Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I'd like to welcome everyone to James River Group Q1 2024 Earnings Call. [Operator instructions] I would like to turn the call over to Brett Shirreffs Investor Relations.Â

Good morning, everyone, and welcome to the James River Group First Quarter 2024 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 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 the reasons described in our earnings press release, all underwriting performance ratios referred to are for our continuing operations and 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, everyone, and welcome to our first quarter 2024 earnings call. I'm pleased to be joining you today to provide additional color on our first quarter results in addition to providing some commentary on market conditions and the future outlook for James River. Before we get into the results for the quarter, I'd like to take a moment to briefly acknowledge the closing of the previously announced sale of…

Thank you very much, Frank. Good morning, everyone, and thanks for joining us today. As you've seen, we started out 2024 on a strong note with net income available to common shareholders of $20.9 million or $0.53 per diluted share compared to $5.3 million or $0.14 per diluted share for the same period a year ago. On an adjusted net operating basis, we are reporting $14.8 million or $0.39 of income per share as compared to $14.97 million or $0.40 per diluted share for the same period a year ago. Turning to our underwriting results. The first quarter combined ratio of 95.3% compared to 94% a year ago. Our loss ratio improved slightly, 66.4% from 66.7% a year ago. And as Frank mentioned, we did not experience any catastrophe losses. There was really no net impact from prior year development. At 28.9%, our expense ratio ticked up slightly from 27.3% a year ago. And as mentioned previously, upon renewal last summer, we changed the key E&S reinsurance treaty to cover more of the portfolio, limit volatility and maximize underwriting income while more efficiently managing reinstatement premiums. This has had the impact of pushing our net to gross retention to 55% this quarter, down from 64% in the prior year period, but consistent with the second half of last year. We've also continued to make investments in people and technology. And finally, it's worth mentioning that our operating expense ratios are elevated in the first quarter of the year due to compensation expenses, including equity-based grants for retirement eligible employees that were made in March, which reside in our corporate and other expense line. For the first quarter, we recorded net investment income of $22.6 million from continuing operations, an increase of 23% or $4.2 million from the prior year quarter. Our embedded book yield was 4.6% compared to 3.9% at this time last year. We've been holding a fair amount of our portfolio in our short-term our cash strategies, which are returning in excess of 5% as we work through the close of our M&A transaction. Going forward, as we begin to allocate some of this to our core fixed income portfolio, reinvestment rates remain attractive in the mid- to low 5% range. We experienced $4.6 million of net realized gains on investments, the majority of which were related to changes in fair values of our common and preferred stock portfolios. Overall, our portfolio remains well positioned to take advantage of the strong market dynamics and attractive yields. And with that, I'll turn the call back to the operator to open the line for questions.

[Operator Instructions] And your first question comes from the line of Casey Alexander with Compass Point.

Congrats on the speedy resolution of the casualty REIT sale, and it's great to see no additional adverse development in E&S. It's really great to see. I appreciate the discipline in the non-renewals of the larger accounts. I'd like to dig into it a little bit more, Frank. Is -- are you developing a strategy of working towards smaller policies, lower limits and trying to get away from types of issues that could lead to larger claims and potentially nuclear verdicts? Frank D’Orazio: Yes, Casey, thanks for the question. And let me first kind of speak about the underwriting actions that we took because I think it will provide some additional context on what we're trying to accomplish here and answer your questions. So as we've spoken about it in the past, portfolio management is an ongoing process for us. And at times, it's caused our writings to decrease in specific quarters, and this is exactly what you're seeing in our results for the first quarter. We took specific underwriting actions to preserve rate and maintain underwriting profitability in a very specific area of the portfolio. So as a result, we nonrenewed several large accounts that didn't meet our profitability hurdles and these were primarily excess casualty accounts with a heavy commercial auto component. So in some instances, we may not have agreed with the proposed underlying attachment or specific account could have had significant loss emergence. But really, in all instances, we just have a very specific view on our 2024 loss trend assumptions associated with excess commercial auto and it's in the high teens. I believe it's our highest view of loss trend of any line we currently write. And so in essence, we held our ground on pricing and we saw it impact several of our larger…

 Look, that's great color. My second question is you had a great -- excellent combined ratio in excess and surplus, but in specialty admit, it's still 97%. It's profitable, but it's -- I think how do you drive better margins through specialty admitted. I think people are not unhappy to see workers' comp exposure go? And also, how do you get fee income from specialty admitted running at a growth rate as opposed to just sideways? Frank D’Orazio: Yes. So listen, I think that some of the metrics and the numbers coming out, especially mid are going to be a little bit noisy right now because of the actions that we took over the last couple of quarters in terms of the non-renewal of the California workers' comp program and then the sale of the individual risk comp unit, the renewal rights transaction that certainly impacted the top line especially at it through 2024. But in essence, what we've done is we've refocused the segment to make it a pure fronting and programs business. And it has been historically profitable for us. We expect to continue to generate attractive returns going forward. We need to continue to scale it now that we are solely focused. So we saw great growth, 23% in the first quarter. Again, that's ex comp -- we continue to experience solid growth from our existing programs, and they have gained scale and benefit from the positive rating environment. But I think the answer to your question is continuing to get additional scale in the space, particularly in this kind of awkward period where we've just made some pretty strategic moves relative to what makes specialty admitted. So the good news there is we do have a pipeline. We have some large programs that we're looking at right now. They're in various stages of diligence. So we'll continue to diligence them, work with the reinsurance market and hopefully have more to kind of speak about relative to new production there in future quarters.

 All right. And my last question and then I'll step out is could you just kind of review where the remaining estate of James River sits with the rating agencies?

I'm not sure exactly what you mean by the remaining you mean by our company as it sits now, Casey, I'm happy to take that...

The company as it sits now with Casualty Re finally out of the way and where do you sit and what are your conversations with the rating agency.

Sure. No, I appreciate that. So we have regular quarterly conversations with the rating agencies. So we've done that by now. It's just typically part of our quarterly process, and we do that at a minimum. And I would say it's a very healthy dynamic. And they're well apprised of kind of where we sit, both on a capital and go forward and certainly current performance perspective, and we feel very good about that dialogue. That's probably how I'd leave it, if that makes sense.

Okay. All right. And appreciate the underwriting discipline that you're showing on those accounts.

Your next question comes from the line of Mark Hughes with Truist Securities.

Kind of the few remaining larger accounts that you're taking a closer look at, is that appears, -- is that a 2Q issue? Or is that going to be spread through the year? Frank D’Orazio: Well, yes. So again, we started the process in the middle of last year. So there may be a 1/4 of these accounts that maybe have not kind of gone through the same type of level of scrutiny. But accounts that we started the process with last year will be up for renewal again. But I think the answer to your question is there's maybe one more quarter of reviewing these accounts. But the point maybe I need to kind of reemphasise is it's not necessarily a binary outcome. We had some binary outcomes this quarter where we actually just non-renewed the business. But there are other outcomes like cutting back limit, raising attachment point, buying additional reinsurance where you still retain the account. We just had a concentration of nonrenewals in the first quarter.

Right. And it sounds like April is pretty strong. So the quarter starting off with a good momentum. The... Frank D’Orazio: Yes. I mean... Let me just touch on that for a second. I mean, because it's not the first time, certainly since I've been with James River that we've taken portfolio management actions that have impacted top line. I think the most recent quarter where we had a similar dynamic was in the third quarter of 2022 and E&S segment premiums declined, I believe, it was 6%. So directly related to underwriting actions impacting a few divisions, but we reported healthy growth for the full year in '22 and then again in 2023. And as I said in the prepared comments, we continue to see a robust set of new and renewal business opportunities. So submission activity up 9%. We saw 8,000 more submissions than the prior year quarter, so we're continuing to receive strong support from our wholesale distribution partners, which is very encouraging and speaks well to the opportunities set for the year.

Yes. On that point, did I hear you properly? I think you said general casualty submissions were up -- was it 45%? Frank D’Orazio: That's right.

Did you kind of increase your appetite? Did you let distribution know that you were interested in a wider range of business? Or is that just the organic, that's what's coming out of the -- or that's the opportunity set these days? Frank D’Orazio:  No, I think it's probably more the latter, just in terms of broader market dynamics. I think the combination of real concerns around social inflation with the reality of the overhang from the last years of the soft market are still playing out reserve balances as well as well as a tighter reinsurance market environment for casualty real risk. So I would say it's not only keeping opportunities maybe with the exception of like D&O, so third-party opportunities. in the E&S market, we're just -- we're benefiting from seeing more growth in the submission opportunity. So you're not seeing the admitted market tempted to come back in. We're seeing more kind of come into the E&S sector.

Okay. And then the current accident year loss ratio in E&S was down year-over-year. Would you say that was mix? Was that better pricing? How would you characterise that? Frank D’Orazio: Yes. So the year-over-year for the quarter you're talking about, is it 140 basis points primarily a mix issue, right? So we talked about the growth in General Casualty, which has a higher loss ratio and then some movement in -- excuse me, in excess casualty as well. And of course, a refreshed view of both expected loss as well as trend assumptions that are baked into the plan for '24.

[Operator Instructions] Your next question comes from the line of Meyer Shields with KBW.Â

I apologise. I missed some of the earlier comments. But Sarah, when you said that there is higher compensation in the first quarter, is that something new because you don't see a higher expense ratio in the past couple of years in the first quarter.

Yes. That's a good question, Meyer. We did our -- you may remember about 1.5 years plus ago. We -- the company adopted a compensation plan that had a number of changes. And specifically, it had directed targets as to how compensation would be earned in the short-term plan versus a high degree of variability and the lack of target. And I think that was designed to better align us with investors, and certainly, the market as it stands. So we made that change with regard to our STI. At the same time, we made a change to institute a retirement function, where it's based on age and years of service. And we have a number of folks who theoretically are eligible for that. So that changes the way that the LTI is expensed through the year. Basically, more of it's expensed in the first quarter rather than ratably for those eligible. So that's what's causing that dynamic, and that is a more recent phenomenon.

The press release also talks about higher professional fees. Is that something that we should expect to continue over the course of the year?

 Yes. Another great question. That's going to be a little bit lumpy. Some of that is obviously related to a little bit of what we experienced in the first quarter with regard to some of the back and forth in the close of JRG Re, so I would expect for that to come down. Just to spend a moment on that. If you look at -- where that's flowing through in PNLS and the corporate and other operating expenses, and you see that this quarter being about $11 million as compared to $9.3 million in the first quarter of last year. I would expect -- and that number is encompassing both the equity comp for the whole company as well as all those professional fees, et cetera. So that number is a little bit elevated. I think it's more than elevated -- it's 20% elevated over the last -- first same quarter of last year. i.e., the 11.1% versus the 9.3%. And I would expect for the rest of this year, Meyer that number to be down closer to where it was in the first quarter of last year.

 And then one last question, and I don't know if this is answerable at this point in time, but I'm guessing there's a little bit of discontinued operations in the second quarter for the period before the casualty deal closed. Is there any quantifying that yet?

 Not yet because that would not be public. But I would imagine that to be pretty small for the 16 days that we own the business Meyer.

That concludes our Q&A session. I will now turn the conference back over to Frank D’Orazio for closing remarks. Frank D’Orazio: Thank you, Benjamin. Before we end today's call, I want to acknowledge and thank Patricia Roberts, who's been a Director of the Board of James River since 2019, serving on multiple committees and sharing our compensation committee for the last few years. The company has benefited greatly from her leadership and knowledge of the E&S sector. And while we will miss her insight and wisdom, we certainly wish her all the best in our upcoming retirement. Okay. I want to thank everyone for their time today and for the questions we received this morning. We look forward to speaking with you all again in a few months to discuss our second quarter results. Thank you, and enjoy the rest of your day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.