RLI Reports First Quarter 2021 Results

·12 min read

RLI Corp. (NYSE: RLI) – RLI Corp. reported first quarter 2021 net earnings of $73.0 million ($1.60 per share), compared to a net loss of $61.3 million (-$1.36 per share) for the first quarter of 2020. Operating earnings(1) for the first quarter of 2021 were $39.6 million ($0.87 per share), compared to $29.8 million ($0.66 per share) for the same period in 2020.

First Quarter

Earnings Per Diluted Share

2021

2020

Net earnings (loss)

$

1.60

$

(1.36

)

Operating earnings (1)

$

0.87

$

0.66

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

Highlights for the quarter included:

  • Underwriting income(1) of $29.9 million on a combined ratio(1) of 86.9.

  • Gross premiums written increased 20%, up 10% when adjusting for the return of premium to transportation customers impacted by the pandemic in 2020.

  • Net favorable development in prior years’ loss reserves, resulting in a $31.4 million net increase in underwriting income.

  • Losses from winter storms, resulting in a $13.6 million net decrease in underwriting income.

  • Book value per share of $25.55, an increase of 2% (inclusive of dividends) from year-end 2020.

"We are proud to report excellent first quarter results," said RLI Corp. Chairman and CEO Jonathan E. Michael. "Despite an active winter storm season, we achieved an 87 combined ratio while continuing to find growth opportunities across our portfolio. Premium volume was up over last year in all three segments, primarily driven by rate increases and expanded distribution. Looking ahead, we will continue to build on our 25 consecutive years of underwriting profitability and focus on growing book value, which is possible through the dedication of our employee owners."

Underwriting Income

RLI achieved $29.9 million of underwriting income in the first quarter of 2021 on an 86.9 combined ratio, compared to $17.2 million on a 92.0 combined ratio in 2020.

Results for both years include net favorable development in prior years’ loss reserves, which totaled $31.4 million and $12.9 million for 2021 and 2020, respectively.

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

Underwriting Income (Loss)(1)

Combined Ratio(1)

(in millions)

2021

2020

2021

2020

Casualty

$

24.9

$

(1.3

)

Casualty

83.3

100.9

Property

(1.0

)

9.9

Property

101.9

77.7

Surety

6.0

8.6

Surety

78.5

68.9

Total

$

29.9

$

17.2

Total

86.9

92.0

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

Other Income

Net investment income for the quarter decreased 7.6% to $16.4 million, compared to the same period in 2020. The investment portfolio’s total return was 0.2% for the quarter.

RLI’s comprehensive earnings were $28.3 million for the quarter ($0.62 per share), compared to a comprehensive loss of $74.3 million (-$1.65 per share) for the same quarter in 2020. 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., a producer of premium sunglasses, was $3.7 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $3.7 million. Comparatively, for the first quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was $2.6 million and $1.9 million, respectively.

Dividends Paid in the First Quarter of 2021

On March 19, 2021, the company paid a regular quarterly dividend of $0.24 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $495 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 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

At 10 a.m. central daylight time (CDT) tomorrow, April 22, 2021, 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/32ig7qpn.

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 45 consecutive years and delivered underwriting profits for 25 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 thousands, except per share amounts)

2021

2020

Net favorable development in casualty prior years' reserves

$

28.2

$

6.4

Net favorable development in property prior years' reserves

$

6.1

$

4.8

Net favorable development in surety prior years' reserves

$

2.8

$

4.0

Net incurred losses related to:

2021 storms

$

(16.0

)

$

-

2020 and prior events

$

-

$

(0.5

)

Operating Earnings Per Share

Three Months Ended March 31,

2021

2020

Operating Earnings Per Share(1)

$

0.87

$

0.66

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

Net favorable development in casualty prior years' reserves

$

0.44

$

0.12

Net favorable development in property prior years' reserves

$

0.08

$

0.05

Net favorable development in surety prior years' reserves

$

0.03

$

0.06

Net incurred losses related to:

2021 storms

$

(0.24

)

$

-

2020 and prior events

$

-

$

(0.01

)

(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.

RLI CORP

2021 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended March 31,

SUMMARIZED INCOME STATEMENT DATA:

2021

2020

% Change

Net premiums earned

$

228,595

$

215,582

6.0

%

Net investment income

16,424

17,778

(7.6

)

%

Net realized gains

14,150

15,152

(6.6

)

%

Net unrealized gains (losses) on equity securities

28,162

(130,395

)

NM

Consolidated revenue

$

287,331

$

118,117

143.3

%

Loss and settlement expenses

104,892

111,021

(5.5

)

%

Policy acquisition costs

74,990

72,941

2.8

%

Insurance operating expenses

18,796

14,381

30.7

%

Interest expense on debt

1,901

1,897

0.2

%

General corporate expenses

3,342

1,755

90.4

%

Total expenses

$

203,921

$

201,995

1.0

%

Equity in earnings of unconsolidated investees

6,424

4,514

42.3

%

Earnings (loss) before income taxes

$

89,834

$

(79,364

)

NM

Income tax expense (benefit)

16,822

(18,097

)

NM

Net earnings (loss)

$

73,012

$

(61,267

)

NM

Other comprehensive earnings (loss), net of tax

(44,747

)

(13,031

)

243.4

%

Comprehensive earnings (loss)

$

28,265

$

(74,298

)

NM

Operating earnings(1):

Net earnings (loss)

$

73,012

$

(61,267

)

NM

Less:

Realized gains

(14,150

)

(15,152

)

(6.6

)

%

Income tax on realized gains

2,972

3,182

(6.6

)

%

Unrealized (gains) losses on equity securities

(28,162

)

130,395

NM

Income tax on unrealized gains (losses) on equity securities

5,914

(27,383

)

NM

Operating earnings

$

39,586

$

29,775

33.0

%

Return on Equity:

Net earnings (trailing four quarters)

27.2

%

6.8

%

Comprehensive earnings (trailing four quarters)

29.5

%

9.4

%

Per Share Data:

Diluted:

Weighted average shares outstanding (in 000's)

45,674

44,920

Net earnings (loss) per share

$

1.60

$

(1.36

)

NM

Less:

Realized gains

(0.31

)

(0.34

)

(8.8

)

%

Income tax on realized gains

0.07

0.07

0.0

%

Unrealized (gains) losses on equity securities

(0.62

)

2.90

NM

Income tax on unrealized gains (losses) on equity securities

0.13

(0.61

)

NM

EPS from operations(1)

$

0.87

$

0.66

31.8

%

Comprehensive earnings (loss) per share

$

0.62

$

(1.65

)

NM

Cash dividends per share - ordinary

$

0.24

$

0.23

4.3

%

Net Cash Flow provided by (used in) Operations

$

60,287

$

(5,767

)

NM

(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)

March 31,

December 31,

2021

2020

% Change

SUMMARIZED BALANCE SHEET DATA:

Fixed income, at fair value

$

2,175,869

$

2,196,626

(0.9

)

%

(amortized cost - $2,096,852 at 3/31/21)

(amortized cost - $2,061,467 at 12/31/20)

Equity securities, at fair value

555,209

524,006

6.0

%

(cost - $298,926 at 3/31/21)

(cost - $293,190 at 12/31/20)

Other invested assets

50,413

54,232

(7.0

)

%

Cash and cash equivalents

94,935

62,217

52.6

%

Total investments and cash

$

2,876,426

$

2,837,081

1.4

%

Premiums and reinsurance balances receivable

149,736

174,628

(14.3

)

%

Ceded unearned premiums

111,071

113,488

(2.1

)

%

Reinsurance balances recoverable on unpaid losses

454,921

443,729

2.5

%

Deferred policy acquisition costs

92,595

88,425

4.7

%

Property and equipment

50,470

51,406

(1.8

)

%

Investment in unconsolidated investees

134,314

128,382

4.6

%

Goodwill and intangibles

53,617

53,719

(0.2

)

%

Other assets

49,290

47,627

3.5

%

Total assets

$

3,972,440

$

3,938,485

0.9

%

Unpaid losses and settlement expenses

$

1,795,275

$

1,750,049

2.6

%

Unearned premiums

590,364

586,386

0.7

%

Reinsurance balances payable

26,560

42,265

(37.2

)

%

Funds held

85,572

81,747

4.7

%

Income taxes - deferred

74,624

80,235

(7.0

)

%

Bonds payable, long-term debt

149,536

149,489

0.0

%

Accrued expenses

45,784

75,925

(39.7

)

%

Other liabilities

49,939

36,411

37.2

%

Total liabilities

$

2,817,654

$

2,802,507

0.5

%

Shareholders' equity

1,154,786

1,135,978

1.7

%

Total liabilities & shareholders' equity

$

3,972,440

$

3,938,485

0.9

%

OTHER DATA:

Common shares outstanding (in 000's)

45,203

45,143

Book value per share

$

25.55

$

25.16

1.6

%

Closing stock price per share

$

111.57

$

104.15

7.1

%

Statutory surplus

$

1,187,640

$

1,121,592

5.9

%

RLI CORP

2021 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

2021

Gross premiums written

$

188,896

$

74,537

$

31,462

$

294,895

Net premiums written

148,891

55,986

30,112

234,989

Net premiums earned

148,770

51,642

28,183

228,595

Net loss & settlement expenses

70,247

47.2

%

31,637

61.3

%

3,008

10.7

%

104,892

45.9

%

Net operating expenses

53,656

36.1

%

21,010

40.6

%

19,120

67.8

%

93,786

41.0

%

Underwriting income (loss)(1)

$

24,867

83.3

%

$

(1,005

)

101.9

%

$

6,055

78.5

%

$

29,917

86.9

%

2020

Gross premiums written

$

159,236

$

56,721

$

29,875

$

245,832

Net premiums written

127,177

41,427

28,499

197,103

Net premiums earned

143,420

44,348

27,814

215,582

Net loss & settlement expenses

94,265

65.7

%

15,971

36.0

%

785

2.8

%

111,021

51.5

%

Net operating expenses

50,478

35.2

%

18,469

41.7

%

18,375

66.1

%

87,322

40.5

%

Underwriting income (loss)(1)

$

(1,323

)

100.9

%

$

9,908

77.7

%

$

8,654

68.9

%

$

17,239

92.0

%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20210421005882/en/

Contacts

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