RLI Reports Fourth Quarter and Year-End 2021 Results

·10 min read

PEORIA, Ill., January 26, 2022--(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.

  • 26th 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

...

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting