Exhibit 99.1
| NEWS RELEASE |
| |
 RLI Corp.
| 9025 N. Lindbergh Drive | Peoria, IL 61615-1431 |
| P: 309-692-1000 | F: 309-692-1068 | www.rlicorp.com |
FOR IMMEDIATE RELEASE | CONTACT: John Robison | |
| 309-693-5846 | |
| John.Robison@rlicorp.com | |
| www.rlicorp.com | |
RLI reports fourth quarter, year-end results
PEORIA, ILLINOIS, January 25, 2010 — RLI Corp. (NYSE: RLI) — RLI Corp. reported fourth quarter 2009 operating earnings of $25.3 million ($1.17 per share), versus $28.3 million ($1.30 per share) for the comparable period last year. For the year ended December 31, 2009, operating earnings were $102.1 million ($4.70 per share), compared to $109.1 million ($4.99 per share) for the fiscal year 2008.
| | Fourth Quarter | | Full Year | |
Earnings Per Diluted Share | | 2009 | | 2008 | | 2009 | | 2008 | |
Operating earnings | | $ | 1.17 | | $ | 1.30 | | $ | 4.70 | | $ | 4.99 | |
Net earnings | | $ | 1.41 | | $ | 0.28 | | $ | 4.32 | | $ | 3.60 | |
Highlights for the quarter included:
· Operating earnings of $25.3 million ($1.17 per share).
· Combined ratio of 80.6.
· $11.9 million ($0.36 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.
· Net realized gains on investment securities of $8.0 million pretax.
· Increased quarterly dividend 4%, to $0.28 per share.
Highlights for 2009 included:
· Operating earnings of $102.1 million ($4.70 per share).
· Combined ratio of 82.3.
· Net operating cash flow of $127.8 million.
· $49.9 million ($1.50 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.
· Book value per share of $39.14, an increase of 18.7% from year end 2008.
“We achieved excellent results in a year marked by economic turmoil, excess capacity and soft pricing. Underwriting income increased and our combined ratio performance improved over 2008, demonstrating our ability to remain focused on underwriting for a profit,” said RLI Corp. President & CEO Jonathan E. Michael. “In addition, we continue to look for new product and market opportunities, which will build upon our 45-year history of success.”
14th consecutive year of underwriting income
For the quarter, RLI recorded underwriting income of $23.6 million on an 80.6 combined ratio versus underwriting income of $24.1 million on an 81.5 combined ratio in the fourth quarter of 2008. For the year, RLI achieved $86.8 million of underwriting income on an 82.3 combined ratio, compared to $83.1 million of underwriting income on an 84.2 combined ratio in 2008. “Underwriting income and outstanding combined ratios continue to be fundamental to our success,” said Michael. “Our 14th consecutive year of underwriting profitability is testament to our culture and validates our reputation as an excellent underwriting company.”
— more —
The following table highlights annual underwriting income and combined ratios by segment:
Underwriting Income | | | | | |
(in millions) | | 2009 | | 2008 | |
Casualty | | $ | 51.5 | | $ | 46.5 | |
Property | | 23.3 | | 15.8 | |
Surety | | 12.0 | | 20.8 | |
Total | | $ | 86.8 | | $ | 83.1 | |
Combined Ratio | | 2009 | | 2008 | |
Casualty | | 80.6 | | 85.2 | |
Property | | 85.0 | | 89.3 | |
Surety | | 83.2 | | 69.7 | |
Total | | 82.3 | | 84.2 | |
Other income
For the quarter, investment income was $16.9 million compared to $20.3 million for the same period in 2008. For the year ending December 31, 2009, investment income was $67.3 million versus $79.0 million for the same period in 2008.
The investment portfolio’s total return for the quarter was 1.3%, with the bond portfolio returning 0.3% and the equity portfolio returning 7.5%. Through twelve months, the investment portfolio’s total return was 10.0% with the bond portfolio returning 8.8% and equities returning 18.5%. During the last nine months capital markets have significantly improved, contributing to our book value growth. Investment income was lower in 2009 versus 2008 as the result of lower reinvestment rates, dividend cuts and changes in asset allocation.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $29.5 million for the quarter ($1.36 per share) versus a loss of $6.3 million ($0.29 per share) over the same period last year. Full year comprehensive earnings were $156.1 million ($7.18 per share), compared to a loss of $1.9 million ($0.09 per share) in 2008.
During the quarter, equity in loss of unconsolidated investee was $0.2 million compared to a loss of $1.6 million for the same period last year. For the year ending December 31, 2009, equity in earnings of unconsolidated investee was $5.1 million versus $4.8 million in 2008. These results are related to Maui Jim, Inc., a producer of premium sunglasses.
Share repurchase program
In the fourth quarter of 2009, we repurchased 386,084 of our shares at an average cost of $51.22 per share ($19.8 million). As of December 31, 2009, we had $18 million of remaining capacity from the $200 million repurchase program approved in 2007.
Dividend increase for 34th straight year
On November 19, 2009, RLI declared a fourth quarter cash dividend of $0.28 per share, a 4% increase over the prior quarter. The dividend was paid on January 15, 2010, to shareholders of record as of December 31, 2009. RLI has paid dividends for 134 consecutive quarters and increased dividends in each of the last 34 years. The company’s dividend yield is 2.2% based on the $1.12 annual dividend and today’s closing stock price of $51.37. The company’s quarterly dividend has grown by an average of 15.1% over the last 10 years. RLI’s cumulative dividends, including this recent payment, are more than $200 million paid.
Other news
Effective January1, 2010, RLI entered into a two-year agreement to become a quota share reinsurer of Producers Agricultural Insurance Company (“ProAg”) based in Amarillo, Texas. Under this agreement RLI will assume 6% of ProAg’s multi-peril crop and crop hail premium and exposure. ProAg, a subsidiary of CUNA Mutual, underwrote $592 million of crop insurance in 2008, making it the 6th largest U.S. crop insurer. Crop insurance is purchased by agricultural producers for protection against crop losses due to natural disasters and other perils.
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At 10 a.m. central time (CT) tomorrow, January 26, 2010, 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. 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. RLI is recognized as one of the insurance industry’s top performing companies by the Ward’s 50® Top P&C Performers and has been a member of group for 19 straight years since its inception in 1991.
For additional information, contact John Robison, Chief Investment Officer at 309-693-5846 or at john.robison@rlicorp.com or visit our website at www.rlicorp.com.
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Supplemental disclosure regarding the earnings impact of specific items:
| | Operating Earnings Per Diluted Share | |
| | 2009 | | 2008 | | 2009 | | 2008 | |
| | 4th Qtr. | | 4th Qtr. | | 12 mos. | | 12 mos. | |
Operating Earnings Per Diluted Share | | $ | 1.17 | | $ | 1.30 | | $ | 4.70 | | $ | 4.99 | |
| | | | | | | | | |
Specific items included in operating earnings per share: (1) (2) | | | | | | | | | |
· Gain from casualty prior years' reserve development | | $ | 0.32 | | $ | 0.28 | | $ | 1.66 | | $ | 1.23 | |
· Loss from property prior years' reserve development | | $ | (0.12 | ) | $ | (0.06 | ) | $ | (0.36 | ) | $ | (0.01 | ) |
· Gain from surety prior years' reserve development | | $ | 0.14 | | $ | 0.08 | | $ | 0.13 | | $ | 0.25 | |
· Gain from 2008 hurricanes' reserve development | | $ | 0.02 | | $ | — | | $ | 0.07 | | $ | — | |
· Loss from 2008 hurricanes | | $ | — | | $ | — | | $ | — | | $ | (0.63 | ) |
· Gain from change in tax rate applicable to the Maui Jim dividend (3) | | $ | — | | $ | — | | $ | — | | $ | 0.05 | |
(1) Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses.
(2) Reserve 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.
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RLI CORP.
2009 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | Three Months Ended December 31, | | Twelve Months Ended December 31, | |
| | 2009 | | 2008 | | % Change | | 2009 | | 2008 | | % Change | |
SUMMARIZED INCOME STATEMENT DATA: | | | | | | | | | | | | | |
Net premiums earned | | $ | 121,051 | | $ | 129,654 | | -6.6 | % | $ | 491,961 | | $ | 528,764 | | -7.0 | % |
Net investment income | | 16,852 | | 20,279 | | -16.9 | % | 67,346 | | 78,986 | | -14.7 | % |
Net realized investment gains (losses) | | 8,034 | | (34,342 | ) | | | (12,755 | ) | (46,738 | ) | 72.7 | % |
Consolidated revenue | | 145,937 | | 115,591 | | 26.3 | % | 546,552 | | 561,012 | | -2.6 | % |
| | | | | | | | | | | | | |
Loss and settlement expenses | | 45,710 | | 57,131 | | -20.0 | % | 203,388 | | 247,174 | | -17.7 | % |
Policy acquisition costs | | 40,824 | | 41,599 | | -1.9 | % | 162,020 | | 163,320 | | -0.8 | % |
Other insurance expenses | | 10,954 | | 6,861 | | 59.7 | % | 39,768 | | 35,207 | | 13.0 | % |
Interest expense on debt | | 1,513 | | 1,513 | | 0.0 | % | 6,050 | | 6,704 | | -9.8 | % |
General corporate expenses | | 2,094 | | 1,094 | | 91.4 | % | 7,941 | | 6,853 | | 15.9 | % |
Total expenses | | 101,095 | | 108,198 | | -6.6 | % | 419,167 | | 459,258 | | -8.7 | % |
| | | | | | | | | | | | | |
Equity in earnings (loss) of unconsolidated investee | | (190 | ) | (1,573 | ) | 87.9 | % | 5,052 | | 4,844 | | 4.3 | % |
| | | | | | | | | | | | | |
Earnings before income taxes | | 44,652 | | 5,820 | | 667.2 | % | 132,437 | | 106,598 | | 24.2 | % |
Income tax expense (benefit) | | 14,090 | | (161 | ) | | | 38,592 | | 27,922 | | 38.2 | % |
Net earnings | | $ | 30,562 | | $ | 5,981 | | 411.0 | % | $ | 93,845 | | $ | 78,676 | | 19.3 | % |
| | | | | | | | | | | | | |
Other comprehensive earnings (loss), net of tax | | (1,076 | ) | (12,297 | ) | 91.2 | % | 62,281 | | (80,571 | ) | | |
| | | | | | | | | | | | | |
Comprehensive earnings (loss) | | $ | 29,486 | | $ | (6,316 | ) | | | $ | 156,126 | | $ | (1,895 | ) | | |
Operating earnings:(1) | | | | | | | | | | | | | |
Net earnings | | $ | 30,562 | | $ | 5,981 | | 411.0 | % | $ | 93,845 | | $ | 78,676 | | 19.3 | % |
Less: Realized investment gains (losses), net of tax | | 5,312 | | (22,323 | ) | | | (8,291 | ) | (30,380 | ) | 72.7 | % |
Operating earnings | | $ | 25,250 | | $ | 28,304 | | -10.8 | % | $ | 102,136 | | $ | 109,056 | | -6.3 | % |
| | | | | | | | | | | | | |
Return on Equity: | | | | | | | | | | | | | |
Net earnings (trailing four quarters) | | | | | | | | 12.2 | % | 10.7 | % | | |
Comprehensive earnings (trailing four quarters) | | | | | | | | 20.3 | % | -0.3 | % | | |
| | | | | | | | | | | | | |
Per Share Data | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Diluted: | | | | | | | | | | | | | |
Weighted average shares outstanding (in 000’s) | | 21,636 | | 21,706 | | | | 21,731 | | 21,848 | | | |
| | | | | | | | | | | | | |
EPS from operations (1) | | $ | 1.17 | | $ | 1.30 | | -10.0 | % | $ | 4.70 | | $ | 4.99 | | -5.8 | % |
Realized gains (losses), net of tax | | 0.24 | | (1.02 | ) | | | (0.38 | ) | (1.39 | ) | 72.7 | % |
Net earnings per share | | $ | 1.41 | | $ | 0.28 | | 403.6 | % | $ | 4.32 | | $ | 3.60 | | 20.0 | % |
| | | | | | | | | | | | | |
Comprehensive earnings (loss) per share | | $ | 1.36 | | $ | (0.29 | ) | | | $ | 7.18 | | $ | (0.09 | ) | | |
| | | | | | | | | | | | | |
Cash dividends per share | | $ | 0.28 | | $ | 0.26 | | 7.7 | % | $ | 1.08 | | $ | 0.99 | | 9.1 | % |
| | | | | | | | | | | | | |
Net Cash Flow from Operations | | $ | 19,314 | | $ | 34,602 | | -44.2 | % | $ | 127,759 | | $ | 161,334 | | -20.8 | % |
(1) See discussion of non-GAAP financial measures on page 3.
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RLI CORP.
2009 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | December 31, | | December 31, | | | |
| | 2009 | | 2008 | | % Change | |
SUMMARIZED BALANCE SHEET DATA: | | | | | | | |
Fixed income | | $ | 1,485,347 | | $ | 1,274,056 | | 16.6 | % |
(amortized cost - $1,452,084 at 12/31/09) | �� | | | | | | |
(amortized cost - $1,286,779 at 12/31/08) | | | | | | | |
Equity securities | | 262,693 | | 286,790 | | -8.4 | % |
(cost - $177,681 at 12/31/09) | | | | | | | |
(cost - $251,283 at 12/31/08) | | | | | | | |
Short-term investments | | 104,462 | | 97,982 | | 6.6 | % |
Total investments | | 1,852,502 | | 1,658,828 | | 11.7 | % |
| | | | | | | |
Premiums and reinsurance balances receivable | | 83,961 | | 92,149 | | -8.9 | % |
Ceded unearned premiums | | 65,379 | | 65,977 | | -0.9 | % |
Reinsurance recoverable on unpaid losses | | 336,392 | | 350,284 | | -4.0 | % |
Deferred acquisition costs | | 75,880 | | 78,520 | | -3.4 | % |
Property and equipment | | 19,110 | | 21,565 | | -11.4 | % |
Income taxes - deferred | | — | | 24,141 | | -100.0 | % |
Investment in unconsolidated investee | | 44,286 | | 38,697 | | 14.4 | % |
Goodwill | | 26,214 | | 26,214 | | — | |
Other assets | | 34,929 | | 63,026 | | -44.6 | % |
Total assets | | $ | 2,538,653 | | $ | 2,419,401 | | 4.9 | % |
| | | | | | | |
Unpaid losses and settlement expenses | | $ | 1,146,460 | | $ | 1,159,311 | | -1.1 | % |
Unearned premiums | | 312,527 | | 335,170 | | -6.8 | % |
Reinsurance balances payable | | 22,431 | | 30,224 | | -25.8 | % |
Long-term debt - bonds payable | | 100,000 | | 100,000 | | — | |
Income taxes - deferred | | 24,299 | | — | | — | |
Accrued expenses | | 41,835 | | 32,894 | | 27.2 | % |
Other liabilities | | 58,851 | | 53,648 | | 9.7 | % |
Total liabilities | | 1,706,403 | | 1,711,247 | | -0.3 | % |
Shareholders’ equity | | 832,250 | | 708,154 | | 17.5 | % |
Total liabilities & shareholders’ equity | | $ | 2,538,653 | | $ | 2,419,401 | | 4.9 | % |
| | | | | | | |
OTHER DATA | | | | | | | |
| | | | | | | |
Common shares outstanding (in 000’s) | | 21,265 | | 21,474 | | | |
| | | | | | | |
Book Value per share | | $ | 39.14 | | $ | 32.98 | | 18.7 | % |
Closing stock price per share | | $ | 53.25 | | $ | 61.16 | | -12.9 | % |
Cash dividends per share | | $ | 1.08 | | $ | 0.99 | | 9.1 | % |
| | | | | | | |
Statutory Surplus | | $ | 784,161 | | $ | 678,041 | | 15.7 | % |
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RLI CORP.
2009 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended December 31,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2009 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 78,126 | | | | $ | 43,485 | | | | $ | 22,361 | | | | $ | 143,972 | | | |
Net premiums written | | 54,273 | | | | 30,588 | | | | 19,125 | | | | 103,986 | | | |
Net premiums earned | | 62,255 | | | | 39,909 | | | | 18,887 | | | | 121,051 | | | |
Net loss & settlement expenses | | 25,988 | | 41.7 | % | 18,837 | | 47.2 | % | 885 | | 4.7 | % | 45,710 | | 37.8 | % |
Net operating expenses | | 22,159 | | 35.6 | % | 17,082 | | 42.8 | % | 12,537 | | 66.4 | % | 51,778 | | 42.8 | % |
Underwriting income | | $ | 14,108 | | 77.3 | % | $ | 3,990 | | 90.0 | % | $ | 5,465 | | 71.1 | % | $ | 23,563 | | 80.6 | % |
| | | | | | | | | | | | | | | | | |
2008 | | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 95,477 | | | | $ | 49,422 | | | | $ | 17,328 | | | | $ | 162,227 | | | |
Net premiums written | | 67,418 | | | | 36,031 | | | | 15,496 | | | | 118,945 | | | |
Net premiums earned | | 75,922 | | | | 35,994 | | | | 17,738 | | | | 129,654 | | | |
Net loss & settlement expenses | | 39,637 | | 52.2 | % | 17,217 | | 47.8 | % | 277 | | 1.6 | % | 57,131 | | 44.1 | % |
Net operating expenses | | 23,224 | | 30.6 | % | 13,814 | | 38.4 | % | 11,422 | | 64.4 | % | 48,460 | | 37.4 | % |
Underwriting income | | $ | 13,061 | | 82.8 | % | $ | 4,963 | | 86.2 | % | $ | 6,039 | | 66.0 | % | $ | 24,063 | | 81.5 | % |
Twelve Months Ended December 31,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2009 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 333,059 | | | | $ | 207,444 | | | | $ | 90,697 | | | | $ | 631,200 | | | |
Net premiums written | | 241,005 | | | | 152,889 | | | | 76,022 | | | | 469,916 | | | |
Net premiums earned | | 265,021 | | | | 155,303 | | | | 71,637 | | | | 491,961 | | | |
Net loss & settlement expenses | | 122,706 | | 46.3 | % | 68,606 | | 44.2 | % | 12,076 | | 16.9 | % | 203,388 | | 41.3 | % |
Net operating expenses | | 90,827 | | 34.3 | % | 63,436 | | 40.8 | % | 47,525 | | 66.3 | % | 201,788 | | 41.0 | % |
Underwriting income | | $ | 51,488 | | 80.6 | % | $ | 23,261 | | 85.0 | % | $ | 12,036 | | 83.2 | % | $ | 86,785 | | 82.3 | % |
| | | | | | | | | | | | | | | | | |
2008 | | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 403,337 | | | | $ | 200,794 | | | | $ | 77,038 | | | | $ | 681,169 | | | |
Net premiums written | | 295,942 | | | | 146,089 | | | | 71,425 | | | | 513,456 | | | |
Net premiums earned | | 313,481 | | | | 146,863 | | | | 68,420 | | | | 528,764 | | | |
Net loss & settlement expenses | | 169,880 | | 54.2 | % | 73,992 | | 50.4 | % | 3,302 | | 4.8 | % | 247,174 | | 46.7 | % |
Net operating expenses | | 97,094 | | 31.0 | % | 57,058 | | 38.9 | % | 44,375 | | 64.9 | % | 198,527 | | 37.5 | % |
Underwriting income | | $ | 46,507 | | 85.2 | % | $ | 15,813 | | 89.3 | % | $ | 20,743 | | 69.7 | % | $ | 83,063 | | 84.2 | % |
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