PEORIA, Ill.--(BUSINESS WIRE)--RLI Corp. (NYSE: RLI) – RLI Corp. reported second quarter 2014 operating earnings of $28.9 million ($0.66 per share), compared to $27.5 million ($0.63 per share) for the second quarter of 2013. For the six months ended June 30, 2014, operating earnings were $53.7 million ($1.23 per share) compared to $49.9 million ($1.15 per share) for the same period in 2013.
| Second Quarter | ||
| Earnings Per Diluted Share | 2014 | 2013 |
| Operating earnings (1) | $0.66 | $0.63 |
| Net earnings | $0.82 | $0.69 |
| (1) See discussion below of non-GAAP financial measures. | ||
Highlights for the quarter included:
- Combined ratio of 84.2, resulting in underwriting income of $26.6 million.
- 3% growth in gross premiums written and 4% growth in net premiums written.
- $22.3 million net increase in underwriting income resulting from favorable development in prior years’ loss reserves.
- $6.8 million net decrease in underwriting income resulting from 2014 spring storms.
- Investment income of $14.0 million, up 9% from the same period last year.
- Book value per share of $21.37, an increase of 11% from year end 2013.
“We are pleased to report solid results for the quarter, including an 84.2 combined ratio, and 11% growth in book value per share for the year,” said RLI Corp. Chairman & CEO Jonathan E. Michael. “Our strong performance and book value growth were driven by consistent underwriting results across all of our segments and positive returns in the investment portfolio.”
“We continuously look for ways to enhance the product offerings and service we provide to our customers. Our company is well-positioned to take advantage of opportunities that add value for our customers and align with our business,” said Michael.
Underwriting income
RLI achieved $26.6 million of underwriting income in the second quarter of 2014 on an 84.2 combined ratio, compared to $25.6 million of underwriting income on an 83.4 combined ratio in the same quarter for 2013. Results for 2014 include $22.3 million in favorable development in prior years’ loss reserves, compared to $24.6 million in favorable development in prior years’ loss reserves in 2013. Partially offsetting the favorable results in both periods were spring storm losses of $6.8 million in 2014 and $8.8 million in 2013.
The following table highlights underwriting income and combined ratios by segment.
| Underwriting Income (1) | Second Quarter | Combined Ratio | Second Quarter | ||||||||||||
| (in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
| Casualty | $16.5 | $14.6 | Casualty | 82.5 | 81.3 | ||||||||||
| Property | 2.3 | 2.2 | Property | 95.3 | 95.6 | ||||||||||
| Surety | 7.8 | 8.8 | Surety | 69.3 | 67.2 | ||||||||||
| Total | $26.6 | $25.6 | Total | 84.2 | 83.4 | ||||||||||
| (1) See discussion below of non-GAAP financial measures. | |||||||||||||||
RLI reported year-to-date underwriting income of $49.1 million representing an 85.1 combined ratio through June 30, 2014, versus $45.4 million of underwriting income representing an 84.8 combined ratio for the same period last year.
Other income
RLI’s net investment income for the quarter increased 8.8% to $14.0 million, compared to the same period in 2013. For the six-month period ended June 30, 2014, investment income was $27.6 million versus $25.7 million for the same period in 2013. The investment portfolio’s total return was 3.0% for the quarter. The bond portfolio’s return was 2.3% in the quarter, while the equity portfolio gained 5.4%. Through six months, the investment portfolio’s total return was 5.8% with the bond portfolio returning 4.7% and equities returning 9.3%.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $55.7 million ($1.27 per share) for the quarter compared to -$3.6 million (-$0.08 per share) for the same quarter in 2013. Year-to-date comprehensive earnings were $102.4 million ($2.34 per share), compared to $38.8 million ($0.90 per share) for the same period last year.
During the quarter, equity in earnings of unconsolidated investees was $5.9 million compared to $4.6 million from the same period last year. Results for the current year are related to Maui Jim, Inc. ($5.7 million), a producer of premium sunglasses, and Prime Holdings Insurance Services, Inc. ($0.2 million), a specialty E&S insurance company. For the six-month period ended June 30, 2014, equity in earnings of unconsolidated investees was $9.3 million versus $8.1 million in 2013. Prior year figures reflect only Maui Jim results, as our equity investment in Prime occurred in the first quarter of 2014.
Dividend paid in the second quarter 2014
On June 20, 2014, the Company paid a dividend of $0.18 per share, a $0.01 increase over the prior quarter. RLI has paid dividends for 152 consecutive quarters and increased dividends in each of the last 39 years.
Non-GAAP measures
Underwriting income, operating earnings, earnings per share (EPS) from operations and other per share items are non-GAAP financial measures, and we believe that investors’ understanding of RLI’s core operating performance is enhanced by our disclosure of these financial measures. Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs, and insurance operating expenses from net premium earned. Operating earnings and EPS from operations consist of our net earnings adjusted by net realized investment gains/(losses) and taxes related to net realized gains/(losses). Our definitions of these items may not be comparable to the definitions used by other companies. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. All earnings per share data are calculated using fully diluted shares. Combined ratio refers to a GAAP combined ratio.
Other news
During the second quarter, the Company’s A+ “Superior” financial strength rating was affirmed by A.M. Best for the following RLI insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company, RLI Indemnity Company and Contractors Bonding and Insurance Company. CBIC’s inclusion as a member of the RLI Group rating recognizes the strategic importance of the company and its successful integration into the RLI Group.
At 10 a.m. central time (CT) tomorrow, July 17, 2014, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion through the Internet at http://www.media-server.com/m/p/koyd4qb9.
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, 2013.
RLI, a specialty insurance company, offers a diversified portfolio of property and casualty coverages and surety bonds serving niche or underserved markets. RLI operates in all 50 states from office locations across the country. RLI’s insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company, RLI Indemnity Company and Contractors Bonding and Insurance Company – are rated A+ “Superior” by A.M. Best Company.
For additional information, contact Aaron Jacoby, Vice President, Corporate Development at 309-693-5880 or at aaron.jacoby@rlicorp.com or visit our website at www.rlicorp.com.
Supplemental disclosure regarding the earnings impact of specific items:
| Operating Earnings Per Share | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
| 2nd Qtr | 2nd Qtr | 6 Mos. | 6 Mos. | ||||||||||||||||
| Operating Earnings Per Share | $ | 0.66 | $ | 0.63 | $ | 1.23 | $ | 1.15 | |||||||||||
| Specific items included in operating earnings per share: (1) (2) | |||||||||||||||||||
| --- Favorable development in casualty prior years' reserves | $ | 0.30 | $ | 0.27 | $ | 0.43 | $ | 0.42 | |||||||||||
| --- Favorable (unfavorable) development in property prior years' reserves | $ | (0.01 | ) | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||||
| --- Favorable development in surety prior years' reserves | $ | 0.05 | $ | 0.06 | $ | 0.09 | $ | 0.07 | |||||||||||
| --- Catastrophe impact | |||||||||||||||||||
| --- 2014 spring storms | $ | (0.10 | ) | $ | - | $ | (0.10 | ) | $ | - | |||||||||
| --- 2013 and prior events | $ | (0.01 | ) | $ | (0.11 | ) | $ | - | $ | (0.11 | ) | ||||||||
| (1) | Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses. | |
| (2) | Reserve development reflects changes from previously estimated losses. | |
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| RLI CORP. | ||||||||||||||||||||||||
| 2014 FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||
|
SUMMARIZED INCOME STATEMENT DATA: |
||||||||||||||||||||||||
| Net premiums earned | $ | 168,604 | $ | 154,553 | 9.1 | % | $ | 329,736 | $ | 298,704 | 10.4 | % | ||||||||||||
| Net investment income | 13,982 | 12,847 | 8.8 | % | 27,564 | 25,733 | 7.1 | % | ||||||||||||||||
| Net realized investment gains | 10,431 | 3,742 | 178.8 | % | 16,932 | 7,426 | 128.0 | % | ||||||||||||||||
| Consolidated revenue | 193,017 | 171,142 | 12.8 | % | 374,232 | 331,863 | 12.8 | % | ||||||||||||||||
| Loss and settlement expenses | 73,345 | 65,607 | 11.8 | % | 144,361 | 127,055 | 13.6 | % | ||||||||||||||||
| Policy acquisition costs | 55,156 | 51,502 | 7.1 | % | 110,207 | 101,838 | 8.2 | % | ||||||||||||||||
| Other insurance expenses | 13,534 | 11,885 | 13.9 | % | 26,067 | 24,454 | 6.6 | % | ||||||||||||||||
| Interest expense on debt | 1,874 | 1,513 | 23.9 | % | 3,725 | 3,025 | 23.1 | % | ||||||||||||||||
| General corporate expenses | 2,549 | 1,692 | 50.7 | % | 4,747 | 4,078 | 16.4 | % | ||||||||||||||||
| Total expenses | 146,458 | 132,199 | 10.8 | % | 289,107 | 260,450 | 11.0 | % | ||||||||||||||||
| Equity in earnings of | ||||||||||||||||||||||||
| unconsolidated investees | 5,864 | 4,633 | 26.6 | % | 9,289 | 8,132 | 14.2 | % | ||||||||||||||||
| Earnings before income taxes | 52,423 | 43,576 | 20.3 | % | 94,414 | 79,545 | 18.7 | % | ||||||||||||||||
| Income tax expense | 16,698 | 13,674 | 22.1 | % | 29,720 | 24,796 | 19.9 | % | ||||||||||||||||
| Net earnings | $ | 35,725 | $ | 29,902 | 19.5 | % | $ | 64,694 | $ | 54,749 | 18.2 | % | ||||||||||||
| Other comprehensive earnings (loss), net of tax | 19,934 | (33,481 | ) | - | 37,671 | (15,928 | ) | - | ||||||||||||||||
| Comprehensive earnings (loss) | $ | 55,659 | $ | (3,579 | ) | - | $ | 102,365 | $ | 38,821 | 163.7 | % | ||||||||||||
| Operating earnings: (1) | ||||||||||||||||||||||||
| Net earnings | $ | 35,725 | $ | 29,902 | 19.5 | % | $ | 64,694 | $ | 54,749 | 18.2 | % | ||||||||||||
|
Less: Realized investment gains, net of tax |
6,780 | 2,432 | 178.8 | % | 11,005 | 4,827 | 128.0 | % | ||||||||||||||||
| Operating earnings | $ | 28,945 | $ | 27,470 | 5.4 | % | $ | 53,689 | $ | 49,922 | 7.5 | % | ||||||||||||
| Return on Equity: | ||||||||||||||||||||||||
| Net earnings (trailing four quarters) | 15.8 | % | 12.5 | % | ||||||||||||||||||||
| Comprehensive earnings (trailing four quarters) | 21.3 | % | 11.7 | % | ||||||||||||||||||||
| Per Share Data | ||||||||||||||||||||||||
|
Diluted: |
||||||||||||||||||||||||
| Weighted average shares outstanding (in 000's) | 43,688 | 43,341 | 43,669 | 43,268 | ||||||||||||||||||||
| EPS from operations (1) | $ | 0.66 | $ | 0.63 | 4.8 | % | $ | 1.23 | $ | 1.15 | 7.0 | % | ||||||||||||
| Realized gains, net of tax | 0.16 | 0.06 | 166.7 | % | 0.25 | 0.12 | 108.3 | % | ||||||||||||||||
| Net earnings per share | $ | 0.82 | $ | 0.69 | 18.8 | % | $ | 1.48 | $ | 1.27 | 16.5 | % | ||||||||||||
| Comprehensive earnings (loss) per share | $ | 1.27 | $ | (0.08 | ) | - | $ | 2.34 | $ | 0.90 | 160.0 | % | ||||||||||||
| Cash dividends per share | $ | 0.18 | $ | 0.17 | 5.9 | % | $ | 0.35 | $ | 0.33 | 6.1 | % | ||||||||||||
| Net Cash Flow provided by Operations | $ | 40,535 | $ | 33,109 | 22.4 | % | $ | 38,528 | $ | 26,781 | 43.9 | % | ||||||||||||
| (1) See discussion above of non-GAAP financial measures. | ||||||||||||||||||||||||
| RLI CORP. | ||||||||||||
| 2014 FINANCIAL HIGHLIGHTS | ||||||||||||
| (Unaudited) | ||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||
| June 30, | December 31, | |||||||||||
| 2014 | 2013 | % Change | ||||||||||
|
SUMMARIZED BALANCE SHEET DATA: |
||||||||||||
| Fixed income | $ | 1,535,272 | $ | 1,440,703 | 6.6 | % | ||||||
| (amortized cost - $1,486,276 at 6/30/14) | ||||||||||||
| (amortized cost - $1,431,700 at 12/31/13) | ||||||||||||
| Equity securities | 436,462 | 418,654 | 4.3 | % | ||||||||
| (cost - $218,797 at 6/30/14) | ||||||||||||
| (cost - $218,848 at 12/31/13) | ||||||||||||
| Cash and cash equivalents | 45,723 | 62,701 | -27.1 | % | ||||||||
| Total investments and cash | 2,017,457 | 1,922,058 | 5.0 | % | ||||||||
| Premiums and reinsurance balances receivable | 203,499 | 152,509 | 33.4 | % | ||||||||
| Ceded unearned premiums | 72,396 | 60,407 | 19.8 | % | ||||||||
| Reinsurance recoverable on unpaid losses | 339,104 | 354,924 | -4.5 | % | ||||||||
| Deferred acquisition costs | 68,190 | 61,508 | 10.9 | % | ||||||||
| Property and equipment | 42,935 | 40,261 | 6.6 | % | ||||||||
| Investment in unconsolidated investees | 64,487 | 49,793 | 29.5 | % | ||||||||
| Goodwill and intangibles | 74,407 | 74,876 | -0.6 | % | ||||||||
| Other assets | 26,521 | 23,974 | 10.6 | % | ||||||||
| Total assets | $ | 2,908,996 | $ | 2,740,310 | 6.2 | % | ||||||
| Unpaid losses and settlement expenses | 1,127,073 | 1,129,433 | -0.2 | % | ||||||||
| Unearned premiums | 444,453 | 392,081 | 13.4 | % | ||||||||
| Reinsurance balances payable | 62,402 | 47,334 | 31.8 | % | ||||||||
| Funds held | 59,398 | 61,656 | -3.7 | % | ||||||||
| Long-term debt - bonds payable | 149,604 | 149,582 | 0.0 | % | ||||||||
| Income taxes - deferred | 81,963 | 57,801 | 41.8 | % | ||||||||
| Accrued expenses | 40,199 | 59,596 | -32.5 | % | ||||||||
| Other liabilities | 24,509 | 13,861 | 76.8 | % | ||||||||
| Total liabilities | 1,989,601 | 1,911,344 | 4.1 | % | ||||||||
| Shareholders' equity | 919,395 | 828,966 | 10.9 | % | ||||||||
| Total liabilities & shareholders' equity | $ | 2,908,996 | $ | 2,740,310 | 6.2 | % | ||||||
|
OTHER DATA |
||||||||||||
| Common shares outstanding (in 000's) | 43,024 | 42,982 | ||||||||||
| Book value per share | $ | 21.37 | $ | 19.29 | 10.8 | % | ||||||
| Closing stock price per share | $ | 45.78 | $ | 48.69 | -6.0 | % | ||||||
| Cash dividends per share - ordinary (annualized) | $ | 0.71 | $ | 0.67 | 6.0 | % | ||||||
| Cash dividends per share - special | $ | - | $ | 1.50 | - | |||||||
| Statutory Surplus | $ | 903,013 | $ | 859,221 | 5.1 | % | ||||||
| RLI CORP. | ||||||||||||||||||||||||||||||||
| 2014 FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||||||||||||
| UNDERWRITING SEGMENT DATA | ||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per share amounts) | ||||||||||||||||||||||||||||||||
|
Three Months Ended June 30, |
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| GAAP | GAAP | GAAP | GAAP | |||||||||||||||||||||||||||||
| Casualty | Ratios | Property | Ratios | Surety | Ratios | Total | Ratios | |||||||||||||||||||||||||
|
2014 |
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| Gross premiums written | $ | 132,283 | $ | 101,735 | $ | 30,152 | $ | 264,170 | ||||||||||||||||||||||||
| Net premiums written | 109,376 | 71,766 | 27,386 | 208,528 | ||||||||||||||||||||||||||||
| Net premiums earned | 94,360 | 48,791 | 25,453 | 168,604 | ||||||||||||||||||||||||||||
| Net loss & settlement expenses | 44,863 | 47.5 | % | 28,272 | 57.9 | % | 210 | 0.8 | % | 73,345 | 43.5 | % | ||||||||||||||||||||
| Net operating expenses | 33,030 | 35.0 | % | 18,226 | 37.4 | % | 17,434 | 68.5 | % | 68,690 | 40.7 | % | ||||||||||||||||||||
| Underwriting income | $ | 16,467 | 82.5 | % | $ | 2,293 | 95.3 | % | $ | 7,809 | 69.3 | % | $ | 26,569 | 84.2 | % | ||||||||||||||||
|
2013 |
||||||||||||||||||||||||||||||||
| Gross premiums written | $ | 123,486 | $ | 102,454 | $ | 30,100 | $ | 256,040 | ||||||||||||||||||||||||
| Net premiums written | 99,247 | 71,937 | 28,765 | 199,949 | ||||||||||||||||||||||||||||
| Net premiums earned | 78,372 | 49,619 | 26,562 | 154,553 | ||||||||||||||||||||||||||||
| Net loss & settlement expenses | 35,530 | 45.3 | % | 28,911 | 58.3 | % | 1,166 | 4.4 | % | 65,607 | 42.4 | % | ||||||||||||||||||||
| Net operating expenses | 28,228 | 36.0 | % | 18,486 | 37.3 | % | 16,673 | 62.8 | % | 63,387 | 41.0 | % | ||||||||||||||||||||
| Underwriting income | $ | 14,614 | 81.3 | % | $ | 2,222 | 95.6 | % | $ | 8,723 | 67.2 | % | $ | 25,559 | 83.4 | % | ||||||||||||||||
|
Six Months Ended June 30, |
||||||||||||||||||||||||||||||||
| GAAP | GAAP | GAAP | GAAP | |||||||||||||||||||||||||||||
| Casualty | Ratios | Property | Ratios | Surety | Ratios | Total | Ratios | |||||||||||||||||||||||||
|
2014 |
||||||||||||||||||||||||||||||||
| Gross premiums written | $ | 244,238 | $ | 159,888 | $ | 57,442 | $ | 461,568 | ||||||||||||||||||||||||
| Net premiums written | 201,024 | 115,425 | 53,670 | 370,119 | ||||||||||||||||||||||||||||
| Net premiums earned | 185,337 | 92,109 | 52,290 | 329,736 | ||||||||||||||||||||||||||||
| Net loss & settlement expenses | 97,482 | 52.6 | % | 43,670 | 47.4 | % | 3,209 | 6.1 | % | 144,361 | 43.8 | % | ||||||||||||||||||||
| Net operating expenses | 65,310 | 35.2 | % | 36,468 | 39.6 | % | 34,496 | 66.0 | % | 136,274 | 41.3 | % | ||||||||||||||||||||
| Underwriting income | $ | 22,545 | 87.8 | % | $ | 11,971 | 87.0 | % | $ | 14,585 | 72.1 | % | $ | 49,101 | 85.1 | % | ||||||||||||||||
|
2013 |
||||||||||||||||||||||||||||||||
| Gross premiums written | $ | 226,937 | $ | 166,474 | $ | 56,421 | $ | 449,832 | ||||||||||||||||||||||||
| Net premiums written | 181,744 | 117,529 | 53,642 | 352,915 | ||||||||||||||||||||||||||||
| Net premiums earned | 151,341 | 94,600 | 52,763 | 298,704 | ||||||||||||||||||||||||||||
| Net loss & settlement expenses | 76,825 | 50.8 | % | 44,045 | 46.6 | % | 6,185 | 11.7 | % | 127,055 | 42.5 | % | ||||||||||||||||||||
| Net operating expenses | 55,798 | 36.9 | % | 37,409 | 39.5 | % | 33,085 | 62.7 | % | 126,292 | 42.3 | % | ||||||||||||||||||||
| Underwriting income | $ | 18,718 | 87.7 | % | $ | 13,146 | 86.1 | % | $ | 13,493 | 74.4 | % | $ | 45,357 | 84.8 | % | ||||||||||||||||
