James River Group Holdings, Ltd. (NASDAQ:JRVR) Q3 2020 Results Earnings Conference Call October 29, 2020 8:00 AM ET

Company Participants

Kevin Copeland - Senior Vice President, Finance, & Chief Investment Officer
J. Adam Abram - Chief Executive Officer and Executive Chairman
Sarah Doran - Chief Financial Officer
Robert Myron - President and Chief Operating Officer

Conference Call Participants

Mark Hughes - Truist Securities
Matthew Carletti - JMP
Randy Binner - B. Riley
Sean Reitenbach - KWB

Operator

Thank you for standing by and welcome to the Third Quarter James River Group Earnings Call. All lines have been placed on mute to prevent any background noise. After the presentation, there will be a question-and-answer session. [Operator Instructions] Thank you.

I would now like to turn the call over to our first speaker for today, Mr. Kevin Copeland, Head of Investor Relations. Sir, you may begin.

Kevin Copeland

Thank you, operator. Good morning, everyone, and welcome to the James River Group's third 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 Adam Abram, Chairman and Chief Executive Officer of James River Group.

J. Adam Abram

Thanks very much, Kevin. As Kevin said, I'm here with Sarah Doran, who is our Chief Financial Officer; and Bob Myron, our Chief Operating Officer and we're looking forward to answering your questions in a minute. Before we do that, we'd like to set the stage with a few observations about our quarter and about market conditions in general.

This is one of the most favorable markets I've witnessed in 30 years. The E&S business, which is at the core of our franchise, is growing with more policies in force, substantially higher rates, and lower loss cost. We wrote 28% more E&S premium this quarter than in the prior-year. New submissions were up by 9% in E&S and renewal submissions were up 27%. The increase in renewal submissions is an indication that standard companies continue to retrench and are not seeking to move accounts from the E&S market to the standard market.

We are selective underwriters in eight of our 12 E&S underwriting divisions group. Trailing 12-month core E&S premiums is $615 million, a 91% increase over the same period just two years ago. We continue to be able to get more rate per unit of exposure. This last quarter was the 15^th quarter in a row we've reported significant rate increases. In eight of these 15 quarters renewal rate increases on our E&S business have been greater than 5%. In every quarter this year, rates were up over 10% and this quarter rates were up 12.8%, and already hard market continues to gain strength.

Year-to-date, our policies in force have increased by 26% and while we're growing both premium and policy, claims counts in core E&S are down 15% this quarter compared to 2019. In the most recent months, claims frequency has been dropping rather precipitously. New claims count within E&S were down 18% in April, 31% in May, 15% in June, 11% in July, 23% in August and 9% in September, and 32% through mid-October. This drop in claims counts is all the more notable as we have policies in force than in prior years and earned premium from core E&S has increased.

Core E&S claims counts per million dollars in earned premium through the third quarter are 30% lower than the three-year average between 2017 and 2019. So obviously, these trends bode very well for the future. Our fully developed Core E&S loss in LAE ratio from 2003 through 2017 is 54.4%. We are carrying the 2018 through 2020 years at a 65.5% loss in the LAE ratio. Our calendar year paid and reported loss ratios in Core E&S is 24.5% reported through three quarters. These are among the lowest reported and paid ratios since 2005.

Our expense ratio is 24.8% this quarter down from over 30% in the first quarter. Sarah will speak in a moment about more about this positive trend in expenses. So we've reported a combined ratio of 85.2% for the E&S division after adding approximately $10 million to reserves for the runoff of the large commercial account canceled at the end of last year.

We raised reserves in the runoff book because in September we observed a spike in medical cost. This expected rise in costs seems to be the result of people with non-life-threatening injuries having postponed surgeries in in-patient treatments due to concerns about being in the hospital or surgical clinic during the pandemic.

We continue to close claims rapidly in this runoff book and as of quarter end we've closed slightly more than half the claims outstanding at December 31, 2019. And at this point we have roughly 2% of the open claims that we ever received from the commercial auto accounts. So this is moving out rapidly.

Our growing -- our rapidly growing and variable price book of E&S premium can absorb spikes in the runoff costs while still delivering very strong returns to shareholders in maintaining our 65.5% loss in LAE ratio from 2018 to 2020. In this quarter we were particularly glad that our focus on casualty business allowed us to avoid significant exposure to or losses from the very difficult hurricane season or from COVID-19 losses. At the same time, the large industry losses from these events will tend to reinforce the attractive pricing we're benefiting from.

Our Specialty Admitted segment is also gaining traction. Third quarter gross written premiums were 12.1% higher than a year ago. We've added eight new programs within this segment over the course of 2020. Three of these new programs have already added $15.4 million in gross premiums through three quarters, and many others are just beginning to produce premiums and fee income and we enjoyed a 22.8% increase in fee income in the first three quarters.

Our net retention of gross written premiums in our Specialty Admitted segment is under 15%. We're developing partnerships in which while we retain some risk to align our interest with reinsurers, we're focused on earning fee income. Year-to-date our return on equity in the Specialty Admitted segment is in the low double-digits.

Having developed our sea legs [ph] in this division we're directing our marketing efforts towards larger fronting programs. We believe the margins from this business already good can still improve. Within the Specialty Admitted segment we've reduced net written premiums from Workers Compensation policies by about a third as we feel pricing in that area of the market is a little soft.

In our Reinsurance division, we wrote $91 million in gross written premiums through nine months which was a 21% reduction compared to last year. Some of that reduction is only a timing difference as the renewal moved from the third to the fourth quarter. The Reinsurance segment has reported 102.1% combined ratio for the quarter. Pricing in this segment is improving and our internal studies show renewal rate increases, including changes in terms and conditions of 4.3%, 6.4% and 8.7% in 2018, 2019, and year-to-date 2020 respectively.

I'd now like to address some important and very good news for our company. We announced last evening that Frank D'Orazio, formerly the Chief Operating Officer and Chief of Staff to the CEO Allied World, will become CEO of James River next week. Some of you will recall that I retired previously and returned in August 2019. Our company is in a very good position, thanks to the hard work of all my colleagues. We are in a rising market and it really seemed to me that this was a good time to introduce a new CEO, who can make the transition when we are enjoying great momentum.

The Board conducted a very broad search and attracted many highly qualified candidates. I'm very pleased Frank will be taking the helm. I suspect some of you on this call may already know him. He has tremendous depth as an executive having run large profitable insurance operations in the U.S. and from Bermuda. His management style and experience fit our culture. He is an underwriter by training and he has a long history of building successful underwriting businesses. He is keenly aware of the opportunity the hard market presents.

Frank and our team have already begun to work on the transition. I will remain as Nonexecutive Chair of the Board and look forward to supporting Frank and his executive team. I have no doubt we are in very good hands. I anticipate over time under Frank's leadership and with the support of the terrific James River team, we will become even more profitable and demonstrate more capabilities than we do today.

And with that, let me turn the call over to sarah.

Sarah Doran

Thanks Adam. Let me highlight a few of the financial points from the quarter. Last night we reported third quarter operating earnings of $0.56 per share and year-to-date annualized adjusted net operating return on average tangible equity of 11.9%. As Adam said, market conditions are very attractive for our business and while early still, revenue has exceeded our early estimates at the start of the pandemic.

First expenses. Our expense ratio decreased to 24.8% this quarter as compared to 34.2% in the first quarter of this year and 29.2% year-to-date. We mentioned on prior calls that we have been working to reduce expenses and gain efficiency. The ratio also benefited from strong growth in lines where we see significant premium for attractive ceding commissions, such as Excess Casualty and o E&S segment.

Gross premiums written in Excess Casualty have increased over 85% year-to-date from the third quarter of 2019 as rate increases in that line have been either the highest or amongst the highest across our E&S book. As it is our largest line of business in E&S, it has also pushed the retention ration in that segment down to 60% this quarter. The expense ratio has also benefited from the offset of the sliding scale commissions in our casualty reinsurance portfolio this quarter. we expect that our expense ratio for the full year will be close to our year-to-date figure.

Moving on, this quarter we posted a loss ratio of 69.4% and accident year loss ratio of 66.6%, largely in line with the balance of this year despite powerful rate increases, low loss emergence, and meaningfully reduced claims frequency. As Adam highlighted, E&S renewal rate increases were 12.8% this quarter and have increased 30% cumulatively since the start of 2017. Reported losses have remained benign for multiple quarters falling again this quarter.

Core E&S continues to make up approximately 75% of the company's net written premiums and close to half of our $1.3 billion net reserves. As Adam mentioned, we added $10 million of reserves to our large commercial auto account in runoff this quarter, but had a similar level of reserve takedowns from our Core E&S book which continues to run very well. The reserve increase relates to the 2017 and 2018 years.

We have continued to close claims rapidly on this block closing 14% this quarter and are receiving very few new claims at this point almost a year into the runoff. Through nine months of the year, as Adam said, open claims for all years of the account represented 1.7% of total reported claims for the account. At the end of the fourth quarter of 2019, by comparison, open claims for all years of the account represented 5.2% of reported claims.

Of our approximately $1.3 billion of total group-wide net loss reserves at quarter end approximately $300 million supports the runoff block of business. This quarter we had $12.9 million of favorable development from our Core E&S business emanating from the years 2019 and prior. As Adam said, we continue to hold the most recent three years of our Core E&S business at a loss ratio of 65.5%, the adverse development of about $6.2 million in our casually reinsurance book, but $2.9 million of this was offset by sliding scale commission adjustments which come through the expense ratio.

The development was concentrated in a few treaties related to general liability and nonstandard in commercial auto business, much of which we no longer write. We also had $2 million of favorable development in our individual risk Worker's Compensation business within our Specialty Admitted segment.

Finally on investments, net investment income for the third quarter was similar to last quarter at $15 million, a decrease from the same quarter last year, largely due to lower income from our bank loan portfolio and to a lesser degree from our renewable energy portfolio. We filled about $100 million of our bank loan portfolio back in the second quarter and the impact of that is spent to reduce gross yields on the portfolio.

This quarter our gross yield was 3.2% or about 70 basis points reduced from the third quarter of 2019. Returns on our $13 [ph] million Renewable Energy portfolio decreased due to the manager's revaluation of the assets which flowed through to us. Those investments have benefited us well for many years.

Lastly, I know I speak for my colleagues when I think Adam for his deep strategic and entrepreneurial insight is thoughtful and energetic leadership and generous friendship. He and Bob have led us on a path of success and we look forward to more ahead. I've had the benefit of working with Frank and I'm very excited to welcome him as our CEO.

So with that, let me turn the call back to Adam. Adam?

J. Adam Abram

Thank you, Sarah. And operator, we are ready to take questions if there are any.

Question-and-Answer Session

Operator

Thank you, sir. [Operator Instructions] Our first question comes from the line of Mark Hughes, Truist. Your line is open.

Mark Hughes

Yes, thank you and good morning.

J. Adam Abram

Good morning, Mark.

Mark Hughes

The claims frequency statistics you've provided are very interesting. Any judgment you've formed about what is causing that, are these delayed reports that are going to come later? What kind of influences are you thinking one way or the other about how material this is to the business?

J. Adam Abram

I think it is really material and what we're talking about our claims from -- what I was talking about our claims from our Core E&S book and I wouldn't expect any change in the speed or pattern of reporting of claims. I just think that frequency is going down. I do think it's most likely explanation for that is the continued pandemic.

But we are in a happy position and the industry is in a happy position. Capital constraints across the industry leading to increases in rate and which we regret, but diminishment of the economic activity of course, but and what's implied by that. But that has led to a fewer events occurring that will give rise to claims.

So I think that this decrease in claims is for each period that we have it is not a deferral. It is an indication that the claims will not arise later. Now you always, every book has late reported claims, but that has never been a problem in our book of business because of the late as we write remember that we mostly write primary layers. So I think this is an indication that these years that we're holding at I think a process careful 65.5 will develop really well. They could prove to be some of the best years in our history ever.

Mark Hughes

The increase you saw in September in medical costs in the runoff reserves, I think you've suggested that your observation was there is a delayed treatment, how has that progressed in recent weeks, is there more information that bears on the duration of this step up in expenses?

J. Adam Abram

Yes, listen, for the most -- earlier in the quarter, we weren’t seeing it, it just really came up in the last couple of weeks of September and so we just jumped on it, was our reaction to it, let's jump on it. And we're doing everything we can to unearth this information early, sometimes it's not – it is a little bit more difficult than you think to do that, but we are trying to unearth that information and get to it as fast as possible.

One thing I would say is that look, I really in the context of our growing Core E&S book and our current, the way we are holding our reserves through the 18 through 20 years. And the fact that simultaneously we've have so thoroughly reduced, thoroughly is probably not the right word for me, but so substantially reduced, both the claims count and the percentage of open claims. I'm really feeling just fine about where we are in that runoff. It doesn't stop us from wanting to react very quickly to a very small piece of data because we're staying on top of it, but I'm not overly troubled by it.

Mark Hughes

Understood, then, one more question on small businesses, there have been a lot of question about the impact of COVID on small business, what does that mean for small midsized accounts, E&S underwriters, any observations you got about the small business trends?

J. Adam Abram

Yes, look, we're up in small business and that we've done well in small business. One does want to -- but it's not the core, it's a small division of our company. So I'm going to make that point that, our average premium in casualty is about $23,000 and our small business division is a much lower average premium and not a huge part of -- though it is a growing part of our book.

I think that was tremendously helped small businesses were boosted I think more than some of the rest of our book by the stimulus packages. I'm hoping and believing that there will be another stimulus package after the election, but if there isn't, it won't affect our book I don't think tremendously because small business is relatively a minor part of our total E&S premium.

And two, because the capital constraints in the industry or what are -- and the industry as a whole are what is really driving the rate increase back and prior to your development that you're seeing in the announcements of many, many companies.

Robert Myron

Hey and this is Bob Myron. Let me just add a comment there. Within our small business division, probably the biggest class there in is small, really small contractors. And we, as Adam said, we -- that continued to be fine from a production standpoint during the quarter. In our general casualty division, not surprisingly, we did see a decline in some bars, restaurants and taverns. But the other part and major part of that other major class of that division is habitational related risks, and there's tremendous demand for E&S product and very strong pricing power in that space. And so, bars, restaurant, taverns is not a huge part of that division Mark and sort of…

J. Adam Abram

Yes and just jumping one what Bob is saying, sorry, Bob, but you're really good point caused me to flip a page here and just make second, the number. I do want to say that, look our small business division for the quarter is up. It's still, it's $6.3 million we wrote, but it's up 25%. So, it's not like we're seeing a decline and it is because as Bob points out, it's got a lot of small contractors in there. And as anybody who's in the, who is watching, residential development sales knows there's been a real constraint on people who can build houses or decks or do renovations for you, et cetera. And our general casualty division, where we write larger risks is also up. It was up 7.6% in the quarter.

Mark Hughes

Very helpful. Thank you.

Operator

Our next question comes from the line of Matt Carletti from JMP. Your line is open.

Matthew Carletti

Hey, thanks. Good morning.

J. Adam Abram

Good morning.

Matthew Carletti

Adam, I just wanted to ask you to, if you could help unpack the Core E&S business a little bit for us. I mean, we see a lot of statistics that you gave which are very helpful. But I know that, rate increases can bounce around based on mix of business in any given quarter. We're also getting into the cycle where I am pretty sure your clients are starting to get second round and third round rate increases or getting that compounding effect.

Can you just help us understand as you look at your business, kind of which of the dozen or so classes of business in E&S you view as really kind of being the most exciting for you guys? And then as you think about it, not just from a kind of price change perspective, but how do you view some of those businesses or the group as a whole, in terms of absolute pricing as opposed to the other point in history?

J. Adam Abram

Okay, well, let me, I'm going to start with absolute pricing, because, I want to, we've had significant, continual increases quarter-over-quarter, increases in pricing on a book that was already delivering good combined ratios before we started, the price increases. So I want to, I just want to - these price increases, I think are helping an already healthy book.

And it's healthy in our case, I think, because of where we've selected to play, and frankly, because of the high quality underwriting that's being done by our underwriting desk, and our leadership teams across the company, and if it weren't for their skill set I'd be less confident. But they have produced great combined ratios for a lot of years as I was mentioning, in terms of what the average has been for many years.

We grew this quarter a year-to-date, we've been growing in general casualty, Life Sciences, manufacturers and contractors, professional liability, small business, sports and entertainment, excess casualty and excess property.

Now, the Excess Casualty growth, of course, when it helps us with our expense ratio, because of the way and so does the Excess Property, but because of the way we've got that structured. By the way, it's probably worth mentioning and this is in responses to your question, but I hadn't said it before, so let me just say it now that, the way we write our Excess Property, we only had $2 million, roughly of exposure to the most recent storm. So it was absorbed in our reported loss ratio. So we're not a big, one of the things we do is, don't expose ourselves to catastrophe losses.

And we did the same thing in the Excess Casualty with large, keeping a relatively modest line there. So I think we've been getting, I don't, I do not think we are finished as an industry with the rate increases. And if you look at our submission rate, and you look at our higher retention rate, I think you can expect and we do expect to continue this trend for some time to come. I don't think we're at the top.

Matthew Carletti

Great, that's very helpful and congrats on the next retirement. I hope you enjoy it and very warm welcome to Frank.

J. Adam Abram

And by the way, this transition, I'll just take this opportunity to say we have been working and the whole team has started working very closely with Frank. We're in the very early stages of it, but this transition is going very well. His management style is just really in tune with the attitudes and underwriting focus that we have as a company. He's fitting right into the culture and he will bring new skills and deep experience to the company. He's going to add a lot to our company and I am really excited about what we're going to see under his leadership.

Matthew Carletti

Great, thanks.

Operator

Our next question comes from the line of Randy Binner from B. Riley. Your line is open.

Randy Binner

Hi, good morning. Yes, Adam, congrats and nice working with you again and until the next time you come back I guess, but on net investment income I wanted to see, you said there were some changes there. What can get that above kind of this $15 million a quarter run rate? And are there kind of alternative investments or partnerships or things you can do that are different that possibly get that running higher.

Sarah Doran

Yes, thanks for the question, Randy. It's Sarah. So, it's tough in the yield environment that we're all living in right now to push that much above the $15 million a quarter that we've been generating for the last little bit. I do think there are probably some things we could do around the edges. But right now, I think we're trying to manage this interest rate environment as best we can and I know our competitors are as well.

So, looking to consider potentially a little bit more risk over the next year or so, but right now, we're pretty comfortable with the portfolio that we have, having wanted to de-risk that volatility and focused on our underwriting returns and our opportunities to grow Core E&S and all the other things we're doing there. So we view it as a portfolio in a trade off and while we look for other things, I think, the environment is what it is, to some degree at this moment.

Randy Binner

Fair enough. And then I apologize, I missed -- I had to miss part of the call, but just on fronting, yes you know, there's a lot of focus here on E&S, and rightfully so. But just on the kind of the front end side, we're -- is that? What inning is that opportunity in? And can you just dimension that a little bit more, are you getting more looks at opportunities, and kind of what the demand function is there, is the underlying risk is a little bit different?

J. Adam Abram

We are getting I'm going to get Bob Myron involved in this because he's been intimately involved. We're all very excited about the advances at Falls Lake, which is our Specialty Admitted group has made for new programs, which are really fee generating programs, because of the small retentions we keep.

But we think this is an area that has expanded as a percent. Really well, it's already delivering a, low double digits of return on equity, but I think we're just beginning. And Bob, do you want to jump in here and comment on some of the work that you and the team there have been doing?

Robert Myron

Yes, so I do. I think it's still the early innings here. We certainly have been at it for a while, but we're continuing to invest a lot of time. We now have full E&S licensure and we've got several statutory entities Randy that are involved here. And I think one of the areas that we're seeing growth and opportunity certainly is in fronting for E&S related deals and/or risks.

And so, and most of this is in the commercial line space. And so I think that there is tremendous demand for -- increasing demand for the product. One of the reasons why, perhaps in the past, we haven't grown as much as we would like, is that a meaningful amount of our, basically, our gross premiums written in this segment, our Workers Compensation, which has been a challenge, has been a declining pricing environment and we've been also watching classes and exposure really, really closely.

But that shouldn't diminish the work that Terry McCafferty and his team have done. They've put on a number of new deals this year. I would say that, the size of these deals is increasing relative to what it's been in the past when we're putting on new deals or getting more interest in rollover deals. And I think that that hasn't enforced book of business already, and can be meaningfully large when it comes on board for us.

So we're going to continue to focus on that, working on building relationships, and developing relationships on some potentially larger transactions, and the group is all working together on that, and I think also we'll get some leverage from Frank in that regard, too. So I think the outlook is positive in terms of our ability to really grow that meaningfully in the future, and really grow the fee income there.

Randy Binner

Great. So I think the frontend is being more admitted on the comp side. So what is there? Can you roughly break out what your programs are right now between admitted and non-admitted?

Robert Myron

Yes, I don't know ifs I have that information at hand, I would say because of the fact that we're, writing $60 million of individual risk Workers Comp business which is 70% ceded away and $140 million of California Workers Comp related business. It's there's probably it's meaningfully more than it's probably somewhere, 70% to 80% right now that's actually committed market business, right.

Randy Binner

Right.

Robert Myron

But the percentage of E&S has been growing.

Randy Binner

Alright, I'll leave it there. Thanks a lot.

Operator

Our next question comes from Sean Reitenbach from KWB. Your line is open.

Sean Reitenbach

Good morning, Adam. We at KBW wish you the best and we're looking forward to getting to know Frank. The re-commentary has been pretty positive and it's been going on a bit. But do you feel rates are mostly adequate to are there still a few areas that need to see more rate in your book before you would say it’s broadly adequate? And, maybe how would rates be impacted you think if corporate tax rate hike becomes increasingly likely?

J. Adam Abram

Yes, well, look I mean, I think if you look at the history that we've been citing of our historic developed loss in LAE ratio, you see that rates, we think that we've been running business that was adequately priced for many years, I mean, I quoted the, 13 years worth of experience and the 52.5% fully developed loss in LAE ratio. So we feel that our historic book has been adequately priced. The price increases that we are getting in the last few years, in the last 15 quarters, I think are expanding our margin.

And, some, there is of course, the question of, well, is there social inflation, but remember that we've always concentrated very heavily on the first million dollars, the primary layer here. So, we're not -- we've already been exposed to that first million dollars and that's not where the social inflation is really being felt. And so, I think these rate increases are helping, I think they are expanding our margin. And think it's a really good harbinger for future results. It was the second part that I missed this, the second part of your question?

Sean Reitenbach

Just how you would think corporate tax rate hike might affect, rate momentum that might further accelerate rate?

J. Adam Abram

Well, look, taxes are just one part of, taxes are just one part of the return on tangible equity. I think if I look at our increase in rates, they're probably higher, they're probably better than or greater than what we'll see in terms of a corporate tax site, but I'm not, a crystal ball reader, we will be, the whole industry will have to face the same hike in rates and we'll all have to respond individually to that to make sure that we maintain margins. The industry is very focused. If you just see the commentary from CEOs across the board, in the U.S. P&C industry, you're seeing that there's a tremendous emphasis on what we have to do as an industry to get margin. So I think that there's a lot of momentum here. And while interest rates are low, the only place to go really is rate.

Sean Reitenbach

Great, thank you. Given, your comments on the double-digit rate on top of rate, would it be reasonable for us to expect kind of low to even mid single digit improvement in the accident year loss ratio next year?

J. Adam Abram

We're not going to, tempting though it is, we're not going to pre-announce.

Sean Reitenbach

Okay, thank you.

Operator

And we do have a follow-up question from Mark Hughes from Truist. Your line is open.

Mark Hughes

Yes, Sarah, the ceding condition in the E&S, the typical percentage on that is it 25, 30, something like that?

Sarah Doran

It starts with a three.

Mark Hughes

Starts with a three, okay.

Sarah Doran

In the 30s, yes. And that's the meaningful benefit to the expense ratio. And obviously, we've already talked about the retention from that segment.

Mark Hughes

Yes, and I'm sorry, I don't know if you mentioned this, but your updated thoughts on expense ratio, both within, I'm actually interested in kind of across the board E&S, Specialty Admitted and then overall is Q3 a good barometer?

Sarah Doran

Good question Mark. I think about the expense ratio. I think that the nine-month year-to-date is a good barometer for where we're going to be on the year. And so that's going to hold true to all the segments, although I think the real thing that I'm not going to be able to predict which is good is, is the real strength in the Excess Casualty market in particular, within Core E&S, because that's, obviously, there's been great rate in that line. It's one of the best rate performers in all of our E&S book.

So we've grown it substantially, and it's had a material impact on the expense ratio. So I think that could continue to be favorable on the E&S expense ratio. I think there were some one offs in casualty reinsurance this quarter. So that's why I'm not particularly focused on the quarter, but really think about the nine-month numbers across the board.

Mark Hughes

And in Specialty Admitted it's kind of the same situation, you've got fee income that's offsetting the expenses. In the year-to-date, I hear what you're saying, but then I, the year-to-date is different than 3Q clearly. Is there some reason why things shouldn't be as good as 3Q particularly in Specialty Admitted and the E&S or is that more conservatism?

Sarah Doran

No, I'm talking about year-to-date. We'd end the year-to-date with the full year, so not particularly in the fourth quarter. So I know I'm mixing and matching a little bit there. On Specialty Admitted, there were some small one offs and there's not a lot of premium in that segment, again, with the focus on the fronted business.

So I think about the run rate in that segment for where we are now and we'll get a benefit if we continue to grow the fronted business of being closer to that, that 20%, 21% where we are in the nine-month basis there. I'm happy to follow-up in more detail offline, if that's helpful, too.

Mark Hughes

Yes, no I think I'm, I think I’m good. I appreciate that help.

Sarah Doran

Thanks for the questions.

Operator

[Operator Instructions] Okay, there are no more questions.

Sarah Doran

There are no more questions, operator.

J. Adam Abram

Operator, thank you and everybody on the phone call, thank you very much for your attention to our company and following us and we look forward to reporting and you'll be hearing from Frank next quarter. And I think we're very excited with the prospect of his leadership. Thank you and we'll speak soon.

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for joining. You may all disconnect.