RLI - RLI Reports Third Quarter 2023 Results

October, 23 2023 04:10 PM RLI Corp.

RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2023 net earnings of $13.5 million ($0.29 per share), compared to $439.9 million ($9.61 per share) for the third quarter of 2022, which included $437.7 million from the sale of RLI’s investment in Maui Jim, Inc.

Operating earnings ⁽¹⁾⁽²⁾ for the third quarter of 2023 were $28.3 million ($0.61 per share), compared to $23.0 million ($0.50 per share) for the same period in 2022.
















Third Quarter

Year to Date
Earnings Per Diluted Share

2023

2022

2023

2022
Net earnings

$
0.29

$
9.61

$
4.12

$
10.61
Operating earnings ^{(1) (2)}

$
0.61

$
0.50

$
3.40

$
3.15

(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 $4.2 million on a combined ratio ⁽¹⁾ of 98.7.
11% increase in gross premiums written.
50% increase in net investment income.
Favorable development in prior years’ loss reserves, resulting in a $19.8 million net increase in underwriting income.
Losses from Hawaiian wildfires, resulting in a $58.2 million net decrease in underwriting income.
Book value per share of $28.47, an increase of 13% (inclusive of dividends) from year-end 2022.

“We have been working diligently to help our policyholders recover from the devastating Hawaiian wildfires that occurred in the quarter,” said RLI Corp. President & CEO Craig Kliethermes. “This event contributed 17 points to our combined ratio. Despite this impact, our diversified portfolio delivered underwriting profitability and an 11% increase in gross premiums written. Growth in investment income supported $0.61 per share of operating income, while book value per share increased to $28.47. Recent catastrophes reinforce RLI’s purpose to protect and serve policyholders in times of need. I would like to thank our associate owners, and especially our claim and Hawaii-based teams, for providing unparalleled service to our insureds and agents.”

Underwriting Income

RLI achieved $4.2 million of underwriting income in the third quarter of 2023 on a 98.7 combined ratio, compared to $8.8 million on a 97.0 combined ratio in 2022.

Results for both years include favorable development in prior years’ loss reserves, which resulted in a $19.8 million and $29.0 million net increase to underwriting income for 2023 and 2022, respectively. The favorable development in 2023 was offset by a $58.2 million net reduction to underwriting income for Hawaiian wildfire losses, compared to $34.8 million of hurricane losses in 2022.

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














Underwriting Income (Loss) ⁽¹⁾







Combined Ratio ⁽¹⁾




(in millions)

2023

2022



2023

2022
Casualty

$
18.7


$
11.3


Casualty

90.1

93.7
Property


(20.7
)


(8.3
)

Property

121.8

110.3
Surety


6.2



5.8


Surety

81.7

81.4
Total

$
4.2


$
8.8


Total

98.7

97.0

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 50.3% to $32.0 million, compared to the same period in 2022. The investment portfolio’s total return was -1.7% for the quarter and 2.2% for the nine months ended September 30, 2023.

RLI’s comprehensive loss was $43.3 million for the quarter (-$0.94 per share), compared to comprehensive earnings of $358.6 million ($7.84 per share) for the same quarter in 2022. In addition to net earnings, comprehensive loss included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates. Comprehensive earnings for 2022 were elevated from the sale of RLI’s investment in Maui Jim.

Dividends Paid in Third Quarter of 2023

On September 20, 2023, the company paid a regular quarterly dividend of $0.27 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $764 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, October 24, 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/461007055 .

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

Nine Months Ended


September 30,

September 30,
(Dollars in millions, except per share amounts)

2023

2022

2023

2022
Favorable development in casualty prior years' reserves

$
22.1


$
28.2


$
67.0


$
72.9

Favorable (unfavorable) development in property prior years' reserves

$
(1.9
)

$
3.3


$
14.3


$
20.8

Favorable development in surety prior years' reserves

$
0.8


$
1.8


$
8.2


$
9.3














Net incurred losses related to:












2023 storms

$
(5.0
)

$
—


$
(27.0
)

$
—

Hawaiian wildfires

$
(51.6
)

$
—


$
(51.6
)

$
—

2022 and prior events

$
1.4


$
(40.0
)

$
4.5


$
(45.0
)
Reinstatement premium from Hawaiian wildfires

$
(14.4
)

$
—


$
(14.4
)

$
—
















Operating Earnings Per Share


Three Months Ended

Nine Months Ended


September 30,

September 30,


2023

2022

2023

2022
Operating Earnings Per Share ^{(1) (2)}

$
0.61


$
0.50


$
3.40


$
3.15














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












Net favorable development in casualty prior years' reserves

$
0.33


$
0.44


$
1.00


$
1.11

Net favorable (unfavorable) development in property prior years' reserves

$
(0.04
)

$
0.04


$
0.20


$
0.31

Net favorable development in surety prior years' reserves

$
0.01


$
0.02


$
0.12


$
0.13














Net incurred losses related to:












2023 storms

$
(0.07
)

$
—


$
(0.40
)

$
—

Hawaiian wildfires (incurred loss and reinstatement premium)

$
(0.97
)

$
—


$
(0.97
)

$
—

2022 and prior events

$
0.02


$
(0.60
)

$
0.06


$
(0.68
)

(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 September 30,


Nine Months Ended September 30,

SUMMARIZED INCOME STATEMENT DATA:

2023

2022

% Change


2023

2022


% Change

Net premiums earned

$
318,409


$
291,468


9.2

%

$
948,412


$
843,430



12.4

%
Net investment income


31,963



21,270


50.3

%


87,835



57,625



52.4

%
Net realized gains


6,558



573,170


(98.9
)
%


26,758



591,562



(95.5
)
%
Net unrealized gains (losses) on equity securities


(25,236
)


(26,414
)

(4.5
)
%


15,474



(155,218
)


NM


Consolidated revenue

$
331,694


$
859,494


(61.4
)
%

$
1,078,479


$
1,337,399



(19.4
)
%
Loss and settlement expenses


189,558



165,089


14.8

%


457,989



388,527



17.9

%
Policy acquisition costs


103,013



96,977


6.2

%


307,083



271,879



12.9

%
Insurance operating expenses


21,591



20,606


4.8

%


70,002



58,794



19.1

%
Interest expense on debt


1,873



2,013


(7.0
)
%


5,928



6,034



(1.8
)
%
General corporate expenses


2,372



2,755


(13.9
)
%


10,805



8,553



26.3

%
Total expenses

$
318,407


$
287,440


10.8

%

$
851,807


$
733,787



16.1

%
Equity in earnings (loss) of unconsolidated investees


1,732



(17,352
)

NM




7,169



3,061



134.2

%
Earnings before income taxes

$
15,019


$
554,702


(97.3
)
%

$
233,841


$
606,673



(61.5
)
%
Income tax expense


1,483



114,809


(98.7
)
%


43,842



121,096



(63.8
)
%
Net earnings

$
13,536


$
439,893


(96.9
)
%

$
189,999


$
485,577



(60.9
)
%




















Other comprehensive earnings (loss), net of tax


(56,834
)


(81,248
)

(30.0
)
%


(38,848
)


(294,392
)


(86.8
)
%
Comprehensive earnings (loss)

$
(43,298
)

$
358,645


NM



$
151,151


$
191,185



(20.9
)
%




















Operating earnings ⁽¹⁾ :



















Net earnings

$
13,536


$
439,893


(96.9
)
%

$
189,999


$
485,577



(60.9
)
%
Less:



















Net realized gains


(6,558
)


(573,170
)

(98.9
)
%


(26,758
)


(591,562
)


(95.5
)
%
Income tax on realized gains


1,377



121,199


(98.9
)
%


5,619



125,061



(95.5
)
%
Net unrealized (gains) losses on equity securities


25,236



26,414


(4.5
)
%


(15,474
)


155,218



NM


Income tax on unrealized gains (losses) on equity securities


(5,299
)


(5,547
)

(4.5
)
%


3,250



(32,596
)


NM


Equity in earnings of Maui Jim


—



17,993


(100.0
)
%


—



3,121



(100.0
)
%
Income tax on equity in earnings of Maui Jim


—



(3,778
)

(100.0
)
%


—



(655
)


(100.0
)
%
Operating earnings ⁽²⁾

$
28,292


$
23,004


23.0

%

$
156,636


$
144,164



8.7

%




















Return on Equity:



















Net earnings (trailing four quarters)











22.1

%

47.8

%



Comprehensive earnings (trailing four quarters)











20.3

%

22.2

%























Per Share Data:



















Diluted:



















Weighted average shares outstanding (in 000's)


46,065



45,775






46,067



45,775

























Net earnings per share ⁽²⁾

$
0.29


$
9.61


(97.0
)
%

$
4.12


$
10.61



(61.2
)
%
Less:



















Net realized gains


(0.14
)


(12.53
)

(98.9
)
%


(0.58
)


(12.93
)


(95.5
)
%
Income tax on realized gains


0.03



2.65


(98.9
)
%


0.13



2.73



(95.2
)
%
Net unrealized (gains) losses on equity securities


0.55



0.58


(5.2
)
%


(0.34
)


3.39



NM


Income tax on unrealized gains (losses) on equity securities


(0.12
)


(0.12
)

—

%


0.07



(0.71
)


NM


Equity in earnings of Maui Jim


—



0.39


(100.0
)
%


—



0.07



(100.0
)
%
Income tax on equity in earnings of Maui Jim


—



(0.08
)

(100.0
)
%


—



(0.01
)


(100.0
)
%
Operating earnings per share ⁽¹⁾ ⁽²⁾

$
0.61


$
0.50


22.0

%

$
3.40


$
3.15



7.9

%




















Comprehensive earnings (loss) per share

$
(0.94
)

$
7.84


NM



$
3.28


$
4.18



(21.5
)
%




















Cash dividends per share - ordinary

$
0.27


$
0.26


3.8

%

$
0.80


$
0.77



3.9

%




















Net Cash Flow provided by Operations

$
85,030


$
112,241


(24.2
)
%

$
328,625


$
282,886



16.2

%

(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)












September 30,

December 31,





2023

2022

% Change

SUMMARIZED BALANCE SHEET DATA:









Fixed income, at fair value

$
2,717,627

$
2,666,950

1.9

%
(amortized cost - $3,046,785 at 9/30/23)









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









Equity securities, at fair value


534,436


498,382

7.2

%
(cost - $347,772 at 9/30/23)









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









Short-term investments


125,032


36,229

245.1

%
Other invested assets


59,730


47,922

24.6

%
Cash and cash equivalents


18,445


22,818

(19.2
)
%
Total investments and cash

$
3,455,270

$
3,272,301

5.6

%










Accrued investment income


25,328


21,259

19.1

%
Premiums and reinsurance balances receivable


225,821


189,501

19.2

%
Ceded unearned premiums


111,072


138,457

(19.8
)
%
Reinsurance balances recoverable on unpaid losses


820,954


740,089

10.9

%
Deferred policy acquisition costs


150,666


127,859

17.8

%
Property and equipment


48,596


49,573

(2.0
)
%
Investment in unconsolidated investees


56,110


58,275

(3.7
)
%
Goodwill and intangibles


53,562


53,562

0.0

%
Income taxes - deferred


51,403


40,269

27.6

%
Other assets


84,744


75,923

11.6

%
Total assets

$
5,083,526

$
4,767,068

6.6

%










Unpaid losses and settlement expenses

$
2,488,695

$
2,315,637

7.5

%
Unearned premiums


906,139


785,085

15.4

%
Reinsurance balances payable


56,570


61,100

(7.4
)
%
Funds held


103,424


101,144

2.3

%
Income taxes - current


5,546


—

NM


Debt


100,000


199,863

(50.0
)
%
Accrued expenses


85,640


94,869

(9.7
)
%
Other liabilities


38,421


32,029

20.0

%
Total liabilities

$
3,784,435

$
3,589,727

5.4

%
Shareholders' equity


1,299,091


1,177,341

10.3

%
Total liabilities & shareholders' equity

$
5,083,526

$
4,767,068

6.6

%










OTHER DATA:









Common shares outstanding (in 000's)


45,626


45,470













Book value per share

$
28.47

$
25.89

10.0

%
Closing stock price per share

$
135.89

$
131.27

3.5

%










Statutory surplus

$
1,509,538

$
1,437,324

5.0

%

RLI CORP 2023 FINANCIAL HIGHLIGHTS UNDERWRITING SEGMENT DATA (Unaudited) (Dollars in thousands, except per share amounts)






















Three Months Ended September 30,


























GAAP




GAAP




GAAP




GAAP



Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2023











































Gross premiums written

$
254,307



$
158,590




$
36,427



$
449,324



Net premiums written


207,177




93,207





34,340




334,724



Net premiums earned


189,305




94,988





34,116




318,409



Net loss & settlement expenses


101,750

53.7
%

81,932


86.3
%

5,876

17.2
%

189,558

59.5
%
Net operating expenses


68,885

36.4
%

33,727


35.5
%

21,992

64.5
%

124,604

39.2
%
Underwriting income (loss) ⁽¹⁾

$
18,670

90.1
%
$
(20,671
)

121.8
%
$
6,248

81.7
%
$
4,247

98.7
%






















2022











































Gross premiums written

$
240,366



$
126,083




$
37,301



$
403,750



Net premiums written


192,615




90,961





35,256




318,832



Net premiums earned


179,615




80,844





31,009




291,468



Net loss & settlement expenses


100,714

56.1
%

59,347


73.4
%

5,028

16.2
%

165,089

56.6
%
Net operating expenses


67,572

37.6
%

29,805


36.9
%

20,206

65.2
%

117,583

40.4
%
Underwriting income (loss) ⁽¹⁾

$
11,329

93.7
%
$
(8,308
)

110.3
%
$
5,775

81.4
%
$
8,796

97.0
%























Nine Months Ended September 30,


























GAAP




GAAP




GAAP




GAAP



Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2023











































Gross premiums written

$
723,198



$
539,325



$
109,777



$
1,372,300



Net premiums written


597,356




395,903




103,591




1,096,850



Net premiums earned


562,384




285,596




100,432




948,412



Net loss & settlement expenses


296,633

52.7
%

149,508

52.3
%

11,848

11.8
%

457,989

48.3
%
Net operating expenses


208,273

37.1
%

102,499

35.9
%

66,313

66.0
%

377,085

39.7
%
Underwriting income (loss) ⁽¹⁾

$
57,478

89.8
%
$
33,589

88.2
%
$
22,271

77.8
%
$
113,338

88.0
%






















2022











































Gross premiums written

$
704,502



$
371,529



$
105,667



$
1,181,698



Net premiums written


569,475




273,312




100,254




943,041



Net premiums earned


528,494




222,974




91,962




843,430



Net loss & settlement expenses


278,813

52.8
%

100,187

44.9
%

9,527

10.4
%

388,527

46.1
%
Net operating expenses


189,263

35.8
%

82,514

37.0
%

58,896

64.0
%

330,673

39.2
%
Underwriting income (loss) ⁽¹⁾

$
60,418

88.6
%
$
40,273

81.9
%
$
23,539

74.4
%
$
124,230

85.3
%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20231023825218/en/

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

Company Name:	RLI Corp.
Stock Symbol:	RLI
Market:	NYSE
Website:	rlicorp.com

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