RLI Reports Fourth Quarter and Year-End 2021 Results

Rhea-AI Summary

RLI Corp. reported strong fourth quarter 2021 results with net earnings of $95.3 million ($2.08 per share), up from $83.8 million ($1.84 per share) in Q4 2020. Operating earnings were $57.7 million ($1.26 per share) versus $34.0 million ($0.75 per share) the previous year. The company achieved a 12% increase in gross premiums written and a favorable underwriting income of $49.7 million, with an 80.7 combined ratio. A special dividend of $2.00 per share was announced, totaling $90.6 million returned to shareholders.

Positive

• Net earnings increased by 14.5% year-over-year.
• Operating earnings rose by 69.1% compared to the prior year.
• 12% growth in gross premiums written.
• Favorable development in prior years’ loss reserves increased underwriting income by $24.2 million.
• Confirmed A+ (Superior) financial strength rating by AM Best.
• 26 consecutive years of underwriting profit.

Negative

• Net investment income growth was modest at 7.7% for the quarter.
• Comprehensive earnings declined to $78.2 million from $89.9 million year-over-year.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005718/en/

Aaron Diefenthaler

Vice President, Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

Source: RLI Corp.

FAQ

What were RLI Corp.'s earnings for Q4 2021?

RLI Corp. reported net earnings of $95.3 million ($2.08 per share) for Q4 2021.

How did RLI Corp.'s operating earnings change in Q4 2021?

Operating earnings increased to $57.7 million ($1.26 per share) in Q4 2021, up from $34.0 million ($0.75 per share) in Q4 2020.

What was RLI Corp.'s combined ratio for the fourth quarter of 2021?

RLI Corp. reported a combined ratio of 80.7 for the fourth quarter of 2021.

What special dividend did RLI Corp. declare?

RLI Corp. declared a special dividend of $2.00 per share, totaling $90.6 million returned to shareholders.

How much did RLI Corp. increase its gross premiums written in 2021?

RLI Corp. achieved a 12% increase in gross premiums written in the fourth quarter of 2021.