RLI Reports First Quarter 2021 Results

PEORIA, Ill.--()--RLI Corp. (NYSE: RLI) – RLI Corp. reported first quarter 2021 net earnings of $73.0 million ($1.60 per share), compared to a net loss of $61.3 million (-$1.36 per share) for the first quarter of 2020. Operating earnings(1) for the first quarter of 2021 were $39.6 million ($0.87 per share), compared to $29.8 million ($0.66 per share) for the same period in 2020.

 

First Quarter

 

Earnings Per Diluted Share

2021

 

 

2020

 

Net earnings (loss)

$

1.60

 

 

$

(1.36

)

Operating earnings (1)

$

0.87

 

 

$

0.66

 

 

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

Highlights for the quarter included:

  • Underwriting income(1) of $29.9 million on a combined ratio(1) of 86.9.
  • Gross premiums written increased 20%, up 10% when adjusting for the return of premium to transportation customers impacted by the pandemic in 2020.
  • Net favorable development in prior years’ loss reserves, resulting in a $31.4 million net increase in underwriting income.
  • Losses from winter storms, resulting in a $13.6 million net decrease in underwriting income.
  • Book value per share of $25.55, an increase of 2% (inclusive of dividends) from year-end 2020.

“We are proud to report excellent first quarter results,” said RLI Corp. Chairman and CEO Jonathan E. Michael. “Despite an active winter storm season, we achieved an 87 combined ratio while continuing to find growth opportunities across our portfolio. Premium volume was up over last year in all three segments, primarily driven by rate increases and expanded distribution. Looking ahead, we will continue to build on our 25 consecutive years of underwriting profitability and focus on growing book value, which is possible through the dedication of our employee owners.”

Underwriting Income

RLI achieved $29.9 million of underwriting income in the first quarter of 2021 on an 86.9 combined ratio, compared to $17.2 million on a 92.0 combined ratio in 2020.

Results for both years include net favorable development in prior years’ loss reserves, which totaled $31.4 million and $12.9 million for 2021 and 2020, respectively.

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

 

$

24.9

 

 

$

(1.3

)

 

Casualty

 

 

83.3

 

 

 

100.9

 

Property

 

 

(1.0

)

 

 

9.9

 

 

Property

 

 

101.9

 

 

 

77.7

 

Surety

 

 

6.0

 

 

 

8.6

 

 

Surety

 

 

78.5

 

 

 

68.9

 

Total

 

$

29.9

 

 

$

17.2

 

 

Total

 

 

86.9

 

 

 

92.0

 

 

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

Other Income

Net investment income for the quarter decreased 7.6% to $16.4 million, compared to the same period in 2020. The investment portfolio’s total return was 0.2% for the quarter.

RLI’s comprehensive earnings were $28.3 million for the quarter ($0.62 per share), compared to a comprehensive loss of $74.3 million (-$1.65 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 $3.7 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $3.7 million. Comparatively, for the first quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was $2.6 million and $1.9 million, respectively.

Dividends Paid in the First Quarter of 2021

On March 19, 2021, the company paid a regular quarterly dividend of $0.24 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $495 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

At 10 a.m. central daylight time (CDT) tomorrow, April 22, 2021, 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 https://edge.media-server.com/mmc/p/32ig7qpn.

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 45 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 March 31,

 

(Dollars in thousands, except per share amounts)

 

2021

 

 

2020

 

Net favorable development in casualty prior years' reserves

 

$

28.2

 

 

$

6.4

 

Net favorable development in property prior years' reserves

 

$

6.1

 

 

$

4.8

 

Net favorable development in surety prior years' reserves

 

$

2.8

 

 

$

4.0

 

 

 

 

 

 

 

 

 

 

 

 

Net incurred losses related to:

 

 

 

 

 

 

 

 

 

2021 storms

 

$

(16.0

)

 

$

-

 

 

2020 and prior events

 

$

-

 

 

$

(0.5

)

 

 

 

 

Operating Earnings Per Share

 

 

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2021

 

 

2020

 

Operating Earnings Per Share(1)

$

0.87

 

 

$

0.66

 

 

 

 

 

 

 

 

 

 

 

 

Specific items included in operating earnings per share:(2) (3)

 

 

 

 

 

 

 

 

Net favorable development in casualty prior years' reserves

 

$

0.44

 

 

$

0.12

 

 

Net favorable development in property prior years' reserves

 

$

0.08

 

 

$

0.05

 

 

Net favorable development in surety prior years' reserves

 

$

0.03

 

 

$

0.06

 

 

 

 

 

 

 

 

 

 

 

 

 

Net incurred losses related to:

 

 

 

 

 

 

 

 

 

 

2021 storms

$

(0.24

)

 

$

-

 

 

 

2020 and prior events

 

$

-

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

(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

2021 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

SUMMARIZED INCOME STATEMENT DATA:

 

 

2021

 

 

 

 

2020

 

 

 

% Change

Net premiums earned

 

$

228,595

 

 

 

$

215,582

 

 

 

 

6.0

 

%

Net investment income

 

 

16,424

 

 

 

 

17,778

 

 

 

 

(7.6

)

%

Net realized gains

 

 

14,150

 

 

 

 

15,152

 

 

 

 

(6.6

)

%

Net unrealized gains (losses) on equity securities

 

 

28,162

 

 

 

 

(130,395

)

 

 

NM

 

 

Consolidated revenue

 

$

287,331

 

 

 

$

118,117

 

 

 

 

143.3

 

%

Loss and settlement expenses

 

 

104,892

 

 

 

 

111,021

 

 

 

 

(5.5

)

%

Policy acquisition costs

 

 

74,990

 

 

 

 

72,941

 

 

 

 

2.8

 

%

Insurance operating expenses

 

 

18,796

 

 

 

 

14,381

 

 

 

 

30.7

 

%

Interest expense on debt

 

 

1,901

 

 

 

 

1,897

 

 

 

 

0.2

 

%

General corporate expenses

 

 

3,342

 

 

 

 

1,755

 

 

 

 

90.4

 

%

Total expenses

 

$

203,921

 

 

 

$

201,995

 

 

 

 

1.0

 

%

Equity in earnings of unconsolidated investees

 

 

6,424

 

 

 

 

4,514

 

 

 

 

42.3

 

%

Earnings (loss) before income taxes

 

$

89,834

 

 

 

$

(79,364

)

 

 

NM

 

 

Income tax expense (benefit)

 

 

16,822

 

 

 

 

(18,097

)

 

 

NM

 

 

Net earnings (loss)

 

$

73,012

 

 

 

$

(61,267

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive earnings (loss), net of tax

 

 

(44,747

)

 

 

 

(13,031

)

 

 

 

243.4

 

%

Comprehensive earnings (loss)

 

$

28,265

 

 

 

$

(74,298

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating earnings(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$

73,012

 

 

 

$

(61,267

)

 

 

NM

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

 

(14,150

)

 

 

 

(15,152

)

 

 

 

(6.6

)

%

Income tax on realized gains

 

 

2,972

 

 

 

 

3,182

 

 

 

 

(6.6

)

%

Unrealized (gains) losses on equity securities

 

 

(28,162

)

 

 

 

130,395

 

 

 

NM

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

5,914

 

 

 

 

(27,383

)

 

 

NM

 

 

Operating earnings

 

$

39,586

 

 

 

$

29,775

 

 

 

 

33.0

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (trailing four quarters)

 

27.2

 

%

 

 

6.8

 

%

 

 

 

 

 

Comprehensive earnings (trailing four quarters)

 

29.5

 

%

 

9.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in 000's)

 

 

45,674

 

 

 

 

44,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) per share

 

$

1.60

 

 

 

$

(1.36

)

 

 

NM

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gains

 

 

(0.31

)

 

 

 

(0.34

)

 

 

 

(8.8

)

%

Income tax on realized gains

 

 

0.07

 

 

 

 

0.07

 

 

 

 

0.0

 

%

Unrealized (gains) losses on equity securities

 

 

(0.62

)

 

 

 

2.90

 

 

 

NM

 

 

Income tax on unrealized gains (losses) on equity securities

 

 

0.13

 

 

 

 

(0.61

)

 

 

NM

 

 

EPS from operations(1)

 

$

0.87

 

 

 

$

0.66

 

 

 

 

31.8

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive earnings (loss) per share

 

$

0.62

 

 

 

$

(1.65

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends per share - ordinary

 

$

0.24

 

 

 

$

0.23

 

 

 

 

4.3

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flow provided by (used in) Operations

 

$

60,287

 

 

 

$

(5,767

)

 

 

NM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

 

 

 

2021

 

 

 

2020

 

 

% Change

SUMMARIZED BALANCE SHEET DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income, at fair value

 

$

2,175,869

 

 

$

2,196,626

 

 

 

(0.9

)

%

(amortized cost - $2,096,852 at 3/31/21)

 

 

 

 

 

 

 

 

 

 

 

 

 

(amortized cost - $2,061,467 at 12/31/20)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities, at fair value

 

 

555,209

 

 

 

524,006

 

 

 

6.0

 

%

(cost - $298,926 at 3/31/21)

 

 

 

 

 

 

 

 

 

 

 

 

 

(cost - $293,190 at 12/31/20)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other invested assets

 

 

50,413

 

 

 

54,232

 

 

 

(7.0

)

%

Cash and cash equivalents

 

 

94,935

 

 

 

62,217

 

 

 

52.6

 

%

Total investments and cash

 

$

2,876,426

 

 

$

2,837,081

 

 

 

1.4

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums and reinsurance balances receivable

 

 

149,736

 

 

 

174,628

 

 

 

(14.3

)

%

Ceded unearned premiums

 

 

111,071

 

 

 

113,488

 

 

 

(2.1

)

%

Reinsurance balances recoverable on unpaid losses

 

 

454,921

 

 

 

443,729

 

 

 

2.5

 

%

Deferred policy acquisition costs

 

 

92,595

 

 

 

88,425

 

 

 

4.7

 

%

Property and equipment

 

 

50,470

 

 

 

51,406

 

 

 

(1.8

)

%

Investment in unconsolidated investees

 

 

134,314

 

 

 

128,382

 

 

 

4.6

 

%

Goodwill and intangibles

 

 

53,617

 

 

 

53,719

 

 

 

(0.2

)

%

Other assets

 

 

49,290

 

 

 

47,627

 

 

 

3.5

 

%

Total assets

 

$

3,972,440

 

 

$

3,938,485

 

 

 

0.9

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

$

1,795,275

 

 

$

1,750,049

 

 

 

2.6

 

%

Unearned premiums

 

 

590,364

 

 

 

586,386

 

 

 

0.7

 

%

Reinsurance balances payable

 

 

26,560

 

 

 

42,265

 

 

 

(37.2

)

%

Funds held

 

 

85,572

 

 

 

81,747

 

 

 

4.7

 

%

Income taxes - deferred

 

 

74,624

 

 

 

80,235

 

 

 

(7.0

)

%

Bonds payable, long-term debt

 

 

149,536

 

 

 

149,489

 

 

 

0.0

 

%

Accrued expenses

 

 

45,784

 

 

 

75,925

 

 

 

(39.7

)

%

Other liabilities

 

 

49,939

 

 

 

36,411

 

 

 

37.2

 

%

Total liabilities

 

$

2,817,654

 

 

$

2,802,507

 

 

 

0.5

 

%

Shareholders' equity

 

 

1,154,786

 

 

 

1,135,978

 

 

 

1.7

 

%

Total liabilities & shareholders' equity

 

$

3,972,440

 

 

$

3,938,485

 

 

 

0.9

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding (in 000's)

 

 

45,203

 

 

 

45,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per share

 

$

25.55

 

 

$

25.16

 

 

 

1.6

 

%

Closing stock price per share

 

$

111.57

 

 

$

104.15

 

 

 

7.1

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statutory surplus

 

$

1,187,640

 

 

$

1,121,592

 

 

 

5.9

 

%

RLI CORP

2021 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

 

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

 

 

 

 

GAAP

 

 

 

 

 

GAAP

 

 

 

 

 

GAAP

 

 

 

 

Casualty

 

 

Ratios

 

Property

 

 

Ratios

 

Surety

 

 

Ratios

 

Total

 

 

Ratios

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

 

$

188,896

 

 

 

 

 

 

 

$

74,537

 

 

 

 

 

 

 

$

31,462

 

 

 

 

 

 

 

$

294,895

 

 

 

 

 

 

Net premiums written

 

 

 

148,891

 

 

 

 

 

 

 

 

55,986

 

 

 

 

 

 

 

 

30,112

 

 

 

 

 

 

 

 

234,989

 

 

 

 

 

 

Net premiums earned

 

 

 

148,770

 

 

 

 

 

 

 

 

51,642

 

 

 

 

 

 

 

 

28,183

 

 

 

 

 

 

 

 

228,595

 

 

 

 

 

 

Net loss & settlement expenses

 

 

 

70,247

 

 

 

47.2

 

%

 

 

31,637

 

 

 

61.3

 

%

 

 

3,008

 

 

 

10.7

 

%

 

 

104,892

 

 

 

45.9

 

%

Net operating expenses

 

 

 

53,656

 

 

 

36.1

 

%

 

 

21,010

 

 

 

40.6

 

%

 

 

19,120

 

 

 

67.8

 

%

 

 

93,786

 

 

 

41.0

 

%

Underwriting income (loss)(1)

 

 

$

24,867

 

 

 

83.3

 

%

 

$

(1,005

)

 

 

101.9

 

%

 

$

6,055

 

 

 

78.5

 

%

 

$

29,917

 

 

 

86.9

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

 

$

159,236

 

 

 

 

 

 

 

$

56,721

 

 

 

 

 

 

 

$

29,875

 

 

 

 

 

 

 

$

245,832

 

 

 

 

 

 

Net premiums written

 

 

 

127,177

 

 

 

 

 

 

 

 

41,427

 

 

 

 

 

 

 

 

28,499

 

 

 

 

 

 

 

 

197,103

 

 

 

 

 

 

Net premiums earned

 

 

 

143,420

 

 

 

 

 

 

 

 

44,348

 

 

 

 

 

 

 

 

27,814

 

 

 

 

 

 

 

 

215,582

 

 

 

 

 

 

Net loss & settlement expenses

 

 

 

94,265

 

 

 

65.7

 

%

 

 

15,971

 

 

 

36.0

 

%

 

 

785

 

 

 

2.8

 

%

 

 

111,021

 

 

 

51.5

 

%

Net operating expenses

 

 

 

50,478

 

 

 

35.2

 

%

 

 

18,469

 

 

 

41.7

 

%

 

 

18,375

 

 

 

66.1

 

%

 

 

87,322

 

 

 

40.5

 

%

Underwriting income (loss)(1)

 

 

$

(1,323

)

 

 

100.9

 

%

 

$

9,908

 

 

 

77.7

 

%

 

$

8,654

 

 

 

68.9

 

%

 

$

17,239

 

 

 

92.0

 

%

(1)

See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

Contacts

Aaron Diefenthaler
Vice President, Chief Investment Officer & Treasurer
309-693-5846
Aaron.Diefenthaler@rlicorp.com

Release Summary

RLI reported Q1 2021 net earnings of $73.0 million ($1.60 per share) and operating earnings for of $39.6 million ($0.87 per share).

Contacts

Aaron Diefenthaler
Vice President, Chief Investment Officer & Treasurer
309-693-5846
Aaron.Diefenthaler@rlicorp.com