James River Group Holdings, Ltd.

Welcome, everyone, to the James River Group Quarter 3 2023 Earnings Conference Call. I'd now like to turn the call over to Brett Sheriffs, our Head of Investor Relations. You may begin your conference.

Good morning, everyone, and welcome to the James River Group Third 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 actual results to differ materially. For 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 business that is not subject to retroactive reinsurance accounting for lost portfolio transfers. I will now turn the call over to Frank D'Orazio, Chief Executive Officer of James River Group.

Thank you for that introduction, Brett. Good morning, everyone, and welcome to our third quarter 2023 earnings call. I'm pleased to be joining you today to provide additional color on our third quarter results while also sharing some thoughts around marketing additions and the strategic priorities that James River continues to focus on. In addition to reporting our third quarter results, this morning we're excited to announce the sale of our casualty reinsurance business, JRG Re, to Fleming Insurance Holdings, a portfolio company of Altamont Capital Partners. This transaction marks a significant milestone for the organization, as it will bring ultimate finality to our exposure from our legacy reinsurance platform. Having also sold the renewal rights to our individual risk workers' compensation business during the third quarter, moving forward, James River will be focused on the E&S and fronting markets, sectors where we have scale, market leadership, and strong teams in place to take advantage of market opportunities. This transaction will provide a clean exit from the reinsurance business, eliminate future reserve volatility, and freeze up capital to focus on our areas of growth. We also believe that sales simplifies the James River story, while paving the way for more consistent earnings. Turning to our results, the third quarter continued to show the positive momentum we have as an organization and strong underlying trends in our ongoing businesses. We again delivered profitable underwriting results in both our E&S and specialty admitted segments, while our investment portfolio continues to perform well with record investment income during the third quarter. We have seen a modest acceleration of some already positive trends in our E&S business including renewal rate increases and submission growth, clearly a favorable indication of the strength and durability of this market cycle, while we also continue to execute on portfolio management actions across our business as we remain focused on bottom-line profitability. For the third quarter, we reported adjusted net operating income of $18.3 million, or 48 cents per share. Our return on tangible common equity, XAOCI, was 13% for the quarter. Tangible common equity per share of $10.25 has increased 9.3% before dividends through the first nine months of the year, as both our underwriting profit and strong investment returns have contributed to this growth. Our tangible common equity per share, including AOCI, was $15.27 at the end of the third quarter and up 11.2% year-to-date. Now let me provide a little more color on our segment results and market conditions. As I have stated previously, we continue to view the ENS environment as highly attractive. Competition remains rational across most of our ENS underwriting units. We have seen renewal rate change trend higher in each sequential quarter this year, topping out at 12.4% in the third quarter. This increase is the latest of 27 consecutive quarters of positive pricing bringing the compound renewal rate change to 77.2% since 2017. Renewal rate increases remain broad-based across our portfolio, with most underwriting divisions achieving rate change in the high single or low double-digit range through nine months. While rate increases in our excess property division continue to lead the segment, the remainder of our E&S business, all casualty lines, achieve rate increases of 9.1% during the third quarter. consistent both with our experience during 2022 and another indicator that our non-property divisions are producing healthy increases in rate. Excess property, excess casualty, and energy all showed meaningful double-digit rate increases, while general casualty rates increased 8.9% during the third quarter. Our 15 underwriting divisions continue to build on our strong relationships with wholesale distribution. Total submission growth of 8% during the third quarter was driven by new business submission activity and was our strongest submission growth rate in three years. Excess casualty and general casualty both recorded double-digit submission growth in the quarter at 14% and 24% respectively, with several other units in the high single digits. Policy count increased 9% during the third quarter, again supported by some of our larger underwriting units. General casualty policy count increased 25%, while excess casualty was up 19% and manufacturers and contractors increased by 12%. Overall, we continue to be encouraged by pricing and market trends, which suggest that the current attractive market conditions should lead us well into 2024. Consistent with our actions last quarter, we have deliberately been more cautious on certain classes of commercial auto, particularly food delivery, and have made efforts to reduce exposure. These actions led to a 44% decline in commercial auto gross written premium, representing a $7 million reduction relative to the prior year. We believe this action is prudent as we look to continue to generate strong profitability across our portfolio. Our core E&S gross written premium growth was 10.3% in the third quarter, excluding commercial auto, and 10.8% on a year-to-date basis. This performance was driven by strong growth in general casualty manufacturers and contractors, energy, excess property, and sports and entertainment. Throughout the third quarter, we saw year-over-year growth rates accelerate in each month. We closed the quarter with nearly 16% growth in core E&S premium in September, which is one of our strongest monthly growth rates during 2023. Looking across our underlying visions and reflecting on the rate improvements we have achieved throughout 2023, we are confident in our outlook for profitable growth. The E&S segment reported a combined ratio of 88.4%, an underwriting profit of $18.3 million for the third quarter. We did not record any catastrophe losses in the period. However, we did experience $7.8 million in adverse prior year development as we made the decision to shore up reserves from older accident years from 2015 to 2018 in our general casualty line of business, where the industry has seen some adverse emergence trends. Partially offsetting this strengthening, was a reduction to estimated losses in the current accident year based on general rate trends and significant portfolio management actions and improved risk selection as we've exited several loss-leading classes over the last few years and have taken other underwriting actions. As a result of these favorable pricing dynamics, as well as our portfolio management actions, we reduced our current accident year losses by $8 million in the quarter to reflect these trends and the impact on year-to-date results. Our E&S accident year loss ratio for the first nine months was 65.8% or 64.1% excluding the impact of reinstatement premiums. This compares to an accident year loss ratio of 65% excluding catastrophes in the prior year period or 90 basis point improvement year over year. All in, we remain excited about the opportunities set in front of our E&S segment and we have an exceptional team in place to continue to execute on our growth plans while maintaining attractive margins. Turning to specialty admitted, as I mentioned earlier, during the third quarter we announced the sale of the renewal rights of our individual risk workers' compensation business to the Aminta Group. The sale encompassed the full operations, including underwriting, loss control, and claims. This business had generated $48.5 million of gross rent and premium on a trailing 12-month basis. This strategic action immediately followed the non-renewal of our large California workers' compensation program that we discussed last quarter and was a natural next step allowing our specialty admitted segment to focus on fronting and program business moving forward. We believe there is a strong opportunity for disciplined growth within the space. As has been the case throughout our history, we will continue to focus on supporting profitable programs with a conservative approach to reinsurance security and collateral. Segment results for the quarter included 10% growth in fronting and program gross written premium, excluding workers' compensation. We saw growth from several new programs initiated during the third quarter and also experienced continued growth from existing programs, which included meaningful rate increases in certain areas. Specialty-admitted underwriting profit in the third quarter was $2 million, and the combined ratio came in at 92.5%. Lastly, turning to our casualty reinsurance segment, results for the quarter continue to reflect the earnings of treaties written in prior years, as well as various premium adjustments. The underwriting loss was $4.2 million and included $4.7 million of reserve strengthening from business not subject to the LPT. Reserve development was driven by movement on a few specific treaties, primarily from treaty years 2016 to 2019, driven by primary GL exposure. There were also several treaties that experienced a modest level of favorable reserve movements during the quarter as a result of claim settlements and loss experience. Additionally, we experienced $7 million of reserve strengthening on treaties covered under the LPT, reflecting deterioration from construction and construction defect exposures. The remaining limit on the retroactive reinsurance that we put in place two years ago is now $38.3 million. Our third quarter results reflect the continued effort of our dedicated employees to refocus James River around our core competencies. Our underwriting franchises remain leaders in their respective specialties and remain well-positioned to take advantage of attractive E&S market conditions and fronting market dislocations. As I've said before, our focus remains on deploying capital where we can achieve consistent and attractive returns for shareholders. And with that, let me turn the call over to Sarah.

Thank you very much, Frank. Good morning, everyone, and thanks for joining us today. First, a bit more on the transaction that we just announced. As Frank mentioned, earlier this morning we executed definitive documentation to sell the business and entity underlying our casualty reinsurance segment to Fleming Holdings. As Frank mentioned, this transaction and the sale of the renewal rights of our individual risk workers' compensation book we announced and closed in September. Our key final pieces of our work these past few years to streamline the organization focus on our core strengths where we have significant market advantage. We're thrilled to be at this point. We believe our franchise is well positioned according to its strengths and to drive compelling returns for shareholders and that our colleagues at JRG RE are very well positioned to help Fleming grow. The sale will be a full separation via the stock purchase agreement we executed with Fleming. Consideration will consist of $138 million of cash at close and $139 million of a pre-closing dividend. The pre-closing dividend does not require regulatory approval. We expect to contribute the transaction proceeds to our existing U.S. insurance businesses. The transaction is subject to customary closing conditions including approval by the BMA. Given the sale at a 25% discount to book, which is entirely consistent with runoff entity sale transactions, we expect to have a loss on sale of approximately $93 million, or $2.50 per share, which we will record next quarter, the fourth quarter, as we move the business into discontinued operations. We expect the transaction to be largely neutral to earnings with the loss of investment returns, but elimination of what has been historical underwriting volatility in the segment. Similarly, we expect to be able to meaningfully improve earnings stability, owning to a larger contributions from our ENS business and less from exposure to the reinsurance business. Finally, It is expected to be accretive to 2024 return on tangible common equity excluding AOCI by approximately 250 basis points. We have had preliminary conversations with both our rating agency and regulator. And while it's early days, those conversations have been positive. To be clear, given the balance sheet and in particular reserves that we are selling, we do not need to raise capital to affect the full separation. We are very grateful for the help of our advisors on this transaction, Citi, Howden Tiger, and Debevoise, and their many months of thoughtful collaboration to get to today. Back to the quarter briefly. For the third quarter, we're reporting adjusted net operating income of 48 cents per share compared to 41 cents per share in the prior year quarter, an increase of 16%. Tangible book value per common share was $10.25 at September 30th and has increased 7.7% from the start of the year or 9.3% before dividends. During the third quarter, AOC accumulated other comprehensive loss declined by $40.2 million due to unrealized losses on our available-for-sale fixed maturity portfolio due to the rise in interest rates. Excluding the impact of AOCI, our tangible book value per common share has increased 10.1% from the start of the year, or 11.2% before earnings. We continue to have solid underwriting performance, strong net investment income, and consistent growth in our core businesses. We're delivering 18.3 million of adjusted net operating income, including 7.6 million of underwriting profit, and $26.3 million of net investment income on a pre-tax basis for the quarter. Our group combined ratio was 96.2%, roughly a two-point increase over the prior year quarter, mainly driven by a higher expense ratio and unfavorable reserve development in our casualty reinsurance segment. We did not experience any catastrophe losses in the quarter. And while higher than the prior year, our expense ratio of 27.6% in the third quarter is consistent with the targets we provided on our fourth quarter call. So with that, I would like to turn it back to the operator to open the line for questions.

Thank you. At this time, I'd like to remind everyone that in order to ask a question, Press start, then number one on your telephone keypad. We'll pause for just a minute to compile the Q&A roster. And our first question comes from the line of Mark Hughes from Truist. Your line is open.

Yeah, thank you. Good morning. Good morning. A lot of... A lot of good news. But I'll focus on the adverse in the ENS. Could you talk a little bit more about what you're seeing? Clearly the 15 through 18 on the general casualty has been a challenge for lots of folks, for the industry as a whole. What did you see? What prompted you to take the action now? And then what are the total reserves that are still outstanding for those 15 through 18 accident years?

Sure. So, listen, I agree with you, Mark. Like much of the rest of the industry, we saw some signs of pressure on our general casualty reserves from the soft market years. So, during the quarter, we chose to address what we perceived as some signs of weakness in the 2015 to 2018 years that caused us to make some adjustments to reserves and shift some IBNR. Obviously, it's a disappointing development to see, but this is an industry dynamic, as you mentioned, and it's clearly extending the current pricing cycle to our benefits. So stepping back, I do take comfort overall based on the persistent strength of the rates that we've achieved now more than 77% cumulatively during the cycle with major improvements in underwriting and no signs that this market is letting up. And you have to take that in concert with the overall conservatism that we've embedded in the last few years. So we believe we've been very conservative in our recent accident year loss picks and a time when we brought a lot more underwriting oversight and discipline into the organization, produced substantial rate, and have made meaningful changes to risk selection and exclusionary language as well as other portfolio management tools. And the benefits of those actions gain strength year after year in these market conditions. So, you know, like the rest of the industry, we're watching the older software market, excuse me, the older soft market act in years very closely, but I look at everything we've done and continue to do for several years now in terms of rate improvements and underwriting actions, and that certainly gives me a lot of confidence overall.

Did you take any favorable development, say, in the 19 through 22 accident years as an offset? Not as an offset, but did you recognize any favorable development?

I don't believe so, Mark. We can go. We don't have all the details in front of us there, but I don't believe that we did on any of the prior years.

Okay. So this was kind of net-net. This was the...

Sorry, let me understand your question. The $8 million is net-net. Absolutely right.

Yeah, yeah, the $8 million is net-net, but I'm just curious whether the adverse in those older years might have been higher but offset by gains in subsequent years during the harder market conditions.

Nothing that I can think of right now.

We're happy to go back and look, but again, the focus was more so on the $8 million.

Yeah, okay. And then if we think about general casualty reserves that are still outstanding from 15 through 18, is there kind of a rough number for what's left within the areas where you saw some emergence?

Mark, I'm sorry. We don't have that number right in front of us, but we are happy to follow up on those details. Apologies.

Yeah, okay. All right, very good. Appreciate the answers.

Thank you. The next question comes from the line of Matt Carletti from JMP Securities. Your line is open.

Hey, thanks. Good morning. Good morning. I just had a question on... kind of the other comments in the press release about the material weakness around some of the accounting for one of the reinsurance transactions. Can you just walk us through, I guess, question one is the 10.4 million of net income overstatement for the six months, is that reflected in the equity and book value numbers we see at 9.30 in the press release, or is that yet to come? And just, yeah, practical impact of what it means and how it gets remedied. Thanks.

Sure. Yes, it's in there. If you look on page 15 of the press release, you can see that the second quarter is restated. So the 10.4 is in there for the six months. 10.4 is net income. Reinstated premium is $12.3 million. That's running through there as well. From a practical perspective, It was an error that was found in the very early days of our close in the third quarter, which we found related to the second quarter. And as you may recall, Matt, because I know you've been covering us for a while, on our specialty casualty treaty, at least up until this year when the structure changed, it had a significant reinstatement component when we've had some large losses that eat into the layer, triggers reinstatements out of the box. We also had this phenomenon in the third quarter of 2021 where So we had three larger losses in the third quarter, excuse me, in the second and first quarter of this year. I think they were all energy, and that's just the impact of the timing at which we had booked the premiums.

Okay. All right. That's helpful. And then just maybe zoom out a little bit. Frank, you gave some high-level comments just on state of the market, and obviously things sound, like, very good. Can you dig in a little bit in kind of as we think about your kind of the specific underwriting divisions? As the markets continue to evolve, what have you seen recently in terms of have you seen more opportunity in certain areas and pulling back in others, or has it been a little more constant over the past several quarters?

Yeah, no, it's a good question, Matt. So I would say very healthy growth opportunities still persist across markets. much of our ens platform and we saw that in the third quarter majority of our underwriting divisions continuing to report solid growth nearly all divisions reporting positive renewal rate changes i don't think we've any we've seen any significant change in the opportunity set for the ens business our core ens segment which of course as you know is all of our ens underwriting divisions with the exception of commercial auto that grew at a double digit clip so at 10.3 percent stand at about 11% year-to-date now, certainly driven by some healthy rate increases. New submissions, I think I referenced in the script, growth for the quarter was up 8.4% over Q3 last year. That's the highest it's been in 2023, which is a great indicator for future growth. And many of our underwriting divisions are certainly growing at an attractive pace, certainly greater than rate increases, including contract bindings, sports and entertainment, professional liability, energy, and then two of our biggest underwriting divisions, general casualty, where we see a lot of opportunity, and manufacturers and contractors. So, you know, it's these types of market dynamics where, you know, you get strong rate, healthy submission trends, that I think suggests that the conditions should, you know, continue to be very favorable as we move into next year. But I guess the other side of that is, and I spoke about it, is commercial auto. So, listen, no surprise here. Most data points suggest the industry hasn't made a lot of money in the last five years in commercial auto. We continue to purposefully reduce the size of our portfolio by being extremely selective, and I would suggest that acutely aware of the impact of lost cost trend as well as social inflation. And we're aggressively pushing rate, particularly in, the subsectors of the classes that we're most concerned about, and I mentioned food delivery before. And as a result, you know, these types of portfolio management actions, we decreased our writings in the quarter by 44% compared to the prior year quarter. So that resulted in about a four-point drag on our E&S growth rate. And I would say that will probably continue to be a trend going forward just relative to our views on commercial auto.

Great. Appreciate the color. Thank you. Sure.

Thank you. The next question comes from the line of Tracy from Barclays. Your line is open.

Thank you. Good morning. Congrats on your JRG resale announcement. While structurally the sale will reduce some overhang, I'm wondering if you could walk through why you feel a 0.75 times price to book is fair valuation I get that maybe other runoff deals valuation is in this range, but you do have that LPT in place. And then I'm also kind of thinking about the 93 million net loss or dilution that you talked about. And if I compare that to your tangible common equity, that was 385.5 million. It feels sizable.

Yeah, let me start with some commentary about how we thought about the transaction. So You know, clearly we felt, I think, the biggest concerns that our investors and other stakeholders in the company had were the questions surrounding our Bermuda reinsurance segment, so including whether we were going to continue to experience adverse development from prior years, whether we had purchased enough LPT limit from the legacy market, and frankly, whether, you know, we would get to a point where we'd need to raise additional capital in the event we had to take steps to further shore up the entity. And so, we feel this transaction addresses those risks, removes roughly $400 million of volatile reserves from the balance sheet and, again, without the need to raise capital. And after we took the steps to, in the third quarter, sell the renewal rights of our workers' comp portfolio, you know, what we're left with now, James River is now roughly a billion-dollar, well-performing E&S carrier. recognized as a leader in the sector and one of the few very well-regarded fronting companies that's been around for a while with a very deep team and a coveted value proposition. But, you know, relative to your question, I mean, certainly we're valuation sensitive. As for the discount to the entity and the sales price, we analyze industry transaction of this nature that have occurred over roughly the last 15 years. And while this entity is a bit greener in terms of how recently it was writing live business, and I think that's a factor, Tracy, obviously also solely focused purely on reinsurance. So we felt the discount to book value is still very comfortably in the range of prior transactions, even with some of the scenarios, the idiosyncrasies that we've just referenced between The LPT limit's still there, but the fact that we're not that far removed from being a live underwriting operation, and it is purely Bermuda Reinsurance. And so, you know, taking all that into consideration, in addition to providing a great new home for the entire team of our segment and providing a clean and final break from the business, I think, prospectively, the company is just in a much better position. positioned with this transaction, simplified, and focused on areas where we've got scale and expertise.

That was very thoughtful. Oh, sorry. Go ahead.

Yeah, I was just going to add a couple more data points to your questions, if I could. So, obviously, the runoff entity, just to get at valuation for a few more points, obviously not a place where you see a ton of entity-level runoff transactions, very disparate. And the level of liabilities is also in the age of the liability. So just to kind of add on to the 75% of book value metric. I think second, the LPT in place. Yeah, certainly helpful to have the LPT in place, but to some degree counterbalanced by, as Frank referenced, the greenness of the reserves. The entity's only been a runoff for a couple quarters at this point. Second, on to the capital question. We certainly have our tangible common equity number spot on. Total shareholders' equity of $562 million and total tangible equity of $530 million. We're offloading over $400 million of loss reserves through the transaction, against which we hold a significant amount of capital. I think between those two pieces, your capital ratios are not too different from where they are as they net out, again, those loss reserves against the $93 million discount to book. So hopefully that helps. Obviously, we hold a lot of capital against those reserves.

No, that's very helpful. So if I piece that all together, I'm wondering if that $93 million net loss could squeeze your underwriting capacity to grow.

We do not expect it to. Our rating agency ratios are very consistent with where they have been. And the idea, I think, as we said in the As I said in my remarks, is that we contribute that capital down to the U.S. entities, but our premium and surplus stays pretty consistent, but more so looking at the loss reserves to equity metric. Again, it's fairly stable. So there's no expectation that that's going to squeeze our growth rate, especially with our remaining businesses being effectively more capital light than the reserves in the casualty reinsurance business. I think that's probably the kicker.

Okay. And can you share some color on your ENS retention that dipped due to a new casualty reinsurance treaty?

Yeah, I can give you some color there. So you'll recall last year at the mid-year point, we increased our retention on one product line, specifically our excess casualty treaty, by 10 percentage points at the mid-year. And that drove... higher net to gross retention over the last four quarters. But at the mid-year 2023 renewal, we undertook a very broad review of our ANS-seeded reinsurance structure and looked at a goal of trying to improve our volatility protection and maximizing underwriting income while certainly utilizing the strong relationships that we have with our reinsurance partners. So this new structure, the way we think about it, allows us to make changes based on mark conditions or reinsured appetite and ultimately the performance of the portfolio. So the new treaty provides broader quota share coverage across all casualty lines, including primary participation. So that's different. And in doing so, it provides us basically with risk sharing across what I'll call maybe some of the more volatile elements of the E&S portfolio. as well as some of our larger lines such as general casualty and manufacturers and contractors. And fortunately, it gives us a very favorable seating structure and economics relative to both seating commissions as well as first dollar protection in areas that we didn't have before. So the other point that is worth noting, particularly in this quarter, is that we expanded our use of excess and loss reinsurance protection, which allowed us to move to that flat-rated structure. I think Sarah kind of spoke to it a bit earlier. So very notably, that means that the reinstatement charges and volatility that have impacted our results in excess energy go away for business written under the new treaty structure. So had the losses that we wrote in prior accident years that were reserved this year, been written under this structure, there would be no follow-up reinstatement charges. So overall, we're very pleased with the outcome and would expect, I think, the third quarter to be a pretty reasonable proxy relative to the net to gross retention going forward.

You mentioned that the seeding commissions were favorable. So that's relative to your policy acquisition costs. Are you still seeing a nice spread?

Yeah. Well, I would say, you know, despite, I think, what's, you know, some headwinds in the reinsurance market, I think overall on the treaties that we placed, and there's a number of them that make up this structure, I think we had a slight pickup of several basis points.

Got it. Thank you. Thanks, Tracy.

Thank you. Your next question comes from the line of Brian Meredith from UBS. Your line is open.

Yeah, thanks. A couple quick ones here for you. I'm just curious. Given that you had adverse reserve development in the E&S segment, I was a little surprised that you took down the loss picks as much as you did this year. I mean, it doesn't seem And I'm wondering, was there a change in kind of reserving philosophy? You know, James River used to hold picks fairly high and have that adverse development coming forward. Just maybe a little more into kind of the thought process behind, you know, how those two fit together or if they fit together at all.

Yeah, I can at least start here. I think it's similar to my earlier comments that I We have been very conservative in our recent Accent Year of Loss picks at a time when we've just done so much relative to additional underwriting oversight and discipline in the organization, have taken a lot of steps relative to exclusionary language. We've gotten out of a number of loss leaders in that specific portfolio over the last couple of years and had given that some time to kind of set in. And so... you know, the benefits of those actions plus all the rate that we've taken in these marked conditions made us feel, you know, comfortable that was an appropriate step to take.

Great. Thanks. And then one other just quick one here. The internal control weakness, is that something that the rating agencies have been, you know, discussed with the rating agencies as well? I'm just curious. I know you talked to them about the reinsurance transaction.

No, absolutely, Brian. We have a very regular quarterly dialogue with them, and we went through all of that a few days ago, for sure.

Great. I appreciate it. Thank you.

Thank you. Our next question comes from the line of Meyer Shields from KBW. Your line is open.

Perfect. Great. Thank you. Good morning. And congratulations on the casualty re-deal. I was hoping, Sarah, can you, for modeling purposes, give us a sense as to the size of the investment portfolio that's being transferred to Fleming?

Sure. The investment portfolio at JRG RE is about $550 million, Mayor. So it's about, you know, 25% of our overall portfolio, give or take.

Okay. Perfect. And, Frank, I think you mentioned pulling back in commercial auto within E&S. Ignoring the Uber stuff that's gone, can you give us a sense of how big the current commercial auto reserves are?

I don't have that in front of me right now. I mean, the portfolio itself is not that significant, but I know that's not your question. I mean, it's probably about a $30, $35 million portfolio. I don't have the reserve numbers in front of me. You're talking about the non-Rideshare portfolio specifically? Yes, exactly. I'm sorry, I don't have it.

I don't have that in front of me. Yeah, I'm sorry, Mayor.

We'll have to follow up with you on that. Okay, perfect. Thank you so much. Thanks, Mayor.

Thank you. Again, if you'd like to... Ask a question, please press star and then the number one on your telephone keypad. Now the next question comes from the line of Casey Alexander from Compass Point. Your line is open.

Yeah. Two questions. One, the sale of the Casualty Rebusiness is also moving a lot of people. How should we expect the expense ratio to develop once the sale is complete?

Sure, Casey. It's actually six people in Bermuda, so it's a fairly small team. I would think there would be an impact on the expense ratio, more so because of the commission structure and the reinsurance business historically. But as you know, that business is running off, so I wouldn't expect it. much of any impact on the expense ratio going forward.

Okay, then one other question. Is this the $7 million development on the casualty re-LPT with $38 million remaining? The way that's been developing over the last several quarters argues that you may actually be taking losses on that book again by 2025. Would that be your expectation at this point in time?

Well, Casey, we did announce the transaction to sell the balance sheet. We would hope to sell it per our press release. We'd hope to close that transaction in the next quarter. So after, by that construct, we would not have any exposure to that balance sheet to that business. starting in the second quarter of 2024, if we're able to close it along that schedule.

Okay. Thank you. Sure.

Thank you. There are no further questions at this time. I'd now like to turn the call over back to our CEO, Frank Durato. Sir?

Thank you. I want to thank everyone for their time today and for the questions we received on the call. We certainly look forward to speaking with you all in 2024 to discuss our fourth quarter and full year results.

Enjoy the rest of your day. This concludes today's conference call. You may now disconnect.