RLI Reports Fourth Quarter and Year-End 2021 Results

PEORIA, Ill.--(BUSINESS WIRE)--
RLI Corp. (NYSE: RLI) – RLI Corp. reported fourth quarter 2021 net earnings of $95.3 million ($2.08 per share), compared to $83.8 million ($1.84 per share) for the fourth quarter of 2020. Operating earnings⁽¹⁾ for the fourth quarter of 2021 were $57.7 million ($1.26 per share), compared to $34.0 million ($0.75 per share) for the same period in 2020.

	Fourth Quarter				Year to Date
Earnings Per Diluted Share	2021		2020		2021		2020
Net earnings	$	2.08	$	1.84	$	6.11	$	3.46
Operating earnings ⁽¹⁾	$	1.26	$	0.75	$	3.87	$	2.59

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

Highlights for the quarter included:

Underwriting income⁽¹⁾ of $49.7 million on a combined ratio⁽¹⁾ of 80.7.
12% increase in gross premiums written.
Favorable development in prior years’ loss reserves, resulting in a $24.2 million net increase in underwriting income.
Special dividend of $2.00 per share, representing $90.6 million returned to shareholders.

Highlights for the year included:

Underwriting income⁽¹⁾ of $129.9 million on a combined ratio⁽¹⁾ of 86.8.
19% increase in gross premiums written.
Favorable development in prior years’ loss reserves, resulting in a $106.5 million net increase in underwriting income.
26^th consecutive year of underwriting profit⁽¹⁾.
Book value per share of $27.14, an increase of 20% (inclusive of dividends) from year-end 2020.

“We are pleased to report excellent fourth quarter and year-end results,” said RLI Corp. President & CEO Craig Kliethermes. “Our focus on organic growth resulted in a 19% increase in gross premium and an 87 combined ratio for the year. For the quarter, light catastrophe activity and favorable reserve development drove positive underwriting results, and we benefitted from solid investment returns. In 2021, we achieved our 26th consecutive year of underwriting profit, and shared our success in the form of a $2 special dividend. The total capital returned to shareholders now exceeds $1.1 billion over the last ten years, a testament to our consistent financial performance.”

“Our accomplishments are a direct result of our underwriting discipline and the dedication of our talented employee owners. We believe our people and culture have been foundational to our success and will continue to play an important role in the long-term sustainability of our company. I want to thank our Chairman, Jon Michael, for his outstanding leadership as CEO of our organization over the past 20 years. It has been an honor to work with him, and I am humbled to carry on the vision and legacy of RLI’s founder, Jerry Stephens.”

Underwriting Income

RLI achieved $49.7 million of underwriting income in the fourth quarter of 2021 on an 80.7 combined ratio, compared to $27.0 million on an 88.0 combined ratio in 2020.

For the year, RLI achieved $129.9 million of underwriting income on an 86.8 combined ratio, compared to $69.6 million on a 92.0 combined ratio in 2020. Results for both years include favorable development in prior years’ loss reserves, which resulted in a $106.5 million and $84.0 million net increase to underwriting income for 2021 and 2020, respectively. The favorable development in 2021 was partially offset by a $50.2 million net reduction to underwriting income for hurricane and storm losses, compared to $49.3 million in 2020.

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

Underwriting Income (Loss)⁽¹⁾						Combined Ratio⁽¹⁾
(in millions)	2021		2020				2021		2020
Casualty	$	95.5	$	44.4		Casualty		84.9		92.2
Property		11.3		(3.2	)	Property		95.1		101.7
Surety		23.1		28.4		Surety		80.0		74.8
Total	$	129.9	$	69.6		Total		86.8		92.0

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

Other Income

Net investment income for the quarter increased 7.7% to $17.9 million, compared to the same period in 2020. For the year ended December 31, 2021, net investment income was $68.9 million, compared to $67.9 million for the same period in 2020. The investment portfolio’s total return was 1.5% for the quarter and 4.7% for the year.

RLI’s comprehensive earnings were $78.2 million for the quarter ($1.71 per share), compared to $89.9 million ($1.97 per share) for the same quarter in 2020. Full-year comprehensive earnings were $220.5 million ($4.82 per share), compared to $213.3 million ($4.70 per share) in 2021. In addition to net earnings, comprehensive earnings (loss) included after-tax unrealized gains/(losses) from the fixed income portfolio.

Equity in earnings of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was $3.1 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $5.3 million. Comparatively, for the fourth quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was ($1.1) million and $3.1 million, respectively. For the year ended December 31, 2021, equity in earnings of unconsolidated investees was $22.8 million from Maui Jim and $17.0 million from Prime, compared to $10.4 million and $10.8 million, respectively, for the prior year.

Special and Regular Dividends

On December 20, 2021, the company paid a special cash dividend of $2.00 per share and a regular quarterly dividend of $0.25 per share for a combined total of $101.9 million. RLI has paid dividends for 182 consecutive quarters and increased regular dividends in each of the last 46 years. Over the last 10 years, the company has returned $1.13 billion to shareholders and the regular quarterly dividend has grown an average of 5.2% per year.

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 2021 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

During the fourth quarter, the company’s A+ (Superior) financial strength rating was affirmed by AM Best Company for the company’s insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company.

At 10 a.m. central standard time (CST) tomorrow, January 27, 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/214990165.

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, 2020.

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 46 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 December 31,					Year Ended December 31,
(Dollars in millions, except per share amounts)	2021		2020			2021			2020
Favorable development in casualty prior years' reserves	$	25.7	$	25.4		$	109.5		$	76.0
Favorable development in property prior years' reserves	$	-	$	0.6		$	8.4		$	5.8
Favorable development in surety prior years' reserves	$	3.2	$	1.9		$	5.8		$	12.9

Net incurred losses related to:
2021 storms	$	-	$	-		$	(25.0	)	$	-
2021 hurricanes	$	-	$	-		$	(34.0	)	$	-
2020 and prior events⁽⁴⁾	$	-	$	(18.0	)	$	2.2		$	(73.1	)

	Operating Earnings Per Share
	Three Months Ended December 31,					Year Ended December 31,
	2021		2020			2021			2020
Operating Earnings Per Share⁽¹⁾	$	1.26	$	0.75		$	3.87		$	2.59

Specific items included in operating earnings per share:^{(2) (3)}
Net favorable development in casualty prior years' reserves	$	0.40	$	0.40		$	1.72		$	1.15
Net favorable development in property prior years' reserves	$	-	$	-		$	0.07		$	0.05
Net favorable development in surety prior years' reserves	$	0.02	$	0.02		$	0.03		$	0.19

Net incurred losses related to:
2021 storms	$	-	$	-		$	(0.37	)	$	-
2021 hurricanes	$	-	$	-		$	(0.50	)	$	-
2020 and prior events⁽⁴⁾	$	-	$	(0.26	)	$	0.03		$	(1.10	)

(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.
(4)	Includes COVID-19 reserves established in 2020.

RLI CORP 2021 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)

	Three Months Ended December 31,										Year Ended December 31,
SUMMARIZED INCOME STATEMENT DATA:		2021			2020		% Change					2021				2020			% Change
Net premiums earned	$	257,919		$	224,801			14.7		%	$	980,903			$	865,747				13.3	%
Net investment income		17,933			16,655			7.7		%		68,862				67,893				1.4	%
Net realized gains		11,780			3,330		NM					64,222				17,885			NM
Net unrealized gains on equity securities		35,732			59,665			(40.1	)	%		65,258				32,101				103.3	%
Consolidated revenue	$	323,364		$	304,451			6.2		%	$	1,179,245			$	983,626				19.9	%
Loss and settlement expenses		101,028			103,065			(2.0	)	%		456,602				442,884				3.1	%
Policy acquisition costs		84,794			73,002			16.2		%		317,468				286,438				10.8	%
Insurance operating expenses		22,403			21,691			3.3		%		76,907				66,828				15.1	%
Interest expense on debt		1,966			1,902			3.4		%		7,677				7,603				1.0	%
General corporate expenses		3,797			3,848			(1.3	)	%		13,330				10,265				29.9	%
Total expenses	$	213,988		$	203,508			5.1		%	$	871,984			$	814,018				7.1	%
Equity in earnings of unconsolidated investees		7,653			1,874		NM					37,060				20,233				83.2	%
Earnings before income taxes	$	117,029		$	102,817			13.8		%	$	344,321			$	189,841				81.4	%
Income tax expense		21,745			19,012			14.4		%		64,967				32,750				98.4	%
Net earnings	$	95,284		$	83,805			13.7		%	$	279,354			$	157,091				77.8	%

Other comprehensive earnings (loss), net of tax		(17,078	)		6,129		NM					(58,888	)			56,219			NM
Comprehensive earnings	$	78,206		$	89,934			(13.0	)	%	$	220,466			$	213,310				3.4	%

Operating earnings⁽¹⁾:
Net earnings	$	95,284		$	83,805			13.7		%	$	279,354			$	157,091				77.8	%
Less:
Realized gains		(11,780	)		(3,330	)	NM					(64,222	)			(17,885	)		NM
Income tax on realized gains		2,474			699		NM					13,487				3,756			NM
Unrealized gains on equity securities		(35,732	)		(59,665	)		(40.1	)	%		(65,258	)			(32,101	)			103.3	%
Income tax on unrealized gains on equity securities		7,503			12,531			(40.1	)	%		13,703				6,741				103.3	%
Operating earnings	$	57,749		$	34,040			69.7		%	$	177,064			$	117,602				50.6	%

Return on Equity:
Net earnings											23.2			%		15.1		%
Comprehensive earnings											18.3			%		20.5		%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		45,730			45,565							45,712				45,376

Net earnings per share	$	2.08		$	1.84			13.0		%	$	6.11			$	3.46				76.6	%
Less:
Realized gains		(0.26	)		(0.07	)	NM					(1.40	)			(0.39	)		NM
Income tax on realized gains		0.05			0.02			150.0		%		0.30				0.08			NM
Unrealized gains on equity securities		(0.77	)		(1.32	)		(41.7	)	%		(1.44	)			(0.71	)			102.8	%
Income tax on unrealized gains on equity securities		0.16			0.28			(42.9	)	%		0.30				0.15				100.0	%
EPS from operations⁽¹⁾	$	1.26		$	0.75			68.0		%	$	3.87			$	2.59				49.4	%

Comprehensive earnings per share	$	1.71		$	1.97			(13.2	)	%	$	4.82			$	4.70				2.6	%

Cash dividends per share - ordinary	$	0.25		$	0.24			4.2		%	$	0.99			$	0.95				4.2	%
Cash dividends per share - special	$	2.00		$	1.00			100.0		%	$	2.00			$	1.00				100.0	%


Net Cash Flow provided by Operations	$	104,464		$	100,015			4.4		%	$	384,905			$	263,259				46.2	%

(1) See discussion above: Non-GAAP and Performance Measures. NM = Not Meaningful

RLI CORP 2021 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)

	December 31,		December 31,
	2021		2020		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	2,409,887	$	2,196,626		9.7		%
(amortized cost - $2,346,267 at 12/31/21)
(amortized cost - $2,061,467 at 12/31/20)
Equity securities, at fair value		613,776		524,006		17.1		%
(cost - $324,501 at 12/31/21)
(cost - $293,190 at 12/31/20)
Other invested assets		50,501		54,232		(6.9	)	%
Cash and cash equivalents		88,804		62,217		42.7		%
Total investments and cash	$	3,162,968	$	2,837,081		11.5		%

Premiums and reinsurance balances receivable		167,279		174,628		(4.2	)	%
Ceded unearned premiums		130,916		113,488		15.4		%
Reinsurance balances recoverable on unpaid losses		608,086		443,729		37.0		%
Deferred policy acquisition costs		103,553		88,425		17.1		%
Property and equipment		52,161		51,406		1.5		%
Investment in unconsolidated investees		171,311		128,382		33.4		%
Goodwill and intangibles		53,562		53,719		(0.3	)	%
Other assets		58,466		47,627		22.8		%
Total assets	$	4,508,302	$	3,938,485		14.5		%

Unpaid losses and settlement expenses	$	2,043,555	$	1,750,049		16.8		%
Unearned premiums		680,444		586,386		16.0		%
Reinsurance balances payable		42,851		42,265		1.4		%
Funds held		89,773		81,747		9.8		%
Income taxes - deferred		83,509		80,235		4.1		%
Long-term debt		199,676		149,489		33.6		%
Accrued expenses		98,274		75,925		29.4		%
Other liabilities		40,859		36,411		12.2		%
Total liabilities	$	3,278,941	$	2,802,507		17.0		%
Shareholders' equity		1,229,361		1,135,978		8.2		%
Total liabilities & shareholders' equity	$	4,508,302	$	3,938,485		14.5		%

OTHER DATA:
Common shares outstanding (in 000's)		45,289		45,143

Book value per share	$	27.14	$	25.16		7.9		%
Closing stock price per share	$	112.10	$	104.15		7.6		%

Statutory surplus	$	1,240,649	$	1,121,592		10.6		%

RLI CORP 2021 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
2021

Gross premiums written	$	213,563				$	91,270					$	32,396					$	337,229
Net premiums written		163,796					68,443						29,166						261,405
Net premiums earned		165,822					63,444						28,653						257,919
Net loss & settlement expenses		82,820		49.9	%		18,281			28.8	%		(73	)		-0.3	%		101,028		39.2	%
Net operating expenses		61,737		37.3	%		25,179			39.7	%		20,281			70.8	%		107,197		41.5	%
Underwriting income (loss)⁽¹⁾	$	21,265		87.2	%	$	19,984			68.5	%	$	8,445			70.5	%	$	49,694		80.7	%

2020

Gross premiums written	$	196,118				$	74,227					$	30,239					$	300,584
Net premiums written		146,623					54,718						28,506						229,847
Net premiums earned		147,884					48,605						28,312						224,801
Net loss & settlement expenses		72,107		48.8	%		26,961			55.5	%		3,997			14.1	%		103,065		45.8	%
Net operating expenses		53,753		36.3	%		20,950			43.1	%		19,990			70.6	%		94,693		42.2	%
Underwriting income (loss)⁽¹⁾	$	22,024		85.1	%	$	694			98.6	%	$	4,325			84.7	%	$	27,043		88.0	%

Twelve Months Ended December 31,
			GAAP						GAAP						GAAP					GAAP
	Casualty		Ratios			Property			Ratios			Surety			Ratios			Total		Ratios
2021

Gross premiums written	$	871,584				$	347,866					$	127,904					$	1,347,354
Net premiums written		674,709					262,816						120,008						1,057,533
Net premiums earned		633,639					231,837						115,427						980,903
Net loss & settlement expenses		311,627		49.2	%		129,924			56.0	%		15,051			13.0	%		456,602		46.5	%
Net operating expenses		226,493		35.7	%		90,613			39.1	%		77,269			67.0	%		394,375		40.3	%
Underwriting income (loss)⁽¹⁾	$	95,519		84.9	%	$	11,300			95.1	%	$	23,107			80.0	%	$	129,926		86.8	%

2020

Gross premiums written	$	749,409				$	268,769					$	118,254					$	1,136,432
Net premiums written		583,244					196,603						112,241						892,088
Net premiums earned		569,521					183,720						112,506						865,747
Net loss & settlement expenses		322,099		56.6	%		111,356			60.6	%		9,429			8.4	%		442,884		51.2	%
Net operating expenses		202,995		35.6	%		75,546			41.1	%		74,725			66.4	%		353,266		40.8	%
Underwriting income (loss)⁽¹⁾	$	44,427		92.2	%	$	(3,182	)		101.7	%	$	28,352			74.8	%	$	69,597		92.0	%

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

Category: Earnings Release

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Aaron Diefenthaler
Vice President, Chief Investment Officer Treasurer

309-693-5846

[email protected]

Source: RLI Corp.

RLI Reports Fourth Quarter and Year-End 2021 Results

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