RLI Reports Third Quarter 2021 Results

Rhea-AI Summary

RLI Corp. reported Q3 2021 net earnings of $29.2 million ($0.64 per share), down from $42.4 million ($0.93 per share) in Q3 2020. Operating earnings increased to $29.8 million ($0.65 per share) compared to $19.0 million ($0.42 per share) year-over-year. Highlights include an 18% rise in gross premiums written and a combined ratio of 94.6 despite losses from Hurricane Ida. Net investment income rose by 7.9% to $17.8 million, while comprehensive earnings fell to $17.0 million from $51.9 million a year earlier. The company sustained a $0.25 dividend, maintaining its dividend payout record.

Positive

• Operating earnings increased to $29.8 million, up from $19.0 million in Q3 2020.
• Gross premiums written rose by 18%.
• Underwriting income improved to $13.7 million from $1.2 million year-over-year.
• Book value per share grew by 13% to $27.63.
• Net investment income increased by 7.9% to $17.8 million.

Negative

• Net earnings decreased to $29.2 million from $42.4 million in Q3 2020.
• Comprehensive earnings dropped from $51.9 million in Q3 2020 to $17.0 million.
• Losses from Hurricane Ida contributed to a $28.9 million net decrease in underwriting income.

PEORIA, Ill.--(BUSINESS WIRE)-- RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2021 net earnings of $29.2 million ($0.64 per share), compared to $42.4 million ($0.93 per share) for the third quarter of 2020. Operating earnings⁽¹⁾ for the third quarter of 2021 were $29.8 million ($0.65 per share), compared to $19.0 million ($0.42 per share) for the same period in 2020.

	Third Quarter								Year to Date
Earnings Per Diluted Share	2021				2020				2021				2020
Net earnings	$	0.64			$	0.93			$	4.03			$	1.62
Operating earnings (1)	$	0.65			$	0.42			$	2.61			$	1.84
(1) See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

• Underwriting income⁽¹⁾ of $13.7 million on a combined ratio⁽¹⁾ of 94.6.
• 18% increase in gross premiums written.
• Favorable development in prior years’ loss reserves, resulting in a $25.1 million net increase in underwriting income.
• Losses from third quarter hurricanes, resulting in a $28.9 million net decrease in underwriting income.
• Book value per share of $27.63, an increase of 13% (inclusive of dividends) from year-end 2020.

“Despite the impact of Hurricane Ida and other catastrophes that occurred during the quarter, we delivered strong underwriting results and a 95 combined ratio,” said RLI Corp. Chairman & CEO Jonathan E. Michael. “We experienced growth in gross written premium across all three segments, reflecting favorable market conditions for most product lines. Although catastrophe activity impacted our bottom line results, these events reinforce our purpose and promise to be there for our customers in times of need. I’m proud of our team’s ongoing efforts to deliver outstanding service and value to all stakeholders we serve.”

Underwriting Income

RLI achieved $13.7 million of underwriting income in the third quarter of 2021 on a 94.6 combined ratio, compared to $1.2 million on a 99.5 combined ratio in 2020.

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

Underwriting Income (Loss)(1)										Combined Ratio(1)
(in millions)		2021				2020						2021				2020
Casualty		$	22.9			$	14.0			Casualty			85.9				90.2
Property			(16.5	)			(19.9	)		Property			127.2				144.0
Surety			7.3				7.1			Surety			75.3				74.8
Total		$	13.7			$	1.2			Total			94.6				99.5
(1) See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 7.9% to $17.8 million, compared to the same period in 2020. The investment portfolio’s total return was 0.1% for the quarter and 3.1% for the nine months ended September 30, 2021.

RLI’s comprehensive earnings were $17.0 million for the quarter ($0.37 per share), compared to $51.9 million ($1.14 per share) for the same quarter in 2020. 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., a producer of premium sunglasses, was $5.4 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $4.4 million. Comparatively, for the third quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was $6.2 million and $3.3 million, respectively.

Dividends Paid in the Third Quarter of 2021

On September 20, 2021, the company paid a regular quarterly dividend of $0.25 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $500 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 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

On July 20, 2021, RLI was named as one of the insurance industry’s top performing companies by Ward benchmarking, a business unit of Aon, for the 31^st 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.

At 10 a.m. central daylight time (CDT) tomorrow, October 21, 2021, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at https://edge.media-server.com/mmc/p/fyykgewf.

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 25 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 September 30,								Nine Months Ended September 30,
(Dollars in millions, except per share amounts)				2021				2020				2021				2020
Favorable development in casualty prior years' reserves				$	26.4			$	22.0			$	83.8			$	49.5
Favorable development in property prior years' reserves				$	0.5			$	4.0			$	8.4			$	9.5
Favorable development in surety prior years' reserves				$	2.5			$	3.2			$	2.6			$	11.1
Net incurred losses related to:
	2021 storms			$	(1.0	)		$	-			$	(25.0	)		$	-
	3Q 2021 hurricanes			$	(34.0	)		$	-			$	(34.0	)		$	-
	2020 and prior events(4)			$	0.1			$	(38.1	)		$	2.1			$	(55.1	)
				Operating Earnings Per Share
				Three Months Ended September 30,								Nine Months Ended September 30,
				2021				2020				2021				2020
Operating Earnings Per Share(1)				$	0.65			$	0.42			$	2.61			$	1.84
Specific items included in operating earnings per share:(2) (3)
	Net favorable development in casualty prior years' reserves			$	0.40			$	0.34			$	1.30			$	0.78
	Net favorable development in property prior years' reserves			$	-			$	0.01			$	0.09			$	0.05
	Net favorable development in surety prior years' reserves			$	0.03			$	0.05			$	0.01			$	0.16
	Net incurred losses related to:
		2021 storms		$	(0.01	)		$	-			$	(0.37	)		$	-
		3Q 2021 hurricanes		$	(0.50	)		$	-			$	(0.50	)		$	-
		2020 and prior events(4)		$	-			$	(0.60	)		$	0.03			$	(0.85	)

(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 September 30,													Nine Months Ended September 30,
SUMMARIZED INCOME STATEMENT DATA:			2021				2020			% Change						2021					2020				% Change
Net premiums earned		$	253,389			$	216,630				17.0		%		$	722,984				$	640,946					12.8		%
Net investment income			17,844				16,543				7.9		%			50,929					51,238					(0.6	)	%
Net realized gains			1,829				1,512				21.0		%			52,442					14,555				NM
Net unrealized gains (losses) on equity securities			(2,592	)			28,126			NM						29,526					(27,564	)			NM
Consolidated revenue		$	270,470			$	262,811				2.9		%		$	855,881				$	679,175					26.0		%
Loss and settlement expenses			143,656				127,596				12.6		%			355,574					339,819					4.6		%
Policy acquisition costs			80,449				71,032				13.3		%			232,674					213,436					9.0		%
Insurance operating expenses			15,560				16,850				(7.7	)	%			54,504					45,137					20.8		%
Interest expense on debt			1,906				1,901				0.3		%			5,711					5,701					0.2		%
General corporate expenses			2,505				2,668				(6.1	)	%			9,533					6,417					48.6		%
Total expenses		$	244,076			$	220,047				10.9		%		$	657,996				$	610,510					7.8		%
Equity in earnings of unconsolidated investees			9,043				8,745				3.4		%			29,407					18,359					60.2		%
Earnings before income taxes		$	35,437			$	51,509				(31.2	)	%		$	227,292				$	87,024					161.2		%
Income tax expense			6,194				9,122				(32.1	)	%			43,222					13,738				NM
Net earnings		$	29,243			$	42,387				(31.0	)	%		$	184,070				$	73,286					151.2		%
Other comprehensive earnings (loss), net of tax			(12,240	)			9,550			NM						(41,810	)				50,090				NM
Comprehensive earnings		$	17,003			$	51,937				(67.3	)	%		$	142,260				$	123,376					15.3		%
Operating earnings(1):
Net earnings		$	29,243			$	42,387				(31.0	)	%		$	184,070				$	73,286					151.2		%
Less:
Realized gains			(1,829	)			(1,512	)			21.0		%			(52,442	)				(14,555	)			NM
Income tax on realized gains			385				318				21.1		%			11,013					3,057				NM
Unrealized (gains) losses on equity securities			2,592				(28,126	)		NM						(29,526	)				27,564				NM
Income tax on unrealized gains (losses) on equity securities			(544	)			5,905			NM						6,200					(5,789	)			NM
Operating earnings		$	29,847			$	18,972				57.3		%		$	119,315				$	83,563					42.8		%
Return on Equity:
Net earnings (trailing four quarters)															22.8			%			12.5		%
Comprehensive earnings (trailing four quarters)															19.7			%			16.9		%
Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)			45,689				45,426									45,714					45,339
Net earnings per share		$	0.64			$	0.93				(31.2	)	%		$	4.03				$	1.62					148.8		%
Less:
Realized gains			(0.04	)			(0.03	)			33.3		%			(1.15	)				(0.32	)			NM
Income tax on realized gains			0.01				0.01				0.0		%			0.24					0.07				NM
Unrealized (gains) losses on equity securities			0.05				(0.62	)			(108.1	)	%			(0.65	)				0.60				NM
Income tax on unrealized gains (losses) on equity securities			(0.01	)			0.13				(107.7	)	%			0.14					(0.13	)			NM
EPS from operations(1)		$	0.65			$	0.42				54.8		%		$	2.61				$	1.84					41.8		%
Comprehensive earnings per share		$	0.37			$	1.14				(67.5	)	%		$	3.11				$	2.72					14.3		%
Cash dividends per share - ordinary		$	0.25			$	0.24				4.2		%		$	0.74				$	0.71					4.2		%
Net Cash Flow provided by Operations		$	115,932			$	79,471				45.9		%		$	280,441				$	163,244					71.8		%

(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)
		September 30,				December 31,
			2021				2020			% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value		$	2,394,669			$	2,196,626				9.0		%
(amortized cost - $2,310,314 at 9/30/21)
(amortized cost - $2,061,467 at 12/31/20)
Equity securities, at fair value			565,238				524,006				7.9		%
(cost - $311,392 at 9/30/21)
(cost - $293,190 at 12/31/20)
Other invested assets			52,480				54,232				(3.2	)	%
Cash and cash equivalents			89,618				62,217				44.0		%
Total investments and cash		$	3,102,005			$	2,837,081				9.3		%
Premiums and reinsurance balances receivable			177,162				174,628				1.5		%
Ceded unearned premiums			127,765				113,488				12.6		%
Reinsurance balances recoverable on unpaid losses			602,154				443,729				35.7		%
Deferred policy acquisition costs			104,309				88,425				18.0		%
Property and equipment			50,860				51,406				(1.1	)	%
Investment in unconsolidated investees			158,721				128,382				23.6		%
Goodwill and intangibles			53,562				53,719				(0.3	)	%
Other assets			56,128				47,627				17.8		%
Total assets		$	4,432,666			$	3,938,485				12.5		%
Unpaid losses and settlement expenses		$	2,033,517			$	1,750,049				16.2		%
Unearned premiums			673,809				586,386				14.9		%
Reinsurance balances payable			38,093				42,265				(9.9	)	%
Funds held			89,288				81,747				9.2		%
Income taxes - deferred			78,308				80,235				(2.4	)	%
Bonds payable, long-term debt			149,629				149,489				0.1		%
Accrued expenses			74,155				75,925				(2.3	)	%
Other liabilities			45,611				36,411				25.3		%
Total liabilities		$	3,182,410			$	2,802,507				13.6		%
Shareholders' equity			1,250,256				1,135,978				10.1		%
Total liabilities & shareholders' equity		$	4,432,666			$	3,938,485				12.5		%
OTHER DATA:
Common shares outstanding (in 000's)			45,245				45,143
Book value per share		$	27.63			$	25.16				9.8		%
Closing stock price per share		$	100.27			$	104.15				(3.7	)	%
Statutory surplus		$	1,220,341			$	1,121,592				8.8		%

RLI CORP
2021 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended September 30,
								GAAP									GAAP									GAAP									GAAP
				Casualty				Ratios					Property				Ratios					Surety				Ratios					Total				Ratios
	2021
Gross premiums written				$	232,796								$	90,148								$	33,302								$	356,246
Net premiums written					178,586									68,444									31,623									278,653
Net premiums earned					162,852									60,886									29,651									253,389
Net loss & settlement expenses					84,139				51.7		%			55,695				91.5		%			3,822				12.9		%			143,656				56.7		%
Net operating expenses					55,764				34.2		%			21,749				35.7		%			18,496				62.4		%			96,009				37.9		%
Underwriting income (loss)(1)				$	22,949				85.9		%		$	(16,558	)			127.2		%		$	7,333				75.3		%		$	13,724				94.6		%
2020
Gross premiums written				$	204,008								$	68,535								$	30,320								$	302,863
Net premiums written					157,330									48,895									28,823									235,048
Net premiums earned					143,002									45,380									28,248									216,630
Net loss & settlement expenses					78,076				54.6		%			46,874				103.3		%			2,646				9.4		%			127,596				58.9		%
Net operating expenses					50,933				35.6		%			18,457				40.7		%			18,492				65.4		%			87,882				40.6		%
Underwriting income (loss)(1)				$	13,993				90.2		%		$	(19,951	)			144.0		%		$	7,110				74.8		%		$	1,152				99.5		%
Nine Months Ended September 30,
								GAAP									GAAP									GAAP									GAAP
				Casualty				Ratios					Property				Ratios					Surety				Ratios					Total				Ratios
2021
Gross premiums written				$	658,021								$	256,596								$	95,508								$	1,010,125
Net premiums written					510,913									194,373									90,842									796,128
Net premiums earned					467,817									168,393									86,774									722,984
Net loss & settlement expenses					228,807				48.9		%			111,643				66.3		%			15,124				17.4		%			355,574				49.2		%
Net operating expenses					164,756				35.2		%			65,434				38.9		%			56,988				65.7		%			287,178				39.7		%
Underwriting income (loss)(1)				$	74,254				84.1		%		$	(8,684	)			105.2		%		$	14,662				83.1		%		$	80,232				88.9		%
2020
Gross premiums written				$	553,291								$	194,542								$	88,015								$	835,848
Net premiums written					436,621									141,885									83,735									662,241
Net premiums earned					421,637									135,115									84,194									640,946
Net loss & settlement expenses					249,992				59.3		%			84,395				62.5		%			5,432				6.5		%			339,819				53.0		%
Net operating expenses					149,242				35.4		%			54,596				40.4		%			54,735				65.0		%			258,573				40.4		%
Underwriting income (loss)(1)				$	22,403				94.7		%		$	(3,876	)			102.9		%		$	24,027				71.5		%		$	42,554				93.4		%

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

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20211020005774/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 Q3 2021 earnings results?

RLI Corp. reported net earnings of $29.2 million ($0.64 per share) for Q3 2021, down from $42.4 million ($0.93 per share) in Q3 2020.

How did RLI Corp.'s underwriting income perform in Q3 2021?

RLI Corp. achieved underwriting income of $13.7 million in Q3 2021, significantly improved from $1.2 million in Q3 2020.

What was the impact of Hurricane Ida on RLI Corp.'s financials?

Hurricane Ida caused a $28.9 million net decrease in underwriting income for RLI Corp. in Q3 2021.

What is RLI Corp.'s book value per share as of Q3 2021?

As of Q3 2021, RLI Corp.'s book value per share increased to $27.63, a 13% rise from year-end 2020.

How did RLI Corp.'s dividend payout change in Q3 2021?

RLI Corp. maintained its quarterly dividend at $0.25 per share in Q3 2021, the same as the previous quarter.