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RLI Reports First Quarter 2023 Results

PEORIA, Ill.--(BUSINESS WIRE)--
RLI Corp. (NYSE: RLI) – RLI Corp. reported first quarter 2023 net earnings of $98.8 million ($2.15 per share), compared to $47.9 million ($1.05 per share) for the first quarter of 2022. Operating earnings(1) for the first quarter of 2023 were $75.0 million ($1.63 per share), compared to $60.4 million ($1.32 per share) for the same period in 2022.

 

 

First Quarter

Earnings Per Diluted Share

 

2023

 

2022

Net earnings

 

$

2.15

 

$

1.05

Operating earnings (1) (2)

 

$

1.63

 

$

1.32

(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 $67.9 million on a combined ratio(1) of 77.9.

  • 16% increase in gross premiums written.

  • 51% increase in net investment income.

  • Favorable development in prior years’ loss reserves, resulting in a $44.5 million net increase in underwriting income.

  • Book value per share of $28.62, an increase of 12% (inclusive of dividends) from year-end 2022.

“After ending 2022 with strong results and delivering our 27th consecutive year of underwriting profit, we are pleased to be off to a solid start in the first quarter of 2023,” said RLI Corp. President & CEO Craig Kliethermes. “We achieved a 78 combined ratio and top line premium growth of 16%, which was driven by our property and surety segments. Investment income continued to support growth in operating earnings, and positive portfolio returns contributed to 12% growth in book value. I commend our associate owners on their commitment to the hard work and values that continue to serve our customers well, provide stability for our stakeholders and uphold our ownership culture.”

Underwriting Income

RLI achieved $67.9 million of underwriting income in the first quarter of 2023 on a 77.9 combined ratio, compared to $59.5 million on a 77.9 combined ratio in 2022.

Results for both years include favorable development in prior years’ loss reserves, which resulted in a $44.5 million and $39.6 million net increase to underwriting income from 2023 and 2022, respectively.

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

Underwriting Income(1)

 

 

 

 

 

 

 

Combined Ratio(1)

 

 

 

 

(in millions)

 

2023

 

2022

 

 

 

2023

 

2022

Casualty

 

$

31.8

 

$

27.6

 

Casualty

 

82.9

 

83.9

Property

 

 

28.4

 

 

22.5

 

Property

 

68.0

 

66.7

Surety

 

 

7.7

 

 

9.4

 

Surety

 

76.7

 

68.8

Total

 

$

67.9

 

$

59.5

 

Total

 

77.9

 

77.9

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 51.5% to $27.1 million, compared to the same period in 2022. The investment portfolio’s total return was 2.8% for the quarter.

RLI’s comprehensive earnings were $136.5 million for the quarter ($2.97 per share), compared to $67.7 million ($1.48 per share) of comprehensive loss for the same quarter in 2022. In addition to net earnings, comprehensive earnings in 2023 included after-tax unrealized gains from the fixed income portfolio, due to declining interest rates.

Dividends Paid in First Quarter of 2023

On March 20, 2023, the company paid a regular quarterly dividend of $0.26 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $759 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

At 10 a.m. central daylight time (CDT) tomorrow, April 20, 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/964127485.

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 47 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

 

 

March 31,

(Dollars in millions, except per share amounts)

 

2023

 

2022

Favorable development in casualty prior years' reserves

 

$

35.9

 

 

$

27.8

 

Favorable development in property prior years' reserves

 

$

12.6

 

 

$

13.2

 

Favorable development in surety prior years' reserves

 

$

3.2

 

 

$

4.5

 

 

 

 

 

 

 

 

Net incurred losses related to:

 

 

 

 

 

 

2023 storms

 

$

(4.0

)

 

$

—

 

2022 and prior events

 

$

—

 

 

$

(2.0

)

 

 

 

 

 

 

 

 

 

Operating Earnings Per Share

 

 

Three Months Ended

 

 

March 31,

 

 

2023

 

2022

Operating Earnings Per Share(1) (2)

 

$

1.63

 

 

$

1.32

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Net favorable development in casualty prior years' reserves

 

$

0.53

 

 

$

0.41

 

Net favorable development in property prior years' reserves

 

$

0.19

 

 

$

0.21

 

Net favorable development in surety prior years' reserves

 

$

0.04

 

 

$

0.06

 

 

 

 

 

 

 

 

Net incurred losses related to:

 

 

 

 

 

 

2023 storms

 

$

(0.06

)

 

$

—

 

2022 and prior events

 

$

—

 

 

$

(0.03

)

(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 March 31,

 

SUMMARIZED INCOME STATEMENT DATA:

 

2023

 

2022

 

 

% Change

 

Net premiums earned

 

$

307,723

 

 

$

269,152

 

 

 

14.3

 

%

Net investment income

 

 

27,084

 

 

 

17,883

 

 

 

51.5

 

%

Net realized gains

 

 

14,620

 

 

 

5,588

 

 

 

161.6

 

%

Net unrealized gains (losses) on equity securities

 

 

15,496

 

 

 

(27,810

)

 

 

NM

 

 

Consolidated revenue

 

$

364,923

 

 

$

264,813

 

 

 

37.8

 

%

Loss and settlement expenses

 

 

114,488

 

 

 

105,524

 

 

 

8.5

 

%

Policy acquisition costs

 

 

101,444

 

 

 

85,287

 

 

 

18.9

 

%

Insurance operating expenses

 

 

23,901

 

 

 

18,863

 

 

 

26.7

 

%

Interest expense on debt

 

 

2,008

 

 

 

2,010

 

 

 

(0.1

)

%

General corporate expenses

 

 

4,214

 

 

 

3,363

 

 

 

25.3

 

%

Total expenses

 

$

246,055

 

 

$

215,047

 

 

 

14.4

 

%

Equity in earnings of unconsolidated investees

 

 

3,923

 

 

 

8,759

 

 

 

(55.2

)

%

Earnings before income taxes

 

$

122,791

 

 

$

58,525

 

 

 

109.8

 

%

Income tax expense

 

 

23,980

 

 

 

10,602

 

 

 

126.2

 

%

Net earnings

 

$

98,811

 

 

$

47,923

 

 

 

106.2

 

%

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings (loss), net of tax

 

 

37,707

 

 

 

(115,581

)

 

 

NM

 

 

Comprehensive earnings (loss)

 

$

136,518

 

 

$

(67,658

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings(1):

 

 

 

 

 

 

 

 

 

 

Net earnings

 

$

98,811

 

 

$

47,923

 

 

 

106.2

 

%

Less:

 

 

 

 

 

 

 

 

 

 

Net realized gains

 

 

(14,620

)

 

 

(5,588

)

 

 

161.6

 

%

Income tax on realized gains

 

 

3,071

 

 

 

1,173

 

 

 

161.8

 

%

Net unrealized (gains) losses on equity securities

 

 

(15,496

)

 

 

27,810

 

 

 

NM

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

3,254

 

 

 

(5,840

)

 

 

NM

 

 

Equity in earnings of Maui Jim

 

 

—

 

 

 

(6,367

)

 

 

(100.0

)

%

Income tax on equity in earnings of Maui Jim

 

 

—

 

 

 

1,337

 

 

 

(100.0

)

%

Operating earnings(2)

 

$

75,020

 

 

$

60,448

 

 

 

24.1

 

%

 

 

 

 

 

 

 

 

 

 

 

Return on Equity:

 

 

 

 

 

 

 

 

 

 

Net earnings (trailing four quarters)

 

 

52.2

 

%

 

21.1

 

%

 

 

 

Comprehensive earnings (trailing four quarters)

 

 

41.9

 

%

 

10.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in 000's)

 

 

46,035

 

 

 

45,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share(2)

 

$

2.15

 

 

$

1.05

 

 

 

104.8

 

%

Less:

 

 

 

 

 

 

 

 

 

 

Net realized gains

 

 

(0.32

)

 

 

(0.12

)

 

 

166.7

 

%

Income tax on realized gains

 

 

0.07

 

 

 

0.03

 

 

 

133.3

 

%

Net unrealized (gains) losses on equity securities

 

 

(0.34

)

 

 

0.60

 

 

 

NM

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

0.07

 

 

 

(0.13

)

 

 

NM

 

 

Equity in earnings of Maui Jim

 

 

—

 

 

 

(0.14

)

 

 

(100.0

)

%

Income tax on equity in earnings of Maui Jim

 

 

—

 

 

 

0.03

 

 

 

(100.0

)

%

Operating earnings per share(1)(2)

 

$

1.63

 

 

$

1.32

 

 

 

23.5

 

%

 

 

 

 

 

 

 

 

 

 

 

Comprehensive earnings (loss) per share

 

$

2.97

 

 

$

(1.48

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share - ordinary

 

$

0.26

 

 

$

0.25

 

 

 

4.0

 

%

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flow provided by Operations

 

$

69,219

 

 

$

39,014

 

 

 

77.4

 

%

(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)

 

 

 

March 31,

 

December 31,

 

 

 

 

 

2023

 

2022

 

% Change

 

SUMMARIZED BALANCE SHEET DATA:

 

 

 

 

 

 

 

 

 

Fixed income, at fair value

 

$

2,701,814

 

$

2,666,950

 

1.3

 

%

(amortized cost - $2,933,313 at 3/31/23)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Equity securities, at fair value

 

 

519,097

 

 

498,382

 

4.2

 

%

(cost - $333,229 at 3/31/23)

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

116,202

 

 

36,229

 

220.7

 

%

Other invested assets

 

 

64,134

 

 

47,922

 

33.8

 

%

Cash and cash equivalents

 

 

22,769

 

 

22,818

 

(0.2

)

%

Total investments and cash

 

$

3,424,016

 

$

3,272,301

 

4.6

 

%

 

 

 

 

 

 

 

 

 

 

Accrued investment income

 

 

21,118

 

 

21,259

 

(0.7

)

%

Premiums and reinsurance balances receivable

 

 

206,445

 

 

189,501

 

8.9

 

%

Ceded unearned premiums

 

 

119,975

 

 

138,457

 

(13.3

)

%

Reinsurance balances recoverable on unpaid losses

 

 

699,915

 

 

740,089

 

(5.4

)

%

Deferred policy acquisition costs

 

 

134,995

 

 

127,859

 

5.6

 

%

Property and equipment

 

 

48,949

 

 

49,573

 

(1.3

)

%

Investment in unconsolidated investees

 

 

52,398

 

 

58,275

 

(10.1

)

%

Goodwill and intangibles

 

 

53,562

 

 

53,562

 

0.0

 

%

Income taxes - deferred

 

 

27,571

 

 

40,269

 

(31.5

)

%

Other assets

 

 

47,275

 

 

75,923

 

(37.7

)

%

Total assets

 

$

4,836,219

 

$

4,767,068

 

1.5

 

%

 

 

 

 

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

2,286,063

 

$

2,315,637

 

(1.3

)

%

Unearned premiums

 

 

801,465

 

 

785,085

 

2.1

 

%

Reinsurance balances payable

 

 

28,091

 

 

61,100

 

(54.0

)

%

Funds held

 

 

102,797

 

 

101,144

 

1.6

 

%

Income taxes - current

 

 

15,802

 

 

—

 

NM

 

 

Current portion of long-term debt

 

 

199,910

 

 

199,863

 

0.0

 

%

Accrued expenses

 

 

57,480

 

 

94,869

 

(39.4

)

%

Other liabilities

 

 

40,690

 

 

32,029

 

27.0

 

%

Total liabilities

 

$

3,532,298

 

$

3,589,727

 

(1.6

)

%

Shareholders' equity

 

 

1,303,921

 

 

1,177,341

 

10.8

 

%

Total liabilities & shareholders' equity

 

$

4,836,219

 

$

4,767,068

 

1.5

 

%

 

 

 

 

 

 

 

 

 

 

OTHER DATA:

 

 

 

 

 

 

 

 

 

Common shares outstanding (in 000's)

 

 

45,555

 

 

45,470

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

28.62

 

$

25.89

 

10.5

 

%

Closing stock price per share

 

$

132.91

 

$

131.27

 

1.2

 

%

 

 

 

 

 

 

 

 

 

 

Statutory surplus

 

$

1,488,706

 

$

1,437,324

 

3.6

 

%

RLI CORP

2023 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

 

Three Months Ended March 31,

 

 

 

 

 

GAAP

 

 

 

 

GAAP

 

 

 

 

GAAP

 

 

 

 

GAAP

 

 

 

Casualty

 

Ratios

 

Property

 

Ratios

 

Surety

 

Ratios

 

Total

 

Ratios

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

217,834

 

 

 

$

158,846

 

 

 

$

38,332

 

 

 

$

415,012

 

 

 

Net premiums written

 

 

181,201

 

 

 

 

124,866

 

 

 

 

36,518

 

 

 

 

342,585

 

 

 

Net premiums earned

 

 

186,031

 

 

 

 

88,767

 

 

 

 

32,925

 

 

 

 

307,723

 

 

 

Net loss & settlement expenses

 

 

84,688

 

45.5

%

 

26,437

 

29.8

%

 

3,363

 

10.2

%

 

114,488

 

37.2

%

Net operating expenses

 

 

69,512

 

37.4

%

 

33,947

 

38.2

%

 

21,886

 

66.5

%

 

125,345

 

40.7

%

Underwriting income(1)

 

$

31,831

 

82.9

%

$

28,383

 

68.0

%

$

7,676

 

76.7

%

$

67,890

 

77.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

215,821

 

 

 

$

109,598

 

 

 

$

33,740

 

 

 

$

359,159

 

 

 

Net premiums written

 

 

175,613

 

 

 

 

81,995

 

 

 

 

32,282

 

 

 

 

289,890

 

 

 

Net premiums earned

 

 

171,756

 

 

 

 

67,440

 

 

 

 

29,956

 

 

 

 

269,152

 

 

 

Net loss & settlement expenses

 

 

83,849

 

48.8

%

 

20,363

 

30.2

%

 

1,312

 

4.4

%

 

105,524

 

39.2

%

Net operating expenses

 

 

60,260

 

35.1

%

 

24,601

 

36.5

%

 

19,289

 

64.4

%

 

104,150

 

38.7

%

Underwriting income(1)

 

$

27,647

 

83.9

%

$

22,476

 

66.7

%

$

9,355

 

68.8

%

$

59,478

 

77.9

%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

src="https://cts.businesswire.com/ct/CT?id=bwnewssty=20230419005781r1sid=acqr8distro=nxlang=en" style="width:0;height:0" />

Aaron Diefenthaler
Chief Investment Officer Treasurer

309-693-5846

[email protected]

Source: RLI Corp.

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