RLI Q2 Earnings & Revenues Miss Estimates, Premiums Rise Y/Y
RLI Corp. RLI reported second-quarter 2023 operating earnings of $1.16 per share, missing the Zacks Consensus Estimate by 3.3%. The bottom line declined 22.1% from the prior-year quarter.
The quarterly results suffered due to higher-than-expected losses from storms.
RLI Corp. Price, Consensus and EPS Surprise
RLI Corp. price-consensus-eps-surprise-chart | RLI Corp. Quote
Operational Performance
Operating revenues for the reported quarter were $351.1 million, up 16.5% year over year, driven by 14% higher net premiums earned and 55.8% higher net investment income. The top line however missed the Zacks Consensus Estimate by 2%.
Gross premiums written increased 21.3% year over year to $508 million. This uptick can be attributed to the solid performance of the Casualty (up 1.1%), Property (up 63.3%) and Surety segments (up 1.1%). Our estimate was $517.7 million.
Net investment income increased 56% year over year to $28.8 million. The Zacks Consensus Estimate for the metric was pegged at $27.6 million, while our estimate was $24.9 million. The investment portfolio’s total return was 1.1% in the quarter.
Total expenses increased 24.2% year over year to $287.3 million, primarily due to higher loss and settlement expenses, and higher policy acquisition costs, insurance operating expenses and general corporate expenses. Our estimate was $262.9 million.
Underwriting income of $41.2 million decreased 26.4%, primarily due to losses from storms. Combined ratio deteriorated 70 basis points (bps) year over year to 87.2. The Zacks Consensus Estimate for the metric was pegged at 85, while our estimate was 78.2.
Financial Update
RLI exited the quarter with total investments and cash of $3.6 billion, up 9.7% from 2022 end.
Book value was $29.65 per share as of Jun 30, 2023, up 17% from the figure as of Dec 31, 2022.
Net cash flow from operations was $174.4 million, up 32.5% year over year.
The statutory surplus decreased 7.1% from 2022 end to $1.5 billion as of Jun 30, 2023.
Return on equity was 53.1% versus -6.1% in the year-ago quarter.
Dividend Update
On Jun 20, 2023, RLI paid a quarterly dividend of 27 cents per share, up 3.8% from the prior payout. Over the last five years, the insurer has returned $761 million to shareholders.
Zacks Rank
RLI currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Insurers
The Travelers Companies TRV reported second-quarter 2023 core income of 6 cents per share, which missed the Zacks Consensus Estimate of $2.27. The bottom line decreased 97.7% year over year, primarily attributable to higher-than-expected catastrophe loss.
Travelers’ total revenues increased 9.8% from the year-ago quarter to $10.1 billion, primarily driven by higher premiums. The top-line figure was almost in line with the Zacks Consensus Estimate.
Net written premiums increased 14% year over year to a record $10.3 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $9.1 billion.
Travelers witnessed an underwriting gain of $781 million, up 38% year over year, driven by record net earned premiums of $9.2 billion and a consolidated underlying combined ratio, which improved 170 basis points. The combined ratio deteriorated 820 basis points year over year to 106.5 due to higher catastrophe losses and lower net favorable prior-year reserve development, partially offset by a lower underlying combined ratio.
The Progressive Corporation’s PGR second-quarter 2023 earnings per share of 50 cents missed the Zacks Consensus Estimate of 88 cents. The bottom line declined 47.4% year over year.
Net premiums earned grew 19% to $14.5 billion and beat our estimate of $12.9 billion as well as the Zacks Consensus Estimate of $14.3 billion. The combined ratio deteriorated 480 bps from the prior-year quarter’s level to 104.
Policies in force were solid in the Personal Auto segment, increasing 17% from the year-ago month’s figure to 19.7 million. Special Lines improved 7% to 5.8 million.
W.R. Berkley Corporation’s WRB second-quarter 2023 operating income of $1.14 per share beat the Zacks Consensus Estimate by 6.5%. The bottom line increased 1.8% year over year.
Operating revenues came in at $2.9 billion, down 57.4% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line missed the consensus estimate by 1.2%.
W.R. Berkley’s net premiums written were a record $2.8 billion, up 8.7% year over year, as market conditions remained favorable for most lines of business. Our estimate for the same was $2.7 billion.
Catastrophe losses totaled $53.5 million in the quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 100 basis points to 89.6, in line with the Zacks Consensus Estimate. Our estimate for the combined ratio was 91.3.
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