RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2023
net earnings of $13.5 million ($0.29 per share), compared to $439.9
million ($9.61 per share) for the third quarter of 2022, which
included $437.7 million from the sale of RLI’s investment in Maui
Jim, Inc.
Operating earnings(1)(2) for the third quarter of 2023 were
$28.3 million ($0.61 per share), compared to $23.0 million ($0.50
per share) for the same period in 2022.
Third Quarter
Year to Date
Earnings Per Diluted Share
2023
2022
2023
2022
Net earnings
$
0.29
$
9.61
$
4.12
$
10.61
Operating earnings (1) (2)
$
0.61
$
0.50
$
3.40
$
3.15
(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 $4.2 million on a combined ratio(1)
of 98.7.
- 11% increase in gross premiums written.
- 50% increase in net investment income.
- Favorable development in prior years’ loss reserves, resulting
in a $19.8 million net increase in underwriting income.
- Losses from Hawaiian wildfires, resulting in a $58.2 million
net decrease in underwriting income.
- Book value per share of $28.47, an increase of 13% (inclusive
of dividends) from year-end 2022.
“We have been working diligently to help our policyholders
recover from the devastating Hawaiian wildfires that occurred in
the quarter,” said RLI Corp. President & CEO Craig Kliethermes.
“This event contributed 17 points to our combined ratio. Despite
this impact, our diversified portfolio delivered underwriting
profitability and an 11% increase in gross premiums written. Growth
in investment income supported $0.61 per share of operating income,
while book value per share increased to $28.47. Recent catastrophes
reinforce RLI’s purpose to protect and serve policyholders in times
of need. I would like to thank our associate owners, and especially
our claim and Hawaii-based teams, for providing unparalleled
service to our insureds and agents.”
Underwriting Income
RLI achieved $4.2 million of underwriting income in the third
quarter of 2023 on a 98.7 combined ratio, compared to $8.8 million
on a 97.0 combined ratio in 2022.
Results for both years include favorable development in prior
years’ loss reserves, which resulted in a $19.8 million and $29.0
million net increase to underwriting income for 2023 and 2022,
respectively. The favorable development in 2023 was offset by a
$58.2 million net reduction to underwriting income for Hawaiian
wildfire losses, compared to $34.8 million of hurricane losses in
2022.
The following table highlights underwriting income and combined
ratios by segment for the third quarter.
Underwriting Income (Loss)(1)
Combined Ratio(1)
(in millions)
2023
2022
2023
2022
Casualty
$
18.7
$
11.3
Casualty
90.1
93.7
Property
(20.7
)
(8.3
)
Property
121.8
110.3
Surety
6.2
5.8
Surety
81.7
81.4
Total
$
4.2
$
8.8
Total
98.7
97.0
(1)
See discussion below: Non-GAAP and
Performance Measures.
Other Income
Net investment income for the quarter increased 50.3% to $32.0
million, compared to the same period in 2022. The investment
portfolio’s total return was -1.7% for the quarter and 2.2% for the
nine months ended September 30, 2023.
RLI’s comprehensive loss was $43.3 million for the quarter
(-$0.94 per share), compared to comprehensive earnings of $358.6
million ($7.84 per share) for the same quarter in 2022. In addition
to net earnings, comprehensive loss included after-tax unrealized
losses from the fixed income portfolio, due to rising interest
rates. Comprehensive earnings for 2022 were elevated from the sale
of RLI’s investment in Maui Jim.
Dividends Paid in Third Quarter of
2023
On September 20, 2023, the company paid a regular quarterly
dividend of $0.27 per share, the same amount as the prior quarter.
RLI’s cumulative dividends total more than $764 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
At 10 a.m. central daylight time (CDT) tomorrow, October 24,
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/461007055.
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
Nine Months Ended
September 30,
September 30,
(Dollars in millions, except per share
amounts)
2023
2022
2023
2022
Favorable development in casualty prior
years' reserves
$
22.1
$
28.2
$
67.0
$
72.9
Favorable (unfavorable) development in
property prior years' reserves
$
(1.9
)
$
3.3
$
14.3
$
20.8
Favorable development in surety prior
years' reserves
$
0.8
$
1.8
$
8.2
$
9.3
Net incurred losses related to:
2023 storms
$
(5.0
)
$
—
$
(27.0
)
$
—
Hawaiian wildfires
$
(51.6
)
$
—
$
(51.6
)
$
—
2022 and prior events
$
1.4
$
(40.0
)
$
4.5
$
(45.0
)
Reinstatement premium from Hawaiian
wildfires
$
(14.4
)
$
—
$
(14.4
)
$
—
Operating Earnings Per Share
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Operating Earnings Per Share(1) (2)
$
0.61
$
0.50
$
3.40
$
3.15
Specific items included in operating
earnings per share:(3) (4)
Net favorable development in casualty
prior years' reserves
$
0.33
$
0.44
$
1.00
$
1.11
Net favorable (unfavorable) development in
property prior years' reserves
$
(0.04
)
$
0.04
$
0.20
$
0.31
Net favorable development in surety prior
years' reserves
$
0.01
$
0.02
$
0.12
$
0.13
Net incurred losses related to:
2023 storms
$
(0.07
)
$
—
$
(0.40
)
$
—
Hawaiian wildfires (incurred loss and
reinstatement premium)
$
(0.97
)
$
—
$
(0.97
)
$
—
2022 and prior events
$
0.02
$
(0.60
)
$
0.06
$
(0.68
)
(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 September
30,
Nine Months Ended September
30,
SUMMARIZED INCOME
STATEMENT DATA:
2023
2022
% Change
2023
2022
% Change
Net premiums earned
$
318,409
$
291,468
9.2
%
$
948,412
$
843,430
12.4
%
Net investment income
31,963
21,270
50.3
%
87,835
57,625
52.4
%
Net realized gains
6,558
573,170
(98.9
)
%
26,758
591,562
(95.5
)
%
Net unrealized gains (losses) on equity
securities
(25,236
)
(26,414
)
(4.5
)
%
15,474
(155,218
)
NM
Consolidated revenue
$
331,694
$
859,494
(61.4
)
%
$
1,078,479
$
1,337,399
(19.4
)
%
Loss and settlement expenses
189,558
165,089
14.8
%
457,989
388,527
17.9
%
Policy acquisition costs
103,013
96,977
6.2
%
307,083
271,879
12.9
%
Insurance operating expenses
21,591
20,606
4.8
%
70,002
58,794
19.1
%
Interest expense on debt
1,873
2,013
(7.0
)
%
5,928
6,034
(1.8
)
%
General corporate expenses
2,372
2,755
(13.9
)
%
10,805
8,553
26.3
%
Total expenses
$
318,407
$
287,440
10.8
%
$
851,807
$
733,787
16.1
%
Equity in earnings (loss) of
unconsolidated investees
1,732
(17,352
)
NM
7,169
3,061
134.2
%
Earnings before income taxes
$
15,019
$
554,702
(97.3
)
%
$
233,841
$
606,673
(61.5
)
%
Income tax expense
1,483
114,809
(98.7
)
%
43,842
121,096
(63.8
)
%
Net earnings
$
13,536
$
439,893
(96.9
)
%
$
189,999
$
485,577
(60.9
)
%
Other comprehensive earnings (loss), net
of tax
(56,834
)
(81,248
)
(30.0
)
%
(38,848
)
(294,392
)
(86.8
)
%
Comprehensive earnings (loss)
$
(43,298
)
$
358,645
NM
$
151,151
$
191,185
(20.9
)
%
Operating earnings(1):
Net earnings
$
13,536
$
439,893
(96.9
)
%
$
189,999
$
485,577
(60.9
)
%
Less:
Net realized gains
(6,558
)
(573,170
)
(98.9
)
%
(26,758
)
(591,562
)
(95.5
)
%
Income tax on realized gains
1,377
121,199
(98.9
)
%
5,619
125,061
(95.5
)
%
Net unrealized (gains) losses on equity
securities
25,236
26,414
(4.5
)
%
(15,474
)
155,218
NM
Income tax on unrealized gains (losses) on
equity securities
(5,299
)
(5,547
)
(4.5
)
%
3,250
(32,596
)
NM
Equity in earnings of Maui Jim
—
17,993
(100.0
)
%
—
3,121
(100.0
)
%
Income tax on equity in earnings of Maui
Jim
—
(3,778
)
(100.0
)
%
—
(655
)
(100.0
)
%
Operating earnings(2)
$
28,292
$
23,004
23.0
%
$
156,636
$
144,164
8.7
%
Return on Equity:
Net earnings (trailing four quarters)
22.1
%
47.8
%
Comprehensive earnings (trailing four
quarters)
20.3
%
22.2
%
Per Share Data:
Diluted:
Weighted average shares outstanding (in
000's)
46,065
45,775
46,067
45,775
Net earnings per share(2)
$
0.29
$
9.61
(97.0
)
%
$
4.12
$
10.61
(61.2
)
%
Less:
Net realized gains
(0.14
)
(12.53
)
(98.9
)
%
(0.58
)
(12.93
)
(95.5
)
%
Income tax on realized gains
0.03
2.65
(98.9
)
%
0.13
2.73
(95.2
)
%
Net unrealized (gains) losses on equity
securities
0.55
0.58
(5.2
)
%
(0.34
)
3.39
NM
Income tax on unrealized gains (losses) on
equity securities
(0.12
)
(0.12
)
—
%
0.07
(0.71
)
NM
Equity in earnings of Maui Jim
—
0.39
(100.0
)
%
—
0.07
(100.0
)
%
Income tax on equity in earnings of Maui
Jim
—
(0.08
)
(100.0
)
%
—
(0.01
)
(100.0
)
%
Operating earnings per
share(1)(2)
$
0.61
$
0.50
22.0
%
$
3.40
$
3.15
7.9
%
Comprehensive earnings (loss) per
share
$
(0.94
)
$
7.84
NM
$
3.28
$
4.18
(21.5
)
%
Cash dividends per share - ordinary
$
0.27
$
0.26
3.8
%
$
0.80
$
0.77
3.9
%
Net Cash Flow provided by
Operations
$
85,030
$
112,241
(24.2
)
%
$
328,625
$
282,886
16.2
%
(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)
September 30,
December 31,
2023
2022
% Change
SUMMARIZED
BALANCE SHEET DATA:
Fixed income, at fair value
$
2,717,627
$
2,666,950
1.9
%
(amortized cost - $3,046,785 at
9/30/23)
(amortized cost - $2,945,273 at
12/31/22)
Equity securities, at fair value
534,436
498,382
7.2
%
(cost - $347,772 at 9/30/23)
(cost - $328,019 at 12/31/22)
Short-term investments
125,032
36,229
245.1
%
Other invested assets
59,730
47,922
24.6
%
Cash and cash equivalents
18,445
22,818
(19.2
)
%
Total investments and cash
$
3,455,270
$
3,272,301
5.6
%
Accrued investment income
25,328
21,259
19.1
%
Premiums and reinsurance balances
receivable
225,821
189,501
19.2
%
Ceded unearned premiums
111,072
138,457
(19.8
)
%
Reinsurance balances recoverable on unpaid
losses
820,954
740,089
10.9
%
Deferred policy acquisition costs
150,666
127,859
17.8
%
Property and equipment
48,596
49,573
(2.0
)
%
Investment in unconsolidated investees
56,110
58,275
(3.7
)
%
Goodwill and intangibles
53,562
53,562
0.0
%
Income taxes - deferred
51,403
40,269
27.6
%
Other assets
84,744
75,923
11.6
%
Total assets
$
5,083,526
$
4,767,068
6.6
%
Unpaid losses and settlement expenses
$
2,488,695
$
2,315,637
7.5
%
Unearned premiums
906,139
785,085
15.4
%
Reinsurance balances payable
56,570
61,100
(7.4
)
%
Funds held
103,424
101,144
2.3
%
Income taxes - current
5,546
—
NM
Debt
100,000
199,863
(50.0
)
%
Accrued expenses
85,640
94,869
(9.7
)
%
Other liabilities
38,421
32,029
20.0
%
Total liabilities
$
3,784,435
$
3,589,727
5.4
%
Shareholders' equity
1,299,091
1,177,341
10.3
%
Total liabilities & shareholders'
equity
$
5,083,526
$
4,767,068
6.6
%
OTHER
DATA:
Common shares outstanding (in 000's)
45,626
45,470
Book value per share
$
28.47
$
25.89
10.0
%
Closing stock price per share
$
135.89
$
131.27
3.5
%
Statutory surplus
$
1,509,538
$
1,437,324
5.0
%
RLI CORP
2023 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
2023
Gross premiums written
$
254,307
$
158,590
$
36,427
$
449,324
Net premiums written
207,177
93,207
34,340
334,724
Net premiums earned
189,305
94,988
34,116
318,409
Net loss & settlement expenses
101,750
53.7
%
81,932
86.3
%
5,876
17.2
%
189,558
59.5
%
Net operating expenses
68,885
36.4
%
33,727
35.5
%
21,992
64.5
%
124,604
39.2
%
Underwriting income (loss)(1)
$
18,670
90.1
%
$
(20,671
)
121.8
%
$
6,248
81.7
%
$
4,247
98.7
%
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
%
Nine Months Ended
September 30,
GAAP
GAAP
GAAP
GAAP
Casualty
Ratios
Property
Ratios
Surety
Ratios
Total
Ratios
2023
Gross premiums written
$
723,198
$
539,325
$
109,777
$
1,372,300
Net premiums written
597,356
395,903
103,591
1,096,850
Net premiums earned
562,384
285,596
100,432
948,412
Net loss & settlement expenses
296,633
52.7
%
149,508
52.3
%
11,848
11.8
%
457,989
48.3
%
Net operating expenses
208,273
37.1
%
102,499
35.9
%
66,313
66.0
%
377,085
39.7
%
Underwriting income (loss)(1)
$
57,478
89.8
%
$
33,589
88.2
%
$
22,271
77.8
%
$
113,338
88.0
%
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
%
(1)
See discussion above: Non-GAAP and
Performance Measures.
Category: Earnings Release
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231023825218/en/
Aaron Diefenthaler Chief Investment Officer & Treasurer
309-693-5846 Aaron.Diefenthaler@rlicorp.com
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