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RLI Reports Third Quarter 2019 Results

PEORIA, Ill.--(BUSINESS WIRE)--

RLI Corp. (RLI) – RLI Corp. reported third quarter 2019 net earnings of $32.3 million ($0.71 per share), compared to $39.4 million ($0.88 per share) for the third quarter of 2018. Operating earnings(1) for the third quarter of 2019 were $25.9 million ($0.57 per share) compared to $20.8 million ($0.46 per share) for the same period in 2018.

 

 

 

 

 

 

 

 

 

 

 

 

 

Third Quarter

 

Year to Date

Earnings Per Diluted Share

2019

 

2018

 

2019

 

2018

Net earnings

$

 

0.71

 

$

 

0.88

 

$

 

3.06

 

$

 

1.90

Operating earnings (1)

$

 

0.57

 

$

 

0.46

 

$

 

1.94

 

$

 

1.66

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

Highlights for the quarter included:

  • Underwriting income(1) of $13.7 million, resulting in a combined ratio(1) of 93.5.
  • 16% increase in gross premiums written and 7% increase in investment income.
  • Favorable development in prior years’ loss reserves, resulting in a $12.1 million net increase in underwriting income.
  • Book value per share of $22.30, an increase of 27% from year-end 2018, inclusive of dividends.

“We are pleased with our sound financial results and continued top line growth during the quarter,” said RLI Corp. Chairman & CEO Jonathan E. Michael. “We achieved a 93.5 combined ratio overall, with contributions from each major product segment. Throughout 2019, we have been focused on using capital generated from our businesses to selectively expand our existing footprint. Quarterly operating earnings of $0.57 per share, in addition to positive investment returns, generated strong book value growth of 27% from year-end 2018. We remain well positioned to take advantage of favorable market conditions, while providing exceptional service to our customers and delivering value to our shareholders.”

Underwriting Income

RLI achieved $13.7 million of underwriting income in the third quarter of 2019 on a 93.5 combined ratio, compared to $7.8 million on a 96.1 combined ratio in 2018. Results for both years include favorable development in prior years’ loss reserves which totaled $12.1 million and $9.7 million for 2019 and 2018, respectively.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting Income (Loss)(1)

 

Combined Ratio(1)

(in millions)

 

2019

 

2018

 

 

 

2019

 

2018

Casualty

 

$

 

2.4

 

$

 

(1.9

)

 

Casualty

 

98.3

 

101.5

Property

 

 

6.2

 

 

2.6

 

 

Property

 

85.0

 

93.3

Surety

 

 

5.1

 

 

7.1

 

 

Surety

 

82.4

 

76.4

Total

 

$

 

13.7

 

$

 

7.8

 

 

Total

 

93.5

 

96.1

 

 

 

 

 

 

 

 

 

 

 

 

 

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

Other Income

RLI’s net investment income for the quarter increased 7.5% to $17.5 million, compared to the same period in 2018. The investment portfolio’s total return was 1.9% for the quarter and 9.6% for the year.

Comprehensive earnings were $47.7 million for the quarter ($1.05 per share) compared to $31.7 million ($0.70 per share) for the same quarter in 2018. In addition to net earnings, comprehensive earnings included after-tax unrealized gains/(losses) from the fixed income portfolio.

Equity in earnings of unconsolidated investees was $4.0 million for the quarter compared to $3.6 million from the same period last year. These results are related to Maui Jim, Inc. ($2.8 million), a producer of premium sunglasses, and Prime Holdings Insurance Services, Inc. ($1.2 million), a specialty insurance company. For the third quarter of 2018, equity in earnings of unconsolidated investees from Maui Jim and Prime was $2.6 million and $1.0 million, respectively.

Dividends Paid in the Third Quarter of 2019

On September 20, 2019, the company paid a regular quarterly dividend of $0.23 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $606 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 better 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 2019 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 16, 2019, RLI was named as one of the insurance industry’s top performing companies by Ward Group for the 29th 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.

At 10 a.m. central daylight time (CDT) tomorrow, October 17, 2019, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion through the Internet at https://edge.media-server.com/mmc/p/vy5j5zy8.

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, 2018.

About RLI

RLI Corp. (RLI) is a specialty insurer serving diverse, 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 A.M. Best Company. RLI has paid and increased regular dividends for 44 consecutive years and delivered underwriting profits for 23 consecutive years. To learn more about RLI, visit www.rlicorp.com.

Supplemental disclosure regarding the earnings impact of specific items:

Operating Earnings Per Share

 

2019

 

 

2018

 

 

2019

 

 

2018

 

3rd Qtr

3rd Qtr

9 Mos.

9 Mos.

Operating Earnings Per Share(1)

$

 

0.57

 

$

 

0.46

 

$

 

1.94

 

$

 

1.66

 

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

• Favorable development in casualty prior years' reserves

$

 

0.19

 

$

 

0.11

 

$

 

0.68

 

$

 

0.36

 

• Favorable development in property prior years' reserves

$

 

0.02

 

$

 

0.01

 

$

 

0.02

 

$

 

0.07

 

• Favorable development in surety prior years' reserves

$

 

-

 

$

 

0.03

 

$

 

0.12

 

$

 

0.16

 

•Catastrophe impact

• 2019 storms

$

 

(0.04

)

$

 

-

 

$

 

(0.12

)

$

 

-

 

• 2018 and prior events

$

 

-

 

$

 

(0.09

)

$

 

-

 

$

 

(0.24

)

(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.

null

RLI CORP

2019 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

SUMMARIZED INCOME STATEMENT DATA:

 

2019

 

 

 

2018

 

 

% Change

 

 

2019

 

 

 

 

2018

 

 

 

% Change

Net premiums earned

 

$

 

211,255

 

 

$

 

200,815

 

 

5.2

 

%

 

$

 

623,485

 

 

 

$

 

587,364

 

 

 

6.1

 

%

Net investment income

 

 

17,532

 

 

 

16,314

 

 

7.5

 

%

 

 

51,095

 

 

 

 

45,123

 

 

 

13.2

 

%

Net realized gains

 

 

3,211

 

 

 

18,647

 

 

(82.8

)

%

 

 

17,043

 

 

 

 

47,900

 

 

 

(64.4

)

%

Net unrealized gains (losses) on equity securities

 

 

4,906

 

 

 

4,848

 

 

1.2

 

%

 

 

47,214

 

 

 

 

(34,535

)

 

 

-

 

 

Consolidated revenue

 

$

 

236,904

 

 

$

 

240,624

 

 

(1.5

)

%

 

$

 

738,837

 

 

 

$

 

645,852

 

 

 

14.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and settlement expenses

 

$

 

108,990

 

 

$

 

110,231

 

 

(1.1

)

%

 

$

 

307,206

 

 

 

$

 

304,305

 

 

 

1.0

 

%

Policy acquisition costs

 

 

71,552

 

 

 

68,414

 

 

4.6

 

%

 

 

214,586

 

 

 

 

201,473

 

 

 

6.5

 

%

Insurance operating expenses

 

 

16,982

 

 

 

14,408

 

 

17.9

 

%

 

 

50,597

 

 

 

 

42,191

 

 

 

19.9

 

%

Interest expense on debt

 

 

1,861

 

 

 

1,862

 

 

(0.1

)

%

 

 

5,583

 

 

 

 

5,576

 

 

 

0.1

 

%

General corporate expenses

 

 

2,583

 

 

 

2,947

 

 

(12.4

)

%

 

 

9,142

 

 

 

 

7,871

 

 

 

16.1

 

%

Total expenses

 

$

 

201,968

 

 

$

 

197,862

 

 

2.1

 

%

 

$

 

587,114

 

 

 

$

 

561,416

 

 

 

4.6

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated investees

 

 

4,011

 

 

 

3,587

 

 

11.8

 

%

 

 

17,793

 

 

 

 

15,853

 

 

 

12.2

 

%

Earnings before income taxes

 

$

 

38,947

 

 

$

 

46,349

 

 

(16.0

)

%

 

$

 

169,516

 

 

 

$

 

100,289

 

 

 

69.0

 

%

Income tax expense

 

 

6,623

 

 

 

6,977

 

 

(5.1

)

%

 

 

31,252

 

 

 

 

15,450

 

 

 

102.3

 

%

Net earnings

 

$

 

32,324

 

 

$

 

39,372

 

 

(17.9

)

%

 

$

 

138,264

 

 

 

$

 

84,839

 

 

 

63.0

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings (loss), net of tax

 

 

15,341

 

 

 

(7,696

)

 

-

 

 

 

 

72,506

 

 

 

 

(41,769

)

 

 

-

 

 

Comprehensive earnings

 

$

 

47,665

 

 

$

 

31,676

 

 

50.5

 

%

 

$

 

210,770

 

 

 

$

 

43,070

 

 

 

389.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

 

32,324

 

 

$

 

39,372

 

 

(17.9

)

%

 

$

 

138,264

 

 

 

$

 

84,839

 

 

 

63.0

 

%

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

 

(3,211

)

 

 

(18,647

)

 

(82.8

)

%

 

 

(17,043

)

 

 

 

(47,900

)

 

 

(64.4

)

%

Income tax on realized gains

 

 

674

 

 

 

3,916

 

 

(82.8

)

%

 

 

3,579

 

 

 

 

10,059

 

 

 

(64.4

)

%

Unrealized (gains) losses on equity securities

 

 

(4,906

)

 

 

(4,848

)

 

1.2

 

%

 

 

(47,214

)

 

 

 

34,535

 

 

 

-

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

1,031

 

 

 

1,018

 

 

1.3

 

%

 

 

9,915

 

 

 

 

(7,252

)

 

 

-

 

 

Operating earnings

 

$

 

25,912

 

 

$

 

20,811

 

 

24.5

 

%

 

$

 

87,501

 

 

 

$

 

74,281

 

 

 

17.8

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (trailing four quarters)

 

 

 

 

 

 

 

 

 

 

 

13.0

 

%

 

 

16.6

 

%

 

 

 

Comprehensive earnings (trailing four quarters)

 

 

 

 

 

 

 

 

 

 

 

21.8

 

%

 

 

12.2

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in 000's)

 

 

45,349

 

 

 

44,940

 

 

 

 

 

 

45,192

 

 

 

 

44,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share

 

$

 

0.71

 

 

$

 

0.88

 

 

(19.3

)

%

 

$

 

3.06

 

 

 

$

 

1.90

 

 

 

61.1

 

%

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

 

(0.07

)

 

 

(0.42

)

 

(83.3

)

%

 

 

(0.38

)

 

 

 

(1.07

)

 

 

(64.5

)

%

Income tax on realized gains

 

 

0.01

 

 

 

0.09

 

 

(88.9

)

%

 

 

0.08

 

 

 

 

0.22

 

 

 

(63.6

)

%

Unrealized (gains) losses on equity securities

 

 

(0.10

)

 

 

(0.11

)

 

(9.1

)

%

 

 

(1.04

)

 

 

 

0.77

 

 

 

-

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

0.02

 

 

 

0.02

 

 

-

 

%

 

 

0.22

 

 

 

 

(0.16

)

 

 

-

 

 

EPS from operations(1)

 

$

 

0.57

 

 

$

 

0.46

 

 

23.9

 

%

 

$

 

1.94

 

 

 

$

 

1.66

 

 

 

16.9

 

%