RLI Reports Third-Quarter 2021 Results

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 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.

Source: RLI | Published on October 21, 2021

Highlights for the quarter included:

  • Underwriting income 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.

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.