James River Q1 GWP plummets due to Uber cancellation

James River has reported a first quarter operating profit that beat analyst expectations but included a 27 percent drop in E&S gross written premium (GWP) and a deterioration in its combined ratio to 100.6 percent.

The Bermuda-based (re)insurer reported adjusted net operating income of $15.4mn, down from $21.7mn in the prior year quarter.

The $0.50 operating income per diluted share in the first quarter beat the $0.46 mean analyst estimate, but was down from $0.71 in last year’s first quarter.

The group combined ratio worsened to 100.6 percent from 96.2 percent in the prior year period.

This was the result of the expense ratio increasing to 34.2 percent from 22.6 percent. The company explained this was “principally due to the mix shift away from commercial auto business, which carried a lower expense ratio and higher loss ratio than other lines of business”.

Overall GWP of $283.8mn was down 13 percent from $327.3mn in the prior year period.

E&S GWP dropped 27 percent in the quarter to $136.2mn. This was the result of commercial auto GWP decreasing from $92.0mn in the first quarter of 2019 to $6.7mn due to the cancellation of all policies issued to Uber, effective at the end of 2019.

James River announced last October that it was cancelling all contracts issued to its largest customer Rasier and its affiliates – part of Uber Technologies – after the account underperformed on profitability. Its management signalled in February that it is open to buying an adverse development cover for the cancelled Uber book.

Aside from the commercial auto segment, James River reported strong E&S performance for the first quarter. Core E&S GWP, excluding commercial auto, was up 37 percent and 11 out of 12 core underwriting divisions grew.

J Adam Abram, James River chairman and CEO, noted that core E&S renewal pricing was up by 13 percent and submission flow increased 20 percent.

“This was the 13th consecutive quarter in which rates increased in core E&S,” he said.

In the company’s other segments, specialty admitted premium was flat at $102.8mn and casualty reinsurance was up 19 percent to $44.8mn due to the change in renewal date of a fronted treaty where the company retains no net underwriting risk.

In contrast to the Q1 operating profit, the Bermudian (re)insurer reported a net loss of $36.8mn for the quarter compared to net income of $22.7mn in the prior year period. This was driven by investment volatility, primarily in the $202.9mn senior secured bank loan portfolio.

Abram commented: “Despite the disruptions, uncertainties and the concerns brought on by the spread of the coronavirus, our team delivered a very strong start to the year.”