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RLI Reports Third Quarter 2021 Results

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PEORIA, Ill., October 20, 2021--(BUSINESS WIRE)--RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter 2021 net earnings of $29.2 million ($0.64 per share), compared to $42.4 million ($0.93 per share) for the third quarter of 2020. Operating earnings(1) for the third quarter of 2021 were $29.8 million ($0.65 per share), compared to $19.0 million ($0.42 per share) for the same period in 2020.

Third Quarter

Year to Date

Earnings Per Diluted Share

2021

2020

2021

2020

Net earnings

$

0.64

$

0.93

$

4.03

$

1.62

Operating earnings (1)

$

0.65

$

0.42

$

2.61

$

1.84

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

Highlights for the quarter included:

  • Underwriting income(1) of $13.7 million on a combined ratio(1) of 94.6.

  • 18% increase in gross premiums written.

  • Favorable development in prior years’ loss reserves, resulting in a $25.1 million net increase in underwriting income.

  • Losses from third quarter hurricanes, resulting in a $28.9 million net decrease in underwriting income.

  • Book value per share of $27.63, an increase of 13% (inclusive of dividends) from year-end 2020.

"Despite the impact of Hurricane Ida and other catastrophes that occurred during the quarter, we delivered strong underwriting results and a 95 combined ratio," said RLI Corp. Chairman & CEO Jonathan E. Michael. "We experienced growth in gross written premium across all three segments, reflecting favorable market conditions for most product lines. Although catastrophe activity impacted our bottom line results, these events reinforce our purpose and promise to be there for our customers in times of need. I’m proud of our team’s ongoing efforts to deliver outstanding service and value to all stakeholders we serve."

Underwriting Income

RLI achieved $13.7 million of underwriting income in the third quarter of 2021 on a 94.6 combined ratio, compared to $1.2 million on a 99.5 combined ratio in 2020.

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

$

22.9

$

14.0

Casualty

85.9

90.2

Property

(16.5

)

(19.9

)

Property

127.2

144.0

Surety

7.3

7.1

Surety

75.3

74.8

Total

$

13.7

$

1.2

Total

94.6

99.5

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

Other Income

Net investment income for the quarter increased 7.9% to $17.8 million, compared to the same period in 2020. The investment portfolio’s total return was 0.1% for the quarter and 3.1% for the nine months ended September 30, 2021.

RLI’s comprehensive earnings were $17.0 million for the quarter ($0.37 per share), compared to $51.9 million ($1.14 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 $5.4 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $4.4 million. Comparatively, for the third quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was $6.2 million and $3.3 million, respectively.

Dividends Paid in the Third Quarter of 2021

On September 20, 2021, the company paid a regular quarterly dividend of $0.25 per share, the same amount as the prior quarter. RLI’s cumulative dividends total more than $500 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

On July 20, 2021, RLI was named as one of the insurance industry’s top performing companies by Ward benchmarking, a business unit of Aon, for the 31st consecutive year. RLI is one of only two property-casualty insurers to be recognized as a Ward’s 50® Top P&C Performer every year since the list’s inception in 1991.

At 10 a.m. central daylight time (CDT) tomorrow, October 21, 2021, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at https://edge.media-server.com/mmc/p/fyykgewf.

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 46 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 September 30,

Nine Months Ended September 30,

(Dollars in millions, except per share amounts)

2021

2020

2021

2020

Favorable development in casualty prior years' reserves

$

26.4

$

22.0

$

83.8

$

49.5

Favorable development in property prior years' reserves

$

0.5

$

4.0

$

8.4

$

9.5

Favorable development in surety prior years' reserves

$

2.5

$

3.2

$

2.6

$

11.1

Net incurred losses related to:

2021 storms

$

(1.0

)

$

-

$

(25.0

)

$

-

3Q 2021 hurricanes

$

(34.0

)

$

-

$

(34.0

)

$

-

2020 and prior events(4)

$

0.1

$

(38.1

)

$

2.1

$

(55.1

)

Operating Earnings Per Share

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating Earnings Per Share(1)

$

0.65

$

0.42

$

2.61

$

1.84

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

Net favorable development in casualty prior years' reserves

$

0.40

$

0.34

$

1.30

$

0.78

Net favorable development in property prior years' reserves

$

-

$

0.01

$

0.09

$

0.05

Net favorable development in surety prior years' reserves

$

0.03

$

0.05

$

0.01

$

0.16

Net incurred losses related to:

2021 storms

$

(0.01

)

$

-

$

(0.37

)

$

-

3Q 2021 hurricanes

$

(0.50

)

$

-

$

(0.50

)

$

-

2020 and prior events(4)

$

-

$

(0.60

)

$

0.03

$

(0.85

)

(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.

(4)

Includes COVID-19 reserves established in 2020.

RLI CORP

2021 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

SUMMARIZED INCOME STATEMENT DATA:

2021

2020

% Change

2021

2020

% Change

Net premiums earned

$

253,389

$

216,630

17.0

%

$

722,984

$

640,946

12.8

%

Net investment income

17,844

16,543

7.9

%

50,929

51,238

(0.6

)

%

Net realized gains

1,829

1,512

21.0

%

52,442

14,555

NM

Net unrealized gains (losses) on equity securities

(2,592

)

28,126

NM

29,526

(27,564

)

NM

Consolidated revenue

$

270,470

$

262,811

2.9

%

$

855,881

$

679,175

26.0

%

Loss and settlement expenses

143,656

127,596

12.6

%

355,574

339,819

4.6

%

Policy acquisition costs

80,449

71,032

13.3

%

232,674

213,436

9.0

%

Insurance operating expenses

15,560

16,850

(7.7

)

%

54,504

45,137

20.8

%

Interest expense on debt

1,906

1,901

0.3

%

5,711

5,701

0.2

%

General corporate expenses

2,505

2,668

(6.1

)

%

9,533

6,417

48.6

%

Total expenses

$

244,076

$

220,047

10.9

%

$

657,996

$

610,510

7.8

%

Equity in earnings of unconsolidated investees

9,043

8,745

3.4

%

29,407

18,359

60.2

%

$

35,437

$

51,509

(31.2

)

%

$

227,292

$

87,024

161.2

%

Income tax expense

...

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