RLI Reports Second Quarter 2023 Results

PEORIA, Ill.--(BUSINESS WIRE)-- RLI Corp. (NYSE: RLI) – RLI Corp. reported second quarter 2023 net earnings of $77.7 million ($1.69 per share), compared to a net loss of $2.2 million ($0.05 per share) for the second quarter of 2022. Operating earnings⁽¹⁾⁽²⁾ for the second quarter of 2023 were $53.3 million ($1.16 per share), compared to $60.7 million ($1.34 per share) for the same period in 2022.

		Second Quarter							Year to Date
Earnings Per Diluted Share		2023			2022				2023			2022
Net earnings (loss)		$	1.69		$	(0.05	)		$	3.83		$	1.00
Operating earnings (1) (2)		$	1.16		$	1.34			$	2.79		$

(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 in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.

Highlights for the quarter included:

• Underwriting income⁽¹⁾ of $41.2 million on a combined ratio⁽¹⁾ of 87.2.
• 21% increase in gross premiums written.
• 56% increase in net investment income.
• Favorable development in prior years’ loss reserves, resulting in a $17.0 million net increase in underwriting income.
• Losses from second quarter storms, resulting in a $15.5 million net decrease in underwriting income.
• Book value per share of $29.65, an increase of 17% (inclusive of dividends) from year-end 2022.

“We are pleased to report an 87 combined ratio for the quarter and an 83 combined ratio year to date,” said RLI Corp. President & CEO Craig Kliethermes. “All three product segments contributed to our strong results. Our property segment continues to experience hard market conditions, which drove significant premium growth in the quarter. Casualty and surety segment premiums increased slightly, as product exits, market conditions and underwriting discipline moderated growth. Our profitability and growth in book value highlight the benefits of our diverse product portfolio and continued focus on responsible underwriting.”

Underwriting Income

RLI achieved $41.2 million of underwriting income in the second quarter of 2023 on an 87.2 combined ratio, compared to $56.0 million on an 80.2 combined ratio in 2022.

Results for both years include favorable development in prior years’ loss reserves, which resulted in a $17.0 million and $20.9 million net increase to underwriting income from 2023 and 2022, respectively.

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

Underwriting Income(1)								Combined Ratio(1)
(in millions)		2023			2022					2023		2022
Casualty		$	7.0		$	21.5		Casualty		96.3		87.9
Property			25.9			26.1		Property		74.6		65.0
Surety			8.3			8.4		Surety		75.0		72.9
Total		$	41.2		$	56.0		Total		87.2		80.2

(1)	See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 55.8% to $28.8 million, compared to the same period in 2022. The investment portfolio’s total return was 1.1% for the quarter and 3.9% for the six months ended June 30, 2023.

RLI’s comprehensive earnings were $57.9 million for the quarter ($1.26 per share), compared to a comprehensive loss of $99.8 million ($2.20 per share) for the same quarter in 2022. In addition to net earnings, comprehensive earnings included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Dividends Paid in Second Quarter of 2023

On June 20, 2023, the company paid a regular quarterly dividend of $0.27 per share, a $0.01 increase over the prior quarter. RLI’s cumulative dividends total more than $761 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 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 for 2022 due to the sale of RLI’s investment in the third quarter of 2022. 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 2023 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, 2023, RLI was named as one of the insurance industry’s top performing companies by Ward Benchmarking, a business unit of Aon, for the 33rd consecutive year. RLI is the only property & casualty insurance company to be recognized as a Ward’s 50® P&C Top Performer every year since the list’s inception in 1991.

At 10 a.m. central daylight time (CDT) tomorrow, July 25, 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/705943023.

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, 2022.

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 48 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								Six Months Ended
		June 30,								June 30,
(Dollars in millions, except per share amounts)		2023				2022				2023				2022
Favorable development in casualty prior years' reserves		$	9.0			$	17.3			$	44.9			$	44.9
Favorable development in property prior years' reserves		$	3.5			$	3.9			$	16.1			$	17.3
Favorable development in surety prior years' reserves		$	4.2			$	3.0			$	7.4			$	7.5
Net incurred losses related to:
2023 storms		$	(18.0	)		$	—			$	(22.0	)		$	—
2022 and prior events		$	3.0			$	(3.0	)		$	3.1			$	(5.0	)
		Operating Earnings Per Share
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023				2022
Operating Earnings Per Share(1) (2)		$	1.16			$	1.34			$	2.79			$	2.65
Specific items included in operating earnings per share:(3) (4)
Net favorable development in casualty prior years' reserves		$	0.14			$	0.26			$	0.66			$	0.67
Net favorable development in property prior years' reserves		$	0.05			$	0.06			$	0.24			$	0.27
Net favorable development in surety prior years' reserves		$	0.07			$	0.05			$	0.11			$	0.11
Net incurred losses related to:
2023 storms		$	(0.27	)		$	—			$	(0.32	)		$	—
2022 and prior events		$	0.04			$	(0.05	)		$	0.04			$	(0.08	)

(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 in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.
(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.

RLI CORP 2023 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		Three Months Ended June 30,												Six Months Ended June 30,
SUMMARIZED INCOME STATEMENT DATA:		2023				2022				% Change				2023				2022					% Change
Net premiums earned		$	322,280			$	282,810			14.0		%		$	630,003			$	551,962				14.1		%
Net investment income			28,788				18,472			55.8		%			55,872				36,355				53.7		%
Net realized gains			5,580				12,804			(56.4	)	%			20,200				18,392				9.8		%
Net unrealized gains (losses) on equity securities			25,214				(100,994	)		NM					40,710				(128,804	)			NM
Consolidated revenue		$	381,862			$	213,092			79.2		%		$	746,785			$	477,905				56.3		%
Loss and settlement expenses			153,943				117,914			30.6		%			268,431				223,438				20.1		%
Policy acquisition costs			102,626				89,615			14.5		%			204,070				174,902				16.7		%
Insurance operating expenses			24,510				19,325			26.8		%			48,411				38,188				26.8		%
Interest expense on debt			2,047				2,011			1.8		%			4,055				4,021				0.8		%
General corporate expenses			4,219				2,435			73.3		%			8,433				5,798				45.4		%
Total expenses		$	287,345			$	231,300			24.2		%		$	533,400			$	446,347				19.5		%
Equity in earnings of unconsolidated investees			1,514				11,654			(87.0	)	%			5,437				20,413				(73.4	)	%
Earnings (loss) before income taxes		$	96,031			$	(6,554	)		NM				$	218,822			$	51,971				NM
Income tax expense (benefit)			18,379				(4,315	)		NM					42,359				6,287				NM
Net earnings (loss)		$	77,652			$	(2,239	)		NM				$	176,463			$	45,684				NM
Other comprehensive earnings (loss), net of tax			(19,721	)			(97,563	)		(79.8	)	%			17,986				(213,144	)			NM
Comprehensive earnings (loss)		$	57,931			$	(99,802	)		NM				$	194,449			$	(167,460	)			NM
Operating earnings(1):
Net earnings (loss)		$	77,652			$	(2,239	)		NM				$	176,463			$	45,684				NM
Less:
Net realized gains			(5,580	)			(12,804	)		(56.4	)	%			(20,200	)			(18,392	)			9.8		%
Income tax on realized gains			1,171				2,689			(56.5	)	%			4,242				3,862				9.8		%
Net unrealized (gains) losses on equity securities			(25,214	)			100,994			NM					(40,710	)			128,804				NM
Income tax on unrealized gains (losses) on equity securities			5,295				(21,209	)		NM					8,549				(27,049	)			NM
Equity in earnings of Maui Jim			—				(8,505	)		(100.0	)	%			—				(14,872	)			(100.0	)	%
Income tax on equity in earnings of Maui Jim			—				1,786			(100.0	)	%			—				3,123				(100.0	)	%
Operating earnings(2)		$	53,324			$	60,712			(12.2	)	%		$	128,344			$	121,160				5.9		%
Return on Equity:
Net earnings (trailing four quarters)															56.9		%		14.4		%
Comprehensive earnings (trailing four quarters)															53.1		%		(6.1	)	%
Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)			46,044				45,354								46,045				45,748
Net earnings (loss) per share(2)		$	1.69			$	(0.05	)		NM				$	3.83			$	1.00				NM
Less:
Net realized gains			(0.12	)			(0.28	)		(57.1	)	%			(0.44	)			(0.40	)			10.0		%
Income tax on realized gains			0.03				0.06			(50.0	)	%			0.09				0.08				12.5		%
Net unrealized (gains) losses on equity securities			(0.55	)			2.23			NM					(0.88	)			2.82				NM
Income tax on unrealized gains (losses) on equity securities			0.11				(0.47	)		NM					0.19				(0.59	)			NM
Equity in earnings of Maui Jim			—				(0.19	)		(100.0	)	%			—				(0.33	)			(100.0	)	%
Income tax on equity in earnings of Maui Jim			—				0.04			(100.0	)	%			—				0.07				(100.0	)	%
Operating earnings per share(1)(2)		$	1.16			$	1.34			(13.4	)	%		$	2.79			$	2.65				5.3		%
Comprehensive earnings (loss) per share		$	1.26			$	(2.20	)		NM				$	4.22			$	(3.66	)			NM
Cash dividends per share - ordinary		$	0.27			$	0.26			3.8		%		$	0.53			$	0.51				3.9		%
Net Cash Flow provided by Operations		$	174,376			$	131,631			32.5		%		$	243,595			$	170,645				42.7		%

(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 in 2022 due to the sale of RLI’s investment in Maui Jim in the third quarter of 2022.
NM = Not Meaningful

RLI CORP 2023 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		June 30,			December 31,
		2023			2022			% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value		$	2,689,100		$	2,666,950		0.8		%
(amortized cost - $2,946,920 at 6/30/23)
(amortized cost - $2,945,273 at 12/31/22)
Equity securities, at fair value			552,566			498,382		10.9		%
(cost - $340,184 at 6/30/23)
(cost - $328,019 at 12/31/22)
Short-term investments			271,296			36,229		648.8		%
Other invested assets			60,907			47,922		27.1		%
Cash and cash equivalents			16,707			22,818		(26.8	)	%
Total investments and cash		$	3,590,576		$	3,272,301		9.7		%
Accrued investment income			22,525			21,259		6.0		%
Premiums and reinsurance balances receivable			229,471			189,501		21.1		%
Ceded unearned premiums			112,353			138,457		(18.9	)	%
Reinsurance balances recoverable on unpaid losses			720,858			740,089		(2.6	)	%
Deferred policy acquisition costs			148,336			127,859		16.0		%
Property and equipment			48,358			49,573		(2.5	)	%
Investment in unconsolidated investees			55,250			58,275		(5.2	)	%
Goodwill and intangibles			53,562			53,562		0.0		%
Income taxes - deferred			29,864			40,269		(25.8	)	%
Other assets			54,693			75,923		(28.0	)	%
Total assets		$	5,065,846		$	4,767,068		6.3		%
Unpaid losses and settlement expenses		$	2,361,577		$	2,315,637		2.0		%
Unearned premiums			891,103			785,085		13.5		%
Reinsurance balances payable			35,931			61,100		(41.2	)	%
Funds held			102,429			101,144		1.3		%
Income taxes - current			5,326			—		NM
Current portion of long-term debt			199,956			199,863		0.0		%
Accrued expenses			70,220			94,869		(26.0	)	%
Other liabilities			47,392			32,029		48.0		%
Total liabilities		$	3,713,934		$	3,589,727		3.5		%
Shareholders' equity			1,351,912			1,177,341		14.8		%
Total liabilities & shareholders' equity		$	5,065,846		$	4,767,068		6.3		%
OTHER DATA:
Common shares outstanding (in 000's)			45,596			45,470
Book value per share		$	29.65		$	25.89		14.5		%
Closing stock price per share		$	136.47		$	131.27		4.0		%
Statutory surplus		$	1,539,490		$	1,437,324		7.1		%

RLI CORP 2023 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
2023
Gross premiums written		$	251,057				$	221,889				$	35,018				$	507,964
Net premiums written			208,978					177,830					32,733					419,541
Net premiums earned			187,048					101,841					33,391					322,280
Net loss & settlement expenses			110,195		58.9	%		41,139		40.4	%		2,609		7.8	%		153,943		47.8	%
Net operating expenses			69,876		37.4	%		34,825		34.2	%		22,435		67.2	%		127,136		39.4	%
Underwriting income(1)		$	6,977		96.3	%	$	25,877		74.6	%	$	8,347		75.0	%	$	41,201		87.2	%
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	%

Six Months Ended June 30,
					GAAP					GAAP					GAAP					GAAP
		Casualty			Ratios		Property			Ratios		Surety			Ratios		Total			Ratios
2023
Gross premiums written		$	468,891				$	380,735				$	73,350				$	922,976
Net premiums written			390,179					302,696					69,251					762,126
Net premiums earned			373,079					190,608					66,316					630,003
Net loss & settlement expenses			194,883		52.2	%		67,576		35.5	%		5,972		9.0	%		268,431		42.6	%
Net operating expenses			139,388		37.4	%		68,772		36.0	%		44,321		66.8	%		252,481		40.1	%
Underwriting income(1)		$	38,808		89.6	%	$	54,260		71.5	%	$	16,023		75.8	%	$	109,091		82.7	%
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	%

(1)	See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20230724724506/en/

Aaron Diefenthaler

Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

Source: RLI Corp.