RLI Reports Fourth Quarter and Year-End 2022 Results

Rhea-AI Summary

RLI Corp. (NYSE: RLI) reported a strong performance in Q4 2022, with net earnings of $97.8 million ($2.13 per share), a rise from $95.3 million ($2.08 per share) in Q4 2021. Operating earnings also increased to $70.5 million ($1.53 per share) from $55.3 million ($1.21 per share) year-over-year. A 14% increase in gross premiums and a significant 59% rise in net investment income were noted. The company announced a special dividend of $7.00 per share, totaling $318.1 million returned to shareholders. For the year, net earnings were $434.4 million ($9.49 per share) following the sale of Maui Jim. RLI achieved an underwriting income of $178.2 million on an 84.4 combined ratio.

Positive

• 14% increase in gross premiums written.
• 59% increase in net investment income.
• Special dividend of $7.00 per share, returning $318.1 million to shareholders.
• 25% increase in book value per share from year-end 2021.

Negative

• $44.4 million in losses from hurricanes and storms impacted performance.
• Equity earnings from Maui Jim dropped to $0.4 million from $22.8 million in 2021.

PEORIA, Ill.--(BUSINESS WIRE)-- RLI Corp. (NYSE: RLI) – RLI Corp. reported fourth quarter 2022 net earnings of $97.8 million ($2.13 per share), compared to $95.3 million ($2.08 per share) for the fourth quarter of 2021. Operating earnings⁽¹⁾ for the fourth quarter of 2022 were $70.5 million ($1.53 per share), compared to $55.3 million ($1.21 per share) for the same period in 2021.

		Fourth Quarter						Year to Date
Earnings Per Diluted Share		2022			2021			2022			2021
Net earnings		$	2.13		$	2.08		$	12.74		$	6.11
Operating earnings (1) (2)		$	1.53		$	1.21		$	4.69		$	3.48

(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 due to the sale of RLI’s investment in Maui Jim. Prior period amounts have been restated to reflect the adjustment.

Highlights for the quarter included:

• Underwriting income⁽¹⁾ of $54.0 million on a combined ratio⁽¹⁾ of 82.1.
• 14% increase in gross premiums written.
• 59% increase in net investment income.
• Favorable development in prior years’ loss reserves, resulting in a $17.0 million net increase in underwriting income.
• Special dividend of $7.00 per share, representing $318.1 million returned to shareholders.

Highlights for the year included:

• Underwriting income⁽¹⁾ of $178.2 million on a combined ratio⁽¹⁾ of 84.4.
• 16% increase in gross premiums written.
• Favorable development in prior years’ loss reserves, resulting in a $106.5 million net increase in underwriting income.
• Net earnings include $434.4 million ($9.49 per diluted share) related to the sale of Maui Jim, Inc.
• Book value per share of $25.89, an increase of 25% (inclusive of dividends) from year-end 2021.

“In 2022, we continued to provide outstanding service to our customers while delivering profitable growth,” said RLI Corp. President & CEO Craig Kliethermes. “We faced some headwinds from hurricane activity and capital market volatility, but strong underwriting performance across all product segments resulted in 16% growth in gross premiums written for the year and an 84 combined ratio, marking our 27th consecutive year of underwriting profitability. We also successfully closed on the sale of our minority ownership interest in Maui Jim and were able to share excess capital generated with shareholders through a $7 per share special dividend.

“I’m proud of what our team accomplished in 2022 and want to thank our talented associate owners for their dedication to our mission and our customers. In the year ahead, we anticipate the industry will remain dynamic. We will continue to address both the opportunities and challenges with discipline, and a focus on the long-term success of our company.”

Underwriting Income

RLI achieved $54.0 million of underwriting income in the fourth quarter of 2022 on an 82.1 combined ratio, compared to $49.7 million on an 80.7 combined ratio in 2021.

For the year, RLI achieved $178.2 million of underwriting income on an 84.4 combined ratio, compared to $129.9 million on an 86.8 combined ratio in 2021. Favorable development in prior years’ loss reserves resulted in a $106.5 million net increase to underwriting income in 2022, which was partially offset by $44.4 million of hurricane and storm losses. Comparatively, favorable development in prior years’ loss reserves resulted in a $106.5 million net increase to underwriting income in 2021, which was partially offset by $50.2 million of hurricane and storm losses.

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

Underwriting Income(1)								Combined Ratio(1)
(in millions)		2022			2021					2022		2021
Casualty		$	73.8		$	95.5		Casualty		89.6		84.9
Property			72.5			11.3		Property		76.4		95.1
Surety			31.9			23.1		Surety		74.4		80.0
Total		$	178.2		$	129.9		Total		84.4		86.8

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 58.7% to $28.5 million, compared to the same period in 2021. For the year ended December 31, 2022, net investment income was $86.1 million, compared to $68.9 million for the same period in 2021. The investment portfolio’s total return was 2.3% for the quarter and -11.5% for the year.

RLI’s comprehensive earnings were $113.3 million for the quarter ($2.47 per share), compared to $78.2 million ($1.71 per share) for the same quarter in 2021. Full-year comprehensive earnings were $304.5 million ($6.65 per share), compared to $220.5 million ($4.82 per share) in 2021. In addition to net earnings, comprehensive earnings included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Equity in earnings of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was $3.5 million for the quarter, as post-closing adjustments were made after the sale. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $3.7 million. Comparatively, for the fourth quarter of 2021, equity in earnings of unconsolidated investees from Maui Jim and Prime was $3.1 million and $5.3 million, respectively. For the year ended December 31, 2022, equity in earnings of Maui Jim was $0.4 million, down from $22.8 million in 2021, primarily due to transaction related expenses from the sale of the company. Equity in earnings of Prime was $13.0 million in 2022, compared to $17.0 million in 2021.

Special and Regular Dividends

On December 20, 2022, the company paid a special cash dividend of $7.00 per share and a regular quarterly dividend of $0.26 per share for a combined total of $329.9 million. RLI has paid dividends for 186 consecutive quarters and increased regular dividends in each of the last 47 years. Over the last 10 years, the company has returned $1.37 billion to shareholders and the regular quarterly dividend has grown an average of 5.0% 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 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 due to the sale of RLI’s investment. Operating earnings and operating EPS for prior periods have been restated to reflect the equity in earnings of Maui Jim adjustment. 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 2022 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 26, 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/603734663.

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, 2021.

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 47 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							Twelve Months Ended
		December 31,							December 31,
(Dollars in millions, except per share amounts)		2022				2021			2022				2021
Favorable development in casualty prior years' reserves		$	14.0			$	25.7		$	87.0			$	109.5
Favorable development in property prior years' reserves		$	0.4			$	—		$	21.2			$	8.4
Favorable development in surety prior years' reserves		$	1.1			$	3.2		$	10.4			$	5.8
Net incurred losses related to:
2022 storms		$	(8.0	)		$	—		$	(13.0	)		$	—
Hurricane Ian		$	2.0			$	—		$	(38.0	)		$	—
2021 and prior events		$	4.0			$	—		$	4.0			$	(56.8	)
		Operating Earnings Per Share
		Three Months Ended							Twelve Months Ended
		December 31,							December 31,
		2022				2021			2022				2021
Operating Earnings Per Share(1) (2)		$	1.53			$	1.21		$	4.69			$	3.48
Specific items included in operating earnings per share:(3) (4)
Net favorable development in casualty prior years' reserves		$	0.21			$	0.40		$	1.31			$	1.72
Net favorable development in property prior years' reserves		$	0.01			$	—		$	0.32			$	0.07
Net favorable development in surety prior years' reserves		$	0.01			$	0.02		$	0.15			$	0.03
Net incurred losses related to:
2022 storms		$	(0.12	)		$	—		$	(0.20	)		$	—
Hurricane Ian		$	0.03			$	—		$	(0.57	)		$	—
2021 and prior events		$	0.06			$	—		$	0.06			$	(0.84	)
Gain from tax benefit of special dividend to ESOP(5)		$	0.08			$	0.02		$	0.08			$	0.02

(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 due to the sale of RLI’s investment in Maui Jim. Prior period amounts have been restated to reflect the adjustment.
(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.
(5)		Dividends paid on employer securities in an ESOP are fully deductible from taxable income and resulted in a 21% tax benefit.

RLI CORP 2022 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		Three Months Ended December 31,												Twelve Months Ended December 31,
SUMMARIZED INCOME STATEMENT DATA:		2022				2021				% Change				2022				2021					% Change
Net premiums earned		$	301,006			$	257,919			16.7		%		$	1,144,436			$	980,903				16.7		%
Net investment income			28,453				17,933			58.7		%			86,078				68,862				25.0		%
Net realized gains (losses)			(3,047	)			11,780			NM					588,515				64,222				NM
Net unrealized gains (losses) on equity securities			34,181				35,732			(4.3	)	%			(121,037	)			65,258				NM
Consolidated revenue		$	360,593			$	323,364			11.5		%		$	1,697,992			$	1,179,245				44.0		%
Loss and settlement expenses			125,849				101,028			24.6		%			514,376				456,602				12.7		%
Policy acquisition costs			97,753				84,794			15.3		%			369,632				317,468				16.4		%
Insurance operating expenses			23,418				22,403			4.5		%			82,212				76,907				6.9		%
Interest expense on debt			2,013				1,966			2.4		%			8,047				7,677				4.8		%
General corporate expenses			4,347				3,797			14.5		%			12,900				13,330				(3.2	)	%
Total expenses		$	253,380			$	213,988			18.4		%		$	987,167			$	871,984				13.2		%
Equity in earnings of unconsolidated investees			6,792				7,653			(11.3	)	%			9,853				37,060				(73.4	)	%
Earnings before income taxes		$	114,005			$	117,029			(2.6	)	%		$	720,678			$	344,321				109.3		%
Income tax expense			16,171				21,745			(25.6	)	%			137,267				64,967				111.3		%
Net earnings(3)		$	97,834			$	95,284			2.7		%		$	583,411			$	279,354				108.8		%
Other comprehensive earnings (loss), net of tax			15,490				(17,078	)		NM					(278,902	)			(58,888	)			NM
Comprehensive earnings		$	113,324			$	78,206			44.9		%		$	304,509			$	220,466				38.1		%
Operating earnings(1):
Net earnings(3)		$	97,834			$	95,284			2.7		%		$	583,411			$	279,354				108.8		%
Less:
Net realized (gains) losses			3,047				(11,780	)		NM					(588,515	)			(64,222	)			NM
Income tax on realized gains (losses)			(646	)			2,474			NM					124,415				13,487				NM
Net unrealized (gains) losses on equity securities			(34,181	)			(35,732	)		(4.3	)	%			121,037				(65,258	)			NM
Income tax on unrealized gains (losses) on equity securities			7,178				7,503			(4.3	)	%			(25,418	)			13,703				NM
Equity in earnings of Maui Jim			(3,493	)			(3,095	)		12.9		%			(372	)			(22,786	)			(98.4	)	%
Income tax on equity in earnings of Maui Jim			734				650			12.9		%			78				4,785				(98.4	)	%
Operating earnings(2)		$	70,472			$	55,304			27.4		%		$	214,636			$	159,063				34.9		%
Return on Equity:
Net earnings															48.6		%		23.2		%
Comprehensive earnings															25.4		%		18.3		%
Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)			45,954				45,730								45,794				45,712
Net earnings per share(2)		$	2.13			$	2.08			2.4		%		$	12.74			$	6.11				108.5		%
Less:
Net realized (gains) losses			0.06				(0.26	)		NM					(12.84	)			(1.40	)			NM
Income tax on realized gains (losses)			(0.01	)			0.05			NM					2.72				0.30				NM
Net unrealized (gains) losses on equity securities			(0.74	)			(0.77	)		(3.9	)	%			2.64				(1.44	)			NM
Income tax on unrealized gains (losses) on equity securities			0.16				0.16			—		%			(0.56	)			0.30				NM
Equity in earnings of Maui Jim			(0.08	)			(0.06	)		33.3		%			(0.01	)			(0.49	)			(98.0	)	%
Income tax on equity in earnings of Maui Jim			0.01				0.01			—		%			—				0.10				(100.0	)	%
Operating earnings per share(1)(2)		$	1.53			$	1.21			26.4		%		$	4.69			$	3.48				34.8		%
Comprehensive earnings per share		$	2.47			$	1.71			44.4		%		$	6.65			$	4.82				38.0		%
Cash dividends per share - ordinary		$	0.26			$	0.25			4.0		%		$	1.03			$	0.99				4.0		%
Cash dividends per share - special			7.00				2.00			NM					7.00				2.00				NM
Net Cash Flow provided by (used in) Operations(4)		$	(32,438	)		$	104,464			(131.1	)	%		$	250,448			$	384,905				(34.9	)	%

(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 due to the sale of RLI’s investment in Maui Jim. Prior period amounts have been restated to reflect the adjustment.
(3)		Net earnings include $434.4 million related to the sale of Maui Jim, which was completed in the third quarter of 2022.
(4)		Proceeds from the sale of Maui Jim were classified as cash flow from investing activities, not operating activities. However, $116.5 million of tax payments related to the sale were included as operating cash outflows.
NM = Not Meaningful

RLI CORP 2022 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		December 31,			December 31,
		2022			2021			% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value		$	2,666,950		$	2,409,887		10.7		%
(amortized cost - $2,945,273 at 12/31/22)
(amortized cost - $2,346,267 at 12/31/21)
Equity securities, at fair value			498,382			613,776		(18.8	)	%
(cost - $328,019 at 12/31/22)
(cost - $324,501 at 12/31/21)
Short-term investments			36,229			—		NM
Other invested assets			47,922			50,501		(5.1	)	%
Cash and cash equivalents			22,818			88,804		(74.3	)	%
Total investments and cash		$	3,272,301		$	3,162,968		3.5		%
Accrued investment income			21,259			17,505		21.4		%
Premiums and reinsurance balances receivable			189,501			167,279		13.3		%
Ceded unearned premiums			138,457			130,916		5.8		%
Reinsurance balances recoverable on unpaid losses			740,089			608,086		21.7		%
Deferred policy acquisition costs			127,859			103,553		23.5		%
Property and equipment			49,573			52,161		(5.0	)	%
Investment in unconsolidated investees			58,275			171,311		(66.0	)	%
Goodwill and intangibles			53,562			53,562		0.0		%
Income taxes - deferred			40,269			—		NM
Other assets			75,923			40,961		85.4		%
Total assets		$	4,767,068		$	4,508,302		5.7		%
Unpaid losses and settlement expenses		$	2,315,637		$	2,043,555		13.3		%
Unearned premiums			785,085			680,444		15.4		%
Reinsurance balances payable			61,100			42,851		42.6		%
Funds held			101,144			89,773		12.7		%
Income taxes - deferred			—			83,509		(100.0	)	%
Current portion of long-term debt			199,863			—		NM
Long-term debt			—			199,676		(100.0	)	%
Accrued expenses			94,869			98,274		(3.5	)	%
Other liabilities			32,029			40,859		(21.6	)	%
Total liabilities		$	3,589,727		$	3,278,941		9.5		%
Shareholders' equity			1,177,341			1,229,361		(4.2	)	%
Total liabilities & shareholders' equity		$	4,767,068		$	4,508,302		5.7		%
OTHER DATA:
Common shares outstanding (in 000's)			45,470			45,289
Book value per share		$	25.89		$	27.14		(4.6	)	%
Closing stock price per share		$	131.27		$	112.10		17.1		%
Statutory surplus		$	1,437,324		$	1,240,649		15.9		%

RLI CORP 2022 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
2022
Gross premiums written		$	221,729				$	127,932				$	34,127						$	383,788
Net premiums written			175,132					91,332					32,031							298,495
Net premiums earned			183,338					84,912					32,756							301,006
Net loss & settlement expenses			102,623		56.0	%		20,558		24.2	%		2,668			8.1		%		125,849		41.8	%
Net operating expenses			67,344		36.7	%		32,105		37.8	%		21,722			66.4		%		121,171		40.3	%
Underwriting income(1)		$	13,371		92.7	%	$	32,249		62.0	%	$	8,366			74.5		%	$	53,986		82.1	%
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(1)		$	21,265		87.2	%	$	19,984		68.5	%	$	8,445			70.5		%	$	49,694		80.7	%

Twelve Months Ended December 31,
					GAAP					GAAP					GAAP					GAAP
		Casualty			Ratios		Property			Ratios		Surety			Ratios		Total			Ratios
2022
Gross premiums written		$	926,231				$	499,461				$	139,794				$	1,565,486
Net premiums written			744,607					364,644					132,285					1,241,536
Net premiums earned			711,832					307,886					124,718					1,144,436
Net loss & settlement expenses			381,436		53.6	%		120,745		39.2	%		12,195		9.8	%		514,376		44.9	%
Net operating expenses			256,607		36.0	%		114,619		37.2	%		80,618		64.6	%		451,844		39.5	%
Underwriting income(1)		$	73,789		89.6	%	$	72,522		76.4	%	$	31,905		74.4	%	$	178,216		84.4	%
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(1)		$	95,519		84.9	%	$	11,300		95.1	%	$	23,107		80.0	%	$	129,926		86.8	%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20230125005742/en/

Aaron Diefenthaler

Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

Source: RLI Corp.

FAQ

What were RLI Corp's earnings per share for Q4 2022?

RLI Corp. reported earnings per share of $2.13 for Q4 2022.

How much was the special dividend paid by RLI Corp in 2022?

RLI Corp. paid a special dividend of $7.00 per share.

What was the underwriting income for RLI Corp in 2022?

RLI Corp. achieved underwriting income of $178.2 million in 2022.

What was the combined ratio for RLI Corp in Q4 2022?

The combined ratio for RLI Corp in Q4 2022 was 82.1.

How much did RLI Corp's net investment income increase in Q4 2022?

Net investment income increased by 59% in Q4 2022.