RLI Reports Second Quarter 2022 Results

Rhea-AI Summary

RLI Corp. reported a Q2 2022 net loss of $2.2 million (-$0.05 per share), down from net earnings of $81.8 million ($1.79 per share) in Q2 2021. Operating earnings increased to $67.4 million ($1.49 per share) from $49.9 million ($1.09 per share) YoY. Highlights include a 17% rise in gross premiums written and net investment income growing by 11%. However, book value per share fell 13% from the prior year. Additionally, RLI was named a top-performing company for the 32nd consecutive year by Ward benchmarking.

Positive

• Operating earnings increased to $67.4 million ($1.49 per share) from $49.9 million ($1.09 per share) YoY.
• 17% increase in gross premiums written.
• Net investment income rose by 11% to $18.5 million.
• Underwriting income grew to $56.0 million with a combined ratio of 80.2.

Negative

• Net loss of $2.2 million (-$0.05 per share) compared to net earnings of $81.8 million ($1.79 per share) in Q2 2021.
• Book value per share decreased by 13% from year-end 2021.
• Comprehensive loss of $99.8 million for the quarter, including unrealized losses from the fixed income portfolio.

PEORIA, Ill.--(BUSINESS WIRE)-- RLI Corp. (NYSE: RLI) – RLI Corp. reported second quarter 2022 net loss of $2.2 million (-$0.05 per share), compared to net earnings of $81.8 million ($1.79 per share) for the second quarter of 2021. Operating earnings⁽¹⁾ for the second quarter of 2022 were $67.4 million ($1.49 per share), compared to $49.9 million ($1.09 per share) for the same period in 2021.

	Second Quarter								Year to Date
Earnings Per Diluted Share	2022				2021				2022				2021
Net earnings (loss)	$	(0.05	)		$	1.79			$	1.00			$	3.39
Operating earnings (1)	$	1.49			$	1.09			$	2.91			$	1.96
(1) See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

• Underwriting income⁽¹⁾ of $56.0 million on a combined ratio⁽¹⁾ of 80.2.
• 17% increase in gross premiums written.
• 11% increase in net investment income.
• Favorable development in prior years’ loss reserves, resulting in a $20.9 million net increase in underwriting income.
• Book value per share of $23.02, a decrease of 13% (inclusive of dividends) from year-end 2021.

“We are pleased with our positive mid-year operating results, as top line premium and underwriting profitability remained strong in the second quarter,” said RLI Corp. President & CEO Craig Kliethermes. “All of our underwriting segments positively contributed to the 17 percent growth in gross premium and 80 combined ratio that we achieved in the quarter. Market conditions continue to offer opportunities for our talented underwriters within their given niche markets. Despite the decline in book value due to the impact from the investment portfolio, we continue to generate capital through operating earnings, which were $1.49 per share. Our strong operating performance is a testament to the dedication of our employee owners and their commitment to our customers.”

Underwriting Income

RLI achieved $56.0 million of underwriting income in the second quarter of 2022 on an 80.2 combined ratio, compared to $36.6 million on an 84.8 combined ratio in 2021.

Results for the second quarter of both years include favorable development in prior years’ loss reserves, which resulted in a $20.9 million and $27.5 million net increase to underwriting income for 2022 and 2021, respectively.

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

Underwriting Income(1)										Combined Ratio(1)
(in millions)		2022				2021						2022				2021
Casualty		$	21.5			$	26.4			Casualty			87.9				83.1
Property			26.1				8.9			Property			65.0				84.1
Surety			8.4				1.3			Surety			72.9				95.6
Total		$	56.0			$	36.6			Total			80.2				84.8
(1) See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 10.9% to $18.5 million, compared to the same period in 2021. The investment portfolio’s total return was -6.1% for the quarter and -10.4% for the six months ended June 30, 2022.

RLI’s comprehensive loss was $99.8 million for the quarter (-$2.20 per share), compared to $97.0 million ($2.12 per share) of comprehensive earnings for the same quarter in 2021. In addition to net earnings, comprehensive loss 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 $8.5 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $3.6 million. Comparatively, for the second quarter of 2021, equity in earnings of unconsolidated investees from Maui Jim and Prime was $10.6 million and $3.6 million, respectively.

Dividends Paid in Second Quarter of 2022

On June 21, 2022, the company paid a regular quarterly dividend of $0.26 per share, a $0.01 increase over the prior quarter. RLI’s cumulative dividends total more than $510 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 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

On July 11, 2022, RLI was named as one of the insurance industry’s top performing companies by Ward benchmarking, a business unit of Aon, for the 32^nd consecutive year. RLI is one of only two property-casualty insurers to be recognized as a Ward’s 50^® Top P&C Performer every year since the list’s inception in 1991.

As previously announced, RLI has agreed to sell its minority interest in Maui Jim, Inc. RLI’s net after-tax proceeds from the sale will be approximately $500 million, with the final proceeds to be determined at closing, based on adjustments to the purchase price for working capital and other items. The sale is expected to close in the second half of 2022.

At 10 a.m. central daylight time (CDT) tomorrow, July 21, 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/945644532.

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 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 June 30,								Six Months Ended June 30,
(Dollars in millions, except per share amounts)				2022				2021				2022				2021
Favorable development in casualty prior years' reserves				$	17.3			$	29.2			$	44.9			$	57.5
Favorable development in property prior years' reserves				$	3.9			$	3.8			$	17.3			$	9.9
Favorable (unfavorable) development in surety prior years' reserves				$	3.0			$	(2.7	)		$	7.5			$	0.1
Net incurred losses related to:
	2022 storms			$	(3.0	)		$	-			$	(5.0	)		$	-
	2021 and prior events			$	-			$	(5.9	)		$	-			$	(21.9	)
				Operating Earnings Per Share
				Three Months Ended June 30,								Six Months Ended June 30,
				2022				2021				2022				2021
Operating Earnings Per Share(1)				$	1.49			$	1.09			$	2.91			$	1.96
Specific items included in operating earnings per share:(2) (3)
	Net favorable development in casualty prior years' reserves			$	0.26			$	0.46			$	0.67			$	0.88
	Net favorable development in property prior years' reserves			$	0.06			$	0.05			$	0.27			$	0.13
	Net favorable (unfavorable) development in surety prior years' reserves			$	0.05			$	(0.06	)		$	0.11			$	(0.02	)
	Net incurred losses related to:
		2022 storms		$	(0.05	)		$	-			$	(0.08	)		$	-
		2021 and prior events		$	-			$	(0.09	)		$	-			$	(0.32	)

(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
2022 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		Three Months Ended June 30,													Six Months Ended June 30,
SUMMARIZED INCOME STATEMENT DATA:			2022				2021			% Change						2022					2021				% Change
Net premiums earned		$	282,810			$	241,000				17.3		%		$	551,962				$	469,595					17.5		%
Net investment income			18,472				16,661				10.9		%			36,355					33,085					9.9		%
Net realized gains			12,804				36,463				(64.9	)	%			18,392					50,613					(63.7	)	%
Net unrealized gains (losses) on equity securities			(100,994	)			3,956			NM						(128,804	)				32,118				NM
Consolidated revenue		$	213,092			$	298,080				(28.5	)	%		$	477,905				$	585,411					(18.4	)	%
Loss and settlement expenses			117,914				107,026				10.2		%			223,438					211,918					5.4		%
Policy acquisition costs			89,615				77,235				16.0		%			174,902					152,225					14.9		%
Insurance operating expenses			19,325				20,148				(4.1	)	%			38,188					38,944					(1.9	)	%
Interest expense on debt			2,011				1,904				5.6		%			4,021					3,805					5.7		%
General corporate expenses			2,435				3,686				(33.9	)	%			5,798					7,028					(17.5	)	%
Total expenses		$	231,300			$	209,999				10.1		%		$	446,347				$	413,920					7.8		%
Equity in earnings of unconsolidated investees			11,654				13,940				(16.4	)	%			20,413					20,364					0.2		%
Earnings (loss) before income taxes		$	(6,554	)		$	102,021			NM					$	51,971				$	191,855					(72.9	)	%
Income tax expense (benefit)			(4,315	)			20,206			NM						6,287					37,028					(83.0	)	%
Net earnings (loss)		$	(2,239	)		$	81,815			NM					$	45,684				$	154,827					(70.5	)	%
Other comprehensive earnings (loss), net of tax			(97,563	)			15,177			NM						(213,144	)				(29,570	)			NM
Comprehensive earnings (loss)		$	(99,802	)		$	96,992			NM					$	(167,460	)			$	125,257				NM
Operating earnings(1):
Net earnings (loss)		$	(2,239	)		$	81,815			NM					$	45,684				$	154,827					(70.5	)	%
Less:
Realized gains			(12,804	)			(36,463	)			(64.9	)	%			(18,392	)				(50,613	)				(63.7	)	%
Income tax on realized gains			2,689				7,656				(64.9	)	%			3,862					10,628					(63.7	)	%
Unrealized (gains) losses on equity securities			100,994				(3,956	)		NM						128,804					(32,118	)			NM
Income tax on unrealized gains (losses) on equity securities			(21,209	)			831			NM						(27,049	)				6,745				NM
Operating earnings		$	67,431			$	49,883				35.2		%		$	132,909				$	89,469					48.6		%
Return on Equity:
Net earnings (trailing four quarters)															14.4			%			24.7		%
Comprehensive earnings (trailing four quarters)															-6.1			%			23.5		%
Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)			45,354				45,715									45,748					45,703
Net earnings (loss) per share		$	(0.05	)		$	1.79			NM					$	1.00				$	3.39					(70.5	)	%
Less:
Realized gains			(0.28	)			(0.80	)			(65.0	)	%			(0.40	)				(1.11	)				(64.0	)	%
Income tax on realized gains			0.06				0.17				(64.7	)	%			0.08					0.23					(65.2	)	%
Unrealized (gains) losses on equity securities			2.23				(0.09	)		NM						2.82					(0.70	)			NM
Income tax on unrealized gains (losses) on equity securities			(0.47	)			0.02			NM						(0.59	)				0.15				NM
EPS from operations(1)		$	1.49			$	1.09				36.7		%		$	2.91				$	1.96					48.5		%
Comprehensive earnings (loss) per share		$	(2.20	)		$	2.12			NM					$	(3.66	)			$	2.74				NM
Cash dividends per share - ordinary		$	0.26			$	0.25				4.0		%		$	0.51				$	0.49					4.1		%
Net Cash Flow provided by Operations		$	131,631			$	104,222				26.3		%		$	170,645				$	164,509					3.7		%
(1) See discussion above: Non-GAAP and Performance Measures.
NM = Not Meaningful

RLI CORP
2022 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		June 30,				December 31,
			2022				2021			% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value		$	2,280,909			$	2,409,887				(5.4	)	%
(amortized cost - $2,480,480 at 6/30/22)
(amortized cost - $2,346,267 at 12/31/21)
Equity securities, at fair value			487,995				613,776				(20.5	)	%
(cost - $327,246 at 6/30/22)
(cost - $324,501 at 12/31/21)
Other invested assets			51,018				50,501				1.0		%
Cash and cash equivalents			113,044				88,804				27.3		%
Total investments and cash		$	2,932,966			$	3,162,968				(7.3	)	%
Premiums and reinsurance balances receivable			191,391				167,279				14.4		%
Ceded unearned premiums			132,417				130,916				1.1		%
Reinsurance balances recoverable on unpaid losses			666,730				608,086				9.6		%
Deferred policy acquisition costs			123,055				103,553				18.8		%
Property and equipment			50,955				52,161				(2.3	)	%
Investment in unconsolidated investees			187,310				171,311				9.3		%
Goodwill and intangibles			53,562				53,562				0.0		%
Other assets			63,377				58,466				8.4		%
Total assets		$	4,401,763			$	4,508,302				(2.4	)	%
Unpaid losses and settlement expenses		$	2,150,519			$	2,043,555				5.2		%
Unearned premiums			754,192				680,444				10.8		%
Reinsurance balances payable			39,291				42,851				(8.3	)	%
Funds held			101,983				89,773				13.6		%
Income taxes - deferred			2,389				83,509				(97.1	)	%
Long-term debt			199,769				199,676				0.0		%
Accrued expenses			68,052				98,274				(30.8	)	%
Other liabilities			41,380				40,859				1.3		%
Total liabilities		$	3,357,575			$	3,278,941				2.4		%
Shareholders' equity			1,044,188				1,229,361				(15.1	)	%
Total liabilities & shareholders' equity		$	4,401,763			$	4,508,302				(2.4	)	%
OTHER DATA:
Common shares outstanding (in 000's)			45,369				45,289
Book value per share		$	23.02			$	27.14				(15.2	)	%
Closing stock price per share		$	116.59			$	112.10				4.0		%
Statutory surplus		$	1,249,906			$	1,240,649				0.7		%

RLI CORP
2022 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30,
								GAAP									GAAP									GAAP									GAAP
				Casualty				Ratios					Property				Ratios					Surety				Ratios					Total				Ratios
2022
Gross premiums written				$	248,315								$	135,848								$	34,626								$	418,789
Net premiums written					201,247									100,356									32,716									334,319
Net premiums earned					177,123									74,690									30,997									282,810
Net loss & settlement expenses					94,250				53.2		%			20,477				27.4		%			3,187				10.3		%			117,914				41.7		%
Net operating expenses					61,431				34.7		%			28,108				37.6		%			19,401				62.6		%			108,940				38.5		%
Underwriting income(1)				$	21,442				87.9		%		$	26,105				65.0		%		$	8,409				72.9		%		$	55,956				80.2		%
2021
Gross premiums written				$	236,329								$	91,911								$	30,744								$	358,984
Net premiums written					183,436									69,943									29,107									282,486
Net premiums earned					156,195									55,865									28,940									241,000
Net loss & settlement expenses					74,421				47.6		%			24,311				43.5		%			8,294				28.7		%			107,026				44.4		%
Net operating expenses					55,336				35.5		%			22,675				40.6		%			19,372				66.9		%			97,383				40.4		%
Underwriting income(1)				$	26,438				83.1		%		$	8,879				84.1		%		$	1,274				95.6		%		$	36,591				84.8		%
Six Months Ended June 30,
								GAAP									GAAP									GAAP									GAAP
				Casualty				Ratios					Property				Ratios					Surety				Ratios					Total				Ratios
2022
Gross premiums written				$	464,136								$	245,446								$	68,366								$	777,948
Net premiums written					376,860									182,351									64,998									624,209
Net premiums earned					348,879									142,130									60,953									551,962
Net loss & settlement expenses					178,099				51.0		%			40,840				28.7		%			4,499				7.4		%			223,438				40.5		%
Net operating expenses					121,691				34.9		%			52,709				37.1		%			38,690				63.5		%			213,090				38.6		%
Underwriting income(1)				$	49,089				85.9		%		$	48,581				65.8		%		$	17,764				70.9		%		$	115,434				79.1		%
2021
Gross premiums written				$	425,225								$	166,448								$	62,206								$	653,879
Net premiums written					332,327									125,929									59,219									517,475
Net premiums earned					304,965									107,507									57,123									469,595
Net loss & settlement expenses					144,668				47.4		%			55,948				52.0		%			11,302				19.8		%			211,918				45.1		%
Net operating expenses					108,992				35.8		%			43,685				40.7		%			38,492				67.4		%			191,169				40.7		%
Underwriting income(1)				$	51,305				83.2		%		$	7,874				92.7		%		$	7,329				87.2		%		$	66,508				85.8		%
(1) See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20220720005863/en/

Media Contact

Aaron Diefenthaler

Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

Source: RLI Corp.

FAQ

What are the key financial results for RLI Corp. in Q2 2022?

RLI Corp. reported a net loss of $2.2 million and operating earnings of $67.4 million.

How did RLI Corp.'s gross premiums perform in Q2 2022?

Gross premiums written increased by 17% in Q2 2022.

What is RLI Corp.'s book value per share as of Q2 2022?

Book value per share decreased to $23.02, a 13% drop from year-end 2021.

What investment income did RLI Corp. generate in Q2 2022?

Net investment income was $18.5 million, reflecting an 11% increase.

When will RLI Corp. discuss its quarterly results with analysts?

RLI Corp. will hold a conference call on July 21, 2022, at 10 a.m. CDT.