UK markets closed
  • FTSE 100

    6,630.52
    -20.36 (-0.31%)
     
  • FTSE 250

    20,961.31
    -334.92 (-1.57%)
     
  • AIM

    1,163.26
    -10.13 (-0.86%)
     
  • GBP/EUR

    1.1617
    +0.0020 (+0.17%)
     
  • GBP/USD

    1.3828
    -0.0066 (-0.47%)
     
  • BTC-GBP

    35,053.16
    +63.54 (+0.18%)
     
  • CMC Crypto 200

    982.93
    +39.75 (+4.21%)
     
  • S&P 500

    3,841.94
    +73.47 (+1.95%)
     
  • DOW

    31,496.30
    +572.16 (+1.85%)
     
  • CRUDE OIL

    66.28
    +2.45 (+3.84%)
     
  • GOLD FUTURES

    1,698.20
    -2.50 (-0.15%)
     
  • NIKKEI 225

    28,864.32
    -65.78 (-0.23%)
     
  • HANG SENG

    29,098.29
    -138.50 (-0.47%)
     
  • DAX

    13,920.69
    -135.65 (-0.97%)
     
  • CAC 40

    5,782.65
    -48.00 (-0.82%)
     

RLI Reports Fourth Quarter and Year-End 2020 Results

·12-min read

RLI Corp. (NYSE: RLI) – RLI Corp. reported fourth quarter 2020 net earnings of $83.8 million ($1.84 per share), compared to $53.4 million ($1.18 per share) for the fourth quarter of 2019. Operating earnings(1) for the fourth quarter of 2020 were $34.0 million ($0.75 per share), compared to $28.6 million ($0.63 per share) for the same period in 2019.

Fourth Quarter

Year to Date

Earnings Per Diluted Share

2020

2019

2020

2019

Net earnings

$

1.84

$

1.18

$

3.46

$

4.23

Operating earnings (1)

$

0.75

$

0.63

$

2.59

$

2.57

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

Highlights for the quarter included:

  • Underwriting income(1) of $27.0 million on a combined ratio(1) of 88.0.

  • 10% increase in gross premiums written.

  • Net favorable development in prior years’ loss reserves, resulting in a $24.7 million net increase in underwriting income.

  • Special dividend of $1.00 per share, representing $45.1 million returned to shareholders.

Highlights for the year included:

  • Underwriting income(1) of $69.6 million on a combined ratio(1) of 92.0.

  • 7% increase in gross premiums written.

  • Net favorable development in prior years’ loss reserves, resulting in a $84.0 million net increase in underwriting income.

  • 25th consecutive year of underwriting profit(1).

  • Book value per share of $25.16, an increase of 22% (inclusive of dividends) from year-end 2019.

"Despite the many uncertainties RLI faced in 2020, we achieved strong results, provided superior service to our customers and delivered value to our shareholders," said RLI Corp. Chairman and CEO Jonathan E. Michael. "We posted a 92 combined ratio for the year, inclusive of 5 points of hurricane activity, which marked our 25th consecutive year of underwriting profit. During the fourth quarter, we achieved profitability in all product segments including property, which experienced headwinds from an active catastrophe season. Our strong underwriting performance, combined with investment income, resulted in $2.59 per share of operating income."

"We believe the successful execution of our strategy is validated by growth in book value, which was up 22% in 2020. This achievement allowed us to share the rewards of our success with shareholders through a $1 per share special dividend. We will continue to position RLI for long-term growth through sustained financial strength, underwriting discipline and customer focus. I want to thank our talented associates for their outstanding efforts over the past year. Their willingness to adapt and readily take on the challenges of 2020 speaks to the resilience and strength of our team and culture."

Underwriting Income

RLI achieved $27.0 million of underwriting income in the fourth quarter of 2020 on a 88.0 combined ratio, compared to $16.5 million on a 92.4 combined ratio in 2019.

For the year, RLI achieved $69.6 million of underwriting income on a 92.0 combined ratio, compared to $67.6 million on a 91.9 combined ratio in 2019. Results for both years include net favorable development in prior years’ loss reserves, which totaled $84.0 million and $62.8 million for 2020 and 2019, respectively. The favorable development in 2020 was partially offset by a $45.1 million net reduction to underwriting income from hurricane losses.

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

Underwriting Income (Loss)(1)

Combined Ratio(1)

(in millions)

2020

2019

2020

2019

Casualty

$

44.4

$

20.6

Casualty

92.2

96.3

Property

(3.2

)

18.2

Property

101.7

88.9

Surety

28.4

28.8

Surety

74.8

75.3

Total

$

69.6

$

67.6

Total

92.0

91.9

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

Other Income

Net investment income for the quarter decreased 6.3% to $16.7 million, compared to the same period in 2019. For the year ended December 31, 2020, net investment income was $67.9 million, compared to $68.9 million for the same period in 2019. The investment portfolio’s total return was 3.2% for the quarter and 7.5% for the year.

RLI’s comprehensive earnings were $89.9 million for the quarter ($1.97 per share), compared to $47.9 million ($1.06 per share) for the same quarter in 2019. Full-year comprehensive earnings were $213.3 million ($4.70 per share), compared to $258.7 million ($5.72 per share) in 2019. 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 $(1.1) million for the quarter, influenced by seasonal sales results. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $3.1 million. Comparatively, for the fourth quarter of 2019, equity in earnings of unconsolidated investees from Maui Jim and Prime was $0.7 million and $2.5 million, respectively. For the year ended December 31, 2020, equity in earnings of unconsolidated investees was $10.4 million from Maui Jim and $10.8 million from Prime, compared to $13.6 million and $7.4 million, respectively, for the prior year. During the quarter, RLI received a $4.7 million dividend from Prime, which resulted in a tax benefit on dividends received from affiliates of $0.5 million ($0.01 per share).

Special and Regular Dividends

On December 18, 2020, the company paid a special cash dividend of $1.00 per share and a regular quarterly dividend of $0.24 per share for a combined total of $56.0 million. RLI has paid dividends for 178 consecutive quarters and increased regular dividends in each of the last 45 years. Over the last 10 years, the company has returned nearly $1.14 billion to shareholders and the regular quarterly dividend has grown an average of 5.2% per year.

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 2020 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

During the fourth quarter, the company’s A+ (Superior) financial strength rating was affirmed by AM Best Company for the company’s insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company.

At 10 a.m. central standard time (CST) tomorrow, January 28, 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/2scgys4w.

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, 2019.

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:

Operating Earnings Per Share

2020

2019

2020

2019

4th Qtr

4th Qtr

12 Mos.

12 Mos.

Operating Earnings Per Share(1)

$

0.75

$

0.63

$

2.59

$

2.57

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

Net favorable development in casualty prior years' reserves

$

0.40

$

0.30

$

1.15

$

0.98

Net favorable (unfavorable) development in property prior years' reserves

$

-

$

(0.03

)

$

0.05

$

(0.01

)

Net favorable development in surety prior years' reserves

$

0.02

$

-

$

0.19

$

0.11

Net incurred losses related to:

▪2020 Hurricanes

$

(0.21

)

$

-

$

(0.78

)

$

-

▪2020 storms and civil unrest

$

-

$

-

$

(0.10

)

$

-

▪COVID-19

$

(0.05

)

$

-

$

(0.27

)

$

-

▪2019 and prior catastrophe events

$

-

$

(0.01

)

$

0.05

$

(0.12

)

Gain from tax benefit applicable to equity method dividends(4)

$

0.01

$

0.04

$

0.01

$

0.04

(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)

As required under the accounting standard for income taxes, the gain reflects the tax benefit of applying the lower tax rate applicable to dividends received from an affiliate (10.8% in 2020 and 7.4% in 2019) as compared to the corporate capital gains tax rate (21%) on which tax estimates were based.

RLI CORP

2020 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

SUMMARIZED INCOME STATEMENT DATA:

2020

2019

% Change

2020

2019

% Change

Net premiums earned

$

224,801

$

215,626

4.3

%

$

865,747

$

839,111

3.2

%

Net investment income

16,655

17,775

(6.3

)

%

67,893

68,870

(1.4

)

%

Net realized gains

3,330

477

NM

17,885

17,520

2.1

%

Net unrealized gains on equity securities

59,665

30,876

93.2

%

32,101

78,090

(58.9

)

%

Consolidated revenue

$

304,451

$

264,754

15.0

%

$

983,626

$

1,003,591

(2.0

)

%

Loss and settlement expenses

103,065

106,210

(3.0

)

%

442,884

413,416

7.1

%

Policy acquisition costs

73,002

74,111

(1.5

)

%

286,438

288,697

(0.8

)

%

Insurance operating expenses

21,691

18,833

15.2

%

66,828

69,430

(3.7

)

%

Interest expense on debt

1,902

2,005

(5.1

)

%

7,603

7,588

0.2

%

General corporate expenses

3,848

3,544

8.6

%

10,265

12,686

(19.1

)

%

Total expenses

$

203,508

$

204,703

(0.6

)

%

$

814,018

$

791,817

2.8

%

Equity in earnings of unconsolidated investees

1,874

3,167

(40.8

)

%

20,233

20,960

(3.5

)

%

Earnings before income taxes

$

102,817

$

63,218

62.6

%

$

189,841

$

232,734

(18.4

)

%

Income tax expense

19,012

9,840

93.2

%

32,750

41,092

(20.3

)

%

Net earnings

$

83,805

$

53,378

57.0

%

$

157,091

$

191,642

(18.0

)

%

Other comprehensive earnings (loss), net of tax

6,129

(5,461

)

NM

56,219

67,045

(16.1

)

%

Comprehensive earnings

$

89,934

$

47,917

87.7

%

$

213,310

$

258,687

(17.5

)

%

Operating earnings(1):

Net earnings

$

83,805

$

53,378

57.0

%

$

157,091

$

191,642

(18.0

)

%

Less:

Realized gains

(3,330

)

(477

)

NM

(17,885

)

(17,520

)

2.1

%

Income tax on realized gains

699

100

NM

3,756

3,679

2.1

%

Unrealized gains on equity securities

(59,665

)

(30,876

)

93.2

%

(32,101

)

(78,090

)

(58.9

)

%

Income tax on unrealized gains on equity securities

12,531

6,484

93.3

%

6,741

16,399

(58.9

)

%

Operating earnings

$

34,040

$

28,609

19.0

%

$

117,602

$

116,110

1.3

%

Return on Equity:

Net earnings

15.1

%

20.6

%

Comprehensive earnings

20.5

%

27.8

%

Per Share Data:

Diluted:

Weighted average shares outstanding (in 000's)

45,565

45,409

45,376

45,257

Net earnings per share

$

1.84

$

1.18

55.9

%

$

3.46

$

4.23

(18.2

)

%

Less:

Realized gains

(0.07

)

(0.01

)

NM

(0.39

)

(0.38

)

2.6

%

Income tax on realized gains

0.02

-

NM

0.08

0.08

0.0

%

Unrealized gains on equity securities

(1.32

)

(0.68

)

94.1

%

(0.71

)

(1.72

)

(58.7

)

%

Income tax on unrealized gains on equity securities

0.28

0.14

100.0

%

0.15

0.36

(58.3

)

%

EPS from operations(1)

$

0.75

$

0.63

19.0

%

$

2.59

$

2.57

0.8

%

Comprehensive earnings per share

$

1.97

$

1.06

85.8

%

$

4.70

$

5.72

(17.8

)

%

Cash dividends per share - ordinary

$

0.24

$

0.23

4.3

%

$

0.95

$

0.91

4.4

%

Cash dividends per share - special

$

1.00

$

1.00

0.0

%

$

1.00

$

1.00

0.0

%

Net Cash Flow provided by Operations

$

100,015

$

90,155

10.9

%

$

263,259

$

276,917

(4.9

)

%

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

NM = Not Meaningful

RLI CORP

2020 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

December 31,

December 31,

2020

2019

% Change

SUMMARIZED BALANCE SHEET DATA:

Fixed income, at fair value

$

2,196,626

$

1,983,086

10.8

%

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

(amortized cost - $1,915,278 at 12/31/19)

Equity securities, at fair value

524,006

460,630

13.8

%

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

(cost - $262,131 at 12/31/19)

Other invested assets

54,232

70,441

(23.0

)

%

Cash and cash equivalents

62,217

46,203

34.7

%

Total investments and cash

$

2,837,081

$

2,560,360

10.8

%

Premiums and reinsurance balances receivable

174,628

160,369

8.9

%

Ceded unearned premiums

113,488

93,656

21.2

%

Reinsurance balances recoverable on unpaid losses

443,729

384,517

15.4

%

Deferred policy acquisition costs

88,425

85,044

4.0

%

Property and equipment

51,406

53,121

(3.2

)

%

Investment in unconsolidated investees

128,382

103,836

23.6

%

Goodwill and intangibles

53,719

54,127

(0.8

)

%

Other assets

47,627

50,691

(6.0

)

%

Total assets

$

3,938,485

$

3,545,721

11.1

%

Unpaid losses and settlement expenses

$

1,750,049

$

1,574,352

11.2

%

Unearned premiums

586,386

540,213

8.5

%

Reinsurance balances payable

42,265

25,691

64.5

%

Funds held

81,747

83,358

(1.9

)

%

Income taxes - deferred

80,235

56,727

41.4

%

Bonds payable, long-term debt

149,489

149,302

0.1

%

Accrued expenses

75,925

66,626

14.0

%

Other liabilities

36,411

54,064

(32.7

)

%

Total liabilities

$

2,802,507

$

2,550,333

9.9

%

Shareholders' equity

1,135,978

995,388

14.1

%

Total liabilities & shareholders' equity

$

3,938,485

$

3,545,721

11.1

%

OTHER DATA:

Common shares outstanding (in 000's)

45,143

44,869

Book value per share

$

25.16

$

22.18

13.4

%

Closing stock price per share

$

104.15

$

90.02

15.7

%

Statutory surplus

$

1,121,592

$

1,029,671

8.9

%

RLI CORP

2020 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2020

Gross premiums written

$

196,118

$

74,227

$

30,239

$

300,584

Net premiums written

146,623

54,718

28,506

229,847

Net premiums earned

147,884

48,605

28,312

224,801

Net loss & settlement expenses

72,107

48.8

%

26,961

55.5

%

3,997

14.1

%

103,065

45.8

%

Net operating expenses

53,753

36.3

%

20,950

43.1

%

19,990

70.6

%

94,693

42.2

%

Underwriting income (loss)(1)

$

22,024

85.1

%

$

694

98.6

%

$

4,325

84.7

%

$

27,043

88.0

%

2019

Gross premiums written

$

179,542

$

64,638

$

29,650

$

273,830

Net premiums written

141,963

47,956

27,945

217,864

Net premiums earned

142,791

43,828

29,007

215,626

Net loss & settlement expenses

82,994

58.1

%

20,680

47.2

%

2,536

8.7

%

106,210

49.3

%

Net operating expenses

53,848

37.7

%

19,017

43.4

%

20,079

69.3

%

92,944

43.1

%

Underwriting income (loss)(1)

$

5,949

95.8

%

$

4,131

90.6

%

$

6,392

78.0

%

$

16,472

92.4

%

Twelve Months Ended December 31,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2020

Gross premiums written

$

749,409

$

268,769

$

118,254

$

1,136,432

Net premiums written

583,244

196,603

112,241

892,088

Net premiums earned

569,521

183,720

112,506

865,747

Net loss & settlement expenses

322,099

56.6

%

111,356

60.6

%

9,429

8.4

%

442,884

51.2

%

Net operating expenses

202,995

35.6

%

75,546

41.1

%

74,725

66.4

%

353,266

40.8

%

Underwriting income (loss)(1)

$

44,427

92.2

%

$

(3,182

)

101.7

%

$

28,352

74.8

%

$

69,597

92.0

%

2019

Gross premiums written

$

704,192

$

241,425

$

119,385

$

1,065,002

Net premiums written

564,979

181,974

113,384

860,337

Net premiums earned

558,458

164,022

116,631

839,111

Net loss & settlement expenses

330,156

59.1

%

73,614

44.9

%

9,646

8.3

%

413,416

49.3

%

Net operating expenses

207,701

37.2

%

72,265

44.0

%

78,161

67.0

%

358,127

42.6

%

Underwriting income (loss)(1)

$

20,601

96.3

%

$

18,143

88.9

%

$

28,824

75.3

%

$

67,568

91.9

%

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

Category: Earnings Release

View source version on businesswire.com: https://www.businesswire.com/news/home/20210127005845/en/

Contacts

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