Ladies and gentlemen, thank you for standing by, and welcome to the James River Group fourth quarter 2020 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Kevin Copeland, Head of Investor Relations. Thank you. Please go ahead. Thank you, Chelsea. Good morning, everyone, and welcome to the James River Group fourth quarter 2020 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 section of our most recent Form 10-K, Form 10-Qs, and other reports and filings we make with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. I will now turn the call over to Frank D'Orazio, Chief Executive Officer of James River Group. Thank you for that introduction, Kevin. Good morning and welcome to everyone on the call. It's my pleasure to join you for the first time as the CEO of the James River Group, and I'm here today with our CFO, Sarah Doran, as well as our President and COO, Bob Myron. Before I hand the call over to Sarah to cover our financial performance for the quarter, I'd like to share a few introductory remarks with you. My primary focus over the first three months of my tenure at James River has been to ensure that the company remains absolutely laser-focused on the market opportunity we have in front of us, strengthening our position as a best-in-class E&S carrier with an expanding fronting and fee income business and reprofiled Casualty Reinsurance capability. To keep the resources and bandwidth of the organization focused on our prospects for the future, it's critical that we respond to emerging loss trends quickly, making any necessary adjustments to our processes, our underwriting appetite, and ultimately, our reserve strength to prevent creating any distractions to the company's mission. As previously announced, during our fourth quarter, we strengthened our reserves by $75.8 million in our commercial auto runoff portfolio and $24.7 million in our Casualty Reinsurance unit. In both instances, we saw emergence in the quarter, changed several assumptions, and acted immediately to bolster reserves, adding nearly 4% to our overall net reserve position for the group. These charges ultimately drove our full year combined ratio for 2020 to 105.6%. Our action year combined ratio was at 77% for the quarter and at 90.4% for the year. These data points cast our prospective business in a very attractive light and give further credence to our focus on the opportunities in front of us. The commercial auto reserve increase primarily relates to the 2016-2018 years of the runoff portfolio, where we've responded to heightened reported losses this quarter. For some context, paid and reported losses on this book had trended down since putting the large commercial auto account into runoff a year ago. The company started to see higher reported losses in the last two weeks of the third quarter, and this trend continued and accelerated during the fourth quarter. We believe this trend reflects COVID-driven delays as well as the year-end settlement season, possibly exacerbated by higher unemployment rates. We also completed a detailed claims review of a large block of the runoff claims and increased case reserves meaningfully in the fourth quarter. We've continued to close claims rapidly on this portfolio and have now closed almost 58% of the claims that were open in January 2020 and are receiving very few new claims at this point. Of our approximately $1.4 billion of total group-wide net reserves at quarter end, approximately $300 million supports the runoff portfolio. It's worth noting that even after our fourth quarter charge, our E&S unit made an underwriting profit for the year, producing a 97.7% combined ratio, and our Specialty Admitted Insurance segment reported a combined ratio of 92.7%. While our overall corporate results are clearly disappointing and not consistent with the company's unwavering focus on underwriting profits, our fourth quarter charge understates what was otherwise a year of significant accomplishment for the organization. I remain both enthusiastic about the positive fundamentals that underlie our ongoing business and very bullish on our prospects for 2021. Excluding the impact of our commercial auto runoff portfolio, the company grew by 26% in the fourth quarter over prior fourth quarter, and by 14.6% over prior year to more than $1.25 billion in GWP, with strong growth in both our E&S and Specialty Admitted Insurance segments, while driving margin expansion throughout the company and benefiting from our 16th straight quarter of positive rate change. Over those 16 quarters, our compounded aggregated rate increase on core E&S renewal book has been 31.8%. Our core E&S segment truly hit its stride in 2020 with positive indicators across all major metrics, including 38.9% GWP growth in the fourth quarter and 29.5% growth for the year as our submission count increased 11% for 2020 and policy count rose 26% over year in 2019. From a rate perspective, the segment experienced 13.7% positive rate change on the renewal portfolio. We feel particularly optimistic about our ability to carry this momentum into 2021. Our early Q1 indicators point to a continuation of the buoyant 2020 rate environment as our January rate change was actually more significant than both Q4 and full year 2020. We also experienced GWP growth in the month of 37% as our quote to bind ratio increased 26% over January of 2020. These metrics seem to signal that we remain in a market that E&S underwriters dream about. I should also mention that these 2020 key measures were achieved while enjoying a major reduction in claims frequency throughout the year, down on an exposure-adjusted basis by 19.1% based on policy count, or 29.3% based on earned premium. I should also note that our budget for 2021 assumes that these reduction in claim frequency are temporary and will revert to normalcy over the course of the year. I'm also pleased to announce that our Specialty Admitted Insurance segment continues to gain scale as the unit onboarded eight new programs in 2020, ensuring further growth in GWP and fee income embedded in their 2021 plan as these new programs gain traction over the course of the next year. We have a very robust pipeline of new and exciting opportunities for 2021 as we continue to see momentum in program submission activity, which increased 74% in 2020, while fee income increased 22% over 2019 to $19.3 million. We are seeing larger and more attractive opportunities in this space as our Falls Lake unit makes a name for itself as a preferred fronting partner. Of course, all of this happened against the backdrop of a global pandemic, with the vast majority of our workforce working remotely. I'm very proud of the dedication and resiliency of the James River staff for their accomplishments and efforts, despite unprecedented challenges, to continue to position James River as a premier specialty E&S carrier. Our plans for 2021 call for us to continue to profitably grow the company, renewing the commitment to our underwriting culture while continuing to invest in our people, our processes, and our technology in an effort to create a larger, more profitable specialty carrier, consistently producing top-tier returns. Our expectation for 2021 is to make an underwriting profit as a group and in each of our segments, as we aim to produce a low double-digit return on tangible equity for the year. With that as an introduction, let me turn the call over to Sarah Doran. Thanks, Frank. Let me highlight a few of the financial points from the quarter. Last night, we reported a net loss of $20.3 million for the quarter and net income of $4.8 million for the year, resulting in an operating return on tangible equity of 3.8% for the year. We had a $29 million operating loss for the quarter, given the reserve charges, and operating income of $21.2 million for the year. For the year, we grew tangible book value per share 9% before dividend payments. Our performance for the quarter reflects strong investment income performance and improved accident year loss ratios in our largest segment, E&S, offset by reserve charges on our commercial auto runoff book and at our smallest segment, Casualty Reinsurance. Market conditions remain extremely attractive for our business, and we took advantage. We are reporting accelerating core E&S growth for this most recent quarter and almost 30% for the year. We continue to closely manage our expenses. Frank covered the commercial auto reserve strengthening, but we also experienced $24.7 million of adverse development in our Casualty Reinsurance segment. This development was offset by $7.5 million of sliding scale commission adjustments that run through our expense ratio, and those are on many of the treaties that performed adversely. Of the adverse development, approximately a third was on treaties that we no longer write. A few of our reinsurance contracts experienced much higher than expected loss emergence during the quarter, and in response, we adjusted our loss development factors. While some of these contracts remain profitable, this dynamic brought on the adverse development. This quarter, we had $13.5 million of favorable development from our core E&S business emanating from the years 2019 and prior. We hold the most recent three years of our core E&S business at a loss ratio of 62.6%. As Frank reviewed, we also reduced our current year loss pick in the core E&S book almost four points due to the 20%-30% decrease in claims frequency we saw during 2020, along with the rate increases that he cited, which substantially exceeded our expectations. Our paid and reported loss ratios in core E&S remained at or below 30% for 2020, a decrease in reported losses of 10 points from 2019 and 27 points from 2018. We're not counting on the low frequency trend to continue in future years, as Frank mentioned, as the COVID vaccine becomes more widely available and activity continues to increase. We believe the reduction in claims frequency for 2020 will be permanent and that we do not expect a catch-up as a result of delayed reporting. Examples of this would be fewer slip and fall accidents, fewer people in restaurants, fewer people going to work. Our primary external reserve study indicates that our reserves are strong and adequate, with a modest redundancy and strengthened from a year ago. For the full year core E&S made up approximately 65% of the company's net written premiums as compared to 40% for last year. It also makes up approximately 50% of our $1.4 billion of net reserves. Moving on to expenses. Our expense ratio decreased to 19.9% this quarter as compared to 34.2% in the first quarter of this year, and 26.7% for the full year 2020. There were a few offsets to this year's expense ratio that we would not expect to repeat. First, the offset of sliding scale commissions and Casualty Re lowered the expense ratio by about two points for the year, reduced travel and other COVID-related savings, as well as a significant reduction in our performance-based compensation, lowered the ratio an additional point. We do expect that our expense ratio in 2021 will be closer to 30%. Moving on to investments. Net investment income for the fourth quarter accelerated as compared to prior recent quarters at $22.2 million, an increase from the same quarter last year, largely due to higher income from our renewable energy portfolio. One investment in this portfolio alone matured and exceeded performance targets. We do not expect this to regularly repeat, the net investment income will be similar in quantum to the second and third quarter of 2020. This quarter, our gross yield was about 3%, or about 70 basis points reduced from the fourth quarter of 2019. With that, I will hand it back to Frank. Thank you, Sarah. Operator, would you kindly open the line to questions? As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes out of Matthew Carletti with JMP. I mean, JMP. Thanks. Good morning. Okay. Frank, I appreciate your comments on the Uber reserve charge and the color that you were able to give around it. I guess, one question I wanted to ask you that I think is on a lot of investors' minds and potential investors' minds is what can you say or what color can you provide, if there's any additional color, that your confidence level with getting it behind you, right? That it wasn't just a reaction to the data that actual was worse than expected, and you reacted to it, but that there was also a very large dose of increased conservatism put into the process such that, hopefully, it won't have to be revisited. Thanks for the question, Matt. Let me try to walk you through our thought process and how I feel about where we are right now. Clearly, we addressed loss emergence with a large number. We called for a claims audit by our senior claims leadership team to review a healthy sampling of the open files at the time, and we boosted our case reserves on a portion of those files. Our actuaries took the data from that quarter and the insights from the claims audit, and the indications were for materially higher ultimate losses that we're now booked to. I'm comfortable with where we ended the quarter, in particular, with the overall group reserve position, given the indications of our external reserve study. We are definitely better off today than we were a quarter ago. In commercial auto runoff, to your question, case reserves per open claim are up about 150% year-over-year and up 25% since Q3. We've closed roughly 58% of the open claims since we had the beginning of 2020, and I feel our new actuarial ultimate selection reflects the experience of the latest quarter as well as what we've learned in closing out the bulk of these claims. I'm comfortable with the actions we've taken. That being said, if there's an opportunity for us to further reduce any possibility of future emergence or tail risk or to move to a higher end of the range of outcomes in a format that makes sense, economically viable, we're open to exploring that option because I don't want our runoff book to be an ongoing distraction and drag on the organization. I want the full resource of the company completely focused on the opportunities in this market to continue to grow our core E&S lines profitably and scale our fronting business. Great. Thank you. Just another question, really a two-part question, just focused on core E&S. I guess twofold question. One is, as I think about top line, I think just to confirm, we will be anniversary-ing kind of the apples to oranges of Uber being gone, and that kind of the, whether it's the core E&S growth rate you quoted for the quarter in the press release or talked about January off to a good start, that those sorts of numbers are what we should be thinking about in terms of that segment reporting? A loss ratio question in the sense of, as I look at kind of the 62 and change accident year that 2020 ended up at, is that a sustainable starting point, or should we be thinking about some of the commentary you had around some of the frequency benefit that took place in 2020 as being a part of that and maybe not transferable to 2021, at least to start? Okay. There's a lot there, Matt. Let me start with. Yeah, I'm down for that. Thank you. Okay. Let me try to start with the last part of your question, which is just how to think about the 2021 accident year relative to a loss ratio pick. Listen, as I mentioned, we had significant reductions in claims frequency in 2020, along with rate increases in excess of expectations. We're not assuming the same reduction in claims frequency for 2021, and we're taking a fairly conservative approach to our loss picks going forward. Hopefully that gives you some sense and color there. Just. Sure relative to your question on the E&S market and how to think about top line and rate, I think that's where you're going on that. Listen, I would tell you, I think our thesis for the rate environment for 2021, if you asked me this a month ago, I would tell you that I thought it was a continuation of some blend of what we saw in Q3 and Q4, maybe with some moderation by the back end of the year. Our January report on rate was much higher, not just than Q4, but our year-end 2020. That tells me we're seeing a lot of opportunities in lines of business like excess casualty, excess property, allied health, maybe some professional lines, where rates we're seeing there are higher than the lines of business that I'm sorry, are higher there than the composite average that we have in the overall portfolio. We'll continue to monitor those business mix dynamics over the course of the year. We still think this market has legs. Between the live size limitations that we're witnessing in the market, the retrenchment of the standard market across a number of classes, the Lloyd's desk overview and limitation on stamp size growth, and certainly the continued overhang of recent accident years. We would be pleased with our regional thesis, just relative to where we think growth can be and where rates will play out over 2021. We have some reason for some additional optimism. Great. Thank you very much. Your next question comes on with Mark Hughes with Truist. Yeah, thank you. Good morning. Good morning. Sarah, you were giving some numbers near the back end of your comments. You talked about the decline in reported either claims or losses for 2019. I think this was in the core E&S business. Could you refresh me on that number, if I'm clear on that? Sure. Happy to. Thanks, Mark. I was just reviewing paid and reported loss ratios in core E&S, because I think Yeah it's a pretty strong story there. Just to say that paid and reported loss ratios in core E&S were at or below 30% for all of 2020, and that reflects a decrease of 10 points from where we were in 2019 and a decrease of 27 points from where we were in 2018. Thank you for that. Frank, when you look at the Casualty Reinsurance business, I wonder if you might talk about which sort of treaties, if there's any commonality, any particular lines where you saw the loss emergence. How you think that business is positioned on a go-forward basis? What are your competitive advantages? What do you bring to the market to give us confidence in the future profitability and returns in that business? Sure. Let me try to address your questions on the development first. In Casualty Re, roughly a third of the development that we saw comes from treaties that we're no longer on. We saw development on treaties from 2012 to 2018, but most of the charge was really from the 2016 and 2017 years. The lines of business that saw the most development were GL for contractors and commercial auto liability. We ended up changing our loss development factors on a few of our larger historical treaties. Some we still write, some we're no longer on. The book's been pared back in recent years, significant reductions or eliminations of some volatile elements, non-standard auto, workers' compensation, any property exposure. Roughly one-third of the emergence came from treaties that we no longer support. Hopefully, that gives you some sense in terms of where we're seeing it from. Ultimately, we chose to take a more significant charge in the actuarial recommendation. The 24.7 is the largest quarterly charge the unit's ever taken. I feel very good about the steps we took there, and I feel even better about the likelihood of making an underwriting profit in the recent and current accident years just based on the reprofiling of that book, the improvements made at the transactional level, relative terms and conditions, and then just the underlying lift in terms of rate and improvements in the underlying business. That's some color there. I'm sorry, go ahead. I didn't mean to cut you off, but I was going to ask You've definitely been very optimistic about the growth outlook in the core E&S. What should we think about the Casualty Re book? Are you trying to grow that, hold it steady? Good question. I would say we've been more focused on margin expansion there than growth. I would expect to see maybe some modest growth. From a strategic standpoint, listen, we like the efficiencies Bermuda has historically provided us. Having the footprint that we do in the States, I like having position in the Bermuda market. I think it's got the ability to round out distribution and market access opportunities for us. I spent 12 years in the Bermuda market, so I think I know that market well, and I will continue to explore ways to see if we can optimize our results there further over time. Sarah, I've asked you this before, the ceded premium ratio within the core E&S. Any directional thoughts on that? I think you described it that excess casualty, excess property were some lines that you saw performing quite well. It sounds like you're growing there. How should that ceded premium ratio trend in the core? Yeah, that's a great question, Mark. Thank you for asking it. Excess casualty is really what drives that. That was about a third of our premium in core E&S this year. That's what brought that ceded ratio down to its current level. That's the book in throughout all of core E&S that's growing the fastest, that really has the most consistent and best rate environment. All that would roll up to say that I don't have a specific crystal ball on which line's going to grow when, but that one still certainly has some significant legs, so I would feel pretty comfortable with that ceded ratio in core E&S, where it's been this quarter is pretty similar to last quarter as well, and think about that moving forward as well. I think we could, as the year goes on, as we're thinking about different things, there are always different levers to consider here. We certainly buy a fair amount of external reinsurance, but that book's been very profitable. That could be something that we'd look about ways to manage our capital going forward as well. Just to give you a sense of other things that we're thinking about moving the dial and taking advantage of this market right now. If we're just looking for a pure kind of modeling question and assumption, I think the current rate is a fair enough one for where we sit. Current ceded ratio. Thank you. Appreciate that. Your next question comes on Randy Binner with B. Riley. Good morning. Thanks. I just wanted to ask on the commercial auto reserve charge, could you lay out, I was looking around, I don't think the Form 10-K is out yet, a number that would be helpful to have is where the incurred net loss sits on a GAAP basis for 2020 now. If you don't have that, what accident years the adverse development was in, so we can understand how each accident year is developing. Hey, Randy. It's Bob. Bob, you want to help us? Randy, let me answer that question. I've got full year data here with me. During the calendar year 2020, we added reserves for 2016, 2017, and 2018 of $11 million, $47 million, and $53 million respectively. I think I would want to mention again that as Frank did, that we've made a significant amount of progress here closing claims, and as of relative to the peak that we had, we've closed 58% of what was outstanding in January 2020. The remaining 80%, or above 80% of what's remaining open are from the accident years 2018 and 2019. You'll remember that there's a lot of moving pieces to this commercial auto book, especially that both rate and state mix changed consistently throughout the six years where the large commercial account was meaningful for us. We got material rate increases in the 2018 underwriting year that continued into the 2019 renewal. As we got increased rate, also the number of states that we insured shrunk, and some of the more problematic states went away that had longer statutes of limitations and significant UM/UIM type of exposure, like Florida, which wasn't in the portfolio in 2018 or 2019. The state mix also, as I mentioned, shifted a lot, and the performance of the book changed with the reductions in the states as well. I think that we continue to get a trickle of new claims in, but it's slowed down a lot. I would just reiterate that we've made material increases in the case reserves. Relative to a year ago, it's above 150% increase there. Okay. Can I just confirm those numbers? You said for 2016 you added $11 million, for 2017 you added $47 million, for 2018 you added $33 million. Is that right? Fifty-three. 53. Well, does that mean you took 2019 down to get to back to the $76 million? No significant Those numbers were for the year, Randy, just to say, Bob was citing, not for the quarter. Just to point out. Right, those numbers sum to 100. Maybe we should take this offline, I guess the question for right now is, there's no material change to 2019. 2019 stays at around $262 million. It's pretty close to where it was. We look at that year- Yeah We look at how it's performing so far. With our, I think we've talked about before, the refocus of claims handling around commercial auto when we canceled, when we significantly pared down this business. We expect that year, the way we're looking at it now, we still think it's a profitable year. Just one other follow-up. Thanks for all this, Bob. The 80%, you said, of the remaining claims are from the 2019 and 2020 accident years, correct? 2018 and 2019. 2018 and 2019. Okay, gotcha. That makes more sense. Yeah, we don't have any exposure. Yeah. Well, it's just worth very quickly reminding everyone how that worked. We're not on risk for any accidents that happened after 12/31/2019. It was done on a cutoff basis. We don't have any claims from 2020. All right. I'll leave it there. Thank you. Your next question comes out of Meyer Shields with KBW. Thanks. Good morning. Good morning. I guess this is for Sarah. You talk about the diminished frequency of claims that clearly didn't happen. I was hoping you could update us on how you're thinking of severity for accident year 2020, and I'm asking both in general and because of the growth in excess casualty, where I would imagine severity trends are typically higher. All right. That cut out for a second. Are you asking about the 2021 versus 2020, Meyer? I apologize, I didn't pick up that full question. No, I'm actually asking just about 2020 itself. Completely on board with the idea that the frequency benefit's going to hold up because these things just didn't happen. I wanted to get a sense as to the severity assumptions underlying the accident year 2020 loss pick. Yeah. Meyer, this is Bob Myron. We've seen in this small account casualty book that's individually underwritten, we have not really seen, when we look backwards, severity has been pretty benign. I think it's important to bifurcate a couple of things here. First of all, in terms of the frequency decline in the stats that we've quoted herein, this is really related to the 2020 accident year when we've looked at it. Not just claims that we received in the year, but specifically related to 2020 accident year claims. Overall, in particular, referencing back to some of the stats that Sarah Doran quoted, the $ of loss emergence have been really benign in this book of business, right? We feel great about where our loss picks are, and we're hoping that we're continuing to build redundancy there. When we look forward, I think we're making a conservative assumption around loss trend. What had probably been low single digits, we're making an assumption around probably mid-single digits. I think that it's really less about the data that we're seeing because our paid and incurred actual $ of loss are so benign, but I think we're just cautious that while I think social inflation and the like has been a bigger issue with larger account business and some areas of exposure and insurance that we really don't get into, I think we're just cautious that it's probably prudent to be raising that trend assumption more to mid-single digits. Yeah. Hopefully that was clear. Oh, it was. It was definitely the right call, so that's good to hear. I'm getting different messages around the industry. Can you talk about how ceding commissions are changing in Casualty Re? Sure. Why don't I start that? There are some improvements in ceding commissions. I would not say significant, at least in the portfolio that we write. Call it a point-ish, roughly, in terms of how we look at the improvements there. The more significant improvement that we're seeing relative to margin expansion is really in the underlying business. Maybe some terms as well, but for the most part, the lift we're seeing in the rate there. Okay, good. No, just there are some examples, I guess, of casualty-related ceding commissions going up instead of down, so it sounds like you're not worried about that. Then finally, with the growth in the excess property, is there any material exposure to Texas weather a couple of weeks ago, or last week? No. Obviously, fair question. We have a fairly modest-sized portfolio of excess property. It's heavily reinsured. Obviously, watching the events over the last couple of weeks closely and monitoring them, in constant touch with our claims folks, but we don't expect it to be a material event for the organization. Perfect. Thank you so much. There are no further questions. I would now like to turn the call over to Mr. Frank D'Orazio. Okay, operator. Thank you to everyone on our call for your interest in James River. We look forward to reporting to you next quarter. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.