RLI Reports Third Quarter 2022 Results

Rhea-AI Summary

RLI Corp. reported remarkable third-quarter 2022 net earnings of $439.9 million ($9.61 per share), a significant rise from $29.2 million ($0.64 per share) in Q3 2021. Operating earnings were $23.0 million ($0.50 per share), down from $25.6 million ($0.56 per share) year-over-year. The report highlights a 13% increase in gross premiums written and a 19% rise in net investment income, although losses from Hurricane Ian impacted underwriting income. The company’s book value per share rose 16% from year-end 2021, indicating positive long-term growth.

Positive

• Net earnings rose to $439.9 million, a substantial increase from $29.2 million in Q3 2021.
• Gross premiums written increased by 13%, reflecting strong business growth.
• Net investment income grew by 19% year-over-year.

Negative

• Operating earnings decreased from $25.6 million in Q3 2021 to $23.0 million.
• Underwriting income fell to $8.8 million, down from $13.7 million in the previous year, primarily due to hurricane losses.

PEORIA, Ill.--(BUSINESS WIRE)-- RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2022 net earnings of $439.9 million ($9.61 per share), compared to net earnings of $29.2 million ($0.64 per share) for the third quarter of 2021. Operating earnings⁽¹⁾ for the third quarter of 2022 were $23.0 million ($0.50 per share), compared to $25.6 million ($0.56 per share) for the same period in 2021.

					Third Quarter						Year to Date
Earnings Per Diluted Share					2022			2021			2022			2021
Net earnings					$	9.61		$	0.64		$	10.61		$	4.03
Operating earnings (1) (2)					$	0.50		$	0.56		$	3.15		$	2.27

(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 $8.8 million on a combined ratio⁽¹⁾ of 97.0.
• 13% increase in gross premiums written.
• 19% increase in net investment income.
• Net earnings include $437.7 million ($9.56 per diluted share) related to the sale of Maui Jim, Inc.
• Favorable development in prior years’ loss reserves, resulting in a $29.0 million net increase in underwriting income.
• Losses from third quarter hurricanes, resulting in a $34.8 million net decrease in underwriting income.
• Book value per share of $30.72, an increase of 16% (inclusive of dividends) from year-end 2021.

“After a fairly quiet start to the storm season, Hurricane Ian had an impact on our third quarter results,” said RLI Corp. President & CEO Craig Kliethermes. “Our thoughts are with all who have been affected by Ian, and I want to acknowledge the outstanding work our associates are doing to help our policyholders recover. Despite the sizable catastrophe losses related to this event, RLI produced an underwriting profit during the quarter. We also experienced continued growth across all three product segments. It is our financial strength that allows us to fulfill our promise to help restore our customers’ businesses and livelihoods following catastrophic events, and we remain focused on delivering on this commitment.”

Underwriting Income

RLI achieved $8.8 million of underwriting income in the third quarter of 2022 on a 97.0 combined ratio, compared to $13.7 million on a 94.6 combined ratio in 2021.

Results for the third quarter of both years include favorable development in prior years’ loss reserves, which resulted in a $29.0 million and $25.1 million net increase to underwriting income for 2022 and 2021, respectively. The favorable development in 2022 was offset by a $34.8 million net reduction to underwriting income for hurricane losses, compared to $29.8 million of hurricane and storm losses in 2021.

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

Underwriting Income (Loss)(1)											Combined Ratio(1)
(in millions)		2022				2021							2022		2021
Casualty		$	11.3			$	22.9				Casualty		93.7		85.9
Property			(8.3	)			(16.5	)			Property		110.3		127.2
Surety			5.8				7.3				Surety		81.4		75.3
Total		$	8.8			$	13.7				Total		97.0		94.6

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 19.2% to $21.3 million, compared to the same period in 2021. The investment portfolio’s total return was -3.4% for the quarter and -13.5% for the nine months ended September 30, 2022.

RLI’s comprehensive earnings was $358.6 million for the quarter ($7.84 per share), compared to $17.0 million ($0.37 per share) for the same quarter 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 (loss) of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was -$18.0 million for the quarter, primarily due to transaction related expenses from the sale of the company. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $2.9 million. Comparatively, for the third quarter of 2021, equity in earnings of unconsolidated investees from Maui Jim and Prime was $5.4 million and $4.4 million, respectively.

Dividends Paid in Third Quarter of 2022

On September 20, 2022, the company paid a regular quarterly dividend of $0.26 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $513 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 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

As previously announced, RLI completed the sale of its minority interest in Maui Jim. RLI’s pre-tax proceeds from the sale was $686.6 million, and remains subject to customary post-closing working capital and other adjustments. The impact of the sale on RLI’s financial statements was a $437.7 million increase to net earnings.

At 10 a.m. central daylight time (CDT) tomorrow, October 20, 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/974954525.

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								Nine Months Ended
		September 30,								September 30,
(Dollars in millions, except per share amounts)		2022				2021				2022				2021
Favorable development in casualty prior years' reserves		$	28.2			$	26.4			$	72.9			$	83.8
Favorable development in property prior years' reserves		$	3.3			$	0.5			$	20.8			$	8.4
Favorable development in surety prior years' reserves		$	1.8			$	2.5			$	9.3			$	2.6
Net incurred losses related to:
2022 storms		$	—			$	—			$	(5.0	)		$	—
2022 hurricanes		$	(40.0	)		$	—			$	(40.0	)		$	—
2021 and prior events		$	—			$	(34.9	)		$	—			$	(56.9	)
		Operating Earnings Per Share
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2022				2021				2022				2021
Operating Earnings Per Share(1) (2)		$	0.50			$	0.56			$	3.15			$	2.27
Specific items included in operating earnings per share:(3) (4)
Net favorable development in casualty prior years' reserves		$	0.44			$	0.40			$	1.11			$	1.30
Net favorable development in property prior years' reserves		$	0.04			$	—			$	0.31			$	0.09
Net favorable development in surety prior years' reserves		$	0.02			$	0.03			$	0.13			$	0.01
Net incurred losses related to:
2022 storms		$	—			$	—			$	(0.08	)		$	—
2022 hurricanes		$	(0.60	)		$	—			$	(0.60	)		$	—
2021 and prior events		$	—			$	(0.51	)		$	—			$	(0.84	)

(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.

RLI CORP 2022 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		Three Months Ended September 30,												Nine Months Ended September 30,
SUMMARIZED INCOME STATEMENT DATA:		2022				2021				% Change				2022					2021					% Change
Net premiums earned		$	291,468			$	253,389			15.0		%		$	843,430				$	722,984				16.7		%
Net investment income			21,270				17,844			19.2		%			57,625					50,929				13.1		%
Net realized gains			573,170				1,829			NM					591,562					52,442				NM
Net unrealized gains (losses) on equity securities			(26,414	)			(2,592	)		NM					(155,218	)				29,526				NM
Consolidated revenue		$	859,494			$	270,470			NM				$	1,337,399				$	855,881				56.3		%
Loss and settlement expenses			165,089				143,656			14.9		%			388,527					355,574				9.3		%
Policy acquisition costs			96,977				80,449			20.5		%			271,879					232,674				16.8		%
Insurance operating expenses			20,606				15,560			32.4		%			58,794					54,504				7.9		%
Interest expense on debt			2,013				1,906			5.6		%			6,034					5,711				5.7		%
General corporate expenses			2,755				2,505			10.0		%			8,553					9,533				(10.3	)	%
Total expenses		$	287,440			$	244,076			17.8		%		$	733,787				$	657,996				11.5		%
Equity in earnings (loss) of unconsolidated investees			(17,352	)			9,043			NM					3,061					29,407				(89.6	)	%
Earnings before income taxes		$	554,702			$	35,437			NM				$	606,673				$	227,292				166.9		%
Income tax expense			114,809				6,194			NM					121,096					43,222				180.2		%
Net earnings(3)		$	439,893			$	29,243			NM				$	485,577				$	184,070				163.8		%
Other comprehensive earnings (loss), net of tax			(81,248	)			(12,240	)		NM					(294,392	)				(41,810	)			NM
Comprehensive earnings		$	358,645			$	17,003			NM				$	191,185				$	142,260				NM
Operating earnings(1):
Net earnings(3)		$	439,893			$	29,243			NM				$	485,577				$	184,070				163.8		%
Less:
Net realized gains			(573,170	)			(1,829	)		NM					(591,562	)				(52,442	)			NM
Income tax on realized gains			121,199				385			NM					125,061					11,013				NM
Net unrealized (gains) losses on equity securities			26,414				2,592			NM					155,218					(29,526	)			NM
Income tax on unrealized gains (losses) on equity securities			(5,547	)			(544	)		NM					(32,596	)				6,200				NM
Equity in (earnings) loss of Maui Jim			17,993				(5,376	)		NM					3,121					(19,691	)			NM
Income tax on equity in earnings (loss) of Maui Jim			(3,779	)			1,129			NM					(655	)				4,135				NM
Operating earnings(2)		$	23,004			$	25,600			(10.1	)	%		$	144,164				$	103,759				38.9		%
Return on Equity:
Net earnings (trailing four quarters)															47.8		%			22.8		%
Comprehensive earnings (trailing four quarters)															22.2		%			19.7		%
Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)			45,775				45,689								45,775					45,714
Net earnings per share(2)		$	9.61			$	0.64			NM				$	10.61				$	4.03				163.3		%
Less:
Net realized gains			(12.53	)			(0.04	)		NM					(12.93	)				(1.15	)			NM
Income tax on realized gains			2.65				0.01			NM					2.73					0.24				NM
Net unrealized (gains) losses on equity securities			0.58				0.05			NM					3.39					(0.65	)			NM
Income tax on unrealized gains (losses) on equity securities			(0.12	)			(0.01	)		NM					(0.71	)				0.14				NM
Equity in (earnings) loss of Maui Jim			0.39				(0.11	)		NM					0.07					(0.43	)			NM
Income tax on equity in earnings (loss) of Maui Jim			(0.08	)			0.02			NM					(0.01	)				0.09				NM
Operating earnings per share(1)(2)		$	0.50			$	0.56			(10.7	)	%		$	3.15				$	2.27				38.8		%
Comprehensive earnings per share		$	7.84			$	0.37			NM				$	4.18				$	3.11				34.4		%
Cash dividends per share - ordinary		$	0.26			$	0.25			4.0		%		$	0.77				$	0.74				4.1		%
Net Cash Flow provided by Operations		$	112,241			$	115,932			(3.2	)	%		$	282,886				$	280,441				0.9		%

(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 $437.7 million related to the sale of Maui Jim, which was completed in the third quarter of 2022.
NM = Not Meaningful

RLI CORP 2022 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		September 30,			December 31,
		2022			2021			% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value		$	2,452,039		$	2,409,887		1.7		%
(amortized cost - $2,753,631 at 9/30/22)
(amortized cost - $2,346,267 at 12/31/21)
Equity securities, at fair value			462,988			613,776		(24.6	)	%
(cost - $327,964 at 9/30/22)
(cost - $324,501 at 12/31/21)
Other invested assets			48,837			50,501		(3.3	)	%
Cash and cash equivalents			723,511			88,804		NM
Total investments and cash		$	3,687,375		$	3,162,968		16.6		%
Premiums and reinsurance balances receivable			201,781			167,279		20.6		%
Ceded unearned premiums			137,346			130,916		4.9		%
Reinsurance balances recoverable on unpaid losses			770,858			608,086		26.8		%
Deferred policy acquisition costs			128,979			103,553		24.6		%
Property and equipment			50,385			52,161		(3.4	)	%
Investment in unconsolidated investees			58,105			171,311		(66.1	)	%
Goodwill and intangibles			53,562			53,562		0.0		%
Income taxes - deferred			51,791			—		NM
Other assets			71,483			58,466		22.3		%
Total assets		$	5,211,665		$	4,508,302		15.6		%
Unpaid losses and settlement expenses		$	2,322,737		$	2,043,555		13.7		%
Unearned premiums			786,485			680,444		15.6		%
Reinsurance balances payable			50,349			42,851		17.5		%
Funds held			100,547			89,773		12.0		%
Income taxes - current			132,446			3,092		NM
Income taxes - deferred			—			83,509		(100.0	)	%
Current portion of long-term debt			149,816			—		NM
Long-term debt			50,000			199,676		(75.0	)	%
Accrued expenses			81,066			98,274		(17.5	)	%
Other liabilities			144,226			37,767		NM
Total liabilities		$	3,817,672		$	3,278,941		16.4		%
Shareholders' equity			1,393,993			1,229,361		13.4		%
Total liabilities & shareholders' equity		$	5,211,665		$	4,508,302		15.6		%
OTHER DATA:
Common shares outstanding (in 000's)			45,378			45,289
Book value per share		$	30.72		$	27.14		13.2		%
Closing stock price per share		$	102.38		$	112.10		(8.7	)	%
Statutory surplus		$	1,195,898		$	1,240,649		(3.6	)	%

RLI CORP 2022 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
2022
Gross premiums written			$	240,366					$	126,083						$	37,301					$	403,750
Net premiums written				192,615						90,961							35,256						318,832
Net premiums earned				179,615						80,844							31,009						291,468
Net loss & settlement expenses				100,714		56.1	%			59,347			73.4	%			5,028		16.2	%			165,089		56.6	%
Net operating expenses				67,572		37.6	%			29,805			36.9	%			20,206		65.2	%			117,583		40.4	%
Underwriting income (loss)(1)			$	11,329		93.7	%		$	(8,308	)		110.3	%		$	5,775		81.4	%		$	8,796		97.0	%
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	%
Nine Months Ended September 30,
						GAAP							GAAP						GAAP						GAAP
			Casualty			Ratios			Property				Ratios			Surety			Ratios			Total			Ratios
2022
Gross premiums written			$	704,502					$	371,529						$	105,667					$	1,181,698
Net premiums written				569,475						273,312							100,254						943,041
Net premiums earned				528,494						222,974							91,962						843,430
Net loss & settlement expenses				278,813		52.8	%			100,187			44.9	%			9,527		10.4	%			388,527		46.1	%
Net operating expenses				189,263		35.8	%			82,514			37.0	%			58,896		64.0	%			330,673		39.2	%
Underwriting income (loss)(1)			$	60,418		88.6	%		$	40,273			81.9	%		$	23,539		74.4	%		$	124,230		85.3	%
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	%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20221019005876/en/

Aaron Diefenthaler

Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

Source: RLI Corp.

FAQ

What were RLI's earnings for Q3 2022?

RLI Corp. reported net earnings of $439.9 million or $9.61 per share for Q3 2022.

How did RLI's gross premiums perform in Q3 2022?

RLI experienced a 13% increase in gross premiums written compared to the same quarter in 2021.

What impact did Hurricane Ian have on RLI's earnings?

Hurricane Ian resulted in a $34.8 million net decrease in underwriting income for RLI in Q3 2022.

What was RLI's operating earnings per share in Q3 2022?

RLI's operating earnings for Q3 2022 were $23.0 million, or $0.50 per share.

How much did RLI's book value per share increase in 2022?

RLI's book value per share increased by 16% from year-end 2021.