RLI Reports Fourth Quarter and Year-End Results
Fourth Quarter | Full Year | ||||||||||||
Earnings Per Diluted Share | 2010 | 2009 | 2010 | 2009 | |||||||||
Operating earnings | $1.66 | $1.17 | $5.29 | $4.70 | |||||||||
Net earnings | $1.90 | $1.41 | $6.00 | $4.32 |
Highlights for the quarter included:
- Operating earnings of
$35.1 million ($1.66 per share). - Combined ratio of 76.3.
$18.4 million ($0.57 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.$7.9 million dividend fromMaui Jim, Inc. resulting in a tax benefit on dividends received from affiliates of$2.2 million ($0.10 per share).- Special dividend of
$7.00 per share, representing$146.7 million returned to shareholders and resulting in a tax benefit of$3.6 million ($0.17 per share) as dividends to the ESOP are fully deductible. - Announced an agreement to acquire
Contractors Bonding Insurance Company .
Highlights for 2010 included:
- Operating earnings of
$112.3 million ($5.29 per share). - Combined ratio of 80.7.
$64.2 million ($1.97 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.- Net operating cash flow of
$100.2 million . - Comprehensive earnings of
$146.0 million ($6.87 per share). - Book value per share of
$37.75 at year-end, representing an increase of 14%, excluding special dividend.
“Fourth quarter financial results were excellent,” said
“RLI posted strong results for the year as well, which were driven by growth in our property and surety businesses,” said Michael. “We benefitted from new product initiatives pursued over the past three years that contributed nearly
15th consecutive year of underwriting income
For the quarter, RLI recorded underwriting income of
The following table highlights annual underwriting income and combined ratios by segment:
Underwriting Income | |||||||||||||||||
(in millions) | 2010 | 2009 | Combined Ratio | 2010 | 2009 | ||||||||||||
Casualty | $ 38.2 | $ 51.5 | Casualty | 83.4 | 80.6 | ||||||||||||
Property | 34.1 | 23.3 | Property | 81.2 | 85.0 | ||||||||||||
Surety | 23.1 | 12.0 | Surety | 71.3 | 83.2 | ||||||||||||
Total | $ 95.4 | $ 86.8 | Total | 80.7 | 82.3 |
Other income
For the quarter, investment income was
The investment portfolio’s total return for the quarter was 0.2%, with the bond portfolio returning negative 1.5% and the equity portfolio returning 9.2%. In 2010, the investment portfolio’s total return was 7.0% with the bond portfolio returning 5.6% and equities returning 13.9%. While the capital markets posted strong returns for the year, interest rates increased during the fourth quarter causing a decline in fair values on RLI’s bond portfolio.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were
During the quarter, for both 2010 and 2009, equity in results of unconsolidated investee was a
Acquisition of CBIC announced
RLI announced on
Special dividend and share repurchase program
On
For the year, RLI repurchased 438,783 shares at an average cost of
Other news
At
Underwriting income, operating earnings, earnings per share (EPS) from operations and other per share items are non-GAAP financial measures, and we believe that investors’ understanding of RLI’s core operating performance is enhanced by our disclosure of these financial measures. Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs, and insurance operating expenses from net premium earned. Operating earnings and EPS from operations consist of our net earnings adjusted by net realized investment gains/(losses) and taxes related to net realized gains/(losses). Our definitions of these items may not be comparable to the definitions used by other companies. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. All earnings per share data are calculated using fully diluted shares. Combined ratio refers to a GAAP combined ratio.
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
RLI, a specialty insurance company, offers a diversified portfolio of property and casualty coverages and surety bonds serving niche or underserved markets. RLI operates in all 50 states from office locations across the country. RLI's insurance subsidiaries –
For additional information, contact
Supplemental disclosure regarding the earnings impact of specific items:
Operating Earnings Per Diluted Share | |||||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||||
4th Qtr. | 4th Qtr. | 12 mos. | 12 mos. | ||||||||||||||
Operating Earnings Per Diluted Share | $ | 1.66 | $ | 1.17 |
|
$ | 5.29 | $ | 4.70 | ||||||||
Specific items included in operating earnings per share: (1) (2) | |||||||||||||||||
• |
Gain from casualty prior years' reserve development | $ | 0.49 | $ | 0.32 |
|
$ | 1.61 | $ | 1.66 | |||||||
• |
Gain/(loss) from property prior years' reserve development | $ | 0.05 | $ | (0.10 | ) | $ | 0.05 | $ | (0.29 | ) | ||||||
• |
Gain from surety prior years' reserve development | $ | 0.03 | $ | 0.14 |
|
$ | 0.31 | $ | 0.13 | |||||||
• |
Gain from change in tax rate applicable to Maui Jim (3) | $ | 0.10 | $ | - | $ | 0.10 | ||||||||||
• |
Gain from tax benefit of special dividend to ESOP (4) | $ | 0.17 | $ | - | $ | 0.17 | ||||||||||
(1) | Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses. | ||||||||||||||||
(2) | Reserve development reflects revisions for previously estimated losses. | ||||||||||||||||
(3) |
As required under the accounting standard for income taxes, the gain reflects the tax benefit of applying the lower tax rate applicable to dividends received from an affiliate (7%) as compared to the corporate capital gains tax rate (35%) on which tax estimates were based. |
||||||||||||||||
(4) | Dividends paid in an ESOP on employer securities are fully deductible from taxable income and result in a 35% tax benefit. | ||||||||||||||||
RLI CORP. | |||||||||||||||||||||||||
2010 FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | |||||||||||||||||||||||||
</td> | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||||
2010 | 2009 | % Change | 2010 | 2009 | % Change | ||||||||||||||||||||
SUMMARIZED INCOME STATEMENT DATA: |
|||||||||||||||||||||||||
Net premiums earned | $ | 127,026 | $ | 121,051 | 4.9 | % | $ | 493,382 | $ | 491,961 | 0.3 | % | |||||||||||||
Net investment income | 16,672 | 16,852 | -1.1 | % | 66,799 | 67,346 | -0.8 | % | |||||||||||||||||
Net realized investment gains (losses) | 7,962 | 8,034 | -0.9 | % | 23,243 | (12,755 | ) | ||||||||||||||||||
Consolidated revenue | 151,660 | 145,937 | 3.9 | % | 583,424 | 546,552 | 6.7 | % | |||||||||||||||||
Loss and settlement expenses | 46,180 | 45,710 | 1.0 | % | 201,332 | 203,388 | -1.0 | % | |||||||||||||||||
Policy acquisition costs | 39,267 | 40,824 | -3.8 | % | 158,071 | 162,020 | -2.4 | % | |||||||||||||||||
Other insurance expenses | 11,426 | 10,954 | 4.3 | % | 38,584 | 39,768 | -3.0 | % | |||||||||||||||||
Interest expense on debt | 1,513 | 1,513 | 0.0 </td> | % | 6,050 | 6,050 | 0.0 | % | |||||||||||||||||
General corporate expenses | 2,592 | 2,094 | 23.8 | % | 7,998 | 7,941 | 0.7 | % | |||||||||||||||||
Total expenses | 100,978 | 101,095 | -0.1 | % | 412,035 | 419,167 | -1.7 | % | |||||||||||||||||
Equity in earnings (loss) of unconsolidated investee |
(226 | ) | (190 | ) | -18.9 | % | 7,101 | 5,052 | 40.6 | % | |||||||||||||||
Earnings before income taxes | 50,456 | 44,652 | 13.0 | % | 178,490 | 132,437 | 34.8 | % | |||||||||||||||||
Income tax expense | 10,204 | 14,090 | -27.6 | % | 51,058 | 38,592 | 32.3 | % | |||||||||||||||||
Net earnings | $ | 40,252 | $ | 30,562 | 31.7 | % | $ | 127,432 | $ | 93,845 | 35.8 | % | |||||||||||||
Other comprehensive earnings (loss), net of tax | (9,405 | ) | (1,076 | ) | -774.1 | % | 18,581 | 62,281 | -70.2 | % | |||||||||||||||
Comprehensive earnings | $ | 30,847 | $ | 29,486 | 4.6 | % | $ | 146,013 | $ | 156,126 | -6.5 | % | |||||||||||||
Operating earnings:(1) | |||||||||||||||||||||||||
Net earnings | $ | 40,252 | $ | 30,562 | 31.7 | % | $ | 127,432 | $ | 93,845 | 35.8 | % | |||||||||||||
Less: Realized investment gains (losses), net of tax | 5,176 | 5,312 | -2.6 | % | 15,108 | (8,291 | ) | ||||||||||||||||||
Operating earnings | $ | 35,076 | $ | 25,250 | 38.9 | % | $ | 112,324 | $ | 102,136 | 10.0 | % | |||||||||||||
Return on Equity: | |||||||||||||||||||||||||
Net earnings (trailing four quarters) | 15.0 | % | 12.2 | % | |||||||||||||||||||||
Comprehensive earnings (trailing four quarters) | 17.2 | % | 20.3 | % | |||||||||||||||||||||
Per Share Data | |||||||||||||||||||||||||
Diluted: |
|||||||||||||||||||||||||
Weighted average shares outstanding (in 000's) | 21,164 | 21,636 | 21,241 | 21,731 | |||||||||||||||||||||
EPS from operations (1) | $ | 1.66 | $ | 1.17 | 41.9 | % | $ | 5.29 | $ | 4.70 | 12.6 | % | |||||||||||||
Realized gains (losses), net of tax | 0.24 | 0.24 | 0.0 | % | 0.71 | (0.38 | ) | ||||||||||||||||||
Net earnings per share | $ | 1.90 | $ | 1.41 | 34.8 | % | $ | 6.00 | $ | 4.32 | 38.9 | % | |||||||||||||
Comprehensive earnings per share | $ | 1.46 | $ | 1.36 | 7.4 | % | $ | 6.87 | $ | 7.18 | -4.3 | % | |||||||||||||
Cash dividends per share | $ | 7.29 | $ | 0.28 | 2503.6 | % | $ | 8.15 | $ | 1.08 | 654.6 | % | |||||||||||||
Net Cash Flow provided by Operations | $ | 12,368 | $ | 19,314 | -36.0 | % | $ | 100,235 | $ | 127,759 | -21.5 | % | |||||||||||||
(1) See discussion of non-GAAP financial measures on page 3. | |||||||||||||||||||||||||
RLI CORP. | ||||||||||
2010 FINANCIAL HIGHLIGHTS | ||||||||||
(Unaudited) | ||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||
December 31, | December 31, | |||||||||
2010 | 2009 | % Change | ||||||||
SUMMARIZED BALANCE SHEET DATA: |
||||||||||
Fixed income | $ | 1,441,337 | $ | 1,485,347 | -3.0 | % | ||||
(amortized cost - $1,403,140 at 12/31/10) | ||||||||||
(amortized cost - $1,452,084 at 12/31/09) | ||||||||||
Equity securities | 321,897 | 262,693 | 22.5 | % | ||||||
(cost - $213,069 at 12/31/10) | ||||||||||
(cost - $177,681 at 12/31/09) | ||||||||||
Short-term investments | 39,787 | 104,462 | -61.9 | % | ||||||
Total investments | 1,803,021 | 1,852,502 | -2.7 | % | ||||||
Premiums and reinsurance balances receivable | 107,391 | 83,961 | 27.9 | % | ||||||
Ceded unearned premiums | 62,631 | 65,379 | -4.2 | % | ||||||
Reinsurance recoverable on unpaid losses | 354,163 | 336,392 | 5.3 | % | ||||||
Deferred acquisition costs | 74,435 | 75,880 | -1.9 | % | ||||||
Property and equipment | 18,370 | 19,110 | -3.9 | % | ||||||
Investment in unconsolidated investee | 43,358 | 44,286 | -2.1 | % | ||||||
Goodwill | 26,214 | 26,214 | - | |||||||
Other assets | 25,009 | 34,929 | -28.4 | % | ||||||
Total assets | $ | 2,514,592 | $ | 2,538,653 | -0.9 | % | ||||
Unpaid losses and settlement expenses | $ | 1,173,943 | $ | 1,146,460 | 2.4 | % | ||||
Unearned premiums | 301,537 | 312,527 | -3.5 | % | ||||||
Reinsurance balances payable | 23,851 | 22,431 | 6.3 | % | ||||||
Long-term debt - bonds payable | 100,000 | 100,000 | - | |||||||
Income taxes - deferred | 33,930 | 24,299 | 39.6 | % | ||||||
Accrued expenses | 42,436 | 41,835 | 1.4 | % | ||||||
Other liabilities | 47,519 | 58,851 | -19.3 | % | ||||||
Total liabilities | 1,723,216 | 1,706,403 | 1.0 | % | ||||||
Shareholders' equity | 791,376 | 832,250 | -4.9 | % | ||||||
Total liabilities & shareholders' equity | $ | 2,514,592 | $ | 2,538,653 | -0.9 | % | ||||
OTHER DATA |
||||||||||
Common shares outstanding (in 000's) | 20,965 | 21,265 | ||||||||
Book value per share | $ | 37.75 | $ | 39.14 | -3.6 | % | ||||
Closing stock price per share | $ | 52.57 | $ | 53.25 | -1.3 | % | ||||
Cash dividends per share - ordinary | $ | 1.15 | $ | 1.08 | 6.5 | % | ||||
Cash dividends per share - special | $ | 7.00 | $ | - | - | |||||
Statutory Surplus | $ | 732,379 | $ | 784,161 | -6.6 | % | ||||
RLI CORP. | |||||||||||||||||||||||||||
2010 FINANCIAL HIGHLIGHTS | |||||||||||||||||||||||||||
UNDERWRITING SEGMENT DATA | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | |||||||||||||||||||||||||||
Three Months Ended December 31, | |||||||||||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | ||||||||||||||||||||||||
Casualty | Ratios | Property | Ratios | Surety | Ratios | Total | Ratios | ||||||||||||||||||||
2010 |
|||||||||||||||||||||||||||
Gross premiums written | $ | 77,285 | $ | 46,987 | $ | 22,366 | $ | 146,638 | |||||||||||||||||||
Net premiums written | 53,218 | 34,389 | 20,060 | 107,667 | |||||||||||||||||||||||
Net premiums earned | 56,185 | 49,512 | 21,329 | 127,026 | </td> | ||||||||||||||||||||||
Net loss & settlement expenses | 22,133 | 39.4 | % | 20,372 | 41.1 | % | 3,675 | 17.2 | % | 46,180 | 36.4 | % | |||||||||||||||
Net operating expenses | 19,504 | 34.7 | % | 17,724 | 35.8 | % | 13,465 | 63.1 | % | 50,693 | 39.9 | % | |||||||||||||||
Underwriting income | $ | 14,548 | 74.1 | % | $ | 11,416 | 76.9 | % | $ | 4,189 | 80.3 | % | $ | 30,153 | 76.3 | % | |||||||||||
2009 |
|||||||||||||||||||||||||||
Gross premiums written | $ | 78,126 | $ | 43,485 | $ | 22,361 | $ | 143,972 | |||||||||||||||||||
Net premiums written | 54,273 | 30,588 | 19,125 | 103,986 | |||||||||||||||||||||||
Net premiums earned | 62,255 | 39,909 | 18,887 | 121,051 | |||||||||||||||||||||||
Net loss & settlement expenses | 25,988 | 41.7 | % | 18,837 | 47.2 | % | 885 | 4.7 | % | 45,710 | 37.8 | % | |||||||||||||||
Net operating expenses | 22,159 | 35.6 | % | 17,082 | 42.8 | % | 12,537 | 66.4 | % | 51,778 | 42.8 | % | |||||||||||||||
Underwriting income | $ | 14,108 | 77.3 | % | $ | 3,990 | 90.0 | % | $ | 5,465 | 71.1 | % | $ | 23,563 | 80.6 | % | |||||||||||
Twelve Months Ended December 31, | |||||||||||||||||||||||||||
GAAP | GAAP | GAAP | GAAP | ||||||||||||||||||||||||
Casualty | Ratios | Property | Ratios | Surety | Ratios | Total | Ratios | ||||||||||||||||||||
2010 |
|||||||||||||||||||||||||||
Gross premiums written | $ | 309,202 | $ | 235,058 | $ | 92,056 | $ | 636,316 | |||||||||||||||||||
Net premiums written | 222,596 | 179,899 | 82,645 | 485,140 | |||||||||||||||||||||||
Net premiums earned | 231,119 | 181,645 | 80,618 | 493,382 | |||||||||||||||||||||||
Net loss & settlement expenses | 113,510 | 49.1 | % | 82,463 | 45.4 | % | 5,359 | 6.6 | % | 201,332 | 40.8 | % | |||||||||||||||
Net operating expenses | 79,370 | 34.3 | % | 65,097 | 35.8 | % | 52,188 | 64.7 | % | 196,655 | 39.9 | % | |||||||||||||||
Underwriting income | $ | 38,239 | 83.4 | % | $ | 34,085 | 81.2 | % | $ | 23,071 | 71.3 | % | $ | 95,395 | 80.7 | % | |||||||||||
2009 |
|||||||||||||||||||||||||||
Gross premiums written | $ | 333,059 | $ | 207,444 | $ | 90,697 | $ | 631,200 | |||||||||||||||||||
Net premiums written | 241,005 | 152,889 | 76,022 | 469,916 | |||||||||||||||||||||||
Net premiums earned | 265,021 | 155,303 | 71,637 | 491,961 | |||||||||||||||||||||||
Net loss & settlement expenses | 122,706 | 46.3 | % | 68,606 | 44.2 | % | 12,076 | 16.9 | % | 203,388 | 41.3 | % | |||||||||||||||
Net operating expenses | 90,827 | 34.3 | % | 63,436 | 40.8 | % | 47,525 | 66.3 | % | 201,788 | 41.0 | % | |||||||||||||||
Underwriting income | $ | 51,488 | 80.6 | % | $ | 23,261 | 85.0 | % | $ | 12,036 | 83.2 | % | $ | 86,785 | 82.3 | % |
309-693-5846
[email protected]
www.rlicorp.com
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