Exhibit 99.1
NEWS RELEASE |
|
RLI Corp.
9025 N. Lindbergh Dr. ½ Peoria, IL 61615-1499
Phone: 309-692-1000 ½ Fax: 309-692-1068
www.rlicorp.com
FOR IMMEDIATE RELEASE | CONTACT: Aaron Jacoby | |
(309) 693-5880 | ||
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| Aaron_Jacoby@rlicorp.com |
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| www.rlicorp.com |
RLI sets earnings records
PEORIA, ILLINOIS, April 14, 2005 — RLI Corp. (NYSE: RLI) – RLI Corp. announced first quarter net earnings of $29.3 million ($1.12 per diluted share), which were 73% better than the $16.9 million ($0.65 per diluted share) reported in the same quarter last year. Quarterly operating earnings of $27.4 million ($1.05 per share) were a 78% improvement over last year’s $15.4 million ($0.59 per share) result. Both the per-share and total dollar results set quarterly net and operating earnings records.
The quarter’s results include certain favorable developments from prior year loss reserves. During the quarter, positive development on prior accident year casualty loss reserves resulted in additional earnings of $9.1 million, or $0.23 per share. Additionally, losses related to the four Florida and Southeast U.S. hurricanes did not develop as expected, improving the first quarter’s pretax results by $3.8 million (affecting casualty by $2.8 million and property by $1.0 million), or $0.10 per share. These developments include bonus-related accruals which affected other insurance and general corporate expenses.
During the quarter, shareholders’ equity grew 1%, to $631.3 million; book value per share was $24.83, up 1%; assets rose by 2%, to $2.5 billion.
All segments report profitable underwriting
RLI reported a first quarter underwriting profit of $26.4 million on a 78.8 net GAAP combined ratio versus the $10.8 million gain on a 91.5 combined ratio for the same period last year. Casualty recorded an 80.5 combined ratio. Prior to the reserve changes noted above, the casualty segment would have produced a 93.7 combined ratio. The property segment improved nearly seven points to register a 61.8 combined ratio. The surety segment recorded a 94.5 combined ratio.
Net premiums earned were down 1% in the quarter, to $124.0 million. Consolidated revenue of $141.6 million was up 1%. Gross premiums written of $166.1 million were down 9% for the quarter. Through three months, segment performance included an increase in surety gross premiums of 7%, a rise in casualty writings of 1%, and a 37% reduction in property business.
“During the first quarter, discipline ruled the day,” said RLI Corp. President & CEO Jonathan E. Michael. “The marketplace is continuing to soften in many coverage areas, which places additional value on underwriting selection to produce profits. Our underwriters excelled by delivering profitable results in all three business segments.
“Our surety segment showed significant progress, reflecting both new business opportunities and the effect of revised underwriting controls. As expected, casualty business was relatively flat, yet continued to be profitable. Our property business is down due to marketplace conditions in several coverages as well as a reduced presence in the construction marketplace.”
— more —
April 14, 2005
RLI Corp. News Release
Page 2 of 5
Investment income
Investment income for the first quarter reached $14.6 million, a 19% increase over the same period last year due to the strength of cash flows.
Due to the declining stock market and rising interest rates, the company’s consolidated investment portfolio’s total return for the quarter was a loss of 0.5%. The equity portfolio’s loss was 0.9% and the bond portfolio’s loss was 0.5%.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $11.8 million for the quarter, or $0.45 per share.
Other quarterly news
During the quarter, RLI announced the opening of a marine insurance division in New York City. The new division will focus on marine classes of cargo, hull, protection and indemnity, primary and excess liabilities, yachts and other marine coverages. The division plans to have a presence in several other current RLI offices.
In early February, the company marked the beginning of its 30th consecutive year of cash payments to shareholders by declaring a $0.14 per share dividend. Over the last five years, the company’s quarterly dividend has grown by an average of 14.9% per year and 11.3% per year over the past decade. Mergent’s Dividend Achievers currently ranks RLI 191st among 11,000 public companies for 10-year average dividend growth rate.
At 3:15 p.m. CDT today, April 14, 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.
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, 2004.
RLI, a specialty insurance company celebrating its 40th anniversary in 2005, offers a diversified portfolio of property and casualty coverages and surety bonds serving “niche” or underserved markets. RLI operates in all 50 states from 18 office locations. The company’s talented associates have delivered underwriting profits in 24 of the last 28 years, including the last nine. RLI’s insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company and RLI Indemnity Company – are rated A+ “Superior” by A.M. Best Company and A+ “Strong” by Standard & Poor’s.
For additional information, contact RLI Vice President, Corporate Development Aaron Jacoby at (309) 693-5880 or at aaron_jacoby@rlicorp.com.or visit our website at www.rlicorp.com.
— more —
April 14, 2005
RLI Corp. News Release
Page 3 of 5
RLI CORP.
2005 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
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| Three Months Ended March 31, |
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| 2005 |
| 2004 |
| % Change |
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SUMMARIZED INCOME STATEMENT DATA: |
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Net premiums earned |
| $ | 124,040 |
| $ | 125,898 |
| -1.5 | % |
Net investment income |
| 14,612 |
| 12,315 |
| 18.7 | % | ||
Net realized investment gains |
| 2,984 |
| 2,436 |
| 22.5 | % | ||
Consolidated revenue |
| 141,636 |
| 140,649 |
| 0.7 | % | ||
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Loss and settlement expenses |
| 56,519 |
| 75,231 |
| -24.9 | % | ||
Policy acquisition costs |
| 31,864 |
| 32,795 |
| -2.8 | % | ||
Other insurance expenses |
| 9,258 |
| 7,052 |
| 31.3 | % | ||
Interest expense on debt |
| 1,810 |
| 1,740 |
| 4.0 | % | ||
General corporate expenses |
| 1,904 |
| 1,285 |
| 48.2 | % | ||
Total expenses |
| 101,355 |
| 118,103 |
| -14.2 | % | ||
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Equity in earnings of unconsolidated investees |
| 1,259 |
| 1,234 |
| 2.0 | % | ||
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Earnings before income taxes |
| 41,540 |
| 23,780 |
| 74.7 | % | ||
Income tax expense |
| 12,233 |
| 6,837 |
| 78.9 | % | ||
Net Earnings |
| $ | 29,307 |
| $ | 16,943 |
| 73.0 | % |
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Other comprehensive earnings (loss), net of tax |
| (17,517 | ) | 7,587 |
| -330.9 | % | ||
Comprehensive earnings |
| $ | 11,790 |
| $ | 24,530 |
| -51.9 | % |
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Operating Earnings:(1) |
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Net Earnings |
| $ | 29,307 |
| $ | 16,943 |
| 73.0 | % |
Less: Realized investment gains, net of tax |
| 1,940 |
| 1,583 |
| 22.6 | % | ||
Operating earnings |
| $ | 27,367 |
| $ | 15,360 |
| 78.2 | % |
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Return on Equity: |
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Net earnings (trailing four quarters) |
| 14.3 | % | 14.0 | % |
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Comprehensive earnings (trailing four quarters) |
| 11.5 | % | 21.4 | % |
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Per Share Data |
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Diluted: |
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Weighted average shares outstanding (in 000’s) |
| 26,213 |
| 26,118 |
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EPS from operations (1) |
| $ | 1.05 |
| $ | 0.59 |
| 78.0 | % |
Realized gains, net of tax |
| 0.07 |
| 0.06 |
| 16.7 | % | ||
Net earnings per share |
| $ | 1.12 |
| $ | 0.65 |
| 72.3 | % |
Comprehensive earnings per share |
| $ | 0.45 |
| $ | 0.94 |
| -52.1 | % |
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Cash dividends per share |
| $ | 0.14 |
| $ | 0.11 |
| 27.3 | % |
(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.
April 14, 2005
RLI Corp. News Release
Page 4 of 5
RLI CORP.
2005 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
|
| Three Months Ended March 31, |
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| 2005 |
| 2004 |
| % Change |
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Total Gross Revenues |
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Gross premiums written |
| $ | 166,135 |
| 182,912 |
| -9.2 | % | |
Net investment income |
| 14,612 |
| 12,315 |
| 18.7 | % | ||
Net realized investment gains |
| 2,984 |
| 2,436 |
| 22.5 | % | ||
Total |
| $ | 183,731 |
| $ | 197,663 |
| -7.0 | % |
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Net Cash Flow from Operations |
| $ | 31,015 |
| $ | 33,017 |
| -6.1 | % |
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|
| March 31, |
| December 31, |
| % Change |
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SUMMARIZED BALANCE SHEET DATA: |
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Fixed income and short-term investments |
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(amortized cost - $1,263,151 at 3/31/05) |
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(amortized cost - $1,237,843 at 12/31/04) |
| $ | 1,260,343 |
| $ | 1,253,843 |
| 0.5 | % |
Equity securities |
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(cost - $178,527 at 3/31/05) |
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(cost - $169,479 at 12/31/04) |
| 317,140 |
| 315,875 |
| 0.4 | % | ||
Total investments |
| 1,577,483 |
| 1,569,718 |
| 0.5 | % | ||
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Premiums and reinsurance balances receivable |
| 139,088 |
| 146,667 |
| -5.2 | % | ||
Ceded unearned premiums |
| 97,074 |
| 101,446 |
| -4.3 | % | ||
Reinsurance recoverable on unpaid losses |
| 520,219 |
| 464,180 |
| 12.1 | % | ||
Deferred acquisition costs |
| 65,142 |
| 67,146 |
| -3.0 | % | ||
Property and equipment |
| 18,999 |
| 18,335 |
| 3.6 | % | ||
Investment in unconsolidated investees |
| 44,541 |
| 43,398 |
| 2.6 | % | ||
Goodwill |
| 26,214 |
| 26,214 |
| 0.0 | % | ||
Other assets |
| 30,876 |
| 31,671 |
| -2.5 | % | ||
Total assets |
| $ | 2,519,636 |
| $ | 2,468,775 |
| 2.1 | % |
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Unpaid losses and settlement expenses |
| 1,198,741 |
| 1,132,599 |
| 5.8 | % | ||
Unearned premiums |
| 349,581 |
| 367,205 |
| -4.8 | % | ||
Reinsurance balances payable |
| 76,815 |
| 78,062 |
| -1.6 | % | ||
Short-term debt |
| 46,946 |
| 46,839 |
| 0.2 | % | ||
Long-term debt - bonds payable |
| 100,000 |
| 100,000 |
| 0.0 | % | ||
Income taxes - deferred |
| 29,433 |
| 38,966 |
| -24.5 | % | ||
Other liabilities |
| 86,780 |
| 81,443 |
| 6.6 | % | ||
Total liabilities |
| 1,888,296 |
| 1,845,114 |
| 2.3 | % | ||
Shareholders’ equity |
| 631,340 |
| 623,661 |
| 1.2 | % | ||
Total liabilities & shareholders’ equity |
| $ | 2,519,636 |
| $ | 2,468,775 |
| 2.1 | % |
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Common shares outstanding (in 000’s) |
| 25,430 |
| 25,316 |
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Book Value per share |
| $ | 24.83 |
| $ | 24.64 |
| 0.8 | % |
Closing stock price per share |
| $ | 41.45 |
| $ | 41.57 |
| -0.3 | % |
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Statutory Surplus |
| $ | 630,070 |
| $ | 605,967 |
| 4.0 | % |
April 14, 2005
RLI Corp. News Release
Page 5 of 5
RLI CORP.
2005 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
UNDERWRITING SEGMENT DATA
(in thousands)
|
| Property |
| GAAP |
| Surety |
| GAAP |
| Casualty |
| GAAP |
| Total |
| GAAP |
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Three Months Ended March 31, |
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Gross premium written |
| $ | 31,519 |
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|
| $ | 13,772 |
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| $ | 120,844 |
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| $ | 166,135 |
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Net premium written |
| 15,141 |
|
|
| 12,778 |
|
|
| 82,869 |
|
|
| 110,788 |
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Net premium earned |
| 21,133 |
|
|
| 12,300 |
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| 90,607 |
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|
| 124,040 |
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Net loss & settlement expenses |
| 6,281 |
| 29.7 | % | 4,032 |
| 32.8 | % | 46,206 |
| 51.0 | % | 56,519 |
| 45.6 | % | ||||
Net operating expenses |
| 6,791 |
| 32.1 | % | 7,584 |
| 61.7 | % | 26,747 |
| 29.5 | % | 41,122 |
| 33.2 | % | ||||
Underwriting income(loss) |
| $ | 8,061 |
| 61.8 | % | $ | 684 |
| 94.5 | % | $ | 17,654 |
| 80.5 | % | $ | 26,399 |
| 78.8 | % |
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2004 |
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Gross premium written |
| $ | 49,819 |
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| $ | 12,922 |
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| $ | 120,171 |
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| $ | 182,912 |
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Net premium written |
| 24,247 |
|
|
| 11,734 |
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| 87,185 |
|
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| 123,166 |
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Net premium earned |
| 25,382 |
|
|
| 11,429 |
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| 89,087 |
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| 125,898 |
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Net loss & settlement expenses |
| 8,171 |
| 32.2 | % | 4,420 |
| 38.7 | % | 62,640 |
| 70.3 | % | 75,231 |
| 59.8 | % | ||||
Net operating expenses |
| 9,266 |
| 36.5 | % | 7,035 |
| 61.6 | % | 23,546 |
| 26.4 | % | 39,847 |
| 31.7 | % | ||||
Underwriting income(loss) |
| $ | 7,945 |
| 68.7 | % | $ | (26 | ) | 100.3 | % | $ | 2,901 |
| 96.7 | % | $ | 10,820 |
| 91.5 | % |