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RLI Reports Second Quarter 2022 Results

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PEORIA, Ill., July 20, 2022--(BUSINESS WIRE)--RLI Corp. (NYSE: RLI) – RLI Corp. reported second quarter 2022 net loss of $2.2 million (-$0.05 per share), compared to net earnings of $81.8 million ($1.79 per share) for the second quarter of 2021. Operating earnings(1) for the second quarter of 2022 were $67.4 million ($1.49 per share), compared to $49.9 million ($1.09 per share) for the same period in 2021.

Second Quarter

Year to Date

Earnings Per Diluted Share

2022

2021

2022

2021

Net earnings (loss)

$

(0.05

)

$

1.79

$

1.00

$

3.39

Operating earnings (1)

$

1.49

$

1.09

$

2.91

$

1.96

(1) See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

  • Underwriting income(1) of $56.0 million on a combined ratio(1) of 80.2.

  • 17% increase in gross premiums written.

  • 11% increase in net investment income.

  • Favorable development in prior years’ loss reserves, resulting in a $20.9 million net increase in underwriting income.

  • Book value per share of $23.02, a decrease of 13% (inclusive of dividends) from year-end 2021.

"We are pleased with our positive mid-year operating results, as top line premium and underwriting profitability remained strong in the second quarter," said RLI Corp. President & CEO Craig Kliethermes. "All of our underwriting segments positively contributed to the 17 percent growth in gross premium and 80 combined ratio that we achieved in the quarter. Market conditions continue to offer opportunities for our talented underwriters within their given niche markets. Despite the decline in book value due to the impact from the investment portfolio, we continue to generate capital through operating earnings, which were $1.49 per share. Our strong operating performance is a testament to the dedication of our employee owners and their commitment to our customers."

Underwriting Income

RLI achieved $56.0 million of underwriting income in the second quarter of 2022 on an 80.2 combined ratio, compared to $36.6 million on an 84.8 combined ratio in 2021.

Results for the second quarter of both years include favorable development in prior years’ loss reserves, which resulted in a $20.9 million and $27.5 million net increase to underwriting income for 2022 and 2021, respectively.

The following table highlights underwriting income and combined ratios by segment.

Underwriting Income(1)

Combined Ratio(1)

(in millions)

2022

2021

2022

2021

Casualty

$

21.5

$

26.4

Casualty

87.9

83.1

Property

26.1

8.9

Property

65.0

84.1

Surety

8.4

1.3

Surety

72.9

95.6

Total

$

56.0

$

36.6

Total

80.2

84.8

(1) See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 10.9% to $18.5 million, compared to the same period in 2021. The investment portfolio’s total return was -6.1% for the quarter and -10.4% for the six months ended June 30, 2022.

RLI’s comprehensive loss was $99.8 million for the quarter (-$2.20 per share), compared to $97.0 million ($2.12 per share) of comprehensive earnings for the same quarter in 2021. In addition to net earnings, comprehensive loss included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Equity in earnings of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was $8.5 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $3.6 million. Comparatively, for the second quarter of 2021, equity in earnings of unconsolidated investees from Maui Jim and Prime was $10.6 million and $3.6 million, respectively.

Dividends Paid in Second Quarter of 2022

On June 21, 2022, the company paid a regular quarterly dividend of $0.26 per share, a $0.01 increase over the prior quarter. RLI’s cumulative dividends total more than $510 million paid over the last five years.

Non-GAAP and Performance Measures

Management has included certain non-generally accepted accounting principles (non-GAAP) financial measures in presenting the company’s results. Management believes that these non-GAAP measures further explain the company’s results of operations and allow for a more complete understanding of the underlying trends in the company’s business. These measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles (GAAP). In addition, our definitions of these items may not be comparable to the definitions used by other companies.

Operating earnings and earnings per share (EPS) from operations consist of our GAAP net earnings adjusted by the net realized gains/(losses), net unrealized gains/(losses) on equity securities and taxes related thereto. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. A reconciliation of the operating earnings and EPS from operations to the comparable GAAP financial measures is included in the 2022 financial highlights below.

Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting loss and settlement expenses, policy acquisition costs and insurance operating expenses from net premium earned, which are all GAAP financial measures. The combined ratio, which is derived from components of underwriting income, is a performance measure commonly used by property and casualty insurance companies and is calculated as the sum of loss and settlement expenses, policy acquisition costs and insurance operating expenses, divided by net premiums earned, which are all GAAP measures.

Other News

On July 11, 2022, RLI was named as one of the insurance industry’s top performing companies by Ward benchmarking, a business unit of Aon, for the 32nd consecutive year. RLI is one of only two property-casualty insurers to be recognized as a Ward’s 50® Top P&C Performer every year since the list’s inception in 1991.

As previously announced, RLI has agreed to sell its minority interest in Maui Jim, Inc. RLI’s net after-tax proceeds from the sale will be approximately $500 million, with the final proceeds to be determined at closing, based on adjustments to the purchase price for working capital and other items. The sale is expected to close in the second half of 2022.

At 10 a.m. central daylight time (CDT) tomorrow, July 21, 2022, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at https://events.q4inc.com/attendee/945644532.

Except for historical information, this news release may include forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) including, without limitation, statements reflecting our current expectations about the future performance of our company or our business segments or about future market conditions. These statements are subject to certain risk factors that could cause actual results to differ materially. Various risk factors that could affect future results are listed in the company's filings with the Securities and Exchange Commission, including the Form 10-K Annual Report for the year ended December 31, 2021.

About RLI

RLI Corp. (NYSE: RLI) is a specialty insurer serving niche property, casualty and surety markets. The company provides deep underwriting expertise and superior service to commercial and personal lines customers nationwide. RLI’s products are offered through its insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company. All of RLI’s insurance subsidiaries are rated A+ (Superior) by AM Best Company. RLI has paid and increased regular dividends for 47 consecutive years and delivered underwriting profits for 26 consecutive years. To learn more about RLI, visit www.rlicorp.com.

Supplemental disclosure regarding the earnings impact of specific items:

Reserve Development and Catastrophe Losses,

Net of Reinsurance

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in millions, except per share amounts)

2022

2021

2022

2021

Favorable development in casualty prior years' reserves

$

17.3

$

29.2

$

44.9

$

57.5

Favorable development in property prior years' reserves

$

3.9

$

3.8

$

17.3

$

9.9

Favorable (unfavorable) development in surety prior years' reserves

$

3.0

$

(2.7

)

$

7.5

$

0.1

Net incurred losses related to:

2022 storms

$

(3.0

)

$

-

$

(5.0

)

$

-

2021 and prior events

$

-

$

(5.9

)

$

-

$

(21.9

)

Operating Earnings Per Share

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Operating Earnings Per Share(1)

$

1.49

$

1.09

$

2.91

$

1.96

Specific items included in operating earnings per share:(2) (3)

Net favorable development in casualty prior years' reserves

$

0.26

$

0.46

$

0.67

$

0.88

Net favorable development in property prior years' reserves

$

0.06

$

0.05

$

0.27

$

0.13

Net favorable (unfavorable) development in surety prior years' reserves

$

0.05

$

(0.06

)

$

0.11

$

(0.02

)

Net incurred losses related to:

2022 storms

$

(0.05

)

$

-

$

(0.08

)

$

-

2021 and prior events

$

-

$

(0.09

)

$

-

$

(0.32

)

(1) See discussion above: Non-GAAP and Performance Measures.

(2) Includes incentive and profit sharing-related impacts which affected policy acquisition, insurance operating and general corporate expenses.

(3) Reserve development reflects changes from previously estimated losses.

RLI CORP

2022 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

SUMMARIZED INCOME STATEMENT DATA:

2022

2021

% Change

2022

2021

% Change

Net premiums earned

$

282,810

$

241,000

17.3

%

$

551,962

$

469,595

17.5

%

Net investment income

18,472

16,661

10.9

%

36,355

33,085

9.9

%

Net realized gains

12,804

36,463

(64.9

)

%

18,392

50,613

(63.7

)

%

Net unrealized gains (losses) on equity securities

(100,994

)

3,956

NM

(128,804

)

32,118

NM

Consolidated revenue

$

213,092

$

298,080

(28.5

)

%

$

477,905

$

585,411

(18.4

)

%

Loss and settlement expenses

117,914

107,026

10.2

%

223,438

211,918

5.4

%

Policy acquisition costs

89,615

77,235

16.0

%

174,902

152,225

14.9

%

Insurance operating expenses

19,325

20,148

(4.1

)

%

38,188

38,944

(1.9

)

%

Interest expense on debt

2,011

1,904

5.6

%

4,021

3,805

5.7

%

General corporate expenses

2,435

3,686

(33.9

)

%

5,798

7,028

(17.5

)

%

Total expenses

$

231,300

$

209,999

10.1

%

$

446,347

$

413,920

7.8

%

Equity in earnings of unconsolidated investees

11,654

13,940

(16.4

)

%

20,413

20,364

...