RLI Reports Fourth Quarter and Year-End 2020 Results
RLI Corp. reported a strong performance for Q4 and full year 2020, with net earnings rising to $83.8 million ($1.84 per share) from $53.4 million ($1.18 per share) in Q4 2019. Operating earnings increased to $34 million ($0.75 per share). The company achieved $27 million in underwriting income with a combined ratio of 88.0. Book value per share rose 22% to $25.16, and a special dividend of $1.00 was paid to shareholders. Despite facing challenges, RLI marked its 25th consecutive year of underwriting profit, demonstrating resilience and effective strategy execution.
- Net earnings increased to $83.8 million in Q4 2020, up from $53.4 million in Q4 2019.
- Operating earnings rose to $34.0 million ($0.75 per share) from $28.6 million ($0.63 per share) year-over-year.
- Achieved 25th consecutive year of underwriting profit with an underwriting income of $69.6 million for 2020.
- Book value per share increased by 22% to $25.16 from year-end 2019.
- Paid a special dividend of $1.00 per share, returning $45.1 million to shareholders.
- Net investment income decreased by 6.3% to $16.7 million in Q4 2020 compared to the same quarter in 2019.
- Total comprehensive earnings for the year fell to $213.3 million ($4.70 per share) from $258.7 million ($5.72 per share) in 2019.
RLI Corp. (NYSE: RLI) – RLI Corp. reported fourth quarter 2020 net earnings of
|
Fourth Quarter |
|
Year to Date |
||||||||
Earnings Per Diluted Share |
2020 |
|
2019 |
|
2020 |
|
2019 |
||||
Net earnings |
$ |
1.84 |
|
$ |
1.18 |
|
$ |
3.46 |
|
$ |
4.23 |
Operating earnings (1) |
$ |
0.75 |
|
$ |
0.63 |
|
$ |
2.59 |
|
$ |
2.57 |
(1) See discussion below: Non-GAAP and Performance Measures. |
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Highlights for the quarter included:
-
Underwriting income(1) of
$27.0 million on a combined ratio(1) of 88.0. -
10% increase in gross premiums written. -
Net favorable development in prior years’ loss reserves, resulting in a
$24.7 million net increase in underwriting income. -
Special dividend of
$1.00 per share, representing$45.1 million returned to shareholders.
Highlights for the year included:
-
Underwriting income(1) of
$69.6 million on a combined ratio(1) of 92.0. -
7% increase in gross premiums written. -
Net favorable development in prior years’ loss reserves, resulting in a
$84.0 million net increase in underwriting income. - 25th consecutive year of underwriting profit(1).
-
Book value per share of
$25.16 , an increase of22% (inclusive of dividends) from year-end 2019.
“Despite the many uncertainties RLI faced in 2020, we achieved strong results, provided superior service to our customers and delivered value to our shareholders,” said RLI Corp. Chairman and CEO Jonathan E. Michael. “We posted a 92 combined ratio for the year, inclusive of 5 points of hurricane activity, which marked our 25th consecutive year of underwriting profit. During the fourth quarter, we achieved profitability in all product segments including property, which experienced headwinds from an active catastrophe season. Our strong underwriting performance, combined with investment income, resulted in
“We believe the successful execution of our strategy is validated by growth in book value, which was up
Underwriting Income
RLI achieved
For the year, RLI achieved
The following table highlights underwriting income and combined ratios by segment for the year.
Underwriting Income (Loss)(1) |
|
|
Combined Ratio(1) |
|
||||||||||||||
(in millions) |
|
2020 |
|
|
2019 |
|
|
|
|
2020 |
|
|
2019 |
|
||||
Casualty |
|
$ |
44.4 |
|
|
$ |
20.6 |
|
|
Casualty |
|
|
92.2 |
|
|
|
96.3 |
|
Property |
|
|
(3.2 |
) |
|
|
18.2 |
|
|
Property |
|
|
101.7 |
|
|
|
88.9 |
|
Surety |
|
|
28.4 |
|
|
|
28.8 |
|
|
Surety |
|
|
74.8 |
|
|
|
75.3 |
|
Total |
|
$ |
69.6 |
|
|
$ |
67.6 |
|
|
Total |
|
|
92.0 |
|
|
|
91.9 |
|
(1) See discussion below: Non-GAAP and Performance Measures. |
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Other Income
Net investment income for the quarter decreased
RLI’s comprehensive earnings were
Equity in earnings of Maui Jim, Inc., a producer of premium sunglasses, was
Special and Regular Dividends
On December 18, 2020, the company paid a special cash dividend of
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 2020 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 28, 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/2scgys4w.
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, 2019.
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:
|
|
Operating Earnings Per Share |
|
|||||||||||||
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|||||||||
|
4th Qtr |
|
4th Qtr |
|
12 Mos. |
|
12 Mos. |
|||||||||
Operating Earnings Per Share(1) |
$ |
0.75 |
|
|
$ |
0.63 |
|
|
$ |
2.59 |
|
|
$ |
2.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specific items included in operating earnings per share:(2) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net favorable development in casualty prior years' reserves |
$ |
0.40 |
|
|
$ |
0.30 |
|
|
$ |
1.15 |
|
|
$ |
0.98 |
|
|
Net favorable (unfavorable) development in property prior years' reserves |
$ |
- |
|
|
$ |
(0.03 |
) |
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
Net favorable development in surety prior years' reserves |
$ |
0.02 |
|
|
$ |
- |
|
|
$ |
0.19 |
|
|
$ |
0.11 |
|
|
Net incurred losses related to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
▪2020 Hurricanes |
$ |
(0.21 |
) |
|
$ |
- |
|
|
$ |
(0.78 |
) |
|
$ |
- |
|
|
▪2020 storms and civil unrest |
$ |
- |
|
|
$ |
- |
|
|
$ |
(0.10 |
) |
|
$ |
- |
|
|
▪COVID-19 |
$ |
(0.05 |
) |
|
$ |
- |
|
|
$ |
(0.27 |
) |
|
$ |
- |
|
|
▪2019 and prior catastrophe events |
$ |
- |
|
|
$ |
(0.01 |
) |
|
$ |
0.05 |
|
|
$ |
(0.12 |
) |
|
Gain from tax benefit applicable to equity method dividends(4) |
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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) |
As required under the accounting standard for income taxes, the gain reflects the tax benefit of applying the lower tax rate applicable to dividends received from an affiliate ( |
RLI CORP 2020 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts) |
||||||||||||||||||||||||||||
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||||||||||||||
SUMMARIZED INCOME STATEMENT DATA: |
|
|
2020 |
|
|
|
2019 |
|
|
% Change |
|
|
2020 |
|
|
|
|
2019 |
|
|
|
% Change |
||||||
Net premiums earned |
|
$ |
224,801 |
|
|
$ |
215,626 |
|
|
|
4.3 |
|
% |
|
$ |
865,747 |
|
|
|
$ |
839,111 |
|
|
|
|
3.2 |
|
% |
Net investment income |
|
|
16,655 |
|
|
|
17,775 |
|
|
|
(6.3 |
) |
% |
|
|
67,893 |
|
|
|
|
68,870 |
|
|
|
|
(1.4 |
) |
% |
Net realized gains |
|
|
3,330 |
|
|
|
477 |
|
|
NM |
|
|
|
|
17,885 |
|
|
|
|
17,520 |
|
|
|
|
2.1 |
|
% |
|
Net unrealized gains on equity securities |
|
|
59,665 |
|
|
|
30,876 |
|
|
|
93.2 |
|
% |
|
|
32,101 |
|
|
|
|
78,090 |
|
|
|
|
(58.9 |
) |
% |
Consolidated revenue |
|
$ |
304,451 |
|
|
$ |
264,754 |
|
|
|
15.0 |
|
% |
|
$ |
983,626 |
|
|
|
$ |
1,003,591 |
|
|
|
|
(2.0 |
) |
% |
Loss and settlement expenses |
|
|
103,065 |
|
|
|
106,210 |
|
|
|
(3.0 |
) |
% |
|
|
442,884 |
|
|
|
|
413,416 |
|
|
|
|
7.1 |
|
% |
Policy acquisition costs |
|
|
73,002 |
|
|
|
74,111 |
|
|
|
(1.5 |
) |
% |
|
|
286,438 |
|
|
|
|
288,697 |
|
|
|
|
(0.8 |
) |
% |
Insurance operating expenses |
|
|
21,691 |
|
|
|
18,833 |
|
|
|
15.2 |
|
% |
|
|
66,828 |
|
|
|
|
69,430 |
|
|
|
|
(3.7 |
) |
% |
Interest expense on debt |
|
|
1,902 |
|
|
|
2,005 |
|
|
|
(5.1 |
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FAQ
What were RLI's Q4 2020 earnings?
How did RLI perform in underwriting income for 2020?
What was the special dividend announced by RLI?
What is RLI's book value per share for 2020?
How much did RLI's net investment income change in Q4 2020?
