Exhibit 99.1
| NEWS RELEASE |
FOR IMMEDIATE RELEASE |
| CONTACT: John Robison |
RLI reports first quarter earnings
PEORIA, ILLINOIS, April 15, 2008 — RLI Corp. (NYSE: RLI) — RLI Corp. reported first quarter 2008 net earnings of $25.5 million ($1.14 per share). Results for the first quarter of 2007, which included $12.3 million ($0.32 per share) of favorable development in prior years’ casualty loss reserves, were $32.5 million ($1.32 per share).
Earnings Per Diluted Share |
| 2008 |
| 2007 |
| ||
Net earnings |
| $ | 1.14 |
| $ | 1.32 |
|
Operating earnings |
| $ | 1.03 |
| $ | 1.20 |
|
Highlights for the quarter included:
· Operating earnings of $23.0 million ($1.03 per share).
· Combined ratio of 89.2.
· Book value per share of $34.57.
· Net operating cash flow of $48.1 million.
“This was an excellent quarterly result in this marketplace,” said RLI Corp. President & CEO Jonathan E. Michael. “We know how to manage our business when prices are soft, and we’ll continue to be disciplined underwriters. In challenging marketplaces like the current one, we focus on building the people, products and processes we want to have in place when conditions improve. Companies that wait to react until after the marketplace turns will be too late.”
Underwriting profits continue
RLI achieved $14.7 million of underwriting income in the first quarter of 2008 on an 89.2 combined ratio, compared to $25.6 million of underwriting income on an 81.4 combined ratio in the same quarter for 2007.
Underwriting Income |
| First Quarter |
|
|
| First Quarter |
| ||||||
(in millions) |
| 2008 |
| 2007 |
| Combined Ratio |
| 2008 |
| 2007 |
| ||
Casualty |
| $ | (0.6 | ) | $ | 18.6 |
| Casualty |
| 100.7 |
| 78.8 |
|
Property |
| 12.4 |
| 4.0 |
| Property |
| 67.3 |
| 88.6 |
| ||
Surety |
| 2.9 |
| 3.0 |
| Surety |
| 81.9 |
| 80.3 |
| ||
Total |
| $ | 14.7 |
| $ | 25.6 |
| Total |
| 89.2 |
| 81.4 |
|
Other income
For the quarter, investment income grew 1.4% to $19.3 million. The investment portfolio’s total return was -0.1%. The bond portfolio gained 1.7% and the equity portfolio’s return was -7.2%.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $6.6 million for the quarter ($0.30 per share) compared to $33.1 million ($1.34 per share) for the same quarter in 2007.
— more —
DIFFERENT WORKS
Other news
In the first quarter of 2008, we repurchased 556,600 of our shares at an average cost of $53.37 ($29.7 million). As of March 31, 2008, we have $56.0 million of remaining capacity from the $200 million repurchase program approved in 2007.
The company paid a first quarter cash dividend of $0.23 per share on April 15, 2008, the same as in the prior quarter. RLI’s cumulative dividends, including this recent payment, are more than $160 million paid in 127 consecutive quarterly dividends. The company’s dividend yield would be 1.8%, based on the $0.92 annualized dividend and today’s closing stock price of $50.42.
At 10 a.m. CDT tomorrow, April 16, 2008, 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.
Underwriting income, operating earnings, earnings per share (EPS) from operations and other per share items are non-GAAP financial measures, and we believe that investors’ understanding of RLI’s core operating performance is enhanced by our disclosure of these financial measures. Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs, and insurance operating expenses from net premium earned. Operating earnings and EPS from operations consist of our net earnings reduced by net realized investment gains and taxes related to net realized gains. Our definitions of these items may not be comparable to the definitions used by other companies. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. All earnings per share data are calculated using fully diluted shares. Combined ratio refers to a GAAP combined ratio.
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, 2007.
RLI, a specialty insurance company, offers a diversified portfolio of property and casualty coverages and surety bonds serving “niche” or underserved markets. RLI operates in all 50 states from office locations across the country. The company’s talented associates have delivered underwriting profits in 27 of the last 31 years, including the last 12. 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 Treasurer John Robison at (309) 693-5846 or at john_robison@rlicorp.com or visit our website at www.rlicorp.com.
Supplemental disclosure regarding the earnings impact of specific items
|
| Operating Earnings Per Share |
| ||||
|
| 2008 |
| 2007 |
| ||
|
| 1st Qtr |
| 1st Qtr |
| ||
Operating Earnings Per Share |
| $ | 1.03 |
| $ | 1.20 |
|
|
|
|
|
|
| ||
Specific items included in operating earnings per share: (1) (2) |
|
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|
| ||
· Favorable development from prior years’ casualty reserves |
| — |
| $ | 0.32 |
| |
(1) Includes bonus- and profit sharing-related impacts which affected other insurance and general corporate expenses.
(2) Favorable developments reflect revisions for previously estimated losses.
— more —
DIFFERENT WORKS
2
RLI CORP.
2008 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
|
| Three Months Ended March 31 |
| |||||||
|
| 2008 |
| 2007 |
| % Change |
| |||
SUMMARIZED INCOME STATEMENT DATA: |
|
|
|
|
|
|
| |||
Net premiums earned |
| $ | 135,965 |
| $ | 137,977 |
|
| -1.5 | % |
Net investment income |
| 19,258 |
| 18,990 |
| 1.4 | % | |||
Net realized investment gains |
| 3,741 |
| 4,625 |
| -19.1 | % | |||
Consolidated revenue |
| 158,964 |
| 161,592 |
| -1.6 | % | |||
|
|
|
|
|
|
|
| |||
Loss and settlement expenses |
| 69,265 |
| 63,060 |
| 9.8 | % | |||
Policy acquisition costs |
| 41,746 |
| 39,764 |
| 5.0 | % | |||
Other insurance expenses |
| 10,290 |
| 9,556 |
| 7.7 | % | |||
Interest expense on debt |
| 1,827 |
| 1,510 |
| 21.0 | % | |||
General corporate expenses |
| 2,104 |
| 1,877 |
| 12.1 | % | |||
Total expenses |
| 125,232 |
| 115,767 |
| 8.2 | % | |||
|
|
|
|
|
|
|
| |||
Equity in earnings of unconsolidated investees |
| 2,229 |
| 1,313 |
| 69.8 | % | |||
|
|
|
|
|
|
|
| |||
Earnings before income taxes |
| 35,961 |
| 47,138 |
| -23.7 | % | |||
Income tax expense |
| 10,502 |
| 14,621 |
| -28.2 | % | |||
Net Earnings |
| $ | 25,459 |
| $ | 32,517 |
|
| -21.7 | % |
|
|
|
|
|
|
|
| |||
Other comprehensive earnings (loss), net of tax |
| (18,826 | ) | 600 |
|
|
| |||
Comprehensive earnings |
| $ | 6,633 |
| $ | 33,117 |
|
| -80.0 | % |
|
|
|
|
|
|
|
| |||
Operating Earnings:(1) |
|
|
|
|
|
|
| |||
Net Earnings |
| $ | 25,459 |
| $ | 32,517 |
|
| -21.7 | % |
Less: Realized investment gains, net of tax |
| 2,432 |
| 3,006 |
| -19.1 | % | |||
Operating earnings |
| $ | 23,027 |
| $ | 29,511 |
|
| -22.0 | % |
|
|
|
|
|
|
|
| |||
Return on Equity: |
|
|
|
|
|
|
| |||
Net earnings (trailing four quarters) |
| 21.7 | % | 19.9 | % |
|
| |||
Comprehensive earnings (trailing four quarters) |
| 18.0 | % | 23.7 | % |
|
| |||
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| |||
Per Share Data |
|
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| |||
|
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|
| |||
Diluted: |
|
|
|
|
|
|
| |||
Weighted average shares outstanding (in 000’s) |
| 22,281 |
| 24,702 |
|
|
| |||
|
|
|
|
|
|
|
| |||
EPS from operations (1) |
| $ | 1.03 |
| $ | 1.20 |
|
| -14.2 | % |
Realized gains, net of tax |
| 0.11 |
| 0.12 |
| -8.3 | % | |||
Net earnings per share |
| $ | 1.14 |
| $ | 1.32 |
|
| -13.6 | % |
Comprehensive earnings per share |
| $ | 0.30 |
| $ | 1.34 |
|
| -77.6 | % |
|
|
|
|
|
|
|
| |||
Cash dividends per share |
| $ | 0.23 |
| $ | 0.20 |
|
| 15.0 | % |
|
|
|
|
|
|
|
| |||
Net Cash Flow from Operations |
| $ | 48,085 |
| $ | 25,310 |
|
| 90.0 | % |
(1) See discussion of use of non-GAAP financial measures on page 2.
3
RLI CORP.
2008 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
|
| March 31, |
| December 31, |
|
|
| |||
|
| 2008 |
| 2007 |
| % Change |
| |||
SUMMARIZED BALANCE SHEET DATA: |
|
|
|
|
|
|
| |||
Fixed income and short-term investments |
| $ | 1,470,563 |
| $ | 1,446,097 |
|
| 1.7 | % |
(amortized cost – $1,456,604 at 3/31/08) |
|
|
|
|
|
|
| |||
(amortized cost – $1,437,463 at 12/31/07) |
|
|
|
|
|
|
| |||
Equity securities |
| 320,926 |
| 359,513 |
| -10.7 | % | |||
(cost – $213,642 at 3/31/08) |
|
|
|
|
|
|
| |||
(cost – $216,465 at 12/31/07) |
|
|
|
|
|
|
| |||
Preferred stock |
| 43,978 |
| 34,167 |
| 28.7 | % | |||
(cost – $47,485 at 3/31/08) |
|
|
|
|
|
|
| |||
(cost – $39,133 at 12/31/07) |
|
|
|
|
|
|
| |||
Total investments |
| 1,835,467 |
| 1,839,777 |
| -0.2 | % | |||
|
|
|
|
|
|
|
| |||
Premiums and reinsurance balances receivable |
| 88,158 |
| 105,937 |
| -16.8 | % | |||
Ceded unearned premiums |
| 64,354 |
| 71,021 |
| -9.4 | % | |||
Reinsurance recoverable on unpaid losses |
| 431,910 |
| 417,250 |
| 3.5 | % | |||
Deferred acquisition costs |
| 77,192 |
| 78,882 |
| -2.1 | % | |||
Property and equipment |
| 19,941 |
| 20,050 |
| -0.5 | % | |||
Investment in unconsolidated investees |
| 40,445 |
| 38,162 |
| 6.0 | % | |||
Goodwill |
| 26,214 |
| 26,214 |
| — |
| |||
Other assets |
| 25,846 |
| 29,230 |
| -11.6 | % | |||
Total assets |
| $ | 2,609,527 |
| $ | 2,626,523 |
|
| -0.6 | % |
|
|
|
|
|
|
|
| |||
Unpaid losses and settlement expenses |
| $ | 1,234,342 |
| $ | 1,192,178 |
| 3.5 | % | |
Unearned premiums |
| 333,778 |
| 355,522 |
| -6.1 | % | |||
Reinsurance balances payable |
| 34,379 |
| 38,273 |
| -10.2 | % | |||
Short-term debt |
| 28,148 |
| 27,975 |
| 0.6 | % | |||
Long-term debt – bonds payable |
| 100,000 |
| 100,000 |
| — |
| |||
Income taxes – deferred |
| 15,368 |
| 25,042 |
| -38.6 | % | |||
Accrued expenses |
| 30,320 |
| 39,303 |
| -22.9 | % | |||
Other liabilities |
| 85,622 |
| 73,808 |
| 16.0 | % | |||
Total liabilities |
| 1,861,957 |
| 1,852,101 |
| 0.5 | % | |||
Shareholders’ equity |
| 747,570 |
| 774,422 |
| -3.5 | % | |||
Total liabilities & shareholders’ equity |
| $ | 2,609,527 |
| $ | 2,626,523 |
|
| -0.6 | % |
|
|
|
|
|
|
|
| |||
OTHER DATA |
|
|
|
|
|
|
| |||
Common shares outstanding (in 000’s) |
| 21,624 |
| 22,155 |
|
|
| |||
Book Value per share |
| $ | 34.57 |
| $ | 34.95 |
|
| -1.1 | % |
Closing stock price per share |
| $ | 49.57 |
| $ | 56.79 |
|
| -12.7 | % |
Statutory Surplus |
| $ | 705,278 |
| $ | 752,004 |
|
| -6.2 | % |
4
RLI CORP.
2008 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended March 31 |
|
|
|
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|
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| GAAP |
|
|
| GAAP |
|
|
| GAAP |
|
|
| GAAP |
| ||||
|
| Casualty |
| Ratios |
| Property |
| Ratios |
| Surety |
| Ratios |
| Total |
| Ratios |
| ||||
|
|
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|
| ||||
2008 |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
| $ | 101,016 |
|
|
| $ | 41,993 |
|
|
| $ | 18,014 |
|
|
| $ | 161,023 |
|
|
|
Net premiums written |
| 75,893 |
|
|
| 28,177 |
|
|
| 16,819 |
|
|
| 120,889 |
|
|
| ||||
Net premiums earned |
| 82,000 |
|
|
| 37,786 |
|
|
| 16,179 |
|
|
| 135,965 |
|
|
| ||||
Net loss & settlement expenses |
| 57,098 |
| 69.6 | % | 9,506 |
| 25.2 | % | 2,661 |
| 16.4 | % | 69,265 |
| 50.9 | % | ||||
Net operating expenses |
| 25,537 |
| 31.1 | % | 15,901 |
| 42.1 | % | 10,598 |
| 65.5 | % | 52,036 |
| 38.3 | % | ||||
Underwriting income (loss) |
| $ | (635 | ) | 100.7 | % | $ | 12,379 |
| 67.3 | % | $ | 2,920 |
| 81.9 | % | $ | 14,664 |
| 89.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
| $ | 111,357 |
|
|
| $ | 42,152 |
|
|
| $ | 17,807 |
|
|
| $ | 171,316 |
|
|
|
Net premiums written |
| 79,694 |
|
|
| 23,140 |
|
|
| 16,666 |
|
|
| 119,500 |
|
|
| ||||
Net premiums earned |
| 88,015 |
|
|
| 34,609 |
|
|
| 15,353 |
|
|
| 137,977 |
|
|
| ||||
Net loss & settlement expenses |
| 42,782 |
| 48.6 | % | 17,550 |
| 50.7 | % | 2,728 |
| 17.8 | % | 63,060 |
| 45.7 | % | ||||
Net operating expenses |
| 26,616 |
| 30.2 | % | 13,110 |
| 37.9 | % | 9,594 |
| 62.5 | % | 49,320 |
| 35.7 | % | ||||
Underwriting income |
| $ | 18,617 |
| 78.8 | % | $ | 3,949 |
| 88.6 | % | $ | 3,031 |
| 80.3 | % | $ | 25,597 |
| 81.4 | % |
5