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: Aaron Jacoby | |
| (309) 693-5880 | |
| Aaron.Jacoby@rlicorp.com | |
| www.rlicorp.com | |
| | | |
RLI reports second quarter results
PEORIA, ILLINOIS, July 20, 2011 — RLI Corp. (NYSE: RLI) — RLI Corp. reported second quarter 2011 operating earnings of $40.8 million ($1.91 per share), compared to $32.2 million ($1.52 per share) for the same period in 2010. For the six months ended June 30, 2011, operating earnings were $64.4 million ($3.02 per share) compared to $52.2 million ($2.45 per share) for the same period in 2010.
| | Second Quarter | |
Earnings Per Diluted Share | | 2011 | | 2010 | |
Operating earnings | | $ | 1.91 | | $ | 1.52 | |
Net earnings | | $ | 2.22 | | $ | 1.65 | |
Highlights for the quarter included:
· Underwriting income of $45.8 million.
· Combined ratio of 65.0.
· Book value per share of $41.02, an increase of 8.7% from year end 2010.
· $42.7 million pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.
· $11.7 million pretax loss on 2011 spring storms, net of effects on bonus and profit sharing-related expenses.
· Return on equity for the trailing four quarters was 16.7%.
· Closed on Contractors Bonding and Insurance Company (CBIC) acquisition on April 28, which contributed $10.3 million in premiums written for the quarter.
“The excellent second quarter results are a testament to the acumen of our underwriters, which is a hallmark of our organization,” said RLI Corp. Chairman and CEO Jonathan E. Michael.
“While conditions in the surplus lines space remain challenging, our premiums written advanced in the quarter and through the first half of the year due to growth from newer product initiatives and the addition of CBIC. Integration efforts related to the CBIC acquisition are underway and are going smoothly.”
“We remain well-positioned to continue to navigate all market conditions. Our capital position is strong and we have great people and products in place,” said Michael.
Second quarter underwriting results
RLI achieved $45.8 million of underwriting income in the second quarter of 2011 on a 65.0 combined ratio, compared to $30.8 million of underwriting income on a 74.7 combined ratio in the same quarter for 2010.
Underwriting Income | | Second Quarter | |
(in millions) | | 2011 | | 2010 | |
Casualty | | $ | 26.9 | | $ | 13.6 | |
Property | | 9.2 | | 9.3 | |
Surety | | 9.7 | | 7.9 | |
Total | | $ | 45.8 | | $ | 30.8 | |
| | Second Quarter | |
Combined Ratio | | 2011 | | 2010 | |
Casualty | | 53.9 | | 76.8 | |
Property | | 80.9 | | 78.6 | |
Surety | | 60.6 | | 59.6 | |
Total | | 65.0 | | 74.7 | |
— more —
RLI reported year-to-date underwriting income of $64.8 million representing a 73.8 combined ratio through June 30, 2011, versus $43.5 million of underwriting income representing an 81.7 combined ratio for the same period last year.
Other income
In the second quarter, investment income was $15.2 million compared to $16.8 million for the same period in 2010. The decline in investment income was driven by the close of the CBIC acquisition, as RLI sold bonds to fund the purchase and acquired relatively lower yielding bonds with higher credit quality and shorter duration characteristics. For the six-month period ended June 30, 2011, investment income was $31.5 million versus $33.4 million for the same period in 2010. The investment portfolio’s total return for the quarter was 2.0%; the bond portfolio return was 2.3% and the equity portfolio return was 0.4%. Through six months, the investment portfolio’s total return was 3.7% with the bond portfolio returning 3.1% and equities returning 6.1%.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $50.1 million for the quarter ($2.35 per share) versus $23.2 million ($1.09 per share) over the comparable period in 2010. Year-to-date comprehensive earnings were $81.9 million ($3.84 per share), compared to $56.7 million ($2.66 per share) for the same period last year.
During the quarter, equity in earnings of Maui Jim, Inc. was $3.9 million compared to $3.4 million from the same period last year. For the six month period, earnings were $6.5 million versus $5.7 million in 2010.
Other news
On May 5, 2011, the RLI Corp. board of directors declared a second quarter regular cash dividend of $0.30 per share, paid on June 20, 2011. RLI has paid dividends for 140 consecutive quarters and increased dividends in each of the last 36 years. The Company’s dividend yield would be 1.9%, based on the $1.20 annualized dividend and today’s closing stock price of $61.96.
In the second quarter of 2011, RLI repurchased 47,100 shares at an average cost of $59.06 per share ($2.8 million). As of June 30, 2011, $91.3 million of capacity remains for stock repurchases.
During the second quarter, the Company’s A+ (Superior) rating was reaffirmed by A.M. Best for three of RLI’s insurance subsidiaries — RLI Insurance Company, Mt. Hawley Insurance Company, and RLI Indemnity Company. In addition, A.M. Best re-affirmed the A (Excellent) rating of Contractors Bonding and Insurance Company, RLI’s newest insurance subsidiary.
On July 12, 2011, RLI received the distinction of being named to Ward’s 50® Top P&C Performers group for the 21st consecutive year. RLI is one of only four property and casualty insurers to be recognized as Ward’s 50® Top P&C Performer every year since the list’s inception in 1991.
At 10 a.m. CDT tomorrow, July 21, 2011, 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.
2
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, 2010.
For additional information, contact Aaron Jacoby, Vice President, Corporate Development at 309-693-5880 or at aaron.jacoby@rlicorp.com or visit our website at www.rlicorp.com.
Supplemental disclosure regarding the earnings impact of specific items
| | Operating Earnings Per Diluted Share | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | 2nd Qtr | | 2nd Qtr | | 6 Mos. | | 6 Mos. | |
Operating Earnings Per Diluted Share | | $ | 1.91 | | $ | 1.52 | | $ | 3.02 | | $ | 2.45 | |
| | | | | | | | | |
Specific items included in operating earnings per share: (1) (2) | | | | | | | | | |
| | | | | | | | | |
· Favorable development on casualty prior years’ reserves | | $ | 0.90 | | $ | 0.47 | | $ | 1.13 | | $ | 0.62 | |
| | | | | | | | | |
· Favorable/(unfavorable) development on property prior years’ reserves | | $ | 0.26 | | $ | (0.02 | ) | $ | 0.31 | | $ | (0.02 | ) |
| | | | | | | | | |
· Favorable development on surety prior years’ reserves | | $ | 0.15 | | $ | 0.13 | | $ | 0.19 | | $ | 0.18 | |
| | | | | | | | | |
· 2011 spring storms (3) | | $ | (0.36 | ) | $ | | | $ | (0.36 | ) | | |
(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) From a comparative standpoint, second quarter and six-month 2010 results included $0.10 per share in losses from Midwest and Southeast storms.
3
RLI CORP.
2011 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2011 | | 2010 | | % Change | | 2011 | | 2010 | | % Change | |
SUMMARIZED INCOME STATEMENT DATA: | | | | | | | | | | | | | |
Net premiums earned | | $ | 130,826 | | $ | 121,758 | | 7.4 | % | $ | 246,877 | | $ | 238,022 | | 3.7 | % |
Net investment income | | 15,180 | | 16,765 | | -9.5 | % | 31,483 | | 33,365 | | -5.6 | % |
Net realized investment gains | | 10,050 | | 4,291 | | 134.2 | % | 14,522 | | 10,754 | | 35.0 | % |
Consolidated revenue | | 156,056 | | 142,814 | | 9.3 | % | 292,882 | | 282,141 | | 3.8 | % |
| | | | | | | | | | | | | |
Loss and settlement expenses | | 30,363 | | 45,072 | | -32.6 | % | 77,234 | | 99,329 | | -22.2 | % |
Policy acquisition costs | | 42,568 | | 37,715 | | 12.9 | % | 83,101 | | 78,180 | | 6.3 | % |
Other insurance expenses | | 12,130 | | 8,170 | | 48.5 | % | 21,745 | | 16,997 | | 27.9 | % |
Interest expense on debt | | 1,512 | | 1,513 | | -0.1 | % | 3,024 | | 3,025 | | 0.0 | % |
General corporate expenses | | 1,964 | | 1,541 | | 27.4 | % | 3,969 | | 3,258 | | 21.8 | % |
Total expenses | | 88,537 | | 94,011 | | -5.8 | % | 189,073 | | 200,789 | | -5.8 | % |
| | | | | | | | | | | | | |
Equity in earnings of unconsolidated investee | | 3,886 | | 3,426 | | 13.4 | % | 6,502 | | 5,679 | | 14.5 | % |
| | | | | | | | | | | | | |
Earnings before income taxes | | 71,405 | | 52,229 | | 36.7 | % | 110,311 | | 87,031 | | 26.7 | % |
Income tax expense | | 24,024 | | 17,235 | | 39.4 | % | 36,469 | | 27,816 | | 31.1 | % |
Net earnings | | $ | 47,381 | | $ | 34,994 | | 35.4 | % | $ | 73,842 | | $ | 59,215 | | 24.7 | % |
Other comprehensive earnings (loss), net of tax | | 2,760 | | (11,765 | ) | | | 8,008 | | (2,490 | ) | | |
Comprehensive earnings | | $ | 50,141 | | $ | 23,229 | | 115.9 | % | $ | 81,850 | | $ | 56,725 | | 44.3 | % |
| | | | | | | | | | | | | |
Operating earnings:(1) | | | | | | | | | | | | | |
Net earnings | | $ | 47,381 | | $ | 34,994 | | 35.4 | % | $ | 73,842 | | $ | 59,215 | | 24.7 | % |
Less: Realized investment gains, net of tax | | 6,533 | | 2,789 | | 134.2 | % | 9,440 | | 6,990 | | 35.1 | % |
Operating earnings | | $ | 40,848 | | $ | 32,205 | | 26.8 | % | $ | 64,402 | | $ | 52,225 | | 23.3 | % |
| | | | | | | | | | | | | |
Return on Equity: | | | | | | | | | | | | | |
Net earnings (trailing four quarters) | | | | | | | | 16.7 | % | 14.6 | % | | |
Comprehensive earnings (trailing four quarters) | | | | | | | | 20.2 | % | 18.7 | % | | |
| | | | | | | | | | | | | |
Per Share Data | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Diluted: | | | | | | | | | | | | | |
Weighted average shares outstanding (in 000’s) | | 21,332 | | 21,223 | | | | 21,315 | | 21,298 | | | |
| | | | | | | | | | | | | |
EPS from operations (1) | | $ | 1.91 | | $ | 1.52 | | 25.7 | % | $ | 3.02 | | $ | 2.45 | | 23.3 | % |
Realized gains, net of tax | | 0.31 | | 0.13 | | 138.5 | % | 0.44 | | 0.33 | | 33.3 | % |
Net earnings per share | | $ | 2.22 | | $ | 1.65 | | 34.5 | % | $ | 3.46 | | $ | 2.78 | | 24.5 | % |
Comprehensive earnings per share | | $ | 2.35 | | $ | 1.09 | | 115.6 | % | $ | 3.84 | | $ | 2.66 | | 44.4 | % |
Cash dividends per share | | $ | 0.30 | | $ | 0.29 | | 3.4 | % | $ | 0.59 | | $ | 0.57 | | 3.5 | % |
| | | | | | | | | | | | | |
Net Cash Flow provided by Operations | | $ | 65,928 | | $ | 37,907 | | 73.9 | % | $ | 83,866 | | $ | 35,459 | | 136.5 | % |
(1) See discussion of non-GAAP financial measures on page 3.
4
RLI CORP.
2011 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | June 30, | | December 31, | | | |
| | 2011 | | 2010 | | % Change | |
SUMMARIZED BALANCE SHEET DATA: | | | | | | | |
Fixed income | | $ | 1,467,391 | | $ | 1,441,337 | | 1.8 | % |
(amortized cost - $1,425,454 at 6/30/11) | | | | | | | |
(amortized cost - $1,403,140 at 12/31/10) | | | | | | | |
Equity securities | | 329,467 | | 321,897 | | 2.4 | % |
(cost - $212,626 at 6/30/11) | | | | | | | |
(cost - $213,069 at 12/31/10) | | | | | | | |
Short-term investments | | 173,860 | | 39,787 | | 337.0 | % |
Total investments | | 1,970,718 | | 1,803,021 | | 9.3 | % |
| | | | | | | |
Premiums and reinsurance balances receivable | | 127,422 | | 107,391 | | 18.7 | % |
Ceded unearned premiums | | 58,735 | | 62,631 | | -6.2 | % |
Reinsurance recoverable on unpaid losses | | 332,911 | | 354,163 | | -6.0 | % |
Deferred acquisition costs/VOBA* | | 91,805 | | 74,435 | | 23.3 | % |
Property and equipment | | 19,707 | | 18,370 | | 7.3 | % |
Investment in unconsolidated investee | | 50,572 | | 43,358 | | 16.6 | % |
Goodwill and intangibles | | 56,475 | | 26,214 | | 115.4 | % |
Other assets | | 21,919 | | 25,009 | | -12.4 | % |
Total assets | | $ | 2,730,264 | | $ | 2,514,592 | | 8.6 | % |
| | | | | | | |
Unpaid losses and settlement expenses | | $ | 1,173,473 | | $ | 1,173,943 | | 0.0 | % |
Unearned premiums | | 363,006 | | 301,537 | | 20.4 | % |
Reinsurance balances payable | | 20,695 | | 23,851 | | -13.2 | % |
Funds held | | 98,887 | | 32,072 | | 208.3 | % |
Long-term debt - bonds payable | | 100,000 | | 100,000 | | — | |
Income taxes - deferred | | 36,509 | | 33,930 | | 7.6 | % |
Accrued expenses | | 50,570 | | 42,436 | | 19.2 | % |
Other liabilities | | 22,703 | | 15,447 | | 47.0 | % |
Total liabilities | | 1,865,843 | | 1,723,216 | | 8.3 | % |
Shareholders’ equity | | 864,421 | | 791,376 | | 9.2 | % |
Total liabilities & shareholders’ equity | | $ | 2,730,264 | | $ | 2,514,592 | | 8.6 | % |
| | | | | | | |
|
* Includes asset for value of business acquired (VOBA) in CBIC acquisition | | | | | |
| | | | | | | |
OTHER DATA | | | | | | | |
| | | | | | | |
Common shares outstanding (in 000’s) | | 21,072 | | 20,965 | | | |
| | | | | | | |
Book value per share | | $ | 41.02 | | $ | 37.75 | | 8.7 | % |
Closing stock price per share | | $ | 61.92 | | $ | 52.57 | | 17.8 | % |
Cash dividends per share - ordinary (annualized) | | $ | 1.19 | | $ | 1.15 | | 3.5 | % |
Cash dividends per share - special | | $ | — | | $ | 7.00 | | | |
| | | | | | | |
Statutory Surplus | | $ | 784,961 | | $ | 732,379 | | 7.2 | % |
5
RLI CORP.
2011 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2011 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 85,616 | | | | $ | 97,418 | | | | $ | 27,462 | | | | $ | 210,496 | | | |
Net premiums written | | 62,848 | | | | 81,198 | | | | 26,014 | | | | 170,060 | | | |
Net premiums earned | | 58,332 | | | | 47,963 | | | | 24,531 | | | | 130,826 | | | |
Net loss & settlement expenses | | 8,629 | | 14.8 | % | 22,695 | | 47.3 | % | (961 | ) | -3.9 | % | 30,363 | | 23.2 | % |
Net operating expenses | | 22,783 | | 39.1 | % | 16,101 | | 33.6 | % | 15,814 | | 64.5 | % | 54,698 | | 41.8 | % |
Underwriting income | | $ | 26,920 | | 53.9 | % | $ | 9,167 | | 80.9 | % | $ | 9,678 | | 60.6 | % | $ | 45,765 | | 65.0 | % |
| | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 85,385 | | | | $ | 83,806 | | | | $ | 21,775 | | | | $ | 190,966 | | | |
Net premiums written | | 61,926 | | | | 67,880 | | | | 20,560 | | | | 150,366 | | | |
Net premiums earned | | 58,640 | | | | 43,644 | | | | 19,474 | | | | 121,758 | | | |
Net loss & settlement expenses | | 25,638 | | 43.7 | % | 20,272 | | 46.4 | % | (838 | ) | -4.3 | % | 45,072 | | 37.0 | % |
Net operating expenses | | 19,408 | | 33.1 | % | 14,038 | | 32.2 | % | 12,439 | | 63.9 | % | 45,885 | | 37.7 | % |
Underwriting income | | $ | 13,594 | | 76.8 | % | $ | 9,334 | | 78.6 | % | $ | 7,873 | | 59.6 | % | $ | 30,801 | | 74.7 | % |
Six Months Ended June 30,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2011 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 151,162 | | | | $ | 153,706 | | | | $ | 48,951 | | | | $ | 353,819 | | | |
Net premiums written | | 111,611 | | | | 124,978 | | | | 46,106 | | | | 282,695 | | | |
Net premiums earned | | 113,311 | | | | 88,789 | | | | 44,777 | | | | 246,877 | | | |
Net loss & settlement expenses | | 38,890 | | 34.3 | % | 37,064 | | 41.7 | % | 1,280 | | 2.9 | % | 77,234 | | 31.3 | % |
Net operating expenses | | 42,827 | | 37.8 | % | 33,177 | | 37.4 | % | 28,842 | | 64.4 | % | 104,846 | | 42.5 | % |
Underwriting income | | $ | 31,594 | | 72.1 | % | $ | 18,548 | | 79.1 | % | $ | 14,655 | | 67.3 | % | $ | 64,797 | | 73.8 | % |
| | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 155,247 | | | | $ | 134,141 | | | | $ | 42,884 | | | | $ | 332,272 | | | |
Net premiums written | | 113,635 | | | | 104,965 | | | | 39,969 | | | | 258,569 | | | |
Net premiums earned | | 118,006 | | | | 81,966 | | | | 38,050 | | | | 238,022 | | | |
Net loss & settlement expenses | | 63,614 | | 53.9 | % | 34,287 | | 41.8 | % | 1,428 | | 3.8 | % | 99,329 | | 41.7 | % |
Net operating expenses | | 40,184 | | 34.1 | % | 30,298 | | 37.0 | % | 24,695 | | 64.9 | % | 95,177 | | 40.0 | % |
Underwriting income | | $ | 14,208 | | 88.0 | % | $ | 17,381 | | 78.8 | % | $ | 11,927 | | 68.7 | % | $ | 43,516 | | 81.7 | % |
6
