Trean Insurance Group, Inc.

I love you. Greetings and welcome to the Treon Insurance Group, Inc. Third Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Garrett Edson from ICR. Please go ahead, sir.

Thank you, operator. Good afternoon and welcome to Treon Insurance Group's third quarter earnings call. This afternoon, the company released its financial results for the quarter end of September 30, 2020. Press release is available in the investor relations section of the company's website at www.treon.com. I would like to remind everyone that certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statement. I refer you to the company's filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. The company undertakes no duty to update any forward-looking statements that may be made during the course of this call. Additionally, certain non-GAAP financial measures will be discussed on this conference call. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at www.sec.gov. Joining me on the call today are Andrew O'Brien, the company's chief executive officer, and Julie Barron, the company's chief financial officer. With that, I am now going to turn the call over to Andy.

Thank you, Garrett, and welcome to our third quarter 2020 earnings call. We appreciate your participation on our call and for your continued interest in TRIAD. On today's call, I will walk through our higher-level quarter results and our overall strategy. Our CFO, Julie Barad, will follow and provide some detail about our third quarter results, and then we'll open it up to Q&A. We were pleased with our third quarter performance as we embarked on public life in mid-July. We continued to execute well in all facets of our operations. from driving revenue growth to flowing it through our cash flows and earnings. This enabled us to enter the fourth quarter in the strongest financial position in Treon's 24-year history, even in the face of the ongoing challenges brought about by the COVID pandemic. Along with our successful initial public offering during the third quarter, we grew gross written premiums by 23% year over year. we increased retention of our net earned premiums to over 25%. We recorded a combined ratio of 81% in 810 basis point improvement over the prior year period, thanks to our prudent underwriting approach. And we generated adjusted net income after excluding one-time items of $10.5 million, or 21 cents per diluted share, producing adjusted ROE of over 15%. Our proven business model and operating strategy is clearly paying dividends for Treon and validates the resiliency of our business. We remain focused on supporting our program partners, responsibly accepting new opportunities, seeking proper rate levels, and quickly and fairly resolving claims. On our prior call, I talked about our four distinct strategies to grow and create long-term value. Growing organically in our existing markets. selectively adding new program partners, opportunistically growing through acquisitions, and harnessing our growing capital base to retain more premium. The third quarter saw us execute well in all of these strategies. Of our 23% increase in gross written premium from the prior year period, our workers' comp segment saw 6% growth, while our non-workers' comp liability lines more than doubled their gross written premiums from the prior year period. A vital part of our program partner strategy involves specific targeting of niche programs with a competitive edge, and our third quarter performance demonstrated the clear value of that approach. We are continuing to maintain a strong pipeline of opportunities to add new partners in the coming quarters. In addition, at the time of the IPO, we completed the acquisition of the remaining Comstar interests, and at the beginning of the fourth quarter, We closed on the acquisition of 7710 Insurance Company, a leader in workers' comp for emergency services, a particularly underserved market, and they are already making valuable contributions to our growth. We also have a robust balance sheet, including $165.3 million in unrestricted cash, putting us in an advantageous position to execute in our growth strategy. During the quarter, we increased retention of our net-earned premiums to over 25%, keeping more of the quality business we are writing on our balance sheet instead of ceding it to reinsurers. As we look into 2021, we remain excited about the landscape we see for workers' comp and other insurance lines. Given the potential for sustainable and profitable growth in vastly underserved markets, we are investing widely in our business and providing proper support for our program partners to better reinforce our partner and customer relationships, which will lead to long-term value creation. I'm proud of our entire team for producing such strong results in the third quarter, and their ongoing hard work and efforts will help ensure our long-term success. With that, I'll now turn the call over to our CFO, Julie Breret. Julie?

Thank you, Andy, and good afternoon to everyone on the call. Let's go right into our third quarter results. In the third quarter, our team grew gross written premiums by 23% to $132.3 million compared to $107.5 million in the prior year period. This growth was driven by the addition of new program partners in the second and third quarters and resulted in an increase in both workers' compensation and non-workers' compensation liability lines of business. We produced a very strong gross written premiums performance, particularly given the ongoing challenging operating environment. Gross earned premiums were $109.3 million for the third quarter of 2020, up 7% compared to the prior year period. due primarily to the increase in gross written premiums and partially offset by the increase in gross unearned premiums due to the addition of new program partners in the second and third quarters whose premiums were largely unearned as of the end of the third quarter. As a reminder, since we cannot control the timing of effective dates of new policies, this lag effect is a fairly common occurrence when we onboard new program partners. Thus, we continue to recommend that the focus be on gross written premiums as the best proxy for the growth of our business. As you think about the fourth quarter, we'd also remind you that premiums sometimes come in uneven blocks, so there can be some imbalance to our quarterly gross written premiums. Thus, while we certainly expect to achieve a strong quarter of growth for the fourth quarter and working hard to exceed our own expectations, it is difficult to simply utilize one quarter's performance as a run rate for the next quarter. That said, we remain confident in our ability to onboard additional program partners and sustainably grow our gross written premiums over the longer term. Net earned premiums for the quarter were $27.9 million, an increase of 26% compared to $22.2 million in the prior year period, primarily due to the increase in gross you Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Music Music Bye.