RLI Reports Second Quarter 2023 Results

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PEORIA, Ill., July 24, 2023--(BUSINESS WIRE)--RLI Corp. (NYSE: RLI) – RLI Corp. reported second quarter 2023 net earnings of $77.7 million ($1.69 per share), compared to a net loss of $2.2 million ($0.05 per share) for the second quarter of 2022. Operating earnings(1)(2) for the second quarter of 2023 were $53.3 million ($1.16 per share), compared to $60.7 million ($1.34 per share) for the same period in 2022.

Second Quarter

Year to Date

Earnings Per Diluted Share

2023

2022

2023

2022

Net earnings (loss)

$

1.69

$

(0.05

)

$

3.83

$

1.00

Operating earnings (1) (2)

$

1.16

$

1.34

$

2.79

$

(1)

See discussion below: Non-GAAP and Performance Measures.

(2)

Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings per share in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.

Highlights for the quarter included:

  • Underwriting income(1) of $41.2 million on a combined ratio(1) of 87.2.

  • 21% increase in gross premiums written.

  • 56% increase in net investment income.

  • Favorable development in prior years’ loss reserves, resulting in a $17.0 million net increase in underwriting income.

  • Losses from second quarter storms, resulting in a $15.5 million net decrease in underwriting income.

  • Book value per share of $29.65, an increase of 17% (inclusive of dividends) from year-end 2022.

"We are pleased to report an 87 combined ratio for the quarter and an 83 combined ratio year to date," said RLI Corp. President & CEO Craig Kliethermes. "All three product segments contributed to our strong results. Our property segment continues to experience hard market conditions, which drove significant premium growth in the quarter. Casualty and surety segment premiums increased slightly, as product exits, market conditions and underwriting discipline moderated growth. Our profitability and growth in book value highlight the benefits of our diverse product portfolio and continued focus on responsible underwriting."

Underwriting Income

RLI achieved $41.2 million of underwriting income in the second quarter of 2023 on an 87.2 combined ratio, compared to $56.0 million on an 80.2 combined ratio in 2022.

Results for both years include favorable development in prior years’ loss reserves, which resulted in a $17.0 million and $20.9 million net increase to underwriting income from 2023 and 2022, respectively.

The following table highlights underwriting income and combined ratios by segment for the second quarter.

Underwriting Income(1)

Combined Ratio(1)

(in millions)

2023

2022

2023

2022

Casualty

$

7.0

$

21.5

Casualty

96.3

87.9

Property

25.9

26.1

Property

74.6

65.0

Surety

8.3

8.4

Surety

75.0

72.9

Total

$

41.2

$

56.0

Total

87.2

80.2

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 55.8% to $28.8 million, compared to the same period in 2022. The investment portfolio’s total return was 1.1% for the quarter and 3.9% for the six months ended June 30, 2023.

RLI’s comprehensive earnings were $57.9 million for the quarter ($1.26 per share), compared to a comprehensive loss of $99.8 million ($2.20 per share) for the same quarter in 2022. In addition to net earnings, comprehensive earnings included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Dividends Paid in Second Quarter of 2023

On June 20, 2023, the company paid a regular quarterly dividend of $0.27 per share, a $0.01 increase over the prior quarter. RLI’s cumulative dividends total more than $761 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 operating earnings per share (EPS) consist of our GAAP net earnings adjusted by net realized gains/(losses), net unrealized gains/(losses) on equity securities and taxes related thereto. Additionally, equity in earnings of Maui Jim and the related taxes were excluded from operating earnings and operating EPS for 2022 due to the sale of RLI’s investment in the third quarter of 2022. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and operating EPS. A reconciliation of the operating earnings and operating EPS to the comparable GAAP financial measures is included in the 2023 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, 2023, RLI was named as one of the insurance industry’s top performing companies by Ward Benchmarking, a business unit of Aon, for the 33rd consecutive year. RLI is the only property & casualty insurance company to be recognized as a Ward’s 50® P&C Top Performer every year since the list’s inception in 1991.

At 10 a.m. central daylight time (CDT) tomorrow, July 25, 2023, 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/705943023.

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, 2022.

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 48 consecutive years and delivered underwriting profits for 27 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

Six Months Ended

June 30,

June 30,

(Dollars in millions, except per share amounts)

2023

2022

2023

2022

Favorable development in casualty prior years' reserves

$

9.0

$

17.3

$

44.9

$

44.9

Favorable development in property prior years' reserves

$

3.5

$

3.9

$

16.1

$

17.3

Favorable development in surety prior years' reserves

$

4.2

$

3.0

$

7.4

$

7.5

Net incurred losses related to:

2023 storms

$

(18.0

)

$

—

$

(22.0

)

$

—

2022 and prior events

$

3.0

$

(3.0

)

$

3.1

$

(5.0

)

Operating Earnings Per Share

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

Operating Earnings Per Share(1) (2)

$

1.16

$

1.34

$

2.79

$

2.65

Specific items included in operating earnings per share:(3) (4)

Net favorable development in casualty prior years' reserves

$

0.14

$

0.26

$

0.66

$

0.67

Net favorable development in property prior years' reserves

$

0.05

$

0.06

$

0.24

$

0.27

Net favorable development in surety prior years' reserves

$

0.07

$

0.05

$

0.11

$

0.11

Net incurred losses related to:

2023 storms

$

(0.27

)

$

—

$

(0.32

)

$

—

2022 and prior events

$

0.04

$

(0.05

)

$

0.04

$

(0.08

)

(1)

See discussion above: Non-GAAP and Performance Measures.

(2)

Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings per share in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.

(3)

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

(4)

Reserve development reflects changes from previously estimated losses.

RLI CORP

2023 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

SUMMARIZED INCOME STATEMENT DATA:

2023

2022

% Change

2023

2022

% Change

Net premiums earned

$

322,280

$

282,810

14.0

%

$

630,003

$

551,962

14.1

%

Net investment income

28,788

18,472

55.8

%

55,872

36,355

53.7

%

Net realized gains

5,580

12,804

(56.4

)

%

20,200

18,392

9.8

%

Net unrealized gains (losses) on equity securities

25,214

(100,994

)

NM

40,710

(128,804

)

NM

Consolidated revenue

$

381,862

$

213,092

79.2

%

$

746,785

$

477,905

56.3

%

Loss and settlement expenses

153,943

117,914

30.6

%

268,431

223,438

20.1

%

Policy acquisition costs

102,626

89,615

14.5

%

204,070

174,902

16.7

%

Insurance operating expenses

24,510

19,325

26.8

%

48,411

38,188

26.8

%

Interest expense on debt

2,047

2,011

1.8

%

4,055

4,021

0.8

%

General corporate expenses

4,219

2,435

73.3

%

8,433

5,798

45.4

%

Total expenses

$

287,345

$

231,300

24.2

%

$

533,400

$

446,347

19.5

%

Equity in earnings of unconsolidated investees

1,514

11,654

(87.0

)

%

5,437

20,413

(73.4

)

%

Earnings (loss) before income taxes

$

96,031

$

(6,554

)

NM

$

218,822

$

51,971

NM

Income tax expense (benefit)

18,379

(4,315

)

NM

42,359

6,287

NM

Net earnings (loss)

$

77,652

$

(2,239

)

NM

$

176,463

$

45,684

NM

Other comprehensive earnings (loss), net of tax

(19,721

)

(97,563

)

(79.8

)

%

17,986

(213,144

)

NM

Comprehensive earnings (loss)

$

57,931

$

(99,802

)

NM

$

194,449

$

(167,460

)

NM

Operating earnings(1):

Net earnings (loss)

$

77,652

$

(2,239

)

NM

$

176,463

$

45,684

NM

Less:

Net realized gains

(5,580

)

(12,804

)

(56.4

)

%

(20,200

)

(18,392

)

9.8

%

Income tax on realized gains

1,171

2,689

(56.5

)

%

4,242

3,862

9.8

%

Net unrealized (gains) losses on equity securities

(25,214

)

100,994

NM

(40,710

)

128,804

NM

Income tax on unrealized gains (losses) on equity securities

5,295

(21,209

)

NM

8,549

(27,049

)

NM

Equity in earnings of Maui Jim

—

(8,505

)

(100.0

)

%

—

(14,872

)

(100.0

)

%

Income tax on equity in earnings of Maui Jim

—

1,786

(100.0

)

%

—

3,123

(100.0

)

%

Operating earnings(2)

$

53,324

$

60,712

(12.2

)

%

$

128,344

$

121,160

5.9

%

Return on Equity:

Net earnings (trailing four quarters)

56.9

%

14.4

%

Comprehensive earnings (trailing four quarters)

53.1

%

(6.1

)

%

Per Share Data:

Diluted:

Weighted average shares outstanding (in 000's)

46,044

45,354

46,045

45,748

Net earnings (loss) per share(2)

$

1.69

$

(0.05

)

NM

$

3.83

$

1.00

NM

Less:

Net realized gains

(0.12

)

(0.28

)

(57.1

)

%

(0.44

)

(0.40

)

10.0

%

Income tax on realized gains

0.03

0.06

(50.0

)

%

0.09

0.08

12.5

%

Net unrealized (gains) losses on equity securities

(0.55

)

2.23

NM

(0.88

)

2.82

NM

Income tax on unrealized gains (losses) on equity securities

0.11

(0.47

)

NM

0.19

(0.59

)

NM

Equity in earnings of Maui Jim

—

(0.19

)

(100.0

)

%

—

(0.33

)

(100.0

)

%

Income tax on equity in earnings of Maui Jim

—

0.04

(100.0

)

%

—

0.07

(100.0

)

%

Operating earnings per share(1)(2)

$

1.16

$

1.34

(13.4

)

%

$

2.79

$

2.65

5.3

%

Comprehensive earnings (loss) per share

$

1.26

$

(2.20

)

NM

$

4.22

$

(3.66

)

NM

Cash dividends per share - ordinary

$

0.27

$

0.26

3.8

%

$

0.53

$

0.51

3.9

%

Net Cash Flow provided by Operations

$

174,376

$

131,631

32.5

%

$

243,595

$

170,645

42.7

%

(1)

See discussion above: Non-GAAP and Performance Measures.

(2)

Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings and operating earnings per share in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.

NM = Not Meaningful

RLI CORP

2023 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

June 30,

December 31,

2023

2022

% Change

SUMMARIZED BALANCE SHEET DATA:

Fixed income, at fair value

$

2,689,100

$

2,666,950

0.8

%

(amortized cost - $2,946,920 at 6/30/23)

(amortized cost - $2,945,273 at 12/31/22)

Equity securities, at fair value

552,566

498,382

10.9

%

(cost - $340,184 at 6/30/23)

(cost - $328,019 at 12/31/22)

Short-term investments

271,296

36,229

648.8

%

Other invested assets

60,907

47,922

27.1

%

Cash and cash equivalents

16,707

22,818

(26.8

)

%

Total investments and cash

$

3,590,576

$

3,272,301

9.7

%

Accrued investment income

22,525

21,259

6.0

%

Premiums and reinsurance balances receivable

229,471

189,501

21.1

%

Ceded unearned premiums

112,353

138,457

(18.9

)

%

Reinsurance balances recoverable on unpaid losses

720,858

740,089

(2.6

)

%

Deferred policy acquisition costs

148,336

127,859

16.0

%

Property and equipment

48,358

49,573

(2.5

)

%

Investment in unconsolidated investees

55,250

58,275

(5.2

)

%

Goodwill and intangibles

53,562

53,562

0.0

%

Income taxes - deferred

29,864

40,269

(25.8

)

%

Other assets

54,693

75,923

(28.0

)

%

Total assets

$

5,065,846

$

4,767,068

6.3

%

Unpaid losses and settlement expenses

$

2,361,577

$

2,315,637

2.0

%

Unearned premiums

891,103

785,085

13.5

%

Reinsurance balances payable

35,931

61,100

(41.2

)

%

Funds held

102,429

101,144

1.3

%

Income taxes - current

5,326

—

NM

Current portion of long-term debt

199,956

199,863

0.0

%

Accrued expenses

70,220

94,869

(26.0

)

%

Other liabilities

47,392

32,029

48.0

%

Total liabilities

$

3,713,934

$

3,589,727

3.5

%

Shareholders' equity

1,351,912

1,177,341

14.8

%

Total liabilities & shareholders' equity

$

5,065,846

$

4,767,068

6.3

%

OTHER DATA:

Common shares outstanding (in 000's)

45,596

45,470

Book value per share

$

29.65

$

25.89

14.5

%

Closing stock price per share

$

136.47

$

131.27

4.0

%

Statutory surplus

$

1,539,490

$

1,437,324

7.1

%

RLI CORP

2023 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended June 30,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2023

Gross premiums written

$

251,057

$

221,889

$

35,018

$

507,964

Net premiums written

208,978

177,830

32,733

419,541

Net premiums earned

187,048

101,841

33,391

322,280

Net loss & settlement expenses

110,195

58.9

%

41,139

40.4

%

2,609

7.8

%

153,943

47.8

%

Net operating expenses

69,876

37.4

%

34,825

34.2

%

22,435

67.2

%

127,136

39.4

%

Underwriting income(1)

$

6,977

96.3

%

$

25,877

74.6

%

$

8,347

75.0

%

$

41,201

87.2

%

2022

Gross premiums written

$

248,315

$

135,848

$

34,626

$

418,789

Net premiums written

201,247

100,356

32,716

334,319

Net premiums earned

177,123

74,690

30,997

282,810

Net loss & settlement expenses

94,250

53.2

%

20,477

27.4

%

3,187

10.3

%

117,914

41.7

%

Net operating expenses

61,431

34.7

%

28,108

37.6

%

19,401

62.6

%

108,940

38.5

%

Underwriting income(1)

$

21,442

87.9

%

$

26,105

65.0

%

$

8,409

72.9

%

$

55,956

80.2

%

Six Months Ended June 30,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2023

Gross premiums written

$

468,891

$

380,735

$

73,350

$

922,976

Net premiums written

390,179

302,696

69,251

762,126

Net premiums earned

373,079

190,608

66,316

630,003

Net loss & settlement expenses

194,883

52.2

%

67,576

35.5

%

5,972

9.0

%

268,431

42.6

%

Net operating expenses

139,388

37.4

%

68,772

36.0

%

44,321

66.8

%

252,481

40.1

%

Underwriting income(1)

$

38,808

89.6

%

$

54,260

71.5

%

$

16,023

75.8

%

$

109,091

82.7

%

2022

Gross premiums written

$

464,136

$

245,446

$

68,366

$

777,948

Net premiums written

376,860

182,351

64,998

624,209

Net premiums earned

348,879

142,130

60,953

551,962

Net loss & settlement expenses

178,099

51.0

%

40,840

28.7

%

4,499

7.4

%

223,438

40.5

%

Net operating expenses

121,691

34.9

%

52,709

37.1

%

38,690

63.5

%

213,090

38.6

%

Underwriting income(1)

$

49,089

85.9

%

$

48,581

65.8

%

$

17,764

70.9

%

$

115,434

79.1

%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20230724724506/en/

Contacts

Aaron Diefenthaler
Chief Investment Officer & Treasurer
309-693-5846
Aaron.Diefenthaler@rlicorp.com

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