James River Group's Q3 2025 Earnings Call: Contradictions Emerge on Expense Ratio Targets, Specialty Admitted Strategy, and 2025 Loss Trends

Date of Call: November 4, 2025

Financials Results

• EPS: $0.32 adjusted net operating income per share; GAAP net loss of $0.01 per diluted share
• Gross Margin: 65.7% loss ratio (part of 94% combined ratio)

Guidance:

• Maintain disciplined underwriting and continue mix shift to smaller, more profitable accounts and underwriting guardrails.
• Full-year group expense ratio target of 31%.
• Redomicile expected Nov 7; one-time Q4 tax savings $10M–$13M and ongoing quarterly expense savings $3M–$6M; will lower effective tax rate.
• Continue monitoring casualty pricing, submission velocity and quote-to-bind efficiency; no explicit revenue target given.
• Expect better quarter-over-quarter NII next quarter due to retroactive structure payments.

Business Commentary:

• Profitability and Underwriting Improvements:
• James River Group Holdings reported an annualized adjusted net operating return on tangible common equity of 19.3% for Q3 2025, well above its mid-teens target.
• The group combined ratio improved to 94%, down over 40 percentage points from the previous year's 135.5%.

• The enhanced profitability was attributed to deliberate efforts in underwriting and derisking actions, leading to significant expense ratio reductions.

• Expense Management and Headcount Reductions:

• The company reduced its expense ratio to 28.3%, reflecting a decrease of more than 3 percentage points compared to the prior year's quarter.
• Lasting savings of about $8 million were achieved company-wide, with a reduction from 640 to 590 full-time employees by the end of Q3.

• These improvements were largely due to headcount reductions and professional fee cuts.

• Reduced Reinsurance Retention:

• The company's E&S net retention exceeded 58% for the first time in over two years, up from 56% in the same quarter last year.

• This increase in retention was supported by favorable performance trends in recent accident years, particularly in 2023.

• Shift to Smaller Accounts and Specialty Lines:

• The company's focus on smaller accounts and specialty lines led to a 30% decrease in gross premium writings in the Manufacturers and Contractors division.
• Six of the company's 15 underwriting departments showed growth, including Allied Health, Energy, and Environmental, contributing to a 4% increase in the Specialty division.

• This strategic shift aims to capitalize on historically more profitable account segments and limited property exposure.

• Reserve Review and Legacy Cover Charges:

• A detailed reserve review resulted in a $51 million charge in accident years 2022 and prior, primarily driven by other liability occurrence and product completed operations.
• The legacy covers purchased last year are serving their intended purpose by addressing developments from older years, allowing for more recent years to age favorably.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted a 94% combined ratio (down from 135.5% a year ago), adjusted annualized operating return on tangible common equity of 19.3%, tangible common book value per share up 23.4% YTD to $8.24, and a 28.3% expense ratio (down >3 pts YOY) as evidence of improving profitability.

Q&A:

• Question from Mark Hughes (Truist Securities, Inc., Research Division): Frank, you had spoken about the recent accident years, 2023 and forward, you're seeing a much more favorable loss experience. Any way to distinguish how much of that might be just your underwriting actions versus the broader market trends perhaps in the last couple of years?
  Response: Primarily driven by James River's underwriting actions (sublimits, exclusions, exiting classes, improved monitoring and feedback loops), with rate increases above loss trends also contributing.

• Question from Mark Hughes (Truist Securities, Inc., Research Division): Yes, very good. Sarah, did you provide any sort of expense ratio target? I think you may have commented on that in the past. But with the improvement this quarter, it sounds like more expense savings flowing through the P&L. Is there a particular target you've got in mind?
  Response: Full-year expense ratio target remains 31%; management is focused on permanent dollar cost reductions and notes redomicile benefits will further improve metrics.

• Question from Mark Hughes (Truist Securities, Inc., Research Division): And then excess property, I know it's small in your book. Rates are down, business is down. What's your judgment about where that stands now? It was obviously a light storm season. Is that business continuing to see further declines and not your book necessarily, but just kind of your judgment of market conditions? Is it softening further here in the fourth quarter? Or is that maybe stabilized?
  Response: Market remains soft with abundant capacity and loosening terms; expect continued double-digit rate decreases absent a very large catastrophe that would change dynamics.

• Question from Brian Meredith (UBS Investment Bank, Research Division): A couple of questions here for you. First, I'm just curious, the reserve charge that took that went to the ADC cover, the lines of business that, that was involved in, how much of that business are you still writing today? And was anything kind of learned through that study that maybe affected your kind of thoughts on what you're underwriting today and how you're booking stuff?
  Response: The $51M DVR charge was driven by other liability occurrence and product/completed operations (2020–2022); those lines (energy, sports & entertainment, elements of general casualty, MC) are still written but under tighter underwriting rules (e.g., prohibitions/guidelines for tracked homebuilding).

• Question from Brian Meredith (UBS Investment Bank, Research Division): Great. And then the second question, I'm just curious, maybe you can provide some outlook and what you think the ultimate happens with your Specialty Admitted segment. I mean it looks like it's shrunk pretty meaningfully.
  Response: Specialty Admitted was intentionally reduced—commercial auto net retention cut to below 5% (3.7% this quarter); the segment is being managed for profitability and net investment income with mostly fully fronted, low-retention programs and significant expense reductions.

Contradiction Point 1

Expense Ratio Trend

It involves differing expectations regarding the future of the expense ratio, which directly impacts profitability and financial performance.

Did you set an expense ratio target? Will additional expense savings flow through the P&L this quarter? - Mark Hughes(Truist Securities)

2025Q3: Our full-year expense ratio target is 31%, which is lower than our starting point of 32%. - Sarah Doran(CFO)

Will the expense ratio stabilize at 31%, or is there potential for further decline in 2026? - Casey Jay Alexander(Compass Point Research & Trading, LLC)

2025Q2: The 31% expense ratio is the immediate line of sight for the year, but there are opportunities to push that further down in 2026. - Sarah Doran(CFO)

Contradiction Point 2

Specialty Admitted Segment Strategy

It reflects differing priorities and strategic intentions for a key segment of the company's operations.

What is your outlook for the Specialty Admitted segment and its market relevance? - Brian Meredith(UBS Investment Bank)

2025Q3: We're managing the segment for profitability, with a focus on expense management and low retention. The segment contributes meaningfully to net investment income. We continue to evaluate all business units for their fit with corporate goals. - Sarah Doran(CFO) and Frank D’Orazio(CEO)

Can you discuss the Specialty Admitted segment's status and the output from excess casualty? - Mark Douglas Hughes(Truist Securities)

2025Q2: The Specialty Admitted segment is not a huge growth driver. It's really a -- it's a stable segment for us that's profitable. - Frank D’Orazio(CEO)

Contradiction Point 3

Specialty Admitted Business Strategy

It involves the strategic direction of the Specialty Admitted business, which affects the company's focus and resource allocation in a crucial market segment.

What's the outlook for the Specialty Admitted segment and its market relevance? - Brian Meredith(UBS Investment Bank)

2025Q3: We're managing the segment for profitability, with a focus on expense management and low retention. The segment contributes meaningfully to net investment income. We continue to evaluate all business units for their fit with corporate goals. - Sarah Doran(CFO) and Frank D’Orazio(CEO)

What is the economic proposition of the Specialty Admitted business? - Casey Alexander(Compass Point)

2025Q1: James River evaluates all businesses for scale and profitability. The fronting business is deal-driven and lumpy. The company will continue to evaluate the business for the best returns for shareholders. - Frank D’Orazio(CEO)

Contradiction Point 4

Expense Ratio Target and Reduction

It involves changes in financial targets, specifically regarding expense ratio reduction, which are crucial for cost management and investor expectations.

Did you provide any expense ratio targets? Are additional expense savings flowing through the P&L with the quarterly improvement? - Mark Hughes (Truist Securities)

2025Q3: Our full-year expense ratio target is 31%, which is lower than our starting point of 32%. - Sarah Doran(CFO)

Is the 31% expense ratio a target? - William Greenput (Morgan Stanley)

2024Q4: We are focused on maintaining our core expense ratio goals. I'm not sure that we would provide an expense ratio percentage goal at this point. - Sarah Doran(CFO)

Contradiction Point 5

Loss Trend Outlook for 2025

It involves changes in financial expectations, specifically regarding loss trend outlook for 2025, which are critical for underwriting strategies and investor assessments.

Can you break down the extent to which the favorable loss experience in recent accident years is due to underwriting actions versus broader market trends? - Mark Hughes (Truist Securities)

2025Q3: We are very pleased with the underwriting actions we've taken during the year, which have been effective in significantly improving our loss ratio. We expect continued improvement through 2026. - Frank D'Orazio(CEO)

Regarding loss picks, you've observed trends in excess casualty and general casualty unsecured losses. Does this trend frequency match what you've observed in manufacturers? - Unidentified Analyst (Meyer Shields from KBW)

2024Q4: Our view for 2025 sees a slightly higher loss trend overall. primarily driven by increases in excess casualty and general casualty. - Frank D'Orazio(CEO)