RLI Reports Third Quarter 2024 Results

Oct 21 2024 21:10 BST

PEORIA, Ill.--(BUSINESS WIRE)--Oct. 21, 2024-- RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2024 net earnings of $95.0 million ($2.06 per share), compared to $13.5 million ($0.29 per share) for the third quarter of 2023. Operating earnings⁽¹⁾ for the third quarter of 2024 were $60.4 million ($1.31 per share), compared to $28.3 million ($0.61 per share) for the same period in 2023.


	Third Quarter				Year to Date
Earnings Per Diluted Share	2024		2023		2024		2023
Net earnings	$	2.06	$	0.29	$	6.60	$	4.12
Operating earnings ⁽¹⁾	$	1.31	$	0.61	$	4.92	$	3.40

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

Highlights for the quarter included:

Underwriting income⁽¹⁾ of $40.7 million on a combined ratio⁽¹⁾ of 89.6.
13% increase in gross premiums written.
15% increase in net investment income.
Favorable development in prior years’ loss reserves resulted in a $18.1 million net increase in underwriting income.
Losses from Hurricanes Beryl and Helene, resulting in a $32.7 million net decrease in underwriting income.
Book value per share of $38.17, an increase of 26% (inclusive of dividends) from year-end 2023.

“Our primary focus has been to assist customers affected by recent hurricanes," said RLI Corp. President & CEO Craig Kliethermes. “When catastrophes occur, we quickly deploy our claim experts to assess damage and help policyholders begin recovering. Despite the storm activity in the third quarter, we continued to find opportunities for balanced top line growth across our portfolio. Our diversified business model, sound risk selection and disciplined underwriting resulted in a solid 90 combined ratio. I want to thank all RLI associates for their commitment to maintaining our financial strength and ensuring RLI remains a stable partner for our customers.”

Underwriting Income

RLI achieved $40.7 million of underwriting income in the third quarter of 2024 on an 89.6 combined ratio, compared to $4.2 million on a 98.7 combined ratio in 2023.

Results for both years include favorable development in prior years’ loss reserves, which resulted in a $18.1 million and $19.8 million net increase to underwriting income in 2024 and 2023, respectively. The favorable development was offset by a $32.7 million net reduction to underwriting income for losses from Hurricanes Beryl and Helene, compared to $58.2 million for losses from Hawaiian wildfires in 2023.

The following table highlights underwriting income and combined ratios by segment for the third quarter.


Underwriting Income⁽¹⁾					Combined Ratio⁽¹⁾
(in millions)	2024		2023			2024	2023
Casualty	$	2.6	$	18.7	Casualty	98.8	90.1
Property		30.4		(20.7)	Property	77.2	121.8
Surety		7.7		6.2	Surety	78.8	81.7
Total	$	40.7	$	4.2	Total	89.6	98.7

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

Other Income

Net investment income for the quarter increased 15% to $36.7 million, compared to the same period in 2023. The investment portfolio’s total return was 4.8% for the quarter and 7.6% for the nine months ended September 30, 2024.

RLI’s comprehensive earnings were $175.3 million for the quarter ($3.79 per share), compared to a comprehensive loss of $43.3 million (-$0.94 per share) for the same quarter in 2023. In addition to net earnings, comprehensive earnings included after-tax unrealized gains from the fixed income portfolio in 2024, due to declining interest rates.

Dividends Paid in Third Quarter of 2024

On September 20, 2024, the company paid a regular quarterly dividend of $0.29 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $822 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. 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 2024 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) on October 22, 2024, 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/811172831.

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, 2023.

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 49 consecutive years and delivered underwriting profits for 28 consecutive years. To learn more about RLI, visit www.rlicorp.com.

Supplemental disclosure regarding the earnings impact of specific items:


	Reserve Development ⁽¹⁾ and Catastrophe Losses,
	Net of Reinsurance
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in millions, except per share amounts)	2024			2023			2024			2023
Favorable development in casualty prior years' reserves	$	9.0		$	22.1		$	40.0		$	67.0
Favorable (unfavorable) development in property prior years' reserves	$	4.4		$	(1.9	)	$	28.5		$	14.3
Favorable development in surety prior years' reserves	$	3.1		$	0.8		$	10.9		$	8.2

Net incurred losses related to:
2024 storms	$	(2.0	)	$	—		$	(30.0	)	$	—
Hurricanes Beryl and Helene	$	(37.0	)	$	—		$	(37.0	)	$	—
2023 and prior events	$	4.0		$	(55.2	)	$	6.0		$	(74.1	)
Reinstatement premium from events	$	—		$	(14.4	)	$	—		$	(14.4	)

	Operating Earnings Per Share
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Operating Earnings Per Share⁽²⁾	$	1.31		$	0.61		$	4.92		$	3.40

Specific items included in operating earnings per share: ^{(1) (3)}
Net favorable development in casualty prior years' reserves	$	0.12		$	0.33		$	0.55		$	1.00
Net favorable (unfavorable) development in property prior years' reserves	$	0.07		$	(0.04	)	$	0.44		$	0.20
Net favorable development in surety prior years' reserves	$	0.05		$	0.01		$	0.17		$	0.12

Net incurred losses related to:
2024 storms	$	(0.03	)	$	—		$	(0.44	)	$	—
Hurricanes Beryl and Helene	$	(0.54	)	$	—		$	(0.54	)	$	—
2023 and prior events (incurred loss and reinstatement premium)	$	0.06		$	(1.02	)	$	0.09		$	(1.31	)

(1)	Reserve development reflects changes from previously estimated losses.
(2)	See discussion above: Non-GAAP and Performance Measures.
(3)	Items included in operating earnings per share are after tax and incorporates incentive and profit sharing-related impacts which affected policy acquisition, insurance operating and general corporate expenses.

RLI CORP
2024 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	Three Months Ended September 30,									Nine Months Ended September 30,
SUMMARIZED INCOME STATEMENT DATA:	2024			2023			% Change			2024				2023				% Change
Net premiums earned	$	389,489		$	318,409		22.3		%	$	1,129,230			$	948,412			19.1		%
Net investment income		36,694			31,963		14.8		%		103,502				87,835			17.8		%
Net realized gains		5,420			6,558		(17.4	)	%		11,222				26,758			(58.1	)	%
Net unrealized gains (losses) on equity securities		38,392			(25,236	)	NM				87,314				15,474			NM
Consolidated revenue	$	469,995		$	331,694		41.7		%	$	1,331,268			$	1,078,479			23.4		%
Loss and settlement expenses		202,118			189,558		6.6		%		513,741				457,989			12.2		%
Policy acquisition costs		117,811			103,013		14.4		%		342,186				307,083			11.4		%
Insurance operating expenses		28,868			21,591		33.7		%		84,892				70,002			21.3		%
Interest expense on debt		1,617			1,873		(13.7	)	%		4,839				5,928			(18.4	)	%
General corporate expenses		3,994			2,372		68.4		%		13,144				10,805			21.6		%
Total expenses	$	354,408		$	318,407		11.3		%	$	958,802			$	851,807			12.6		%
Equity in earnings of unconsolidated investees		1,238			1,732		(28.5	)	%		7,653				7,169			6.8		%
Earnings before income taxes	$	116,825		$	15,019		NM			$	380,119			$	233,841			62.6		%
Income tax expense		21,798			1,483		NM				75,200				43,842			71.5		%
Net earnings	$	95,027		$	13,536		NM			$	304,919			$	189,999			60.5		%

Other comprehensive earnings (loss), net of tax		80,293			(56,834	)	NM				59,779				(38,848	)		NM
Comprehensive earnings (loss)	$	175,320		$	(43,298	)	NM			$	364,698			$	151,151			141.3		%

Operating earnings⁽¹⁾:
Net earnings	$	95,027		$	13,536		NM			$	304,919			$	189,999			60.5		%
Less:
Net realized gains		(5,420	)		(6,558	)	(17.4	)	%		(11,222	)			(26,758	)		(58.1	)	%
Income tax on realized gains		1,139			1,377		(17.3	)	%		2,357				5,619			(58.1	)	%
Net unrealized (gains) losses on equity securities		(38,392	)		25,236		NM				(87,314	)			(15,474	)		NM
Income tax on unrealized gains (losses) on equity securities		8,062			(5,299	)	NM				18,335				3,250			NM
Operating earnings	$	60,416		$	28,292		113.5		%	$	227,075			$	156,636			45.0		%

Return on Equity:
Net earnings (trailing four quarters)											27.7		%		22.1		%
Comprehensive earnings (trailing four quarters)											38.4		%		20.3		%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		46,220			46,065						46,185				46,067

Net earnings per share	$	2.06		$	0.29		NM			$	6.60			$	4.12			60.2		%
Less:
Net realized gains		(0.12	)		(0.14	)	(14.3	)	%		(0.24	)			(0.58	)		(58.6	)	%
Income tax on realized gains		0.02			0.03		(33.3	)	%		0.05				0.13			(61.5	)	%
Net unrealized (gains) losses on equity securities		(0.83	)		0.55		NM				(1.89	)			(0.34	)		NM
Income tax on unrealized gains (losses) on equity securities		0.18			(0.12	)	NM				0.40				0.07			NM
Operating earnings per share⁽¹⁾	$	1.31		$	0.61		114.8		%	$	4.92			$	3.40			44.7		%

Comprehensive earnings (loss) per share	$	3.79		$	(0.94	)	NM			$	7.90			$	3.28			140.9		%

Cash dividends per share - ordinary	$	0.29		$	0.27		7.4		%	$	0.85			$	0.80			6.3		%

Net cash flow provided by operations	$	219,368		$	98,597		122.5		%	$	432,139			$	342,192			26.3		%

(1)	See discussion above: Non-GAAP and Performance Measures.
NM = Not Meaningful

RLI CORP
2024 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	September 30,		December 31,
	2024		2023		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	3,176,073	$	2,855,849	11.2		%
(amortized cost - $3,302,684 at 9/30/24)
(amortized cost - $3,054,391 at 12/31/23)
Equity securities, at fair value		729,738		590,041	23.7		%
(cost - $405,663 at 9/30/24)
(cost - $354,022 at 12/31/23)
Short-term investments		203,296		134,923	50.7		%
Other invested assets		53,993		59,081	(8.6	)	%
Cash and cash equivalents		60,634		36,424	66.5		%
Total investments and cash	$	4,223,734	$	3,676,318	14.9		%

Accrued investment income		26,711		24,062	11.0		%
Premiums and reinsurance balances receivable		241,311		221,206	9.1		%
Ceded unearned premiums		120,845		112,257	7.7		%
Reinsurance balances recoverable on unpaid losses		759,540		757,349	0.3		%
Deferred policy acquisition costs		172,069		146,566	17.4		%
Property and equipment		44,644		46,715	(4.4	)	%
Investment in unconsolidated investees		65,271		56,966	14.6		%
Goodwill and intangibles		53,562		53,562	0.0		%
Income taxes - deferred		—		15,872	(100.0	)	%
Other assets		84,068		69,348	21.2		%
Total assets	$	5,791,755	$	5,180,221	11.8		%

Unpaid losses and settlement expenses	$	2,611,941	$	2,446,025	6.8		%
Unearned premiums		1,010,760		892,326	13.3		%
Reinsurance balances payable		43,423		71,507	(39.3	)	%
Funds held		98,585		101,446	(2.8	)	%
Income taxes - current		4,369		3,757	16.3		%
Income taxes - deferred		15,369		—	NM
Debt		100,000		100,000	—		%
Accrued expenses		105,813		108,880	(2.8	)	%
Other liabilities		53,145		42,766	24.3		%
Total liabilities	$	4,043,405	$	3,766,707	7.3		%
Shareholders' equity		1,748,350		1,413,514	23.7		%
Total liabilities & shareholders' equity	$	5,791,755	$	5,180,221	11.8		%

OTHER DATA:
Common shares outstanding (in 000's)		45,810		45,640

Book value per share	$	38.17	$	30.97	23.2		%
Closing stock price per share	$	154.98	$	133.12	16.4		%

Statutory surplus	$	1,806,660	$	1,520,135	18.8		%

NM = Not Meaningful

RLI CORP
2024 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
2024

Gross premiums written	$	294,267			$	173,813				$	39,710			$	507,790
Net premiums written		242,650				122,428					36,466				401,544
Net premiums earned		219,638				133,266					36,585				389,489
Net loss & settlement expenses		137,951	62.8	%		60,991		45.8	%		3,176	8.7	%		202,118	51.9	%
Net operating expenses		79,138	36.0	%		41,873		31.4	%		25,668	70.1	%		146,679	37.7	%
Underwriting income (loss)⁽¹⁾	$	2,549	98.8	%	$	30,402		77.2	%	$	7,741	78.8	%	$	40,692	89.6	%

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	%


Nine Months Ended September 30,
			GAAP				GAAP				GAAP				GAAP
	Casualty		Ratios		Property		Ratios		Surety		Ratios		Total		Ratios
2024

Gross premiums written	$	826,152			$	590,191			$	123,495			$	1,539,838
Net premiums written		687,170				439,052				112,854				1,239,076
Net premiums earned		627,014				396,774				105,442				1,129,230
Net loss & settlement expenses		369,273	58.9	%		134,950	34.0	%		9,518	9.0	%		513,741	45.5	%
Net operating expenses		231,203	36.9	%		120,526	30.4	%		75,349	71.5	%		427,078	37.8	%
Underwriting income (loss)⁽¹⁾	$	26,538	95.8	%	$	141,298	64.4	%	$	20,575	80.5	%	$	188,411	83.3	%

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	%

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

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20241021767239/en/

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

Source: RLI Corp.