Exhibit 99.1
NEWS RELEASE | |
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|
| 9025 N. Lindbergh Drive | Peoria, IL 61615-1431 |
| P: 309-692-1000 | F: 309-692-1068 | www.rlicorp.com |
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|
FOR IMMEDIATE RELEASE | CONTACT: John Robison |
| (309) 693-5846 |
| John.Robison@rlicorp.com |
| www.rlicorp.com |
RLI reports third quarter earnings
PEORIA, ILLINOIS, October 19, 2009 — RLI Corp. (NYSE: RLI) — RLI Corp. reported third quarter 2009 operating earnings of $25.8 million ($1.18 per share). For the nine months ended September 30, 2009, operating earnings were $76.9 million ($3.53 per share).
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| Third Quarter |
| ||||
Earnings Per Diluted Share |
| 2009 |
| 2008 |
| ||
Operating earnings |
| $ | 1.18 |
| $ | 1.12 |
|
Net earnings |
| $ | 1.42 |
| $ | 0.40 |
|
Highlights for the quarter included:
· Operating earnings of $25.8 million ($1.18 per share).
· Combined ratio of 81.3.
· Book value per share of $38.23, an increase of 15.9% from year end 2008.
· Net operating cash flow of $46.8 million.
· $15.1 million ($0.45 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.
“This outstanding result was driven by solid underwriting, favorable loss trends and positive investment returns,” said Jonathan E. Michael, President & CEO, “Our strong balance sheet and disciplined approach to business continue to serve us well.”
Third quarter underwriting results
RLI achieved $23.0 million of underwriting income in the third quarter of 2009 on an 81.3 combined ratio, compared to $15.2 million of underwriting income on an 88.3 combined ratio in the same quarter for 2008.
Underwriting Income |
| Third Quarter |
| ||||
(in millions) |
| 2009 |
| 2008 |
| ||
Casualty |
| $ | 17.4 |
| $ | 18.5 |
|
Property |
| 3.9 |
| (11.0 | ) | ||
Surety |
| 1.7 |
| 7.7 |
| ||
Total |
| $ | 23.0 |
| $ | 15.2 |
|
|
| Third Quarter |
| ||
Combined Ratio |
| 2009 |
| 2008 |
|
Casualty |
| 73.2 |
| 75.9 |
|
Property |
| 90.2 |
| 130.4 |
|
Surety |
| 90.6 |
| 55.8 |
|
Total |
| 81.3 |
| 88.3 |
|
RLI reported year-to-date underwriting income of $63.2 million representing an 82.9 combined ratio versus the $59.0 million underwriting income representing an 85.2 combined ratio for the same period last year.
Other income
For the quarter, investment income was $16.3 million compared to $19.8 million for the same period in 2008. For the nine month period ended September 30, 2009, investment income was $50.5 million versus $58.7 million for the same period in 2008.
The investment portfolio’s total return for the quarter was 5.0%, with the bond portfolio returning 3.8% and the equity portfolio returning 12.8%. Through nine months, the investment portfolio’s total return was 8.6% with the bond portfolio returning 8.4% and equities returning 10.2%. During the last six months capital markets have significantly improved, contributing to our book value growth. Investment income is lower in 2009 versus the same period in 2008 as the result of lower reinvestment rates, dividend cuts and changes in asset allocation.
— more —
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $68.0 million for the quarter ($3.12 per share) versus a loss of $15.5 million ($0.72 per share) over the same period in 2008. Year-to-date comprehensive earnings were $126.6 million ($5.82 per share), compared to $4.4 million ($0.20 per share) for the same period last year.
During the quarter, equity in earnings of unconsolidated investee was $1.1 million compared to $0.2 million from the same period last year. The quarter’s results for last year were negatively impacted by the increased value of the dollar, which resulted in currency losses. For the nine month period, earnings were $5.2 million versus $6.4 million in 2008. These results are related to Maui Jim, Inc., a producer of premium sunglasses, which has been affected by the economic slowdown and the ensuing effect on consumer discretionary spending.
Supplemental disclosure regarding the earnings impact of specific items
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| Operating Earnings Per Share |
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| 2009 |
| 2008 |
| 2009 |
| 2008 |
| ||||
|
| 3rd Qtr |
| 3rd Qtr |
| 9 mos. |
| 9 mos. |
| ||||
Operating Earnings Per Share |
| $ | 1.18 |
| $ | 1.12 |
| $ | 3.53 |
| $ | 3.69 |
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Specific items included in operating earnings per share: (1) (2) |
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· Gain from casualty prior years’ reserve development |
| $ | 0.51 |
| $ | 0.52 |
| $ | 1.34 |
| $ | 0.95 |
|
· Gain (Loss) from property prior years’ reserve development |
| $ | (0.07 | ) | — |
| $ | (0.23 | ) | $ | 0.06 |
| |
· Gain (Loss) from surety prior years’ reserve development |
| $ | — |
| $ | 0.14 |
| $ | (0.01 | ) | $ | 0.16 |
|
· Gain from 2008 hurricanes’ reserve development |
| $ | 0.01 |
| $ | — |
| $ | 0.05 |
| $ | — |
|
· Loss from 2008 hurricanes |
| $ | — |
| $ | (0.64 | ) | $ | — |
| $ | (0.63 | ) |
· Gain from change in tax rate applicable to the Maui Jim dividend (3) |
| $ | — |
| $ | 0.05 |
| $ | — |
| $ | 0.05 |
|
(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.
(3) 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 (7%) as compared to the corporate capital gains tax rate (35%) on which tax estimates were based.
Other news
During the quarter, the company was named as one of the insurance industry’s top performing companies by the Ward’s 50® Top P&C Performers group. RLI is one of only five property and casualty insurers to have been recognized for excellence among 3,100 property and casualty insurers for 19 straight years since the group’s inception in 1991.
The company paid a third quarter cash dividend of $0.27 per share on October 15, 2009. RLI’s cumulative dividends, including this recent payment, are more than $190 million paid in 133 consecutive quarters. RLI has paid and increased dividends in each of the last 34 years. The company’s dividend yield would be 2.0%, based on the $1.08 annualized dividend and today’s closing stock price of $54.90.
The company’s $200 million stock repurchase program, approved in 2007 and suspended in the third quarter of 2008, was reinstated with $37.8 million of remaining capacity.
2
At 10 a.m. CDT tomorrow, October 20, 2009, 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 adjusted by net realized investment gains/(losses) and taxes related to net realized gains/(losses). 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, 2008.
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 28 of the last 32 years, including the last 13. 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 John Robison, Treasurer, Chief Investment Officer at (309) 693-5846 or at John.Robison@rlicorp.com or visit our website at www.rlicorp.com.
3
RLI CORP.
2009 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||||||
|
| 2009 |
| 2008 |
| % Change |
| 2009 |
| 2008 |
| % Change |
| ||||
SUMMARIZED INCOME STATEMENT DATA: |
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Net premiums earned |
| $ | 122,736 |
| $ | 130,850 |
| -6.2 | % | $ | 370,910 |
| $ | 399,110 |
| -7.1 | % |
Net investment income |
| 16,295 |
| 19,844 |
| -17.9 | % | 50,494 |
| 58,707 |
| -14.0 | % | ||||
Net realized investment gains (losses) |
| 6,985 |
| (24,212 | ) |
|
| (20,789 | ) | (12,396 | ) | -67.7 | % | ||||
Consolidated revenue |
| 146,016 |
| 126,482 |
| 15.4 | % | 400,615 |
| 445,421 |
| -10.1 | % | ||||
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Loss and settlement expenses |
| 47,677 |
| 66,013 |
| -27.8 | % | 157,678 |
| 190,043 |
| -17.0 | % | ||||
Policy acquisition costs |
| 41,627 |
| 41,424 |
| 0.5 | % | 121,196 |
| 121,721 |
| -0.4 | % | ||||
Other insurance expenses |
| 10,480 |
| 8,216 |
| 27.6 | % | 28,814 |
| 28,346 |
| 1.7 | % | ||||
Interest expense on debt |
| 1,512 |
| 1,646 |
| -8.1 | % | 4,537 |
| 5,191 |
| -12.6 | % | ||||
General corporate expenses |
| 2,177 |
| 1,735 |
| 25.5 | % | 5,847 |
| 5,759 |
| 1.5 | % | ||||
Total expenses |
| 103,473 |
| 119,034 |
| -13.1 | % | 318,072 |
| 351,060 |
| -9.4 | % | ||||
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Equity in earnings of unconsolidated investee |
| 1,120 |
| 248 |
| 351.6 | % | 5,242 |
| 6,417 |
| -18.3 | % | ||||
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Earnings before income taxes |
| 43,663 |
| 7,696 |
| 467.3 | % | 87,785 |
| 100,778 |
| -12.9 | % | ||||
Income tax expense (benefit) |
| 12,644 |
| (890 | ) |
|
| 24,502 |
| 28,083 |
| -12.8 | % | ||||
Net Earnings |
| $ | 31,019 |
| $ | 8,586 |
| 261.3 | % | $ | 63,283 |
| $ | 72,695 |
| -12.9 | % |
Other comprehensive earnings (loss), net of tax |
| 36,969 |
| (24,109 | ) |
|
| 63,357 |
| (68,274 | ) |
|
| ||||
Comprehensive earnings (loss) |
| $ | 67,988 |
| $ | (15,523 | ) |
|
| $ | 126,640 |
| $ | 4,421 |
| 2764.5 | % |
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Operating Earnings:(1) |
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Net Earnings |
| $ | 31,019 |
| $ | 8,586 |
| 261.3 | % | $ | 63,283 |
| $ | 72,695 |
| -12.9 | % |
Less: Realized investment gains (losses) , net of tax |
| 5,250 |
| (15,737 | ) |
|
| (13,603 | ) | (8,057 | ) | -68.8 | % | ||||
Operating earnings |
| $ | 25,769 |
| $ | 24,323 |
| 5.9 | % | $ | 76,886 |
| $ | 80,752 |
| -4.8 | % |
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Return on Equity: |
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Net earnings (trailing four quarters) |
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| 9.3 | % | 13.8 | % |
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Comprehensive earnings (trailing four quarters) |
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| 16.1 | % | 4.1 | % |
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Per Share Data |
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Diluted: |
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Weighted average shares outstanding (in 000’s) |
| 21,769 |
| 21,678 |
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| 21,760 |
| 21,893 |
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EPS from operations (1) |
| $ | 1.18 |
| $ | 1.12 |
| 5.4 | % | $ | 3.53 |
| $ | 3.69 |
| -4.3 | % |
Realized gains (losses), net of tax |
| 0.24 |
| (0.72 | ) |
|
| (0.62 | ) | (0.37 | ) | -67.6 | % | ||||
Net earnings per share |
| $ | 1.42 |
| $ | 0.40 |
| 255.0 | % | $ | 2.91 |
| $ | 3.32 |
| -12.3 | % |
Comprehensive earnings (loss) per share |
| $ | 3.12 |
| $ | (0.72 | ) |
|
| $ | 5.82 |
| $ | 0.20 |
| 2810.0 | % |
Cash dividends per share |
| $ | 0.27 |
| $ | 0.25 |
| 8.0 | % | $ | 0.80 |
| $ | 0.73 |
| 9.6 | % |
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Net Cash Flow from Operations |
| $ | 46,845 |
| $ | 40,164 |
| 16.6 | % | $ | 108,445 |
| $ | 126,732 |
| -14.4 | % |
(1) See discussion of non-GAAP financial measures on page 3.
4
RLI CORP.
2009 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
|
| September 30, |
| December 31, |
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| 2009 |
| 2008 |
| % Change |
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SUMMARIZED BALANCE SHEET DATA: |
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Fixed income |
| $ | 1,475,032 |
| $ | 1,274,056 |
| 15.8 | % |
(amortized cost - $1,427,058 at 9/30/09) |
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(amortized cost - $1,286,779 at 12/31/08) |
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Equity securities |
| 238,590 |
| 286,790 |
| -16.8 | % | ||
(cost - $166,505 at 9/30/09) |
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(cost - $251,283 at 12/31/08) |
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Short-term investments |
| 142,771 |
| 97,982 |
| 45.7 | % | ||
Total investments |
| 1,856,393 |
| 1,658,828 |
| 11.9 | % | ||
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Premiums and reinsurance balances receivable |
| 86,033 |
| 92,149 |
| -6.6 | % | ||
Ceded unearned premiums |
| 66,417 |
| 65,977 |
| 0.7 | % | ||
Reinsurance recoverable on unpaid losses |
| 343,377 |
| 350,284 |
| -2.0 | % | ||
Deferred acquisition costs |
| 79,923 |
| 78,520 |
| 1.8 | % | ||
Property and equipment |
| 19,592 |
| 21,565 |
| -9.1 | % | ||
Income taxes - deferred |
| — |
| 24,141 |
| -100.0 | % | ||
Investment in unconsolidated investee |
| 44,348 |
| 38,697 |
| 14.6 | % | ||
Goodwill |
| 26,214 |
| 26,214 |
| — |
| ||
Other assets |
| 40,661 |
| 63,026 |
| -35.5 | % | ||
Total assets |
| $ | 2,562,958 |
| $ | 2,419,401 |
| 5.9 | % |
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Unpaid losses and settlement expenses |
| $ | 1,159,025 |
| $ | 1,159,311 |
| 0.0 | % |
Unearned premiums |
| 330,629 |
| 335,170 |
| -1.4 | % | ||
Reinsurance balances payable |
| 22,844 |
| 30,224 |
| -24.4 | % | ||
Long-term debt - bonds payable |
| 100,000 |
| 100,000 |
| — |
| ||
Income taxes - deferred |
| 26,089 |
| — |
| — |
| ||
Accrued expenses |
| 36,327 |
| 32,894 |
| 10.4 | % | ||
Other liabilities |
| 61,100 |
| 53,648 |
| 13.9 | % | ||
Total liabilities |
| 1,736,014 |
| 1,711,247 |
| 1.4 | % | ||
Shareholders’ equity |
| 826,944 |
| 708,154 |
| 16.8 | % | ||
Total liabilities & shareholders’ equity |
| $ | 2,562,958 |
| $ | 2,419,401 |
| 5.9 | % |
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OTHER DATA |
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Common shares outstanding (in 000’s) |
| 21,629 |
| 21,474 |
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Book Value per share |
| $ | 38.23 |
| $ | 32.98 |
| 15.9 | % |
Closing stock price per share |
| $ | 52.78 |
| $ | 61.16 |
| -13.7 | % |
Statutory Surplus |
| $ | 750,478 |
| $ | 678,041 |
| 10.7 | % |
5
RLI CORP.
2009 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended September 30,
|
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| GAAP |
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| GAAP |
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| GAAP |
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| GAAP |
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| Casualty |
| Ratios |
| Property |
| Ratios |
| Surety |
| Ratios |
| Total |
| Ratios |
| ||||
2009 |
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Gross premiums written |
| $ | 83,337 |
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| $ | 51,177 |
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| $ | 25,406 |
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| $ | 159,920 |
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Net premiums written |
| 59,274 |
|
|
| 38,018 |
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|
| 21,874 |
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| 119,166 |
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Net premiums earned |
| 64,794 |
|
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| 39,829 |
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| 18,113 |
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| 122,736 |
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Net loss & settlement expenses |
| 24,243 |
| 37.4 | % | 19,379 |
| 48.7 | % | 4,055 |
| 22.4 | % | 47,677 |
| 38.8 | % | ||||
Net operating expenses |
| 23,221 |
| 35.8 | % | 16,536 |
| 41.5 | % | 12,350 |
| 68.2 | % | 52,107 |
| 42.5 | % | ||||
Underwriting income |
| $ | 17,330 |
| 73.2 | % | $ | 3,914 |
| 90.2 | % | $ | 1,708 |
| 90.6 | % | $ | 22,952 |
| 81.3 | % |
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2008 |
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Gross premiums written |
| $ | 99,570 |
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| $ | 51,599 |
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| $ | 21,728 |
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| $ | 172,897 |
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Net premiums written |
| 73,371 |
|
|
| 38,334 |
|
|
| 20,363 |
|
|
| 132,068 |
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Net premiums earned |
| 76,993 |
|
|
| 36,376 |
|
|
| 17,481 |
|
|
| 130,850 |
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Net loss & settlement expenses |
| 34,121 |
| 44.3 | % | 33,395 |
| 91.8 | % | (1,503 | ) | -8.6 | % | 66,013 |
| 50.4 | % | ||||
Net operating expenses |
| 24,335 |
| 31.6 | % | 14,040 |
| 38.6 | % | 11,265 |
| 64.4 | % | 49,640 |
| 37.9 | % | ||||
Underwriting income (loss) |
| $ | 18,537 |
| 75.9 | % | $ | (11,059 | ) | 130.4 | % | $ | 7,719 |
| 55.8 | % | $ | 15,197 |
| 88.3 | % |
Nine Months Ended September 30,
|
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| GAAP |
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| GAAP |
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| GAAP |
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| GAAP |
| ||||
|
| Casualty |
| Ratios |
| Property |
| Ratios |
| Surety |
| Ratios |
| Total |
| Ratios |
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2009 |
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Gross premiums written |
| $ | 254,933 |
|
|
| $ | 163,959 |
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|
| $ | 68,336 |
|
|
| $ | 487,228 |
|
|
|
Net premiums written |
| 186,732 |
|
|
| 122,301 |
|
|
| 56,897 |
|
|
| 365,930 |
|
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| ||||
Net premiums earned |
| 202,766 |
|
|
| 115,394 |
|
|
| 52,750 |
|
|
| 370,910 |
|
|
| ||||
Net loss & settlement expenses |
| 96,718 |
| 47.7 | % | 49,769 |
| 43.1 | % | 11,191 |
| 21.2 | % | 157,678 |
| 42.5 | % | ||||
Net operating expenses |
| 68,668 |
| 33.9 | % | 46,354 |
| 40.2 | % | 34,988 |
| 66.3 | % | 150,010 |
| 40.4 | % | ||||
Underwriting income |
| $ | 37,380 |
| 81.6 | % | $ | 19,271 |
| 83.3 | % | $ | 6,571 |
| 87.5 | % | $ | 63,222 |
| 82.9 | % |
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|
|
| ||||
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
| $ | 307,860 |
|
|
| $ | 151,372 |
|
|
| $ | 59,710 |
|
|
| $ | 518,942 |
|
|
|
Net premiums written |
| 228,524 |
|
|
| 110,058 |
|
|
| 55,929 |
|
|
| 394,511 |
|
|
| ||||
Net premiums earned |
| 237,559 |
|
|
| 110,869 |
|
|
| 50,682 |
|
|
| 399,110 |
|
|
| ||||
Net loss & settlement expenses |
| 130,243 |
| 54.8 | % | 56,775 |
| 51.2 | % | 3,025 |
| 6.0 | % | 190,043 |
| 47.6 | % | ||||
Net operating expenses |
| 73,870 |
| 31.1 | % | 43,244 |
| 39.0 | % | 32,953 |
| 65.0 | % | 150,067 |
| 37.6 | % | ||||
Underwriting income |
| $ | 33,446 |
| 85.9 | % | $ | 10,850 |
| 90.2 | % | $ | 14,704 |
| 71.0 | % | $ | 59,000 |
| 85.2 | % |
6