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 third quarter results
PEORIA, ILLINOIS, October 18, 2011 — RLI Corp. (NYSE: RLI) — RLI Corp. reported third quarter 2011 operating earnings of $26.2 million ($1.23 per share), compared to $25.0 million ($1.19 per share) for the same period in 2010. For the nine months ended September 30, 2011, operating earnings were $90.6 million ($4.25 per share) compared to $77.2 million ($3.64 per share) for the same period in 2010.
| | Third Quarter | |
Earnings Per Diluted Share | | 2011 | | 2010 | |
Operating earnings | | $ | 1.23 | | $ | 1.19 | |
Net earnings | | $ | 1.22 | | $ | 1.33 | |
Highlights for the quarter included:
· Combined ratio of 83.1.
· Underwriting income of $24.7 million.
· 17% growth in gross premiums written, including 9% growth driven by RLI’s recent acquisition of Contractors Bonding and Insurance Company (CBIC).
· Book value per share of $41.16, an increase of 9% from year end 2010.
· $28.0 million pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.
· $5.9 million pretax loss on Hurricane Irene, net of effects on bonus and profit sharing-related expenses.
· Return on equity for the trailing four quarters was 16.5%.
“This quarter’s results continue to reflect our underwriting discipline in challenging market conditions,” said RLI Corp. Chairman and CEO Jonathan E. Michael. “Our ability to deliver superior underwriting results is particularly important given a persistently low interest rate environment. Growth in premium was driven by the acquisition of CBIC in the second quarter and by newer product initiatives.”
“We benefit greatly from having a well-rounded, diversified product portfolio. Our strong financial track record is the result of a well-honed strategy executed by some of the most talented underwriters and associates in the industry. Their dedication to outstanding customer service and profitable growth is the foundation of our ongoing success,” said Michael.
Third quarter underwriting results
RLI achieved $24.7 million of underwriting income in the third quarter of 2011 on an 83.1 combined ratio, compared to $21.7 million of underwriting income on an 83.1 combined ratio in the same quarter for 2010.
Underwriting Income (Loss) | | Third Quarter | |
(in millions) | | 2011 | | 2010 | |
Casualty | | $ | 23.8 | | $ | 8.9 | |
Property | | (1.9 | ) | 5.3 | |
Surety | | 2.8 | | 7.5 | |
Total | | $ | 24.7 | | $ | 21.7 | |
| | Third Quarter | |
Combined Ratio | | 2011 | | 2010 | |
Casualty | | 60.7 | | 84.5 | |
Property | | 103.2 | | 89.4 | |
Surety | | 89.2 | | 63.6 | |
Total | | 83.1 | | 83.1 | |
— more —
RLI reported year-to-date underwriting income of $89.5 million representing a 77.2 combined ratio through September 30, 2011, versus $65.2 million of underwriting income representing an 82.2 combined ratio for the same period last year.
Other income
In the third quarter, investment income was $16.0 million compared to $16.8 million for the same period in 2010. The decline in investment income was a result of lower reinvestment rates. For the nine-month period ended September 30, 2011, investment income was $47.4 million versus $50.1 million for the same period in 2010. The investment portfolio’s total return for the quarter was flat; the bond portfolio return was 2.4% and the equity portfolio return was -10.0%. Through nine months, the investment portfolio’s total return was 3.7% with the bond portfolio returning 5.5% and equities returning -4.5%.
Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $11.7 million for the quarter ($0.55 per share) versus $58.4 million ($2.77 per share) over the comparable period in 2010. Year-to-date comprehensive earnings were $93.6 million ($4.39 per share), compared to $115.2 million ($5.42 per share) for the same period last year.
During the quarter, equity in earnings of Maui Jim, Inc. was $0.7 million compared to $1.6 million from the same period last year. For the nine-month period, earnings were $7.2 million versus $7.3 million in 2010.
Other news
On August 18, 2011, the RLI Corp. board of directors declared a third quarter regular cash dividend of $0.30 per share, paid on September 20, 2011. RLI has paid dividends for 141 consecutive quarters and increased dividends in each of the last 36 years. The Company’s dividend yield would be 1.77%, based on the $1.20 annualized dividend and yesterday’s closing stock price of $67.78.
During the quarter, RLI repurchased 64,856 shares at an average cost of $59.24 per share ($3.8 million). As of September 30, 2011, $87.5 million of capacity remains for stock repurchases in the stock purchase program announced on May 6, 2010.
At 10 a.m. CDT tomorrow, October 19, 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.
Gross premiums written, 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. Gross premiums written is the component of net premiums earned that measures insurance business produced before the impact of ceding reinsurance premiums, but without respect to when those premiums will be recognized as actual revenue. 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, 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.
2
Supplemental disclosure regarding the earnings impact of specific items
| | Operating Earnings Per Share | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
| | 3rd Qtr | | 3rd Qtr | | 9 Mos. | | 9 Mos. | |
Operating Earnings Per Share | | $ | 1.23 | | $ | 1.19 | | $ | 4.25 | | $ | 3.64 | |
| | | | | | | | | |
Specific items included in operating earnings per share: (1) (2) | | | | | | | | | |
· Favorable development on casualty prior years’ reserves | | $ | 0.83 | | $ | 0.52 | | $ | 1.96 | | $ | 1.14 | |
· Favorable development on property prior years’ reserves | | $ | 0.01 | | $ | 0.01 | | $ | 0.32 | | $ | — | |
· Favorable development on surety prior years’ reserves | | $ | 0.01 | | $ | 0.09 | | $ | 0.20 | | $ | 0.26 | |
· 2011 spring storms (3) | | $ | — | | $ | — | | $ | (0.36 | ) | $ | — | |
· Hurricane Irene | | $ | (0.18 | ) | $ | — | | $ | (0.18 | ) | $ | — | |
(1) | Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses. |
(2) | Reserve development reflects revisions for previously estimated losses. |
(3) | From a comparative standpoint, nine-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 September 30, | | Nine Months Ended September 30, | |
| | 2011 | | 2010 | | % Change | | 2011 | | 2010 | | % Change | |
SUMMARIZED INCOME STATEMENT DATA: | | | | | | | | | | | | | |
Net premiums earned | | $ | 146,552 | | $ | 128,334 | | 14.2 | % | $ | 393,429 | | $ | 366,356 | | 7.4 | % |
Net investment income | | 15,954 | | 16,762 | | -4.8 | % | 47,437 | | 50,127 | | -5.4 | % |
Net realized investment gains (losses) | | (177 | ) | 4,527 | | | | 14,345 | | 15,281 | | -6.1 | % |
Consolidated revenue | | 162,329 | | 149,623 | | 8.5 | % | 455,211 | | 431,764 | | 5.4 | % |
| | | | | | | | | | | | | |
Loss and settlement expenses | | 64,802 | | 55,823 | | 16.1 | % | 142,036 | | 155,152 | | -8.5 | % |
Policy acquisition costs | | 46,712 | | 40,624 | | 15.0 | % | 129,813 | | 118,804 | | 9.3 | % |
Other insurance expenses | | 10,302 | | 10,161 | | 1.4 | % | 32,047 | | 27,158 | | 18.0 | % |
Interest expense on debt | | 1,513 | | 1,512 | | 0.1 | % | 4,537 | | 4,537 | | 0.0 | % |
General corporate expenses | | 1,594 | | 2,148 | | -25.8 | % | 5,563 | | 5,406 | | 2.9 | % |
Total expenses | | 124,923 | | 110,268 | | 13.3 | % | 313,996 | | 311,057 | | 0.9 | % |
| | | | | | | | | | | | | |
Equity in earnings of unconsolidated investee | | 713 | | 1,648 | | -56.7 | % | 7,215 | | 7,327 | | -1.5 | % |
| | | | | | | | | | | | | |
Earnings before income taxes | | 38,119 | | 41,003 | | -7.0 | % | 148,430 | | 128,034 | | 15.9 | % |
Income tax expense | | 12,062 | | 13,038 | | -7.5 | % | 48,531 | | 40,854 | | 18.8 | % |
Net earnings | | $ | 26,057 | | $ | 27,965 | | -6.8 | % | $ | 99,899 | | $ | 87,180 | | 14.6 | % |
| | | | | | | | | | | | | |
Other comprehensive earnings (loss), net of tax | | (14,331 | ) | 30,476 | | | | (6,323 | ) | 27,986 | | | |
Comprehensive earnings | | $ | 11,726 | | $ | 58,441 | | -79.9 | % | $ | 93,576 | | $ | 115,166 | | -18.7 | % |
| | | | | | | | | | | | | |
Operating earnings:(1) | | | | | | | | | | | | | |
Net earnings | | $ | 26,057 | | $ | 27,965 | | -6.8 | % | $ | 99,899 | | $ | 87,180 | | 14.6 | % |
Less: Realized investment gains (losses), net of tax | | (116 | ) | 2,942 | | | | 9,324 | | 9,932 | | -6.1 | % |
Operating earnings | | $ | 26,173 | | $ | 25,023 | | 4.6 | % | $ | 90,575 | | $ | 77,248 | | 17.3 | % |
| | | | | | | | | | | | | |
Return on Equity: | | | | | | | | | | | | | |
Net earnings (trailing four quarters) | | | | | | | | 16.5 | % | 13.8 | % | | |
Comprehensive earnings (trailing four quarters) | | | | | | | | 14.6 | % | 16.9 | % | | |
| | | | | | | | | | | | | |
Per Share Data | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Diluted: | | | | | | | | | | | | | |
Weighted average shares outstanding (in 000’s) | | 21,335 | | 21,090 | | | | 21,324 | | 21,233 | | | |
| | | | | | | | | | | | | |
EPS from operations (1) | | $ | 1.23 | | $ | 1.19 | | 3.4 | % | $ | 4.25 | | $ | 3.64 | | 16.8 | % |
Realized gains (losses), net of tax | | (0.01 | ) | 0.14 | | | | 0.43 | | 0.47 | | -8.5 | % |
Net earnings per share | | $ | 1.22 | | $ | 1.33 | | -8.3 | % | $ | 4.68 | | $ | 4.11 | | 13.9 | % |
Comprehensive earnings per share | | $ | 0.55 | | $ | 2.77 | | -80.1 | % | $ | 4.39 | | $ | 5.42 | | -19.0 | % |
| | | | | | | | | | | | | |
Cash dividends per share | | $ | 0.30 | | $ | 0.29 | | 3.4 | % | $ | 0.89 | | $ | 0.86 | | 3.5 | % |
| | | | | | | | | | | | | |
Net Cash Flow provided by Operations | | $ | 32,056 | | $ | 52,408 | | -38.8 | % | $ | 115,922 | | $ | 87,867 | | 31.9 | % |
(1) See discussion of non-GAAP financial measures on page 2.
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RLI CORP.
2011 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
| | September 30, | | December 31, | | | |
| | 2011 | | 2010 | | % Change | |
SUMMARIZED BALANCE SHEET DATA: | | | | | | | |
Fixed income | | $ | 1,530,195 | | $ | 1,441,337 | | 6.2 | % |
(amortized cost - $1,473,660 at 9/30/11) | | | | | | | |
(amortized cost - $1,403,140 at 12/31/10) | | | | | | | |
Equity securities | | 331,301 | | 321,897 | | 2.9 | % |
(cost - $251,077 at 9/30/11) | | | | | | | |
(cost - $213,069 at 12/31/10) | | | | | | | |
Short-term investments | | 155,970 | | 39,787 | | 292.0 | % |
Total investments | | 2,017,466 | | 1,803,021 | | 11.9 | % |
| | | | | | | |
Premiums and reinsurance balances receivable | | 119,771 | | 107,391 | | 11.5 | % |
Ceded unearned premiums | | 59,298 | | 62,631 | | -5.3 | % |
Reinsurance recoverable on unpaid losses | | 341,986 | | 354,163 | | -3.4 | % |
Deferred acquisition costs/VOBA* | | 95,365 | | 74,435 | | 28.1 | % |
Property and equipment | | 19,502 | | 18,370 | | 6.2 | % |
Investment in unconsolidated investee | | 51,258 | | 43,358 | | 18.2 | % |
Goodwill and intangibles | | 60,733 | | 26,214 | | 131.7 | % |
Other assets | | 28,984 | | 25,009 | | 15.9 | % |
Total assets | | $ | 2,794,363 | | $ | 2,514,592 | | 11.1 | % |
| | | | | | | |
Unpaid losses and settlement expenses | | $ | 1,179,993 | | $ | 1,173,943 | | 0.5 | % |
Unearned premiums | | 361,591 | | 301,537 | | 19.9 | % |
Reinsurance balances payable | | 22,687 | | 23,851 | | -4.9 | % |
Funds held | | 109,592 | | 32,072 | | 241.7 | % |
Long-term debt - bonds payable | | 100,000 | | 100,000 | | — | |
Income taxes - deferred | | 31,917 | | 33,930 | | -5.9 | % |
Accrued expenses | | 55,165 | | 42,436 | | 30.0 | % |
Other liabilities | | 65,933 | | 15,447 | | 326.8 | % |
Total liabilities | | 1,926,878 | | 1,723,216 | | 11.8 | % |
Shareholders’ equity | | 867,485 | | 791,376 | | 9.6 | % |
Total liabilities & shareholders’ equity | | $ | 2,794,363 | | $ | 2,514,592 | | 11.1 | % |
*Includes asset for value of business acquired (VOBA) in CBIC acquisition | | | | | |
| | | | | | | |
OTHER DATA | | | | | | | |
| | | | | | | |
Common shares outstanding (in 000’s) | | 21,077 | | 20,965 | | | |
| | | | | | | |
Book value per share | | $ | 41.16 | | $ | 37.75 | | 9.0 | % |
Closing stock price per share | | $ | 63.58 | | $ | 52.57 | | 20.9 | % |
Cash dividends per share - ordinary (annualized) | | $ | 1.19 | | $ | 1.15 | | 3.5 | % |
Cash dividends per share - special | | $ | — | | $ | 7.00 | | -100.0 | % |
| | | | | | | |
Statutory Surplus | | $ | 780,480 | | $ | 732,379 | | 6.6 | % |
5
RLI CORP.
2011 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended September 30,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2011 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 87,921 | | | | $ | 64,849 | | | | $ | 31,252 | | | | $ | 184,022 | | | |
Net premiums written | | 65,133 | | | | 49,921 | | | | 29,520 | | | | 144,574 | | | |
Net premiums earned | | 60,626 | | | | 59,226 | | | | 26,700 | | | | 146,552 | | | |
Net loss & settlement expenses | | 14,819 | | 24.4 | % | 43,435 | | 73.3 | % | 6,548 | | 24.5 | % | 64,802 | | 44.2 | % |
Net operating expenses | | 22,013 | | 36.3 | % | 17,717 | | 29.9 | % | 17,284 | | 64.7 | % | 57,014 | | 38.9 | % |
Underwriting income (loss) | | $ | 23,794 | | 60.7 | % | $ | (1,926 | ) | 103.2 | % | $ | 2,868 | | 89.2 | % | $ | 24,736 | | 83.1 | % |
| | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 79,887 | | | | $ | 53,930 | | | | $ | 23,589 | | | | $ | 157,406 | | | |
Net premiums written | | 56,224 | | | | 40,545 | | | | 22,135 | | | | 118,904 | | | |
Net premiums earned | | 57,684 | | | | 50,167 | | | | 20,483 | | | | 128,334 | | | |
Net loss & settlement expenses | | 27,962 | | 48.5 | % | 27,804 | | 55.4 | % | 57 | | 0.3 | % | 55,823 | | 43.5 | % |
Net operating expenses | | 20,745 | | 36.0 | % | 17,075 | | 34.0 | % | 12,965 | | 63.3 | % | 50,785 | | 39.6 | % |
Underwriting income | | $ | 8,977 | | 84.5 | % | $ | 5,288 | | 89.4 | % | $ | 7,461 | | 63.6 | % | $ | 21,726 | | 83.1 | % |
Nine Months Ended September 30,
| | | | GAAP | | | | GAAP | | | | GAAP | | | | GAAP | |
| | Casualty | | Ratios | | Property | | Ratios | | Surety | | Ratios | | Total | | Ratios | |
2011 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 239,083 | | | | $ | 218,555 | | | | $ | 80,203 | | | | $ | 537,841 | | | |
Net premiums written | | 176,744 | | | | 174,899 | | | | 75,626 | | | | 427,269 | | | |
Net premiums earned | | 173,937 | | | | 148,015 | | | | 71,477 | | | | 393,429 | | | |
Net loss & settlement expenses | | 53,709 | | 30.9 | % | 80,499 | | 54.4 | % | 7,828 | | 11.0 | % | 142,036 | | 36.1 | % |
Net operating expenses | | 64,840 | | 37.3 | % | 50,894 | | 34.4 | % | 46,126 | | 64.5 | % | 161,860 | | 41.1 | % |
Underwriting income | | $ | 55,388 | | 68.2 | % | $ | 16,622 | | 88.8 | % | $ | 17,523 | | 75.5 | % | $ | 89,533 | | 77.2 | % |
| | | | | | | | | | | | | | | | | |
2010 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 235,134 | | | | $ | 188,071 | | | | $ | 66,473 | | | | $ | 489,678 | | | |
Net premiums written | | 169,859 | | | | 145,510 | | | | 62,104 | | | | 377,473 | | | |
Net premiums earned | | 175,690 | | | | 132,133 | | | | 58,533 | | | | 366,356 | | | |
Net loss & settlement expenses | | 91,576 | | 52.1 | % | 62,091 | | 47.0 | % | 1,485 | | 2.5 | % | 155,152 | | 42.4 | % |
Net operating expenses | | 60,929 | | 34.7 | % | 47,373 | | 35.9 | % | 37,660 | | 64.3 | % | 145,962 | | 39.8 | % |
Underwriting income | | $ | 23,185 | | 86.8 | % | $ | 22,669 | | 82.9 | % | $ | 19,388 | | 66.8 | % | $ | 65,242 | | 82.2 | % |
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