Exhibit 99.1
NEWS RELEASE |
|
RLI Insurance Company
9025 N. Lindbergh Dr. | Peoria, IL 61615-1431
Phone: 309-692-1000 | Fax: 309-692-1068
FOR IMMEDIATE RELEASE |
| CONTACT: Aaron Jacoby |
|
| (309) 693-5880 |
|
| Aaron_Jacoby@rlicorp.com |
|
| www.rlicorp.com |
RLI reports all-time record earnings
PEORIA, ILLINOIS, July 16, 2003 — RLI Corp. (NYSE: RLI) — RLI Corp. posted quarterly net earnings of $15.4 million ($0.60 per diluted share), a 22% per-share improvement over the $10.0 million ($0.49 per diluted share) posted in the second quarter last year. Both the total dollar and per-share amounts set RLI records. Quarterly operating earnings of $14.1 million ($0.55 per share) were up 20% per share from last year’s $9.3 million ($0.46 per share) result, and matched the operating earnings per share record set last quarter. Book value per share finished the quarter at $20.36, up 10% since year end.
Through six months, RLI net earnings were $29.8 million ($1.16 per share), versus last year’s $19.1 million ($0.93 per share) posting, a 25% per-share gain. Operating earnings of $28.3 million ($1.10 per share) were 31% better per share than the $17.2 million ($0.84 per share) result reported at this time last year. These results set mid-year records.
RLI net operating earnings consist of net earnings after the elimination of after-tax realized investment gains/losses. This measure is useful in gauging core operating performance across reporting periods, but may not be comparable to other companies’ definitions of operating earnings.
Strong underwriting income
RLI’s quarterly underwriting profits were $7.4 million on a 93.4 net GAAP combined ratio. This result compares to a $2.6 million gain on a 96.8 combined ratio for the same period last year. The company’s property segment drove these results, as it posted a 71.5 combined ratio for the second quarter, an outstanding figure in light of seasonal weather-related claims. The casualty segment continued to record underwriting profits with a 98.5 combined ratio. Surety results stayed level for the quarter, reflected in its combined ratio of 112.0.
“Our 2003 results are benefiting from last year’s premium growth,” said RLI President & CEO Jonathan E. Michael. “As planned, we’ve also increased our retentions this year, which have boosted net consolidated revenue and earnings.” Net premiums earned grew 39% in the quarter, to $113.6 million.
“The overall insurance marketplace is still very attractive for specialty niche writers such as RLI, and we are well positioned to continue to prosper in this environment.”
Investment income posts records on solid gains
Investment income reached $10.9 million, a 14% increase over the second quarter of last year. Increased cash flows from operations and the infusion of new capital from 2002’s equity offering drove this increase. Invested asset growth of 8% over year end helped push total assets to $1.9 billion.
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1
The company’s consolidated investment portfolio generated a 5.2% total return year to date. The equity portfolio registered a 14.6% return for the quarter, 10.5% year to date. RLI’s bond portfolio continued its strong performance from 2002, generating a total return of 3.1% for the second quarter.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, posted a $40.7 million gain for the quarter ($1.58 per share). “We have had strong performance across our investment portfolio through the first half of the year,” said Michael. “While there are no guarantees for the near-term performance of the market, we remain committed to enhancing book value growth through a long-term investment philosophy that includes equities.”
As of June 30, 2003, $140.1 million of cumulative unrealized gains remained in the RLI investment portfolio. Over the past 20 years, the equity portfolio has generated a 12.7% average annual return.
Other quarterly news
On July 1, 2003, RLI sold an insurance company shell to a group of private investors. This transaction, which is to be recognized in the third quarter, is expected to result in an after-tax gain of approximately $4 million.
Also during the quarter, the company’s directors declared a $0.10 per share cash dividend. The dividend was paid on July 15, 2003, to shareholders of record as of June 30, 2003.
At 3:15 p.m. CDT today, July 16, 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 RLI’s website, www.rlicorp.com, or through http://www.firstcallevents.com/service/ajwz384008648gf12.html.
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) which 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 for the year ended December 31, 2002.
RLI Corp., through its subsidiaries RLI Insurance Company, Mt. Hawley Insurance Company and Planet Indemnity Company, underwrites selected property and casualty insurance products. For additional information, contact RLI Director, Corporate Development Aaron Jacoby at (309) 693-5880 or at aaron_jacoby@rlicorp.com.
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2
RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
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| Three Months Ended June 30, |
| Six Months Ended June 30, |
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| 2003 |
| 2002 |
| % Change |
| 2003 |
| 2002 |
| % Change |
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SUMMARIZED INCOME STATEMENT DATA: |
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Net premiums earned |
| $ | 113,626 |
| $ | 81,686 |
| 39.1 | % | $ | 222,772 |
| $ | 155,788 |
| 43.0 | % | |
Net investment income |
| 10,890 |
| 9,572 |
| 13.8 | % | 21,550 |
| 18,657 |
| 15.5 | % | |||||
Net realized investment gains |
| 1,943 |
| 1,077 |
| 80.4 | % | 2,352 |
| 2,864 |
| -17.9 | % | |||||
Consolidated revenue |
| 126,459 |
| 92,335 |
| 37.0 | % | 246,674 |
| 177,309 |
| 39.1 | % | |||||
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Loss and settlement expenses |
| 70,241 |
| 47,357 |
| 48.3 | % | 133,527 |
| 90,471 |
| 47.6 | % | |||||
Policy acquisition costs |
| 28,807 |
| 25,127 |
| 14.6 | % | 58,311 |
| 47,953 |
| 21.6 | % | |||||
Other insurance expenses |
| 7,148 |
| 6,585 |
| 8.5 | % | 13,832 |
| 12,198 |
| 13.4 | % | |||||
Interest expense on debt |
| 204 |
| 481 |
| -57.6 | % | 447 |
| 905 |
| -50.6 | % | |||||
General corporate expenses |
| 932 |
| 889 |
| 4.8 | % | 2,049 |
| 1,919 |
| 6.8 | % | |||||
Total expenses |
| 107,332 |
| 80,439 |
| 33.4 | % | 208,166 |
| 153,446 |
| 35.7 | % | |||||
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Equity in earnings of unconsolidated investee |
| 2,367 |
| 1,906 |
| 24.2 | % | 3,543 |
| 2,439 |
| 45.3 | % | |||||
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Earnings before income taxes |
| 21,494 |
| 13,802 |
| 55.7 | % | 42,051 |
| 26,302 |
| 59.9 | % | |||||
Income tax expense |
| 6,102 |
| 3,848 |
| 58.6 | % | 12,223 |
| 7,243 |
| 68.8 | % | |||||
Net Earnings |
| $ | 15,392 |
| $ | 9,954 |
| 54.6 | % | $ | 29,828 |
| $ | 19,059 |
| 56.5 | % | |
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Other comprehensive earnings (loss), net of tax |
| 25,317 |
| (14,644 | ) | 272.9 | % | 19,900 |
| (12,944 | ) | 253.7 | % | |||||
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Comprehensive earnings |
| $ | 40,709 |
| $ | (4,690 | ) | 968.0 | % | $ | 49,728 |
| $ | 6,115 |
| 713.2 | % | |
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Operating Earnings: (1) |
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Net Earnings |
| $ | 15,392 |
| $ | 9,954 |
| 54.6 | % | $ | 29,828 |
| $ | 19,059 |
| 56.5 | % | |
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Realized gains, net of tax |
| 1,263 |
| 700 |
| 80.4 | % | 1,529 |
| 1,862 |
| -17.9 | % | |||||
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Net operating earnings |
| $ | 14,129 |
| $ | 9,254 |
| 52.7 | % | $ | 28,299 |
| $ | 17,197 |
| 64.6 | % | |
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Return on Equity: |
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Net earnings (trailing four quarters) |
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| 11.1 | % | 10.4 | % |
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Comprehensive earnings (trailing four quarters) |
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| 13.6 | % | 4.0 | % |
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Per Share Data (2) |
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Diluted: |
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Weighted average shares outstanding (in 000’s) |
| 25,808 |
| 20,463 |
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| 25,731 |
| 20,405 |
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EPS from operations (1) |
| $ | 0.55 |
| $ | 0.46 |
| 19.6 | % | $ | 1.10 |
| $ | 0.84 |
| 31.0 | % | |
Realized gains, net of tax |
| 0.05 |
| 0.03 |
| 66.7 | % | 0.06 |
| 0.09 |
| -33.3 | % | |||||
Net earnings per share |
| $ | 0.60 |
| $ | 0.49 |
| 22.4 | % | $ | 1.16 |
| $ | 0.93 |
| 24.7 | % | |
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Comprehensive earnings per share |
| $ | 1.58 |
| $ | (0.23 | ) | 787.0 | % | $ | 1.93 |
| $ | 0.30 |
| 543.3 | % | |
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Cash dividends per share |
| $ | 0.10 |
| $ | 0.085 |
| 17.6 | % | $ | 0.19 |
| $ | 0.165 |
| 15.2 | % | |
(1) Net operating earnings and EPS from operations consist of our net earnings reduced by after-tax realized investment gains/losses. This measure is useful in gauging our core operating performance across reporting periods, but may not be comparable to the definition of operating earnings used by all companies.
(2) Prior year’s per share data has been stated to reflect the 2-for-1 stock split that occurred on October 15, 2002.
3
RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
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|
| 2003 |
| 2002 |
| % Change |
| 2003 |
| % Change |
| 2002 |
| ||||
Total Gross Sales |
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Gross premiums written |
| $ | 190,084 |
| 183,193 |
| 3.8 | % | $ | 364,008 |
| 339,501 |
| 7.2 | % | ||
Net investment income |
| 10,890 |
| 9,572 |
| 13.8 | % | 21,550 |
| 18,657 |
| 15.5 | % | ||||
Net realized investment gains |
| 1,943 |
| 1,077 |
| 80.4 | % | 2,352 |
| 2,864 |
| -17.9 | % | ||||
Total |
| $ | 202,917 |
| $ | 193,842 |
| 4.7 | % | $ | 387,910 |
| $ | 361,022 |
| 7.4 | % |
|
| June 30, |
| December 31, |
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| 2003 |
| 2002 |
| % Change |
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SUMMARIZED BALANCE SHEET DATA: |
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Fixed income and short-term investments |
| $ | 836,353 |
| $ | 772,685 |
| 8.2 | % |
(amortized cost - $805,202 at 6/30/03) |
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(amortized cost - $753,458 at 12/31/02) |
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Equity securities |
| 247,928 |
| 227,342 |
| 9.1 | % | ||
(cost - $138,247 at 6/30/03) |
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(cost - $136,282 at 12/31/02) |
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Total investments |
| 1,084,281 |
| 1,000,027 |
| 8.4 | % | ||
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Premiums and reinsurance balances receivable |
| 169,554 |
| 122,258 |
| 38.7 | % | ||
Ceded unearned premiums |
| 95,618 |
| 95,406 |
| 0.2 | % | ||
Reinsurance recoverable on unpaid losses |
| 364,756 |
| 340,886 |
| 7.0 | % | ||
Deferred acquisition costs |
| 61,617 |
| 60,102 |
| 2.5 | % | ||
Property and equipment |
| 17,714 |
| 17,757 |
| -0.2 | % | ||
Investment in unconsolidated investee |
| 28,689 |
| 25,261 |
| 13.6 | % | ||
Goodwill |
| 27,882 |
| 27,882 |
| 0.0 | % | ||
Other assets |
| 26,836 |
| 29,748 |
| -9.8 | % | ||
Total assets |
| $ | 1,876,947 |
| $ | 1,719,327 |
| 9.2 | % |
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Unpaid losses and settlement expenses |
| 817,767 |
| 732,838 |
| 11.6 | % | ||
Unearned premiums |
| 354,008 |
| 350,803 |
| 0.9 | % | ||
Reinsurance balances payable |
| 80,959 |
| 78,231 |
| 3.5 | % | ||
Short-term debt |
| 49,041 |
| 54,356 |
| -9.8 | % | ||
Income taxes - deferred |
| 36,624 |
| 26,022 |
| 40.7 | % | ||
Other liabilities |
| 27,134 |
| 20,522 |
| 32.3 | % | ||
Total liabilities |
| 1,365,533 |
| 1,262,772 |
| 8.1 | % | ||
Shareholders’ equity |
| 511,414 |
| 456,555 |
| 12.0 | % | ||
Total liabilities & shareholders’ equity |
| $ | 1,876,947 |
| $ | 1,719,327 |
| 9.2 | % |
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Common shares outstanding (in 000’s) |
| 25,122 |
| 24,681 |
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Book Value per share |
| $ | 20.36 |
| $ | 18.50 |
| 10.1 | % |
Closing stock price per share |
| $ | 32.90 |
| $ | 27.90 |
| 17.9 | % |
4
RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
UNDERWRITING SEGMENT DATA
(in thousands)
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| GAAP |
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| GAAP |
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| GAAP |
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| GAAP |
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| Property |
| Ratios |
| Surety |
| Ratios |
| Casualty |
| Ratios |
| Total |
| Ratios |
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Three Months Ended June 30, |
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2003 |
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Gross premium written |
| $ | 52,425 |
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| $ | 12,909 |
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| $ | 124,750 |
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| $ | 190,084 |
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Net premium written |
| 28,193 |
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| 10,872 |
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| 80,603 |
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| 119,668 |
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Net premium earned |
| 26,797 |
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| 11,785 |
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| 75,044 |
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| 113,626 |
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Net loss & settlement expenses |
| 10,304 |
| 38.5 | % | 5,564 |
| 47.2 | % | 54,373 |
| 72.5 | % | 70,241 |
| 61.8 | % | ||||
Net operating expenses |
| 8,830 |
| 33.0 | % | 7,632 |
| 64.8 | % | 19,493 |
| 26.0 | % | 35,955 |
| 31.6 | % | ||||
Underwriting income(loss) |
| $ | 7,663 |
| 71.5 | % | $ | (1,411 | ) | 112.0 | % | $ | 1,178 |
| 98.5 | % | $ | 7,430 |
| 93.4 | % |
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2002 |
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Gross premium written |
| $ | 56,921 |
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| $ | 16,432 |
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| $ | 109,840 |
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| $ | 183,193 |
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Net premium written |
| 27,540 |
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| 14,450 |
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| 61,007 |
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| 102,997 |
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Net premium earned |
| 21,323 |
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| 12,259 |
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| 48,104 |
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| 81,686 |
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Net loss & settlement expenses |
| 8,529 |
| 40.0 | % | 5,709 |
| 46.6 | % | 33,119 |
| 68.8 | % | 47,357 |
| 58.0 | % | ||||
Net operating expenses |
| 8,502 |
| 39.9 | % | 7,938 |
| 64.8 | % | 15,271 |
| 31.7 | % | 31,711 |
| 38.8 | % | ||||
Underwriting income(loss) |
| $ | 4,292 |
| 79.9 | % | $ | (1,388 | ) | 111.4 | % | $ | (286 | ) | 100.5 | % | $ | 2,618 |
| 96.8 | % |
UNDERWRITING SEGMENT DATA
(in thousands)
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| GAAP |
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| GAAP |
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| GAAP |
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| GAAP |
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| Property |
| Ratios |
| Surety |
| Ratios |
| Casualty |
| Ratios |
| Total |
| Ratios |
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Six Months Ended June 30, |
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2003 |
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Gross premium written |
| $ | 100,584 |
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| $ | 26,468 |
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| $ | 236,956 |
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| $ | 364,008 |
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Net premium written |
| 54,714 |
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| 22,081 |
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| 148,969 |
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| 225,764 |
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Net premium earned |
| 54,129 |
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| 24,138 |
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| 144,505 |
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| 222,772 |
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Net loss & settlement expenses |
| 16,777 |
| 31.0 | % | 11,840 |
| 49.1 | % | 104,910 |
| 72.6 | % | 133,527 |
| 59.9 | % | ||||
Net operating expenses |
| 18,409 |
| 34.0 | % | 15,502 |
| 64.2 | % | 38,232 |
| 26.5 | % | 72,143 |
| 32.4 | % | ||||
Underwriting income(loss) |
| $ | 18,943 |
| 65.0 | % | $ | (3,204 | ) | 113.3 | % | $ | 1,363 |
| 99.1 | % | $ | 17,102 |
| 92.3 | % |
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2002 |
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Gross premium written |
| $ | 106,110 |
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| $ | 32,572 |
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| $ | 200,819 |
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| $ | 339,501 |
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Net premium written |
| 52,155 |
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| 28,707 |
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| 107,811 |
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| 188,673 |
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Net premium earned |
| 41,176 |
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| 24,494 |
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| 90,118 |
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| 155,788 |
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Net loss & settlement expenses |
| 17,798 |
| 43.2 | % | 9,885 |
| 40.4 | % | 62,788 |
| 69.7 | % | 90,471 |
| 58.1 | % | ||||
Net operating expenses |
| 16,306 |
| 39.6 | % | 15,887 |
| 64.9 | % | 27,958 |
| 31.0 | % | 60,151 |
| 38.6 | % | ||||
Underwriting income(loss) |
| $ | 7,072 |
| 82.8 | % | $ | (1,278 | ) | 105.3 | % | $ | (628 | ) | 100.7 | % | $ | 5,166 |
| 96.7 | % |
5