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Date
May 5, 2026, 8:30 a.m. ET
Call participants
- Chief Executive Officer — Frank D'Orazio
- Chief Financial Officer — Sarah Doran
Takeaways
- Net Loss to Common Shareholders -- $10.9 million versus net income of $7.6 million in the prior-year period, reflecting a reversal in quarterly results.
- Operating Earnings -- $5.8 million, or $0.12 per diluted share, down from $9.1 million or $0.19 per share in the previous year.
- Reinsurance Reinstatement Premium Impact -- $6.7 million expense tied to a single E&S claim from 2022 resulted in adverse effects across core operating measures.
- Combined Ratio -- 104.6%, adversely impacted by approximately 5 points from the reinstatement premium; absent this, the group combined ratio would have been 99.7%.
- E&S Segment Combined Ratio -- 96.5%, with a 68% loss ratio and 28.5% expense ratio; adjusted to 91.8% if excluding the reinstatement premium charge.
- Casualty Rate Increases -- 7.7% during the quarter, aligning with management expectations and supporting margin focus.
- Gross Written Premiums -- Returned to growth for E&S Casualty and Specialty portfolios, with 7 of 14 underwriting divisions reporting positive increases.
- Specialty Lines Growth -- 6% rise in specialty lines premium, led by professional liability, energy, and healthcare, while excess casualty premiums grew 15%.
- Submission Growth -- 4% increase across segments, indicating expansion in new business opportunities.
- G&A Expense Reduction -- 11% decrease groupwide, driven by a 46% drop in the Specialty Admitted segment and a 15% reduction in the Corporate segment.
- Net Investment Income -- $21.3 million, a 6.6% year-over-year improvement, attributed to higher private investment and bank loan income.
- Investment Portfolio Allocation -- 73% allocated to high-grade fixed income, averaging a 3.5-year duration and an A+ credit rating.
- Adverse Development Cover Utilization -- $16.2 million in adverse development ceded under E&S top-up cover for accident years 2010-2023, with $7.5 million of reinsurance protection remaining.
- Tangible Common Equity Per Share -- Declined to $8.77, a modest decrease due to investment market movements and legacy reinsurance impacts.
- AI-Enabled Underwriting Workbench Rollout -- Implementation began in two underwriting departments, aiming to increase underwriting efficiency and improve operational processes.
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Risks
- Sarah Doran said, "This quarter, we reported a net loss to common shareholders of $10.9 million," citing a $6.7 million reinsurance reinstatement premium related to a single E&S claim as the principal driver of the adverse result.
- Competitive pressure was explicitly noted as increasing in the primary general casualty department, with Frank D'Orazio referencing "fairly aggressive MGAs and just an overall increase in capacity from carriers interested in the E&S sector."
- Frank D'Orazio warned, "we've also recently seen increasing competitive pressure in our primary general casualty department. And as a result, our underwriters are navigating opportunities in those lines with appropriate prudence."
- The migration of some business to admitted markets, especially in property and select standard lines, was highlighted as a market dynamic currently reducing certain E&S opportunities.
Summary
James River Group Holdings (JRVR 24.63%) delivered a quarterly net loss driven by a single large reinsurance reinstatement expense but maintained positive operating earnings despite the charge. Management cited distinct expansion in gross written premiums in both E&S and Specialty portfolios, with targeted premium growth in professional liability, energy, and healthcare sectors. The adverse development cover continued to reduce exposure from older accident years, and further technology investments—including an AI-enabled underwriting workbench—commenced rollout to enhance productivity in selected divisions. Investment income rose moderately on strategic asset allocation changes, but tangible common equity slipped due to legacy reinsurance and market moves.
- Management's shift in E&S treaty structure, implemented in July 2023, aims to mitigate volatility by changing premium recognition timing for reinstatement exposure.
- The expense ratio was pressured by the reinstatement charge but otherwise remained stable relative to prior periods.
- Competitive conditions intensified in the primary lines segment, prompting disciplined underwriting adjustments and highlighting the need for careful risk selection.
- James River Group Holdings' CEO described the evolving E&S and admitted market landscape as characteristic of a market cycle, noting selective migration of business back to admitted carriers.
Industry glossary
- Excess and Surplus (E&S) Lines: Insurance provided for unique, hard-to-place, or higher-risk exposures not eligible for coverage in standard (admitted) markets, often written through wholesale brokers.
- Reinsurance Reinstatement Premium: An additional premium paid to restore reinsurance coverage after a claim exhaustion event, particularly relevant for multi-year or aggregate-limit treaties.
- Adverse Development Cover (ADC): Reinsurance protection against unexpectedly negative loss development on prior accident years, capping further loss exposure on covered claims.
- Managing General Agent (MGA): Specialized insurance agent or broker authorized to underwrite policies and manage programs on behalf of insurers, often with delegated authority.
- Fronting: The practice in insurance where one company issues a policy on paper but transfers most or all risk to a reinsurer, acting as a conduit for others' underwriting.
Full Conference Call Transcript
Frank D'Orazio: Thank you for the introduction, Bob. Good morning, everyone, and thank you for joining us today. As we do each quarter, we look forward to discussing notable highlights of our performance, updates on the execution of key corporate objectives and the progress that James River continues to make in becoming a best-in-class E&S carrier. This quarter, our E&S results were negatively impacted by a sizable reinsurance reinstatement charge on a 2022 casualty treaty triggered by an individual claim, a disappointing development on an otherwise solid quarter. As we've discussed in the past, the organization restructured its E&S treaty placements in July of 2023 to prevent these types of outsized adjustments from impacting future results.
In a few moments, Sarah will provide additional details on the specifics of this reinsurance charge. But before she does, I'd like to spend a few minutes discussing our current view of the market opportunity for James River as well as our progress across a number of prioritized corporate initiatives. First and foremost, relative to market opportunities, we continue to believe that heightened discipline is essential in a transitioning marketplace, and James River has been well served by the refinement of our underwriting appetite, focus on smaller insureds, investment in underwriting governance and performance monitoring and prioritization on underwriting margin, particularly over the last several years.
For 2026, we feel our greatest opportunity to push rate remains in our Excess Casualty division and the greatest opportunities for overall growth reside in our specialty lines division as well as our small business unit, underwriting areas that we feel hold the most attractive margin in today's marketplace. At the segment level, casualty rates were positive at 7.7% for the quarter and were consistent with our expectations. While pressure on rates has been most pronounced in our excess property division for several quarters now, we've also recently seen increasing competitive pressure in our primary general casualty department. And as a result, our underwriters are navigating opportunities in those lines with appropriate prudence.
For the segment, submission growth was strong at 4%. And for the first time in several quarters, we modestly grew gross written premiums across our E&S Casualty and Specialty portfolios with 7 of our 14 underwriting divisions reporting positive growth. Excluding our manufacturers and contractors business, where we made refinements and appetite last year and our small delegated contract binding portfolio, which is currently in runoff, our casualty portfolio was up over 6% when compared to the prior year. Looking more closely at production, targeted growth during the quarter was driven by several areas I have highlighted this morning.
In the aggregate, specialty lines were up 6%, driven by professional liability, energy and health care and excess casualty premiums increased 15%, largely driven by our underwriters' ability to continue to drive rate. As mentioned earlier, during 2026, the company has prioritized a number of initiatives aimed largely at making James River a more efficient organization while also significantly improving our business development acumen and expanding our presence with our distribution partners. Continuing the same discipline that we exhibited during 2025, we also reduced G&A expenses across the group during the quarter by 11%.
Finally, as we discussed during last quarter's call, we are excited about the significant investments in technology that we believe will increase underwriting efficiency while improving the underwriting tools and resources available to our E&S underwriting staff. The rollout of AI-enabled underwriting workbench technology is already underway with our first 2 underwriting departments being rolled out this quarter, and we expect to report on the progress of the initiative in future quarters. We are confident that the combination of underwriting improvements and appetite changes we have made over the last several years in concert with continued expense vigilance and technology adoption will allow us to optimize our SME platform and further differentiate our very special wholesale-only distribution model.
As we manage the market cycle, I'm encouraged by the uptick in focus production in areas we are hoping to scale and by our ability to continue to push rate where necessary as we navigate through 2026. It continues to be a dynamic and competitive marketplace, but we are well positioned to succeed, strongly supported by our underwriters and wholesale distribution partners. With that, I'll turn it over to Sarah to walk through the financial results in more detail.
Sarah Doran: Thank you, Frank, and good morning, everyone. This quarter, we reported a net loss to common shareholders of $10.9 million, which compares to net income of $7.6 million for the first quarter of 2025. Operating earnings were $5.8 million or $0.12 per diluted share as compared to $9.1 million or $0.19 per share. As Frank mentioned, our results this quarter were negatively impacted by $6.7 million of reinsurance reinstatement premiums, largely related to a single E&S claim from 2022 that was booked and settled in the first quarter and subject to our prior $9 million excess of $2 million casualty reinsurance treaty.
The runoff structure of that treaty includes specific amounts of reinstatement premium potential for each accident year, leaving reinstatement premium aggregate exposure of about $9 million across accident years 2022 and prior. The structural changes that we made to that treaty should mitigate the forward impact of earnings volatility for accident years 2023 and on as we now pay a higher rate on such a premium upfront rather than pay meaningfully for these reinstatement premiums. Absent the reinsurance reinstatement impact, operating earnings would have been $0.22 per diluted share. This impact reduced net written premium, net earned premium and underwriting income for the quarter.
It added approximately 5 points to the group combined ratio of 104.6%, including almost 2 points to our expense ratio, which was 35.4%. Absent this impact, the consolidated combined ratio would have been 99.7%, comprised of an adjusted loss ratio of 66% and expense ratio of 33.7%. For E&S specifically, the combined ratio of 96.5% was driven by a 68% loss ratio and a 28.5% expense ratio. And again, when adjusted for the impact of reinstatement premiums, the E&S combined ratio would be 91.8%, which is right in line with that of the prior quarter. Moving quickly to expenses.
As Frank mentioned, expense efficiency continues to be a priority and G&A expenses declined 11% compared to the prior year quarter, driven by reductions within Specialty Admitted, where they were down 46% in the Corporate segment, where they were down 15%. Underlying loss trends remain stable, and the reserves continue to reflect improved risk selection in the more recent accident years. We recorded de minimis favorable reserve development of $165,000 split between E&S and Specialty Admitted. Consistent with the prior year period, and we continue to observe lower frequency and incurred losses in recent accident years, while remaining appropriately cautious in recognizing those trends as the business seasons.
During the quarter, we ceded $16.2 million of development to the E&S top-up adverse development cover, which covers accident years 2010 through 2023. There is $7.5 million remaining on that cover. Finally, moving on to investments. Net investment income was $21.3 million for the quarter, an increase of 6.6% year-over-year. These results were driven by improved private investment income due to our move over the last 18 months to invest capital efficiently in private credit rated note vehicles as well as the deployment of cash into our high-grade portfolio.
While we did have strong income from our diversified bank loan portfolio, which represents about 8% of our total cash and invested assets, we also saw some volatility there as the largest driver of net realized and unrealized investment losses. Overall, though, the portfolio remains positioned fairly conservatively with about 73% of it invested in high-grade fixed income at an average duration of 3.5 years and an A+ average credit rating. Tangible common equity per share declined modestly to $8.77, reflecting the combination of investment market movements and the impact of the legacy reinsurance structures. With that, I'll turn the call back to the operator to open the line for questions.
Operator: [Operator Instructions] Your first question comes from the line of Mark Hughes with Truist.
Mark Hughes: Frank, you had mentioned a little more competition in the primary general casualty. Where do you see that coming from? How significant do you think that is?
Frank D'Orazio: So in casualty lines, first of all, thanks for the question, Mark. In casualty lines, we've seen fairly aggressive MGAs and just an overall increase in capacity from carriers interested in the E&S sector as others, I think, have reported. We've also seen some of the newer competition not only competing on price, but in terms and conditions that at this point, seem unwise, particularly in the GC space. I mean fortunately, for James River, we've been in the sector for greater than 20 years with an existing portfolio and long-standing relationships with distribution partners and insurers.
But we definitely see a break between underwriters being able to push rate in the excess lines versus the primary lines, much more significant. There seems to be more respect for loss trend from excess casualty underwriters at this point.
Mark Hughes: Understood. And then, Sarah, on the adverse development cover, the top-up cover, what through the total reserves that are covered by that? And then if you've got it in front of you, how much has been paid on those expected losses? Just trying to figure out what the paid versus unpaid is at this point on the relevant reserves.
Sarah Doran: Yes. Thanks, Mark, for the question. I don't have the page right in front of me, but very little of the reserves subject to those -- both of those structures would have been paid by now. I can certainly follow up with that. But order of magnitude, I would expect that number to be fairly low. And then the top-up adverse development cover and the other E&S ADC, LPT cover all E&S accident years 2010 through 2023 with the exception of the excess property book and the exception of the runoff Uber portfolio, which is covered by a legacy structure as well.
Mark Hughes: Understood. If I could slip a third one in. Frank, you talked about the AI-enabled technology on the underwriters work bench, I think. Could you expand a little bit more on that, kind of what are the kind of practical implications of their day-to-day underwriting activity? And what do you think it could mean in terms of either efficiency, underwriting effectiveness? Just curious.
Frank D'Orazio: Sure, Mark. So we spent the first -- really the last few years, I would say, kind of updating and upgrading our core systems, which has enabled us to now explore and invest in these AI-enabled work benches. And we see it as a competitive enabler just allowing us to optimize operational efficiency. But it really runs a gamut of clearance through risk prioritization against our appetite and production source relationships, data ingestion from third parties and ultimately, we will facilitate quote and buying processes. So we see it as a major efficiency play relative to being able to turn around quotes quicker and in a more targeted fashion.
Operator: Your next question comes from the line of Brian Meredith with UBS.
Brian Meredith: Frank, just following up on the market conditions. Perhaps you can kind of give us a little color on what's going on as far as movements between E&S and the admitted markets. We've heard that we're starting to see some business move back to the admitted market.
Frank D'Orazio: We've definitely seen that as well, particularly in property. We've definitely seen that. But we've now started to see it in some of the more standard lines like primary casualty as well. So from a primary basis, some lines that have historically been in the E&S marketplace now starting to attract some attention from standard markets as well. But I would say, to date, it's been most broadly observed in the property area for us specifically.
Brian Meredith: So would you like characterize as like a typical cycle here where business starts to move back a little bit? The market has been transitioning...
Frank D'Orazio: I'm sorry, Brian, did I catch that?
Brian Meredith: You think it will continue?
Frank D'Orazio: Yes. So listen, I think we're several quarters now into a transitioning market, and this is kind of an old story, right? So we start to see some of this business now get the attention of the admitted market. But I think it's going to be more specific to certain classes of business. And anybody who hangs a shingle, writes a primary general casualty capability or has a primary casualty capability. So that's an obvious choice as is property as well. We're seeing, I think, a little bit more resilience in some of the specialty lines.
Brian Meredith: Appreciate that. That's great. And then, Sarah, just one other just quick question on this reinstatement. Just trying to get my hands around it. So I think what's going on here, right, is that because there was perhaps some development on this claim is why you had the reinstatement premium come through. Is that true? So like if the treaty wasn't in effect, would there have been adverse development booked this quarter on this claim?
Sarah Doran: Well, that -- let me just be clear. The 9X 2, there's an awful that covers the majority of our E&S book. That's obviously a prospective treaty. So I want to differentiate that from the retrospective treaties. And we have reinstatement premiums pretty frequently. I think what stood out this quarter, Brian, was that it was more sizable. So it was a larger claim that settled. But there is a fair amount in that book that, that treaty protects us from on an ongoing basis.
Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back over to Frank D'Orazio, CEO, for any closing comments.
Frank D'Orazio: Thank you, moderator. I also want to thank everyone who listened to our call for their time and thoughtful questions this morning. While the quarter did have its headwinds, a very positive takeaway that remains is the underlying strength of the improved business model that we continue to build and most notably, the very targeted growth in Specialty and Casualty lines, the expense discipline and a team that is executing in today's market. We are well positioned for 2026 and look forward to keeping you updated on our progress in just a few months.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
