Good day everyone and welcome to today's -- and welcome to the James River Group Q1 2023 Earnings Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Brett Shirreffs, Head of Investor Relations, to begin the conference. Over to you.

Thanks and good morning, everyone. Welcome to the James River Group first quarter 2023 earnings conference call. During the call, we will be making forward-looking statements. These statements are based on current beliefs, intentions, expectations and assumptions that are subject to various risks and uncertainties which may cause results -- actual results to differ materially. For a discussion of such risks and uncertainties, please see the cautionary language regarding forward-looking statements in yesterday's earnings release and the risk factors of our most recent Form 10-K and other reports and filings we have made with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. In addition, during this presentation, we may reference non-GAAP financial measures such as adjusted net operating income, underwriting profit, tangible equity, tangible common equity and adjusted net operating return on tangible common equity. Please refer to our earnings press release for a reconciliation of these numbers to GAAP. A copy of which can be found on our website at www.jrvrgroup.com. Lastly, unless otherwise specified for reasons described in our earnings press release, all underwriting performance ratios referred to are for our business that is not subject to retroactive reinsurance accounting for loss portfolio transfers. I will now turn the call over to Frank D’Orazio, Chief Executive Officer of James River Group. Frank D’Orazio: Thank you for that introduction, Brett. Good morning and welcome to everyone on the call. I'm pleased to be joining you today to provide additional color on our strong first quarter results, while also sharing some thoughts on market conditions and growth opportunities for our company. The results we released last night demonstrated a continuation of the positive momentum we established 5 quarters ago as we delivered another strong quarter of consistent mid-double-digit returns on tangible equity.…

Thanks very much, Frank and good morning to everybody. Thanks for joining us today. We're starting out the year in a very strong financial position, a continuation of our powerful momentum these last 5 quarters. This quarter, we're reporting adjusted net operating income of $0.56 per share, an increase of over 50% as compared to the prior year quarter. Tangible book value per common share increased 14.7% from last quarter to $10.91, carrying strong momentum forward into 2023. We are delivering $21.6 million of adjusted net operating income this quarter which included $10.6 million of underwriting profit and $25.8 million of net investment income, each on a pretax basis. For the quarter, adjusted net operating return on tangible common equity, excluding AOCI, was 16.3%, as Frank mentioned, an increase of over 60 basis points from last quarter and over 230 basis points from the full year 2022, including AOCI. Our annualized return moves from 16.3% to 22.5%. Our expense ratio for the quarter was 28.4%, in line with what we cited from this year during our earnings -- our last earnings call in February. Our expense ratio was higher from a year ago for 2 primary reasons. Most impactfully, as previously discussed, we decided to increase the retention in our excess casualty line within E&S. That line represents about 1/3 of the segment. We did this at midyear last year by reducing the quota share we purchased by about 10%. This is a line that's taken on about 135% of cumulative rate over the last 6 years, roughly double the increase that we've seen in the full E&S segment. We believe this is meaningfully in excess of our loss costs. And given our long and positive experience in this line, we wanted to retain more of our underwriting profits. In…

[Operator Instructions] Your first question comes from Brian Meredith.

A couple of questions here for you, Frank. The first one, maybe talk a little bit about your business mix in the E&S business and the growth you're putting on there, particularly when it comes to the excess property business, geographically, where is that business? Is it cat exposed? Is this something we should think about going forward with James over the maybe given the opportunity in that market, you may have a little bit of more cat volatility in your results? Or am I thinking that the wrong way? Frank D’Orazio: Sure, Brian. Thanks for the question. So let me talk first, I guess, just more broadly about the opportunities that we're seeing and then I want to address your property question more specifically. So we saw very healthy growth opportunities across most of our UNS platform during the first quarter with the majority of our underwriting divisions, reporting solid growth and all divisions reporting positive renewal rate changes. We also saw continued strong growth in renewal submissions. In particular, they were up 8%, while new submission activity also showed growth. I would say that most of our underwriting divisions have experienced continued renewal submission growth in our 3 largest divisions, excess casualty, general casualty and manufacturing contractors all experienced renewal submission growth of more than 10% with General Casualty coming in above 20%. We saw a similar dynamic from a policy count perspective across the segment. Policies in force increased nearly 13%, as I said earlier. That was led by Excess Casuality that was up 19%. General Casualty also up 19% and manufacturers and contractors, up 17%. And we would expect to see these trends continue certainly through 2023. From a gross premium standpoint if you want some of our larger unearned visions experienced strong growth like Excess…

That was helpful. And then my second question, just pivoting over to the Admitted Segment, 102.3% combined ratio. Is that a level of the combined ratio that you're kind of comfortable with? Are you in the acceptable return on capital above 100 combined ratio in that segment? Frank D’Orazio: So Brian, what I'd say is on a calendar year basis, the Specialty Admitted Segment has generally had a long track record of profitable results which has been aided over time by favorable reserve development. We have a strong team leading this business and they've carefully managed the top line through the cycle. We obviously can't control what happens in the market, particularly in the workers' comp market but we can actively manage our portfolio and navigate market conditions. And that doesn't end with some decision that we make on a reinsurance structure. So longer term, we certainly expect the business to continue to be profitable. So fundamentals, as you know, Brian, it's 2 separate business units. The fundamentals of the workers' compensation market are challenged right now but the fronting program business does provide some nice balance for our E&S segment based on the strong fee income and the capital light structure of the segment.

Your next question comes from Meyer Shields.

First question, I don't know if this is for Frank or for Sarah. But based on the evolution of business mix, specifically, I guess, the growth was in excess casualty, is the duration of your liabilities and therefore, the duration of your investment -- targeted investment portfolio changing over like the last 2, 3 years?

I don't think so, Meyer. I think most of our E&S book is longer duration business and our portfolio -- our investment portfolio has had a duration of around 4 for quite some time. I don't think we feel like we need to manage the asset liability mix exactly with the business mix. But I think we're very close and continuing to grow in excess casualty which is now 1/3 of the book as we've said, is probably making it a little bit longer but I would say it's largely a rounding error compared to the rest of the business mix in the segment.

Okay, understood. And second question, I guess, when I look at either the net underwriting expenses or the expenses gross fee income in specialty admitted, they're up something like 20% on a year-over-year basis. And I was hoping you could talk through what's driving that and whether we should expect that growth to profit.

Sure. And you're just focused on the underwriting -- the net underwriting expenses in specialty [ph], just to be super clear on your question, right?

Net or growth. So we're seeing similar growth rates.

Yes, yes. I mean I think much of it is really just due to the change in the reinsurance structure that we mentioned, not having the quota share at 1/1 on the workers' comp business that was providing a significant amount of offset towards expenses in that segment in the form of the ceding commission. And I think you'll -- that will continue to, call it, grade down as the business earns in over the next couple of quarters. So we certainly had some contribution from ceding commission in this first quarter but I think there will be less of that going forward, considering that was a 1/1 nonrenewal. So that's really the biggest dynamic, I think. There are small things around just regular G&A but it is really being driven by the change in the reinsurance structure. And you see, to some degree, an offset there in the form of a loss ratio and some of the structure that some of the structure contributes as it kind of feeds into some other components of that. And of course, the increase on the net overall just given that we've moved away from that structure.

Next question comes from Tracy.

Sticking with the expense ratio, I'm just wondering a lower ceding commission was that considered in your 28% guidance for the year? Or is that something you may want to revisit as we go through the remainder of the year?

No. When we -- when I gave that guidance in our February call, Tracy and thank you for the clarifying question of around 28% and we consider the 28.4% around 28% that we delivered this quarter. So the change in the reinsurance structures, both that we've mentioned, were incorporated in that guidance.

Perfect. And I also realize it's tough just to completely exit business. I did see you had some gross written premium in your reinsurance business this quarter. How should we think about that through the course of the year? Is that something where we could expect that to go closer to zero in the near term?

Yes, that's a great question. I appreciate you clarifying that. We had about $10 million of audit premium -- premium adjustments in that line this quarter. So that's what you're seeing. Otherwise, the business is effectively grading down through the suspension of underwriting activities. I would say that premium adjustment, premium driven by premium models, et cetera, are very consistent thing in that business for us, for anyone. And those are coming from multiple treaties, multiple lines, et cetera. I would say it was a little bit -- and we don't typically budget those because you don't have line of sight into them. And they're also earned as they're written, so they're having really an immediate effect on the quarter. I would also say that $10 million is a little higher than it has been in previous quarters as well. Again, there's really no pattern to it. It just happens as a normal course of the business. So I would expect and we have expected that the top line that there's little to no GWP, NWP and then the earned continues to grade down as I think we've said but just to take a moment to clarify the business that we write in that segment does earn over a multiyear period. So we certainly were expecting earned premium in the segment to continue for the year but the gross and the written, I think those are entirely -- or no, those were entirely driven by the auto premium adjustments.

[Operator Instructions] Your next question comes from Mark Hughes.

Sarah, the ceded premium in the E&S, it's 36%. I assume that's influenced by mix. Is that a good run rate if excess casualty continues to grow more quickly? Will that grade up over time?

I think that's a good run rate, Mark. I think we would expect kind of a similar mix as we look at the balance of the year and certainly in our plan, we do. But we speak a little bit out of both sides of my mouth. Certainly, given rate and dynamics every quarter, it can bump around. But I think that's a fine assumption. There's no other kind of one-off or anomaly that I'm seeing in the quarter that would make me give you different advice.

Yes. And then the -- in specialty admitted, earned this quarter around $21 million, your gross written has been relatively stable. If one were to assume it was to remain stable with the earned also remained stable at about $21 million. I'm just trying to understand the relationship between the written and earned more clearly. Would that be the case?

I think that's right. It's -- the relationship should be pretty straightforward. I think there -- we certainly would expect and hope to continue to put on new programs as we did this quarter. But I think that you know that those will -- those develop in terms of premium impact, they can develop slowly as they come online.

Yes. A question for Frank. Is this the right growth rate in this environment of low double digits is a very healthy growth. I know you've been bringing in new people. And I think your appetite around what you retain and what you write has been maybe evolving over time. Does it feel like with what you're seeing with submission growth, with the book of business you're finding attractive that's in front of you? Is this a sensible growth rate for you? I'll ask it that way. Frank D’Orazio: Yes, Mark, thanks for the question. I would say that we're very pleased with the growth opportunities that we see in front of us. We're pleased with where the rate environment is across the portfolio and we are starting to think about broadening out our product set and diversifying it and we announced a new initiative over the course of the quarter. So I'd say that growth rates will fluctuate, obviously, from quarter to quarter. But given where the rate environment is right now, we feel comfortable with the current rate.

[Operator Instructions] So there are no further questions at this time. I turn back the call over to Brett. Frank D’Orazio: Actually, I'll take that. I want to thank everyone listening on the call for their time today and for the questions we received this morning. We look forward to speaking with you again in just a few months to discuss our second quarter results. Thank you and enjoy your day.

This concludes today's conference call. You may now disconnect. Thank you.