expense Ratio -- 30.2% for the year, down more than one point from 2024, with quarterly expense ratio down over 2.5 points from Q1.
  • Total Employees -- Ended 2025 with 578 employees, a reduction of over 60 from the beginning of the year.
  • Gross Written Premium -- Down about 5% for the year, with Property down 27% and Manufacturers and Contractors down 11%.
  • Average Policy Size -- Decreased 9.6% in Q4 and 8.4% for the year, supporting the company’s strategic focus on smaller, more profitable accounts.
  • E&S Segment Underwriting Income -- $59.5 million for the year and $19.7 million for the quarter.
  • Group Underwriting Income -- $20.3 million for the year and $8.6 million for the quarter.
  • Prior Year Reserve Development -- $1.8 million net favorable effect for the quarter, driven by $5 million of E&S favorable development, offset by adverse in Specialty Admitted.
  • Net Investment Income -- $21 million for the quarter, down about $1 million sequentially.
  • Fixed Income Portfolio -- 72% weight, average credit rating A+, duration of 3.5 years, and new money yields in the 5% range versus a book yield of 4.5%.
  • Technology and Operational Initiatives -- Completed redomicile to the U.S. in Q4 and announced partnership with Kalepa to introduce AI-enabled underwriting workbench for E&S; Guidewire core system upgrade to complete in 2026.
  • Tax Benefit Impact -- $14.1 million one-time tax benefit from redomiciling, excluded from operating earnings but would have raised Q4 operating EPS to $0.53 and quarterly annualized return on tangible equity to 19.7%.
  • Adverse Development Cover -- $23 million of aggregate limit remains for E&S, covering accident years 2010–2023, with $28.6 million of development ceded in the quarter.
  • Operating Return Guidance -- Management expects a low- to mid-teens return on average tangible common equity for 2026.

SUMMARY

The company reported a full leadership reorganization and a completed corporate structure shift that resulted in tax efficiencies and streamlined operations. Management stated, "our active portfolio management actions are largely behind us," and signaled a readiness to focus on profitable top-line growth with enhanced use of technology in 2026. Expense reductions led to nearly $13 million in savings and a 9% decline in G&A expenses, achieved without decreasing net earned premium. Management sees opportunities to scale in Allied Health, Professional Liability, and the small business unit, with intentions to selectively relax rates and grow scale in targeted E&S areas. Plans for full Guidewire upgrade and AI technology deployment in 2026 are described as keys for underwriting efficiency and competitive differentiation. In summary, the firm exited 2025 with improved profitability metrics, a more focused product mix, and a stated intent to leverage both cost structure and technology investments for future performance.

  • Management emphasized continued "protection of our balance sheet" while targeting scale and profitable growth, particularly in E&S through 2026.
  • Employee count dropped to 578, reflecting lasting structure changes and ongoing expense discipline.
  • Leadership characterized the decline in gross written premium as intentional, prioritizing profitability over rapid top-line growth.
  • Redomicile to the U.S. is anticipated to permanently align effective tax rate with U.S. statutory levels for future periods.
  • Ongoing investments in technology, including the Kalepa partnership and Guidewire core system, are positioned as drivers of future margin expansion and risk-monitoring capabilities.

INDUSTRY GLOSSARY

  • Combined Ratio: A key insurance profitability metric calculated as (incurred losses + expenses) divided by earned premiums; values below 100% indicate underwriting profit.
  • Excess and Surplus (E&S) Lines: Non-admitted insurance products designed for unique or high-risk exposures not written by standard insurers, distributed via wholesale brokers.
  • Adverse Development Cover: Reinsurance protection purchased to cap the company’s exposure to negative loss reserve development from prior accident years.
  • Guidewire: A leading insurance software platform for policy administration, claims, and billing, often representing modernization and automation of insurers' core systems.

Full Conference Call Transcript

Frank D’Orazio: Okay. Thanks, Bob. Good morning, everyone, and thank you for joining our call today. We are speaking to you this morning, already two months into 2026, and keenly focused on executing our business plan and strategic objectives for the year. Today, I am eager to discuss our fourth quarter and full year results with you, but just as importantly, I want to communicate our vision and share our optimism for 2026. Over the past few quarters, we have commented at length on the strides that the company has taken to focus on its wholesale-only E&S platform, maintaining a strong position in the E&S marketplace while delivering shareholder value to our investors.

I think it is fair to say that our future success will not be driven by a single factor, but rather the combination of several purposeful, prioritized initiatives working in concert to drive our future results. At a high level, I believe three primary themes both underlie and empower our ability to perform in 2026 and beyond. First, I would point to our refined risk appetite and enhanced performance monitoring that we have invested in over the last few years, which has resulted in a focus on smaller and more profitable accounts across our casualty universe, while exiting or reengineering our stance on several classes that have proven to be unprofitable to James River Group Holdings, Ltd. over time.

Secondly, we will benefit from the lasting operational efficiencies and expense management focus achieved through substantial cost saving initiatives across the business during 2025, including our redomicile to the United States. And finally, our continued engagement and deployment of our technology platform will support both of these efforts, which we expect will drive efficiencies and future profitable scale in our E&S business.

Now as for execution, we began the year with a refreshed and reorganized E&S leadership team fully in place, with a compelling game plan for the implementation of our strategic vision. With respect to our redefined appetite in E&S, that work has largely been done already. We will continue to target smaller accounts that tend to have higher renewal retention ratios that we believe have proven to be more profitable for James River Group Holdings, Ltd. over the company’s 20-plus year history. In Q4, that same focus saw our average policy size decrease by 9.6% compared to the prior year quarter, and for the full year, the impact has been an average policy size decrease of 8.4%.

While our approach tempered top line growth in the quarter and much of 2025, the prioritized focus of the organization is on profitability, and admittedly we are comfortable with that trade-off. Submission flow across our casualty-focused business remains healthy, 4% overall growth for 2025. With increased competition in a transitioning market, we are seeing a combination of both strong renewal submission activity, which we view as a sign of continued relevance with our distribution partners, and an increase in new submissions overall. Rate change remained positive at 9% for the year, consistent with 2024 and above loss trend, but clearly the level of rate increases has moderated and there is dispersion by product line and division.

Expense discipline remains an essential part of our story. In the fourth quarter, we executed on our redomicile to the U.S., which simplifies our corporate structure, improves tax efficiency, and gives us greater flexibility as a U.S. specialty insurer. Through the redomicile and other initiatives, we removed meaningful expenses, permanently lowering our full year expense ratio over one point from 2024 and the quarterly expense ratio over 2.5 points from the first quarter, all on fairly flat net earned premium. Combined with the underwriting improvements and appetite changes we have made over the last several years, our expense discipline has meaningfully improved the company’s profitability and earnings profile.

Perhaps even more importantly, deliberately taking these measures has enhanced the organization’s future ability to further leverage profitability and increase scale utilizing the investments we have made in technology, most notably the complete multiyear upgrade of our core operating systems to Guidewire that will be completed in 2026, and our recently announced partnership with Kalepa to roll out AI-enabled underwriting workbench capabilities throughout our E&S segment. The Guidewire implementation has afforded our platform a notable modernization uplift while allowing us to fully engage in the deployment of customized AI underwriting workbench technology, which we believe will enhance our underwriting efficiency in 2026 and beyond. We are using advanced data and decision support tools to enhance underwriting judgment, not replace it.

These tools will help us assess risk more consistently, identify outliers earlier, and improve operating efficiency in an increasingly competitive environment. While speed in our market is a priority, the goal is not speed for its own sake. It is about better decisions made more efficiently and having a positive impact on our day-to-day underwriting workflows and quote and bind rates. We are confident that continued technology adoption will undoubtedly be a tangible differentiator for us as we optimize our SME platform and our very special wholesale-only distribution model.

Moving back to our performance, our 2025 results validate the balance sheet actions of the last few years, but more so position us for continued success ahead. For the full year, we delivered a 96.6% combined ratio and generated a 15.3% annualized adjusted net operating return on tangible common equity, while growing tangible common book value per share by 34%. Those outcomes were not driven by a favorable market surprise; rather, they are a result of strong execution and deliberate choices around underwriting, expenses, and risk selection. Our fourth quarter E&S combined ratio of 86% reflects that progress and represents our strongest quarterly profitability in several years.

When we look at production over the course of 2025, our gross written premium was down approximately 5% overall. That said, two of our five primary divisions are driving most of that reduction, with Property down 27% year-over-year and Manufacturers and Contractors, one of our larger divisions, down 11% year-over-year. Property remains a small component of our overall focus, and our construction production has been impacted by our decision to refine our underwriting guidelines relative to tract housing exposure. Despite these dynamics, we did see growth this year across several specialty departments including Allied Health, Professional Liability, and Management Liability, and maintained flat performance in our largest division, Excess Casualty.

Overall, we remain encouraged by the profitability headroom we see across even more divisions in 2026. On recent accident years, we continue to be encouraged by a lower frequency of claims and improved loss emergence, but remain cautious in recognizing those trends as the book continues to mature. Importantly, we continue to operate with reserve protection in place, which has allowed us to focus on the company’s current performance profile rather than its legacy.

In sum, while growth in certain lines has slowed, we believe that the trade-off has been the right one for James River Group Holdings, Ltd. Profitability, balance sheet strength, and earnings durability were priorities in 2025, and our results reflect that focus. We enter 2026 with a leadership reorganization complete, a cleaner corporate structure, improving margins, a more disciplined portfolio, and a team that is empowered by technology and positioned well to execute.

The North American E&S market is vast, and although the market has been transitioning for several quarters now, we see attractive opportunities for James River Group Holdings, Ltd. in 2026, particularly with our focus on smaller insureds, with the benefit of refreshed underwriting guidelines, new technology, and the emphasis we have placed on performance monitoring. In particular, we see an opportunity to scale our small business unit as well as several underwriting departments in our specialty division like Allied Health and Professional Liability—departments that have historically been very profitable for the company.

We also expect to push rate in areas like Excess Casualty and parts of our General Casualty portfolio in an effort to stay ahead of our view of loss trends, but have also identified areas across the E&S segment where we can relax rate and attempt to gain a bit of scale in those businesses. In short, we feel 2026 holds significant promise and opportunity for James River Group Holdings, Ltd. With that, I will turn it over to Sarah to walk through more details for the quarter and the year.

Sarah Doran: Thank you, Frank, and good morning, everyone. James River Group Holdings, Ltd. generated very strong financial results for 2025. We reported $47,400,000 of net income, $39,600,000 of it available to common shareholders, which is a marked improvement from the $81,100,000 net loss of 2024. Operating earnings were $54,100,000, or $0.79 per diluted share, for the 2025 year. As Frank pointed out, we delivered a full year combined ratio of 96.6% as compared to 117.6% for 2024. Our operating return on average tangible common equity was 15.3% for the year, and tangible common book value per share increased 34% to $8.94 per share.

For the fourth quarter, we reported operating earnings of $16,000,000 as compared to a loss of $40,800,000 in the prior year quarter. Annualized return on tangible common equity was 16.2%.

As we review them, our results included strong underwriting income, meaningfully improved expenses, solid investment returns, as well as a tax benefit, which I will address first. As previously discussed, the one-time $14,100,000 tax benefit was driven by interest expense deduction in connection with the company’s November redomicile from Bermuda to Delaware. Importantly, we excluded that tax benefit from our operating earnings due to its one-time nature. I am drawing this important distinction as most analysts did include it in operating earnings, which distorted a comparison this quarter. If we had included it, fourth quarter operating earnings would have been $0.53 per share rather than the $0.30 per share that we reported.

On top of that, annualized operating return on tangible equity would have been 19.7% for the quarter, and 19.3% for the full year. Looking ahead, alongside the expense work accomplished in 2025, we see meaningful efficiency benefits to our tax rate coming out of the redomicile, as on a go-forward basis we expect our effective tax rate to be in line with the U.S. statutory rate.

Moving to underwriting results, our E&S segment generated $59,500,000 of underwriting income for the year, and $19,700,000 for the quarter. Our full group results were $20,300,000 and $8,600,000, respectively. Our full year expense ratio of 30.2% was below the 31% indication discussed earlier in the year. We have made meaningful permanent changes to our structure throughout the year. It is notable that we reduced the expense ratio in a year when we also reduced gross written premium, and more so that net earned premium was flat given our portfolio management, as Frank reviewed. Throughout the year, we have created nearly $13,000,000 in expense savings and reduced G&A expenses by about 9% overall.

We ended the year with 578 total employees, over 60 fewer than when we began the year. These changes were driven by continued optimization and operating efficiency gains at both operating segments. As a result, lasting changes in items including compensation expenses drove a material amount of the savings throughout the year, while rent and professional fees contributed as well.

Regarding the quarter’s loss activity, we recorded $1,800,000 of net favorable impact from prior year development. This consisted of $5,000,000 of favorable development in the E&S segment, partially offset by adverse development attributed to Specialty Admitted. Within E&S, we continue to observe declining trends in frequency for recent accident years, and we have removed meaningful exposure to accounts and risks that drove prior year development in 2023 and prior. We start 2026 with $23,000,000 of aggregate limit on the adverse development cover for E&S, covering accident years 2010 through 2023 with no retention. During the quarter, we ceded $28,600,000 of development to the cover, largely related to product liability in the 2019 through 2023 years.

Turning to investments, we had $21,000,000 of net investment income for the quarter, down about $1,000,000 from the previous quarter and a year when interest rates also declined generally. The quarterly result reflects outperformance within the company’s fixed income portfolio, which had about 72% of cash and invested assets, generating meaningful income as new money yields remain in the 5% range, well above our current book yield of 4.5%. We mentioned earlier this year that we had been able to put a meaningful amount of cash to work at attractive yields in high credit quality securities, as we worked through our cash aggregation from year-end 2024.

Still, compared to the prior year quarter, a lower rate environment overall impacted both the bank loan portfolio and short-term cash returns. Our portfolio remains conservatively positioned with an average credit rating of A+ and a duration of 3.5 years.

Finally, as we close out last year and move further into 2026, we expect our performance for the year to generate a low- to mid-teens return on average tangible common equity. While we continue to prioritize the protection of our balance sheet, we feel our active portfolio management actions are largely behind us. That means that, especially given our employment of technology, we see meaningful opportunities for profitable top line growth this year. Finally, we expect to continue to be vigilant with our expenses as we look for profitable growth to bring improved scale across our E&S business especially. With that, I would like to turn the call back over to the operator to open the line for any questions.

Operator: We will now open for questions. A quick reminder before we start the Q&A: press 1 on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question or your question has been answered or has been asked, please press 1 again. Thank you. We will pause for just a moment to compile our roster. We have not received any questions from any of our analysts. I will be turning the call back over to Frank D’Orazio, our CEO, for closing remarks.

Frank D’Orazio: Thank you, operator, and many thanks to those of you who were able to join our call this morning. To conclude, we are pleased with how the organization performed in 2025, particularly given the competitive market we are operating in. The progress we have made reflects a continued focus on bottom line profitability, and with new leadership in place across the organization, we are motivated and encouraged to perform well in 2026. Thank you again for your time, and we look forward to speaking to you again in just a few short weeks. The meeting has now concluded. Thank you all for joining. You may now disconnect.