Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 11, 2013 | |
Document and Entity Information | ||
Entity Registrant Name | RLI CORP | |
Entity Central Index Key | 84246 | |
Document Type | 10-Q | |
Document Period End Date | 30-Sep-13 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 21,446,816 | |
Document Fiscal Year Focus | 2013 | |
Document Fiscal Period Focus | Q3 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Earnings and Comprehensive Earnings (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Consolidated Statements of Earnings and Comprehensive Earnings | ||||
Net premiums earned | $163,702 | $149,943 | $462,406 | $428,807 |
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 |
Net realized investment gains | 10,999 | 5,481 | 18,425 | 17,389 |
Other-than-temporary impairment (OTTI) losses on investments | -1,156 | |||
Consolidated revenue | 188,299 | 169,645 | 520,162 | 489,380 |
Losses and settlement expenses | 64,246 | 70,598 | 191,301 | 193,486 |
Policy acquisition costs | 54,176 | 49,262 | 156,014 | 145,632 |
Insurance operating expenses | 13,462 | 11,553 | 37,916 | 34,595 |
Interest expense on debt | 1,513 | 1,512 | 4,538 | 4,537 |
General corporate expenses | 2,157 | 2,099 | 6,235 | 5,901 |
Total expenses | 135,554 | 135,024 | 396,004 | 384,151 |
Equity in earnings of unconsolidated investee | 2,564 | 1,859 | 10,696 | 8,928 |
Earnings before income taxes | 55,309 | 36,480 | 134,854 | 114,157 |
Income tax expense | 17,662 | 11,017 | 42,458 | 35,908 |
Net earnings | 37,647 | 25,463 | 92,396 | 78,249 |
Other comprehensive earnings (loss), net of tax | -1,946 | 21,047 | -17,874 | 37,713 |
Comprehensive earnings | $35,701 | $46,510 | $74,522 | $115,962 |
Basic: | ||||
Basic net earnings per share (in dollars per share) | $1.76 | $1.20 | $4.33 | $3.69 |
Basic comprehensive earnings per share (in dollars per share) | $1.67 | $2.19 | $3.49 | $5.47 |
Diluted: | ||||
Diluted net earnings per share (in dollars per share) | $1.73 | $1.19 | $4.26 | $3.64 |
Diluted comprehensive earnings per share (in dollars per share) | $1.64 | $2.16 | $3.44 | $5.39 |
Weighted average number of common shares outstanding | ||||
Basic (in shares) | 21,422 | 21,218 | 21,337 | 21,207 |
Diluted (in shares) | 21,773 | 21,486 | 21,665 | 21,519 |
Cash dividends declared per common share (in dollars per share) | $0.34 | $0.32 | $1 | $0.94 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Fixed income | ||
Available-for-sale, at fair value | $1,379,012 | $1,378,582 |
Held-to-maturity, at amortized cost | 651 | 11,728 |
Trading, at fair value | 7 | |
Equity securities, at fair value | 392,156 | 375,788 |
Short-term investments, at cost | 22,994 | 30,462 |
Cash | 87,398 | 44,314 |
Total investments and cash | 1,882,211 | 1,840,881 |
Bond issuance - proceeds receivable | 148,596 | |
Accrued investment income | 12,781 | 14,403 |
Premiums and reinsurance balances receivable | 157,213 | 139,355 |
Ceded unearned premium | 69,842 | 73,192 |
Reinsurance balances recoverable on unpaid losses | 360,194 | 359,884 |
Deferred policy acquisition costs | 63,215 | 52,344 |
Property and equipment | 36,007 | 27,987 |
Investment in unconsolidated investee | 62,506 | 52,128 |
Goodwill and intangibles | 75,140 | 76,113 |
Other assets | 18,932 | 8,345 |
TOTAL ASSETS | 2,886,637 | 2,644,632 |
Liabilities: | ||
Unpaid losses and settlement expenses | 1,135,698 | 1,158,483 |
Unearned premiums | 416,886 | 369,346 |
Reinsurance balances payable | 44,530 | 43,959 |
Funds held | 64,047 | 56,633 |
Income taxes-deferred | 54,337 | 55,566 |
Debt, notes payable due 2014 | 100,000 | 100,000 |
Debt, notes payable due 2023 | 150,000 | |
Accrued expenses | 49,108 | 49,933 |
Other liabilities | 17,453 | 14,349 |
TOTAL LIABILITIES | 2,032,059 | 1,848,269 |
Shareholders' Equity | ||
Common stock ($1 par value, 100,000,000 shares authorized) (32,911,923 shares issued, 21,446,816 shares outstanding at 9/30/13) (32,727,731 shares issued, 21,262,624 shares outstanding at 12/31/12) | 32,912 | 32,728 |
Paid-in capital | 240,125 | 235,262 |
Accumulated other comprehensive earnings | 125,296 | 143,170 |
Retained earnings | 849,244 | 778,202 |
Deferred compensation | 10,482 | 11,106 |
Less: Treasury shares at cost (11,465,107 shares at 9/30/13 and 12/31/12) | -403,481 | -404,105 |
TOTAL SHAREHOLDERS' EQUITY | 854,578 | 796,363 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $2,886,637 | $2,644,632 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Condensed Consolidated Balance Sheets | ||
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 32,911,923 | 32,727,731 |
Common stock, shares outstanding (in shares) | 21,446,816 | 21,262,624 |
Treasury stock, shares (in shares) | 11,465,107 | 11,465,107 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Consolidated Statements of Cash Flows | ||
Net cash provided by operating activities | $81,736 | $13,154 |
Cash Flows from Investing Activities | ||
Investments purchased | -358,510 | -628,331 |
Investments sold | 221,133 | 180,641 |
Investments called or matured | 114,929 | 469,041 |
Net change in short-term investments | 10,869 | -59,088 |
Net property and equipment purchased | -10,766 | -11,073 |
Net cash used in investing activities | -22,345 | -48,810 |
Cash Flows from Financing Activities | ||
Cash dividends paid | -21,354 | -19,940 |
Stock plan share issuance | 159 | 4,842 |
Excess tax benefit from exercise of stock options | 4,888 | 871 |
Net cash used in financing activities | -16,307 | -14,227 |
Net increase (decrease) in cash | 43,084 | -49,883 |
Cash at the beginning of the period | 44,314 | 81,184 |
Cash at September 30 | $87,398 | $31,301 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | |||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||
A. BASIS OF PRESENTATION | ||||||||||||||||||
The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2012 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at September 30, 2013 and the results of operations of RLI Corp. and Subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. | ||||||||||||||||||
The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates. | ||||||||||||||||||
B. ADOPTED ACCOUNTING STANDARDS | ||||||||||||||||||
ASU 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment | ||||||||||||||||||
This ASU permits an entity the option to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The results of the qualitative assessment are used as a basis in determining whether it is necessary to perform the two-step quantitative impairment test. If the qualitative assessment supports the conclusion that it is more likely than not that the fair value of the asset exceeds its carrying amount, the entity would not need to perform the two-step quantitative impairment test. The focus of the guidance is to reduce the cost and complexity of performing impairment tests for indefinite-lived intangible assets other than goodwill, and to improve consistency in impairment testing among long-lived asset categories. | ||||||||||||||||||
We adopted ASU 2012-02 on January 1, 2013. The adoption did not have a material effect on our financial statements. There have been no triggering events that would suggest possible impairment or that it is more likely than not that the fair values of indefinite-lived intangible assets are less than their carrying amounts. | ||||||||||||||||||
ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income | ||||||||||||||||||
This ASU was issued to improve the reporting of reclassifications out of accumulated other comprehensive income. The guidance requires an entity to present, either on the face of the statement where net earnings is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items in the statement of earnings. The intent of the guidance is to provide financial statement users with a single location to determine the effect of reclassification adjustments on the financial statements. | ||||||||||||||||||
We adopted ASU 2013-02 on January 1, 2013. The required disclosures have been included in note 1.F. to these unaudited condensed consolidated interim financial statements. | ||||||||||||||||||
C. PROSPECTIVE ACCOUNTING STANDARDS | ||||||||||||||||||
There are no prospective accounting standards which would impact our financial statements as of September 30, 2013. | ||||||||||||||||||
D. INTANGIBLE ASSETS | ||||||||||||||||||
In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangibles totaled $75.1 million at September 30, 2013. These assets relate to acquisition activity including our recent acquisitions of Contractors Bonding and Insurance Company (CBIC) and Rockbridge Underwriting Agency (Rockbridge). | ||||||||||||||||||
Goodwill resulting from acquisitions completed prior to 2011 totaled $26.2 million and is attributable to our surety segment. Goodwill and intangible assets resulting from the CBIC acquisition in April 2011 totaled $32.6 million. The CBIC-related assets include goodwill attributable to our casualty and surety segments of $5.3 million and $15.1 million, respectively, and an indefinite-lived intangible asset in the amount of $8.8 million. Annual impairment testing was performed on each of these goodwill and indefinite-lived intangible assets during the second quarter of 2013. Based upon these reviews, none of the assets were impaired. In addition, as of September 30, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. Definite-lived intangible assets related to the CBIC acquisition totaled $3.4 million, net of amortization, as of September 30, 2013. | ||||||||||||||||||
The remaining $16.3 million of goodwill and intangibles relates to our purchase of Rockbridge in November 2012. Goodwill attributable to our casualty segment totaled $12.4 million. Definite-lived intangible assets totaled $3.9 million, net of amortization, as of September 30, 2013. Our initial annual impairment testing on this goodwill will be performed in the fourth quarter of 2013. As of September 30, 2013, there were no triggering events that occurred that would suggest an interim review was necessary. See note 6 to the unaudited condensed consolidated interim financial statements for further discussion. | ||||||||||||||||||
The aforementioned definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets resulting from the acquisitions of CBIC and Rockbridge was $0.4 million for the third quarter of 2013, and $1.0 million for the nine months ended September 30, 2013. | ||||||||||||||||||
E. EARNINGS PER SHARE | ||||||||||||||||||
Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. | ||||||||||||||||||
The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements. | ||||||||||||||||||
For the Three-Month Period | For the Three-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,422 | $ | 1.76 | $ | 25,463 | 21,218 | $ | 1.2 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 351 | — | 268 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,773 | $ | 1.73 | $ | 25,463 | 21,486 | $ | 1.19 | ||||||||
For the Nine-Month Period | For the Nine-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,337 | $ | 4.33 | $ | 78,249 | 21,207 | $ | 3.69 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 328 | — | 312 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,665 | $ | 4.26 | $ | 78,249 | 21,519 | $ | 3.64 | ||||||||
F. COMPREHENSIVE EARNINGS | ||||||||||||||||||
Our comprehensive earnings include net earnings plus unrealized gains/losses on our available-for-sale investment securities, net of tax. In reporting comprehensive earnings on a net basis in the statement of earnings, we used a 35 percent tax rate. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the unaudited condensed consolidated interim financial statements. | ||||||||||||||||||
For the Three-Month Periods Ended | For the Nine-Month Periods | |||||||||||||||||
September 30, | Ended September 30, | |||||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | ||||||||||||||||||
Beginning balance | $ | 127,242 | 133,991 | $ | 143,170 | 117,325 | ||||||||||||
Other comprehensive earnings before reclassifications | 5,203 | 25,127 | (5,354 | ) | 50,066 | |||||||||||||
Amounts reclassified from accumulated other comprehensive earnings | (7,149 | ) | (4,080 | ) | (12,520 | ) | (12,353 | ) | ||||||||||
Net current-period other comprehensive earnings | $ | (1,946 | ) | 21,047 | $ | (17,874 | ) | 37,713 | ||||||||||
Ending balance | $ | 125,296 | 155,038 | $ | 125,296 | 155,038 | ||||||||||||
The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. | ||||||||||||||||||
Amount Reclassified from Accumulated Other | ||||||||||||||||||
Comprehensive Earnings | ||||||||||||||||||
(in thousands) | For the Three-Month | For the Nine-Month | Affected line item in the | |||||||||||||||
Component of Accumulated | Periods Ended | Periods Ended | ||||||||||||||||
September 30, | September 30, | |||||||||||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2013 | 2012 | Statement of Earnings | |||||||||||||
Unrealized gains and losses on available-for-sale securities | $ | 10,998 | 6,278 | $ | 19,261 | 20,161 | Net realized investment gains | |||||||||||
— | — | — | (1,156 | ) | Other-than-temporary impairment (OTTI) losses on investments | |||||||||||||
10,998 | 6,278 | 19,261 | 19,005 | Earnings before income taxes | ||||||||||||||
(3,849 | ) | (2,198 | ) | (6,741 | ) | (6,652 | ) | Income tax expense | ||||||||||
$ | 7,149 | 4,080 | $ | 12,520 | 12,353 | Net earnings | ||||||||||||
INVESTMENTS
INVESTMENTS | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
INVESTMENTS | |||||||||||||||||
INVESTMENTS | 2. INVESTMENTS | ||||||||||||||||
Our investments include fixed income debt securities and common stock equity securities. As disclosed in our 2012 Annual Report on Form 10-K, we present our investments in these classes as available-for-sale and held-to-maturity. When available, we obtain quoted market prices to determine fair value for our investments. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. We have no investment securities for which fair value is determined using Level 3 inputs as defined in note 3 to the unaudited condensed consolidated interim financial statements, “Fair Value Measurements.” | |||||||||||||||||
The following tables show the amortized cost, unrealized gains/losses, fair value and contractual maturities for our available-for-sale and held-to-maturity securities. | |||||||||||||||||
Available-for-Sale Securities | |||||||||||||||||
The amortized cost and fair value of available-for-sale securities at September 30, 2013 and December 31, 2012 were as follows: | |||||||||||||||||
Available-for-sale | |||||||||||||||||
(in thousands) | |||||||||||||||||
9/30/13 | |||||||||||||||||
Cost or | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
Asset Class | Cost | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 8,537 | $ | 52 | $ | (130 | ) | $ | 8,459 | ||||||||
Corporate | 474,628 | 23,746 | (6,850 | ) | 491,524 | ||||||||||||
Mortgage-backed | 247,317 | 7,722 | (3,475 | ) | 251,564 | ||||||||||||
ABS/CMBS* | 94,123 | 1,609 | (1,725 | ) | 94,007 | ||||||||||||
Non-U.S. govt. & agency | 11,414 | 469 | (16 | ) | 11,867 | ||||||||||||
U.S. government | 17,090 | 253 | — | 17,343 | |||||||||||||
Municipal | 506,834 | 8,079 | (10,665 | ) | 504,248 | ||||||||||||
Total Fixed Income | $ | 1,359,943 | $ | 41,930 | $ | (22,861 | ) | $ | 1,379,012 | ||||||||
Equity | $ | 218,656 | $ | 173,861 | $ | (361 | ) | $ | 392,156 | ||||||||
Available-for-sale | |||||||||||||||||
(in thousands) | |||||||||||||||||
12/31/12 | |||||||||||||||||
Cost or | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
Asset Class | Cost | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 11,609 | $ | 150 | $ | — | $ | 11,759 | |||||||||
Corporate | 535,437 | 45,497 | (226 | ) | 580,708 | ||||||||||||
Mortgage-backed | 234,629 | 15,758 | — | 250,387 | |||||||||||||
ABS/CMBS* | 72,681 | 4,648 | — | 77,329 | |||||||||||||
Non-U.S. govt. & agency | 8,410 | 957 | — | 9,367 | |||||||||||||
U.S. government | 16,358 | 355 | — | 16,713 | |||||||||||||
Municipal | 415,226 | 17,250 | (157 | ) | 432,319 | ||||||||||||
Total Fixed Income | $ | 1,294,350 | $ | 84,615 | $ | (383 | ) | $ | 1,378,582 | ||||||||
Equity | $ | 240,287 | $ | 136,376 | $ | (875 | ) | $ | 375,788 | ||||||||
*Asset-backed and commercial mortgage-backed | |||||||||||||||||
The following table presents the amortized cost and fair value of available-for-sale debt securities by contractual maturity dates as of September 30, 2013: | |||||||||||||||||
9/30/13 | |||||||||||||||||
AFS | Amortized | Fair | |||||||||||||||
(in thousands) | Cost | Value | |||||||||||||||
Due in one year or less | $ | 12,910 | $ | 13,014 | |||||||||||||
Due after one year through five years | 146,264 | 155,143 | |||||||||||||||
Due after five years through 10 years | 616,368 | 627,254 | |||||||||||||||
Due after 10 years | 242,961 | 238,030 | |||||||||||||||
Mtge/ABS/CMBS* | 341,440 | 345,571 | |||||||||||||||
Total available-for-sale | $ | 1,359,943 | $ | 1,379,012 | |||||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | |||||||||||||||||
Held-to-Maturity Debt Securities | |||||||||||||||||
The carrying value and fair value of held-to-maturity securities at September 30, 2013 and December 31, 2012 were as follows: | |||||||||||||||||
Held-to-maturity | |||||||||||||||||
(in thousands) | |||||||||||||||||
9/30/13 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Amortized Cost/ | Unrecognized | Unrecognized | Fair | ||||||||||||||
Asset Class | Carrying Value** | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | — | $ | — | $ | — | $ | — | |||||||||
Corporate | — | — | — | — | |||||||||||||
Mortgage-backed | — | — | — | — | |||||||||||||
ABS/CMBS* | — | — | — | — | |||||||||||||
Non-U.S. govt. & agency | — | — | — | — | |||||||||||||
U.S. government | — | — | — | — | |||||||||||||
Municipal | 651 | 44 | — | 695 | |||||||||||||
Total Fixed Income | $ | 651 | $ | 44 | $ | — | $ | 695 | |||||||||
Held-to-maturity | |||||||||||||||||
(in thousands) | |||||||||||||||||
12/31/12 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Amortized Cost/ | Unrecognized | Unrecognized | Fair | ||||||||||||||
Asset Class | Carrying Value** | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 10,076 | $ | 74 | $ | — | $ | 10,150 | |||||||||
Corporate | — | — | — | — | |||||||||||||
Mortgage-backed | — | — | — | — | |||||||||||||
ABS/CMBS* | — | — | — | — | |||||||||||||
U.S. government | — | — | — | — | |||||||||||||
Municipal | 1,652 | 66 | — | 1,718 | |||||||||||||
Total Fixed Income | $ | 11,728 | $ | 140 | $ | — | $ | 11,868 | |||||||||
* Asset-backed and commercial mortgage-backed | |||||||||||||||||
** Held-to-maturity securities are carried on the unaudited condensed consolidated balance sheets at amortized cost and changes in the fair value of these securities, other than impairment charges, are not reported on the financial statements. | |||||||||||||||||
The following table presents the carrying value and fair value of debt securities held-to-maturity by contractual maturity dates as of September 30, 2013: | |||||||||||||||||
9/30/13 | |||||||||||||||||
HTM | Amortized | Fair | |||||||||||||||
(in thousands) | Cost | Value | |||||||||||||||
Due in one year or less | $ | — | $ | — | |||||||||||||
Due after one year through five years | 651 | 695 | |||||||||||||||
Due after five years through 10 years | — | — | |||||||||||||||
Due after 10 years | — | — | |||||||||||||||
Mtge/ABS/CMBS* | — | — | |||||||||||||||
Total held-to-maturity | $ | 651 | $ | 695 | |||||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed | |||||||||||||||||
We conduct and document periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. The following tables are used as part of our impairment analysis and illustrate the total value of securities that were in an unrealized loss position as of September 30, 2013 and December 31, 2012. The tables segregate the securities based on type, noting the fair value, cost (or amortized cost), and unrealized loss on each category of investment as well as in total. The tables further classify the securities based on the length of time they have been in an unrealized loss position. As of September 30, 2013 unrealized losses, as shown in the following tables, were 1.2% of total invested assets. Unrealized losses have increased in 2013, as interest rates have increased throughout the year, particularly during the second quarter. | |||||||||||||||||
Investment Positions with Unrealized Losses | |||||||||||||||||
Segmented by Type and Period of Continuous | |||||||||||||||||
Unrealized Loss at September 30, 2013 | |||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. & Greater | Total | ||||||||||||||
U.S. Government | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
U.S. Agency | |||||||||||||||||
Fair value | $ | 3,866 | $ | — | $ | 3,866 | |||||||||||
Cost or Amortized Cost | 3,996 | — | 3,996 | ||||||||||||||
Unrealized Loss | (130 | ) | — | (130 | ) | ||||||||||||
Non-U.S. govt. & agency | |||||||||||||||||
Fair value | $ | 2,985 | $ | — | $ | 2,985 | |||||||||||
Cost or Amortized Cost | 3,001 | — | 3,001 | ||||||||||||||
Unrealized Loss | (16 | ) | — | (16 | ) | ||||||||||||
Mortgage-backed | |||||||||||||||||
Fair value | $ | 92,321 | $ | — | $ | 92,321 | |||||||||||
Cost or Amortized Cost | 95,796 | — | 95,796 | ||||||||||||||
Unrealized Loss | (3,475 | ) | — | (3,475 | ) | ||||||||||||
ABS/CMBS* | |||||||||||||||||
Fair value | $ | 50,376 | $ | — | $ | 50,376 | |||||||||||
Cost or Amortized Cost | 52,101 | — | 52,101 | ||||||||||||||
Unrealized Loss | (1,725 | ) | — | (1,725 | ) | ||||||||||||
Corporate | |||||||||||||||||
Fair value | $ | 175,314 | $ | — | $ | 175,314 | |||||||||||
Cost or Amortized Cost | 182,164 | — | 182,164 | ||||||||||||||
Unrealized Loss | (6,850 | ) | — | (6,850 | ) | ||||||||||||
Municipal | |||||||||||||||||
Fair value | $ | 283,155 | $ | 946 | $ | 284,101 | |||||||||||
Cost or Amortized Cost | 293,809 | 957 | 294,766 | ||||||||||||||
Unrealized Loss | (10,654 | ) | (11 | ) | (10,665 | ) | |||||||||||
Subtotal, debt securities | |||||||||||||||||
Fair value | $ | 608,017 | $ | 946 | $ | 608,963 | |||||||||||
Cost or Amortized Cost | 630,867 | 957 | 631,824 | ||||||||||||||
Unrealized Loss | (22,850 | ) | (11 | ) | (22,861 | ) | |||||||||||
Equity securities | |||||||||||||||||
Fair value | $ | 7,041 | $ | — | $ | 7,041 | |||||||||||
Cost or Amortized Cost | 7,402 | — | 7,402 | ||||||||||||||
Unrealized Loss | (361 | ) | — | (361 | ) | ||||||||||||
Total | |||||||||||||||||
Fair value | $ | 615,058 | $ | 946 | $ | 616,004 | |||||||||||
Cost or Amortized Cost | 638,269 | 957 | 639,226 | ||||||||||||||
Unrealized Loss | (23,211 | ) | (11 | ) | (23,222 | ) | |||||||||||
* Asset-backed & commercial mortgage-backed. | |||||||||||||||||
Investment Positions with Unrealized Losses | |||||||||||||||||
Segmented by Type and Period of Continuous | |||||||||||||||||
Unrealized Loss at December 31, 2012 | |||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. & Greater | Total | ||||||||||||||
U.S. Government | |||||||||||||||||
Fair value | $ | 749 | $ | — | $ | 749 | |||||||||||
Cost or Amortized Cost | 749 | — | 749 | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
U.S. Agency | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Non-U.S. govt. & agency | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Mortgage-backed | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
ABS/CMBS* | |||||||||||||||||
Fair value | $ | 18 | $ | — | $ | 18 | |||||||||||
Cost or Amortized Cost | 18 | — | 18 | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Corporate | |||||||||||||||||
Fair value | $ | 35,969 | $ | 960 | $ | 36,929 | |||||||||||
Cost or Amortized Cost | 36,162 | 993 | 37,155 | ||||||||||||||
Unrealized Loss | (193 | ) | (33 | ) | (226 | ) | |||||||||||
Municipal | |||||||||||||||||
Fair value | $ | 35,064 | $ | — | $ | 35,064 | |||||||||||
Cost or Amortized Cost | 35,221 | — | 35,221 | ||||||||||||||
Unrealized Loss | (157 | ) | — | (157 | ) | ||||||||||||
Subtotal, debt securities | |||||||||||||||||
Fair value | $ | 71,800 | $ | 960 | $ | 72,760 | |||||||||||
Cost or Amortized Cost | 72,150 | 993 | 73,143 | ||||||||||||||
Unrealized Loss | (350 | ) | (33 | ) | (383 | ) | |||||||||||
Equity securities | |||||||||||||||||
Fair value | $ | 16,207 | $ | — | $ | 16,207 | |||||||||||
Cost or Amortized Cost | 17,082 | — | 17,082 | ||||||||||||||
Unrealized Loss | (875 | ) | — | (875 | ) | ||||||||||||
Total | |||||||||||||||||
Fair value | $ | 88,007 | $ | 960 | $ | 88,967 | |||||||||||
Cost or Amortized Cost | 89,232 | 993 | 90,225 | ||||||||||||||
Unrealized Loss | (1,225 | ) | (33 | ) | (1,258 | ) | |||||||||||
* Asset-backed & commercial mortgage-backed. | |||||||||||||||||
This table excludes securities with a fair value of less than $0.1 million, classified as trading. | |||||||||||||||||
The following table shows the composition of the fixed income securities in unrealized loss positions at September 30, 2013 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s. | |||||||||||||||||
Equivalent | Equivalent | (dollars in thousands) | |||||||||||||||
NAIC | S&P | Moody’s | Amortized | Unrealized | Percent | ||||||||||||
Rating | Rating | Rating | Cost | Fair Value | Loss | to Total | |||||||||||
1 | AAA/AA/A | Aaa/Aa/A | $ | 597,964 | $ | 576,292 | $ | (21,672 | ) | 94.8 | % | ||||||
2 | BBB | Baa | 32,870 | 31,703 | (1,167 | ) | 5.1 | % | |||||||||
3 | BB | Ba | 990 | 968 | (22 | ) | 0.1 | % | |||||||||
4 | B | B | — | — | — | — | |||||||||||
5 | CCC or lower | Caa or lower | — | — | — | — | |||||||||||
6 | — | — | — | — | |||||||||||||
Total | $ | 631,824 | $ | 608,963 | $ | (22,861 | ) | 100 | % | ||||||||
Cash and Short-term Investments | |||||||||||||||||
Cash consists of uninvested balances in bank accounts. We had a cash balance of $87.4 million at the end of the third quarter of 2013, compared to $44.3 million at the end of 2012. Short-term investments are carried at cost, which approximates fair value. The balance at September 30, 2013 was $23.0 million compared to $30.5 million at December 31, 2012. | |||||||||||||||||
Evaluating Investments for OTTI | |||||||||||||||||
The fixed income portfolio contained 288 securities in an unrealized loss position as of September 30, 2013. The $22.9 million in associated unrealized losses for these 288 securities represents 1.7% of the fixed income portfolio’s cost basis. Of these 288 securities, one has been in an unrealized loss position for 12 consecutive months or longer. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed income securities we do not plan to sell and for which we are not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed income portfolio is of high credit quality and we believe we will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. There were no other-than-temporary impairment (OTTI) losses recognized in net earnings or other comprehensive earnings in the periods presented on the fixed income portfolio. | |||||||||||||||||
As of September 30, 2013, we held three common stock securities that were in an unrealized loss position. The unrealized loss on these securities was $0.4 million. Based on our analysis, we believe each security will recover in a reasonable period of time and we have the intent and ability to hold them until recovery. No equity securities have been in an unrealized loss position for 12 consecutive months or longer. | |||||||||||||||||
No securities were considered to be other-than-temporarily impaired during the first nine months of 2013. During the first nine months of 2012, we recognized $1.2 million in other-than-temporary impairment charges for equity securities we no longer had the intent to hold until recovery. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
FAIR VALUE MEASUREMENTS | 3. FAIR VALUE MEASUREMENTS | |||||||||||||
Assets and Liabilities Recorded at Fair Value on a Recurring Basis | ||||||||||||||
Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. | ||||||||||||||
We determined the fair values of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value. | ||||||||||||||
Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level: | ||||||||||||||
Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. These valuations are based on quoted prices that are readily and regularly available in an active market. | ||||||||||||||
Pricing Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. | ||||||||||||||
Pricing Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. | ||||||||||||||
As a part of management’s process to determine fair value, we utilize a widely recognized, third-party pricing source to determine our fair values. We have obtained an understanding of the third-party pricing source’s valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. | ||||||||||||||
Corporate, Agencies, Government and Municipal Bonds: The pricing vendor uses a generic model which uses standard inputs, including (listed in order of priority for use), benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All corporate, agency, government and municipal securities were deemed Level 2. | ||||||||||||||
Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes interest rate movements, new issue data and other pertinent data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, prepayment assumptions and to incorporate collateral performance. To evaluate MBS and CMBS volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMBS and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMBS and ABS are deemed Level 2. | ||||||||||||||
Common Stock: Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). All of our common stock holdings are deemed Level 1. | ||||||||||||||
For the Level 2 securities, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing service. Our review consists of a two pronged approach. First, we compare prices provided by our pricing service to those provided by an additional source. Second, we obtain prices from securities brokers and compare them to the prices provided by our pricing service. In both comparisons, when discrepancies are found, we compare our prices to actual reported trade data. Based on this assessment, we determined that the fair values of our Level 2 securities provided by our pricing service are reasonable. | ||||||||||||||
For common stock, we receive prices from the same nationally recognized pricing service. Prices are based on observable inputs in an active market and are therefore classified as Level 1. Based on this assessment, we determined that the fair values of our Level 1 securities provided by our pricing service are reasonable. | ||||||||||||||
Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. | ||||||||||||||
Assets measured at fair value in the accompanying unaudited condensed consolidated interim financial statements on a recurring basis are summarized below: | ||||||||||||||
As of September 30, 2013 | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||
(in thousands) | Identical Assets | Inputs | Inputs | |||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||
Trading securities | ||||||||||||||
Corporate | $ | — | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | — | — | — | — | ||||||||||
ABS/CMBS* | — | — | — | — | ||||||||||
U.S. government | — | — | — | — | ||||||||||
Total trading securities | $ | — | $ | — | $ | — | $ | — | ||||||
Available-for-sale securities | ||||||||||||||
U.S. agency | $ | — | $ | 8,459 | $ | — | $ | 8,459 | ||||||
Corporate | — | 491,524 | — | 491,524 | ||||||||||
Mortgage-backed | — | 251,564 | — | 251,564 | ||||||||||
ABS/CMBS* | — | 94,007 | — | 94,007 | ||||||||||
Non-U.S. govt. & agency | — | 11,867 | — | 11,867 | ||||||||||
U.S. government | — | 17,343 | — | 17,343 | ||||||||||
Municipal | — | 504,248 | — | 504,248 | ||||||||||
Equity | 392,156 | — | — | 392,156 | ||||||||||
Total available-for-sale securities | $ | 392,156 | $ | 1,379,012 | $ | — | $ | 1,771,168 | ||||||
Total | $ | 392,156 | $ | 1,379,012 | $ | — | $ | 1,771,168 | ||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||
As of December 31, 2012 | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||
(in thousands) | Identical Assets | Inputs | Inputs | |||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||
Trading securities | ||||||||||||||
Corporate | $ | — | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | — | 7 | — | 7 | ||||||||||
ABS/CMBS* | — | — | — | — | ||||||||||
U.S. government | — | — | — | — | ||||||||||
Total trading securities | $ | — | $ | 7 | $ | — | $ | 7 | ||||||
Available-for-sale securities | ||||||||||||||
U.S. agency | $ | — | $ | 11,759 | $ | — | $ | 11,759 | ||||||
Corporate | — | 580,708 | — | 580,708 | ||||||||||
Mortgage-backed | — | 250,387 | — | 250,387 | ||||||||||
ABS/CMBS* | — | 77,329 | — | 77,329 | ||||||||||
Non-U.S. govt. & agency | — | 9,367 | — | 9,367 | ||||||||||
U.S. government | — | 16,713 | — | 16,713 | ||||||||||
Municipal | — | 432,319 | — | 432,319 | ||||||||||
Equity | 375,788 | — | — | 375,788 | ||||||||||
Total available-for-sale securities | $ | 375,788 | $ | 1,378,582 | $ | — | $ | 1,754,370 | ||||||
Total | $ | 375,788 | $ | 1,378,589 | $ | — | $ | 1,754,377 | ||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||
As noted in the above table, we do not have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period. Additionally, there were no securities transferred in or out of levels 1 or 2 during the three-month period ended September 30, 2013. |
STOCK_BASED_COMPENSATION
STOCK BASED COMPENSATION | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
STOCK BASED COMPENSATION | ||||||||||||
STOCK BASED COMPENSATION | 4. STOCK BASED COMPENSATION | |||||||||||
Our RLI Corp. Omnibus Stock Plan (omnibus plan) was in place from 2005 to 2010. The omnibus plan provided for grants of up to 1,500,000 shares (subject to adjustment for changes in our capitalization). Since 2005, we have granted 1,228,726 stock options under this plan, including incentive stock options (ISOs), which were adjusted as part of the special dividends in 2012, 2011 and 2010. | ||||||||||||
During the second quarter of 2010, our shareholders approved the RLI Corp. Long-Term Incentive Plan (LTIP), which replaced the omnibus plan. In conjunction with the adoption of the LTIP, effective May 6, 2010, options will no longer be granted under the omnibus plan. Awards under the LTIP may be in the form of restricted stock, stock options (nonqualified only), stock appreciation rights, performance units, as well as other stock-based awards. Eligibility under the LTIP is limited to employees or directors of the company or any affiliate. The granting of awards under the LTIP is solely at the discretion of the board of directors. The total number of shares of common stock available for distribution under the LTIP may not exceed 2,000,000 shares (subject to adjustment for changes in our capitalization and certain other events). Since 2010, we have granted 1,131,000 stock options under the LTIP, including 291,100 thus far in 2013. | ||||||||||||
Under the LTIP, as under the omnibus plan, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant. Options generally vest and become exercisable ratably over a five-year period. Beginning with the annual grant in May 2009, options granted under both plans have an eight-year life. Prior to that grant, options were granted with a ten-year life. The related compensation expense is recognized over the requisite service period. | ||||||||||||
In most instances, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75, the requisite service period is deemed to be met and options are immediately expensed on the date of grant. For participants who will become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares. | ||||||||||||
The following tables summarize option activity for the periods ended September 30, 2013 and 2012: | ||||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2013 | 1,472,602 | $ | 44.45 | |||||||||
Options granted | 291,100 | $ | 72.62 | |||||||||
Options exercised | (380,681 | ) | $ | 34.36 | $ | 17,211 | ||||||
Options canceled/forfeited | (22,440 | ) | $ | 51.86 | ||||||||
Outstanding options at September 30, 2013 | 1,360,581 | $ | 53.18 | 5.65 | $ | 46,590 | ||||||
Exercisable options at September 30, 2013 | 530,331 | $ | 42.18 | 4.35 | $ | 23,995 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2012 | 1,280,866 | $ | 43.23 | |||||||||
Options granted | 292,900 | $ | 68.46 | |||||||||
Options exercised | (63,721 | ) | $ | 40.29 | $ | 1,966 | ||||||
Options canceled/forfeited | (3,120 | ) | $ | 45.84 | ||||||||
Outstanding options at September 30, 2012 | 1,506,925 | $ | 48.26 | 5.32 | $ | 28,385 | ||||||
Exercisable options at September 30, 2012 | 738,945 | $ | 40.78 | 4.33 | $ | 19,125 | ||||||
The majority of our options are granted annually at our regular board meeting in May. In addition, options are approved at the May meeting for quarterly grants to certain retirement eligible employees. Since grants to retirement eligible employees are fully expensed when issued, the approach allows for a more even expense distribution throughout the year. | ||||||||||||
Thus far in 2013, 291,100 options were granted with an average exercise price of $72.62 and a weighted average fair value of $13.17. We recognized $1.0 million of expense in the third quarter of 2013, and $2.8 million in the first nine months of 2013, related to options vesting. Since options granted under our plan are non-qualified, we recorded a tax benefit of $0.3 million in the third quarter of 2013, and $1.0 million in the first nine months of 2013, related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $5.1 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $0.9 million of expense in the third quarter of 2012, and $2.7 million of expense in the first nine months of 2012. We recorded a tax benefit of $0.3 million in the third quarter of 2012, and $0.9 million in the first nine months of 2012, related to this compensation expense. | ||||||||||||
The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of September 30: | ||||||||||||
2013 | 2012 | |||||||||||
Weighted-average fair value of grants | $ | 13.17 | $ | 13.13 | ||||||||
Risk-free interest rates | 0.8 | % | 0.9 | % | ||||||||
Dividend yield | 2 | % | 1.93 | % | ||||||||
Expected volatility | 25.41 | % | 25.64 | % | ||||||||
Expected option life | 5.23 years | 5.39 years | ||||||||||
The risk-free rate is determined based on U.S. treasury yields that most closely approximate the option’s expected life. The dividend yield is calculated based on the average annualized dividends paid during the most recent five-year period. It excludes the special dividends paid in the fourth quarters of 2012, 2011 and 2010. The expected volatility is calculated based on the mean reversion of RLI’s stock. The expected option life is determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant. | ||||||||||||
In 2013, we began providing restricted common stock to outside directors. Shares are issued to outside directors from the LTIP as part of annual director compensation and are directly owned by each director on the date of issuance. Currently, each director receives restricted shares worth $10,000 at the time of issuance. The shares are issued annually in the first quarter and include a one-year restriction on the sale or transfer of such shares. In the first quarter of 2013, we issued a total of 1,160 restricted shares and recognized $0.1 million of compensation expense. |
OPERATING_SEGMENT_INFORMATION
OPERATING SEGMENT INFORMATION | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
OPERATING SEGMENT INFORMATION | ||||||||||||||
OPERATING SEGMENT INFORMATION | 5. OPERATING SEGMENT INFORMATION - Selected information by operating segment is presented in the table below. Additionally, the table reconciles segment totals to total earnings and total revenues. | |||||||||||||
SEGMENT DATA (in thousands) | ||||||||||||||
For the Three-Month Periods | For the Nine-Month Periods | |||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||
REVENUES | REVENUES | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net premiums earned: | ||||||||||||||
Casualty | $ | 83,966 | $ | 68,194 | $ | 235,307 | $ | 197,409 | ||||||
Property | 52,705 | 54,741 | 147,305 | 151,581 | ||||||||||
Surety | 27,031 | 27,008 | 79,794 | 79,817 | ||||||||||
Segment totals before income taxes | $ | 163,702 | $ | 149,943 | $ | 462,406 | $ | 428,807 | ||||||
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 | ||||||||||
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 | ||||||||||
Total consolidated revenue | $ | 188,299 | $ | 169,645 | $ | 520,162 | $ | 489,380 | ||||||
NET EARNINGS | NET EARNINGS | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Casualty | $ | 20,799 | $ | 10,806 | $ | 39,517 | $ | 22,409 | ||||||
Property | 6,468 | (310 | ) | 19,614 | 11,317 | |||||||||
Surety | 4,551 | 8,034 | 18,044 | 21,368 | ||||||||||
Net underwriting income | $ | 31,818 | $ | 18,530 | $ | 77,175 | $ | 55,094 | ||||||
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 | ||||||||||
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 | ||||||||||
General corporate expense and interest on debt | (3,670 | ) | (3,611 | ) | (10,773 | ) | (10,438 | ) | ||||||
Equity in earnings of unconsolidated investee | 2,564 | 1,859 | 10,696 | 8,928 | ||||||||||
Total earnings before income taxes | $ | 55,309 | $ | 36,480 | $ | 134,854 | $ | 114,157 | ||||||
Income tax expense | 17,662 | 11,017 | 42,458 | 35,908 | ||||||||||
Total net earnings | $ | 37,647 | $ | 25,463 | $ | 92,396 | $ | 78,249 | ||||||
The following table further summarizes revenues (net premiums earned) by major product type within each operating segment: | ||||||||||||||
For the Three-Month Periods | For the Nine-Month Periods | |||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Casualty | ||||||||||||||
General liability | $ | 20,342 | $ | 21,556 | $ | 61,139 | $ | 63,449 | ||||||
Commercial and personal umbrella | 22,247 | 17,430 | 61,803 | 50,337 | ||||||||||
Commercial transportation | 13,463 | 8,583 | 35,594 | 25,252 | ||||||||||
P&C package business | 7,643 | 7,479 | 22,671 | 21,334 | ||||||||||
Executive products | 4,550 | 3,914 | 13,175 | 11,666 | ||||||||||
Professional services | 11,021 | 7,386 | 30,092 | 19,704 | ||||||||||
Medical professional liability | 2,674 | — | 5,136 | — | ||||||||||
Other | 2,026 | 1,846 | 5,697 | 5,667 | ||||||||||
Total | $ | 83,966 | $ | 68,194 | $ | 235,307 | $ | 197,409 | ||||||
Property | ||||||||||||||
Commercial property | $ | 18,938 | $ | 18,640 | $ | 57,813 | $ | 55,285 | ||||||
Marine | 14,242 | 14,026 | 43,898 | 44,591 | ||||||||||
Crop reinsurance | 11,846 | 9,876 | 19,501 | 15,992 | ||||||||||
Property reinsurance | 2,848 | 6,826 | 12,503 | 20,193 | ||||||||||
Other property | 4,831 | 5,373 | 13,590 | 15,520 | ||||||||||
Total | $ | 52,705 | $ | 54,741 | $ | 147,305 | $ | 151,581 | ||||||
Surety | ||||||||||||||
Miscellaneous | $ | 9,590 | $ | 10,026 | $ | 28,559 | $ | 29,600 | ||||||
Contract | 7,025 | 6,835 | 20,137 | 19,507 | ||||||||||
Commercial | 5,857 | 5,574 | 17,285 | 16,536 | ||||||||||
Oil and Gas | 4,559 | 4,573 | 13,813 | 14,174 | ||||||||||
Total | $ | 27,031 | $ | 27,008 | $ | 79,794 | $ | 79,817 | ||||||
Grand Total | $ | 163,702 | $ | 149,943 | $ | 462,406 | $ | 428,807 |
ACQUISITION
ACQUISITION | 9 Months Ended |
Sep. 30, 2013 | |
ACQUISITION | |
ACQUISITION | 6. ACQUISITION |
On November 2, 2012, we acquired Rockbridge, a Houston-based managing general agency. Rockbridge specializes in medical professional liability insurance in the excess and surplus market. Coverage is offered to individual physicians and physician groups in all 50 states through a network of retail and wholesale brokers. | |
Total consideration for the acquisition was $16.7 million, which included $15.5 million of cash paid at acquisition, and $1.2 million associated with the present value of a contingent earn-out agreement. The earn-out is subject to the achievement of certain loss ratio targets and may be adjusted, either upward or downward, in future periods based on actual performance achieved. As of September 30, 2013, the recorded value of the contingent earn-out agreement is $1.2 million. | |
During the third quarter of 2013, Rockbridge contributed gross premiums written of $3.5 million and net premiums earned of $2.7 million to our casualty segment. For the nine months ended September 30, 2013, Rockbridge contributed gross premiums written of $11.5 million and net premiums earned of $5.1 million. |
SUBSEQUENT_EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | 7. SUBSEQUENT EVENT |
On September 25, 2013, we entered into an underwriting agreement to issue $150.0 million of senior unsecured notes. On October 2, 2013, the public offering was completed with funds received and notes issued bearing a coupon rate of 4.875% and a maturity date of September 15, 2023 (a 10-year maturity). The condensed consolidated balance sheet as of September 30, 2013, presented in these unaudited condensed interim consolidated financial statements reflects amounts related to this debt offering. The condensed consolidated statement of cash flows for the nine-month period ended September 30, 2013, however, does not reflect our receipt of the net debt offering proceeds. Actual cash receipt occurred on October 2, 2013, subsequent to quarter end, and will be reflected in financing activity cash flows for the fourth quarter of 2013. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | |||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||||
BASIS OF PRESENTATION | A. BASIS OF PRESENTATION | |||||||||||||||||
The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2012 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at September 30, 2013 and the results of operations of RLI Corp. and Subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. | ||||||||||||||||||
The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements, and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates. | ||||||||||||||||||
INTANGIBLE ASSETS | D. INTANGIBLE ASSETS | |||||||||||||||||
In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangibles totaled $75.1 million at September 30, 2013. These assets relate to acquisition activity including our recent acquisitions of Contractors Bonding and Insurance Company (CBIC) and Rockbridge Underwriting Agency (Rockbridge). | ||||||||||||||||||
Goodwill resulting from acquisitions completed prior to 2011 totaled $26.2 million and is attributable to our surety segment. Goodwill and intangible assets resulting from the CBIC acquisition in April 2011 totaled $32.6 million. The CBIC-related assets include goodwill attributable to our casualty and surety segments of $5.3 million and $15.1 million, respectively, and an indefinite-lived intangible asset in the amount of $8.8 million. Annual impairment testing was performed on each of these goodwill and indefinite-lived intangible assets during the second quarter of 2013. Based upon these reviews, none of the assets were impaired. In addition, as of September 30, 2013, there were no triggering events that occurred that would suggest an updated review was necessary. Definite-lived intangible assets related to the CBIC acquisition totaled $3.4 million, net of amortization, as of September 30, 2013. | ||||||||||||||||||
The remaining $16.3 million of goodwill and intangibles relates to our purchase of Rockbridge in November 2012. Goodwill attributable to our casualty segment totaled $12.4 million. Definite-lived intangible assets totaled $3.9 million, net of amortization, as of September 30, 2013. Our initial annual impairment testing on this goodwill will be performed in the fourth quarter of 2013. As of September 30, 2013, there were no triggering events that occurred that would suggest an interim review was necessary. See note 6 to the unaudited condensed consolidated interim financial statements for further discussion. | ||||||||||||||||||
The aforementioned definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets resulting from the acquisitions of CBIC and Rockbridge was $0.4 million for the third quarter of 2013, and $1.0 million for the nine months ended September 30, 2013. | ||||||||||||||||||
EARNINGS PER SHARE | E. EARNINGS PER SHARE | |||||||||||||||||
Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. | ||||||||||||||||||
The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements. | ||||||||||||||||||
For the Three-Month Period | For the Three-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,422 | $ | 1.76 | $ | 25,463 | 21,218 | $ | 1.2 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 351 | — | 268 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,773 | $ | 1.73 | $ | 25,463 | 21,486 | $ | 1.19 | ||||||||
For the Nine-Month Period | For the Nine-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,337 | $ | 4.33 | $ | 78,249 | 21,207 | $ | 3.69 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 328 | — | 312 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,665 | $ | 4.26 | $ | 78,249 | 21,519 | $ | 3.64 | ||||||||
COMPREHENSIVE EARNINGS | F. COMPREHENSIVE EARNINGS | |||||||||||||||||
Our comprehensive earnings include net earnings plus unrealized gains/losses on our available-for-sale investment securities, net of tax. In reporting comprehensive earnings on a net basis in the statement of earnings, we used a 35 percent tax rate. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the unaudited condensed consolidated interim financial statements. | ||||||||||||||||||
For the Three-Month Periods Ended | For the Nine-Month Periods | |||||||||||||||||
September 30, | Ended September 30, | |||||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | ||||||||||||||||||
Beginning balance | $ | 127,242 | 133,991 | $ | 143,170 | 117,325 | ||||||||||||
Other comprehensive earnings before reclassifications | 5,203 | 25,127 | (5,354 | ) | 50,066 | |||||||||||||
Amounts reclassified from accumulated other comprehensive earnings | (7,149 | ) | (4,080 | ) | (12,520 | ) | (12,353 | ) | ||||||||||
Net current-period other comprehensive earnings | $ | (1,946 | ) | 21,047 | $ | (17,874 | ) | 37,713 | ||||||||||
Ending balance | $ | 125,296 | 155,038 | $ | 125,296 | 155,038 | ||||||||||||
The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. | ||||||||||||||||||
Amount Reclassified from Accumulated Other | ||||||||||||||||||
Comprehensive Earnings | ||||||||||||||||||
(in thousands) | For the Three-Month | For the Nine-Month | Affected line item in the | |||||||||||||||
Component of Accumulated | Periods Ended | Periods Ended | ||||||||||||||||
September 30, | September 30, | |||||||||||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2013 | 2012 | Statement of Earnings | |||||||||||||
Unrealized gains and losses on available-for-sale securities | $ | 10,998 | 6,278 | $ | 19,261 | 20,161 | Net realized investment gains | |||||||||||
— | — | — | (1,156 | ) | Other-than-temporary impairment (OTTI) losses on investments | |||||||||||||
10,998 | 6,278 | 19,261 | 19,005 | Earnings before income taxes | ||||||||||||||
(3,849 | ) | (2,198 | ) | (6,741 | ) | (6,652 | ) | Income tax expense | ||||||||||
$ | 7,149 | 4,080 | $ | 12,520 | 12,353 | Net earnings |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended | |||||||||||||||||
Sep. 30, 2013 | ||||||||||||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||||||||||||||
Schedule of reconciliation of numerator and denominator of the basic and diluted earnings per share computations | ||||||||||||||||||
For the Three-Month Period | For the Three-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,422 | $ | 1.76 | $ | 25,463 | 21,218 | $ | 1.2 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 351 | — | 268 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 37,647 | 21,773 | $ | 1.73 | $ | 25,463 | 21,486 | $ | 1.19 | ||||||||
For the Nine-Month Period | For the Nine-Month Period | |||||||||||||||||
Ended September 30, 2013 | Ended September 30, 2012 | |||||||||||||||||
(in thousands, except | Income | Shares | Per Share | Income | Shares | Per Share | ||||||||||||
per share data) | (Numerator) | (Denominator) | Amount | (Numerator) | (Denominator) | Amount | ||||||||||||
Basic EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,337 | $ | 4.33 | $ | 78,249 | 21,207 | $ | 3.69 | ||||||||
Effect of Dilutive Securities | ||||||||||||||||||
Stock options | — | 328 | — | 312 | ||||||||||||||
Diluted EPS | ||||||||||||||||||
Income available to common shareholders | $ | 92,396 | 21,665 | $ | 4.26 | $ | 78,249 | 21,519 | $ | 3.64 | ||||||||
Schedule of changes in the balance of each component of accumulated other comprehensive earnings | ||||||||||||||||||
For the Three-Month Periods Ended | For the Nine-Month Periods | |||||||||||||||||
September 30, | Ended September 30, | |||||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
Unrealized Gains/Losses on Available-for-Sale Securities | ||||||||||||||||||
Beginning balance | $ | 127,242 | 133,991 | $ | 143,170 | 117,325 | ||||||||||||
Other comprehensive earnings before reclassifications | 5,203 | 25,127 | (5,354 | ) | 50,066 | |||||||||||||
Amounts reclassified from accumulated other comprehensive earnings | (7,149 | ) | (4,080 | ) | (12,520 | ) | (12,353 | ) | ||||||||||
Net current-period other comprehensive earnings | $ | (1,946 | ) | 21,047 | $ | (17,874 | ) | 37,713 | ||||||||||
Ending balance | $ | 125,296 | 155,038 | $ | 125,296 | 155,038 | ||||||||||||
Schedule of effects of reclassifications out of accumulated other comprehensive earnings | ||||||||||||||||||
Amount Reclassified from Accumulated Other | ||||||||||||||||||
Comprehensive Earnings | ||||||||||||||||||
(in thousands) | For the Three-Month | For the Nine-Month | Affected line item in the | |||||||||||||||
Component of Accumulated | Periods Ended | Periods Ended | ||||||||||||||||
September 30, | September 30, | |||||||||||||||||
Other Comprehensive Earnings | 2013 | 2012 | 2013 | 2012 | Statement of Earnings | |||||||||||||
Unrealized gains and losses on available-for-sale securities | $ | 10,998 | 6,278 | $ | 19,261 | 20,161 | Net realized investment gains | |||||||||||
— | — | — | (1,156 | ) | Other-than-temporary impairment (OTTI) losses on investments | |||||||||||||
10,998 | 6,278 | 19,261 | 19,005 | Earnings before income taxes | ||||||||||||||
(3,849 | ) | (2,198 | ) | (6,741 | ) | (6,652 | ) | Income tax expense | ||||||||||
$ | 7,149 | 4,080 | $ | 12,520 | 12,353 | Net earnings |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
INVESTMENTS | |||||||||||||||||
Schedule of amortized cost and fair value of available-for-sale securities | Available-for-sale | ||||||||||||||||
(in thousands) | |||||||||||||||||
9/30/13 | |||||||||||||||||
Cost or | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
Asset Class | Cost | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 8,537 | $ | 52 | $ | (130 | ) | $ | 8,459 | ||||||||
Corporate | 474,628 | 23,746 | (6,850 | ) | 491,524 | ||||||||||||
Mortgage-backed | 247,317 | 7,722 | (3,475 | ) | 251,564 | ||||||||||||
ABS/CMBS* | 94,123 | 1,609 | (1,725 | ) | 94,007 | ||||||||||||
Non-U.S. govt. & agency | 11,414 | 469 | (16 | ) | 11,867 | ||||||||||||
U.S. government | 17,090 | 253 | — | 17,343 | |||||||||||||
Municipal | 506,834 | 8,079 | (10,665 | ) | 504,248 | ||||||||||||
Total Fixed Income | $ | 1,359,943 | $ | 41,930 | $ | (22,861 | ) | $ | 1,379,012 | ||||||||
Equity | $ | 218,656 | $ | 173,861 | $ | (361 | ) | $ | 392,156 | ||||||||
Available-for-sale | |||||||||||||||||
(in thousands) | |||||||||||||||||
12/31/12 | |||||||||||||||||
Cost or | Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | ||||||||||||||
Asset Class | Cost | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 11,609 | $ | 150 | $ | — | $ | 11,759 | |||||||||
Corporate | 535,437 | 45,497 | (226 | ) | 580,708 | ||||||||||||
Mortgage-backed | 234,629 | 15,758 | — | 250,387 | |||||||||||||
ABS/CMBS* | 72,681 | 4,648 | — | 77,329 | |||||||||||||
Non-U.S. govt. & agency | 8,410 | 957 | — | 9,367 | |||||||||||||
U.S. government | 16,358 | 355 | — | 16,713 | |||||||||||||
Municipal | 415,226 | 17,250 | (157 | ) | 432,319 | ||||||||||||
Total Fixed Income | $ | 1,294,350 | $ | 84,615 | $ | (383 | ) | $ | 1,378,582 | ||||||||
Equity | $ | 240,287 | $ | 136,376 | $ | (875 | ) | $ | 375,788 | ||||||||
*Asset-backed and commercial mortgage-backed | |||||||||||||||||
Schedule of carrying value and fair value of held-to-maturity securities | Held-to-maturity | ||||||||||||||||
(in thousands) | |||||||||||||||||
9/30/13 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Amortized Cost/ | Unrecognized | Unrecognized | Fair | ||||||||||||||
Asset Class | Carrying Value** | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | — | $ | — | $ | — | $ | — | |||||||||
Corporate | — | — | — | — | |||||||||||||
Mortgage-backed | — | — | — | — | |||||||||||||
ABS/CMBS* | — | — | — | — | |||||||||||||
Non-U.S. govt. & agency | — | — | — | — | |||||||||||||
U.S. government | — | — | — | — | |||||||||||||
Municipal | 651 | 44 | — | 695 | |||||||||||||
Total Fixed Income | $ | 651 | $ | 44 | $ | — | $ | 695 | |||||||||
Held-to-maturity | |||||||||||||||||
(in thousands) | |||||||||||||||||
12/31/12 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Amortized Cost/ | Unrecognized | Unrecognized | Fair | ||||||||||||||
Asset Class | Carrying Value** | Gains | Losses | Value | |||||||||||||
U.S. agency | $ | 10,076 | $ | 74 | $ | — | $ | 10,150 | |||||||||
Corporate | — | — | — | — | |||||||||||||
Mortgage-backed | — | — | — | — | |||||||||||||
ABS/CMBS* | — | — | — | — | |||||||||||||
U.S. government | — | — | — | — | |||||||||||||
Municipal | 1,652 | 66 | — | 1,718 | |||||||||||||
Total Fixed Income | $ | 11,728 | $ | 140 | $ | — | $ | 11,868 | |||||||||
* Asset-backed and commercial mortgage-backed | |||||||||||||||||
** Held-to-maturity securities are carried on the unaudited condensed consolidated balance sheets at amortized cost and changes in the fair value of these securities, other than impairment charges, are not reported on the financial statements. | |||||||||||||||||
Schedule of securities in an unrealized loss position segregated by type and length of time in an unrealized loss position | Investment Positions with Unrealized Losses | ||||||||||||||||
Segmented by Type and Period of Continuous | |||||||||||||||||
Unrealized Loss at September 30, 2013 | |||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. & Greater | Total | ||||||||||||||
U.S. Government | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
U.S. Agency | |||||||||||||||||
Fair value | $ | 3,866 | $ | — | $ | 3,866 | |||||||||||
Cost or Amortized Cost | 3,996 | — | 3,996 | ||||||||||||||
Unrealized Loss | (130 | ) | — | (130 | ) | ||||||||||||
Non-U.S. govt. & agency | |||||||||||||||||
Fair value | $ | 2,985 | $ | — | $ | 2,985 | |||||||||||
Cost or Amortized Cost | 3,001 | — | 3,001 | ||||||||||||||
Unrealized Loss | (16 | ) | — | (16 | ) | ||||||||||||
Mortgage-backed | |||||||||||||||||
Fair value | $ | 92,321 | $ | — | $ | 92,321 | |||||||||||
Cost or Amortized Cost | 95,796 | — | 95,796 | ||||||||||||||
Unrealized Loss | (3,475 | ) | — | (3,475 | ) | ||||||||||||
ABS/CMBS* | |||||||||||||||||
Fair value | $ | 50,376 | $ | — | $ | 50,376 | |||||||||||
Cost or Amortized Cost | 52,101 | — | 52,101 | ||||||||||||||
Unrealized Loss | (1,725 | ) | — | (1,725 | ) | ||||||||||||
Corporate | |||||||||||||||||
Fair value | $ | 175,314 | $ | — | $ | 175,314 | |||||||||||
Cost or Amortized Cost | 182,164 | — | 182,164 | ||||||||||||||
Unrealized Loss | (6,850 | ) | — | (6,850 | ) | ||||||||||||
Municipal | |||||||||||||||||
Fair value | $ | 283,155 | $ | 946 | $ | 284,101 | |||||||||||
Cost or Amortized Cost | 293,809 | 957 | 294,766 | ||||||||||||||
Unrealized Loss | (10,654 | ) | (11 | ) | (10,665 | ) | |||||||||||
Subtotal, debt securities | |||||||||||||||||
Fair value | $ | 608,017 | $ | 946 | $ | 608,963 | |||||||||||
Cost or Amortized Cost | 630,867 | 957 | 631,824 | ||||||||||||||
Unrealized Loss | (22,850 | ) | (11 | ) | (22,861 | ) | |||||||||||
Equity securities | |||||||||||||||||
Fair value | $ | 7,041 | $ | — | $ | 7,041 | |||||||||||
Cost or Amortized Cost | 7,402 | — | 7,402 | ||||||||||||||
Unrealized Loss | (361 | ) | — | (361 | ) | ||||||||||||
Total | |||||||||||||||||
Fair value | $ | 615,058 | $ | 946 | $ | 616,004 | |||||||||||
Cost or Amortized Cost | 638,269 | 957 | 639,226 | ||||||||||||||
Unrealized Loss | (23,211 | ) | (11 | ) | (23,222 | ) | |||||||||||
* Asset-backed & commercial mortgage-backed. | |||||||||||||||||
Investment Positions with Unrealized Losses | |||||||||||||||||
Segmented by Type and Period of Continuous | |||||||||||||||||
Unrealized Loss at December 31, 2012 | |||||||||||||||||
(in thousands) | < 12 Mos. | 12 Mos. & Greater | Total | ||||||||||||||
U.S. Government | |||||||||||||||||
Fair value | $ | 749 | $ | — | $ | 749 | |||||||||||
Cost or Amortized Cost | 749 | — | 749 | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
U.S. Agency | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Non-U.S. govt. & agency | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Mortgage-backed | |||||||||||||||||
Fair value | $ | — | $ | — | $ | — | |||||||||||
Cost or Amortized Cost | — | — | — | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
ABS/CMBS* | |||||||||||||||||
Fair value | $ | 18 | $ | — | $ | 18 | |||||||||||
Cost or Amortized Cost | 18 | — | 18 | ||||||||||||||
Unrealized Loss | — | — | — | ||||||||||||||
Corporate | |||||||||||||||||
Fair value | $ | 35,969 | $ | 960 | $ | 36,929 | |||||||||||
Cost or Amortized Cost | 36,162 | 993 | 37,155 | ||||||||||||||
Unrealized Loss | (193 | ) | (33 | ) | (226 | ) | |||||||||||
Municipal | |||||||||||||||||
Fair value | $ | 35,064 | $ | — | $ | 35,064 | |||||||||||
Cost or Amortized Cost | 35,221 | — | 35,221 | ||||||||||||||
Unrealized Loss | (157 | ) | — | (157 | ) | ||||||||||||
Subtotal, debt securities | |||||||||||||||||
Fair value | $ | 71,800 | $ | 960 | $ | 72,760 | |||||||||||
Cost or Amortized Cost | 72,150 | 993 | 73,143 | ||||||||||||||
Unrealized Loss | (350 | ) | (33 | ) | (383 | ) | |||||||||||
Equity securities | |||||||||||||||||
Fair value | $ | 16,207 | $ | — | $ | 16,207 | |||||||||||
Cost or Amortized Cost | 17,082 | — | 17,082 | ||||||||||||||
Unrealized Loss | (875 | ) | — | (875 | ) | ||||||||||||
Total | |||||||||||||||||
Fair value | $ | 88,007 | $ | 960 | $ | 88,967 | |||||||||||
Cost or Amortized Cost | 89,232 | 993 | 90,225 | ||||||||||||||
Unrealized Loss | (1,225 | ) | (33 | ) | (1,258 | ) | |||||||||||
* Asset-backed & commercial mortgage-backed. | |||||||||||||||||
Schedule of credit quality indicators for investments in unrealized loss positions | |||||||||||||||||
Equivalent | Equivalent | (dollars in thousands) | |||||||||||||||
NAIC | S&P | Moody’s | Amortized | Unrealized | Percent | ||||||||||||
Rating | Rating | Rating | Cost | Fair Value | Loss | to Total | |||||||||||
1 | AAA/AA/A | Aaa/Aa/A | $ | 597,964 | $ | 576,292 | $ | (21,672 | ) | 94.8 | % | ||||||
2 | BBB | Baa | 32,870 | 31,703 | (1,167 | ) | 5.1 | % | |||||||||
3 | BB | Ba | 990 | 968 | (22 | ) | 0.1 | % | |||||||||
4 | B | B | — | — | — | — | |||||||||||
5 | CCC or lower | Caa or lower | — | — | — | — | |||||||||||
6 | — | — | — | — | |||||||||||||
Total | $ | 631,824 | $ | 608,963 | $ | (22,861 | ) | 100 | % | ||||||||
Available-For-Sale Securities | |||||||||||||||||
INVESTMENTS | |||||||||||||||||
Schedule of contractual maturity of securities | 9/30/13 | ||||||||||||||||
AFS | Amortized | Fair | |||||||||||||||
(in thousands) | Cost | Value | |||||||||||||||
Due in one year or less | $ | 12,910 | $ | 13,014 | |||||||||||||
Due after one year through five years | 146,264 | 155,143 | |||||||||||||||
Due after five years through 10 years | 616,368 | 627,254 | |||||||||||||||
Due after 10 years | 242,961 | 238,030 | |||||||||||||||
Mtge/ABS/CMBS* | 341,440 | 345,571 | |||||||||||||||
Total available-for-sale | $ | 1,359,943 | $ | 1,379,012 | |||||||||||||
Held-to-Maturity Securities | |||||||||||||||||
INVESTMENTS | |||||||||||||||||
Schedule of contractual maturity of securities | |||||||||||||||||
9/30/13 | |||||||||||||||||
HTM | Amortized | Fair | |||||||||||||||
(in thousands) | Cost | Value | |||||||||||||||
Due in one year or less | $ | — | $ | — | |||||||||||||
Due after one year through five years | 651 | 695 | |||||||||||||||
Due after five years through 10 years | — | — | |||||||||||||||
Due after 10 years | — | — | |||||||||||||||
Mtge/ABS/CMBS* | — | — | |||||||||||||||
Total held-to-maturity | $ | 651 | $ | 695 | |||||||||||||
*Mortgage-backed, asset-backed & commercial mortgage-backed |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ||||||||||||||
Schedule of assets measured at fair value on recurring basis | As of September 30, 2013 | |||||||||||||
Fair Value Measurements Using | ||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||
(in thousands) | Identical Assets | Inputs | Inputs | |||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||
Trading securities | ||||||||||||||
Corporate | $ | — | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | — | — | — | — | ||||||||||
ABS/CMBS* | — | — | — | — | ||||||||||
U.S. government | — | — | — | — | ||||||||||
Total trading securities | $ | — | $ | — | $ | — | $ | — | ||||||
Available-for-sale securities | ||||||||||||||
U.S. agency | $ | — | $ | 8,459 | $ | — | $ | 8,459 | ||||||
Corporate | — | 491,524 | — | 491,524 | ||||||||||
Mortgage-backed | — | 251,564 | — | 251,564 | ||||||||||
ABS/CMBS* | — | 94,007 | — | 94,007 | ||||||||||
Non-U.S. govt. & agency | — | 11,867 | — | 11,867 | ||||||||||
U.S. government | — | 17,343 | — | 17,343 | ||||||||||
Municipal | — | 504,248 | — | 504,248 | ||||||||||
Equity | 392,156 | — | — | 392,156 | ||||||||||
Total available-for-sale securities | $ | 392,156 | $ | 1,379,012 | $ | — | $ | 1,771,168 | ||||||
Total | $ | 392,156 | $ | 1,379,012 | $ | — | $ | 1,771,168 | ||||||
*Asset-backed & commercial mortgage-backed | ||||||||||||||
As of December 31, 2012 | ||||||||||||||
Fair Value Measurements Using | ||||||||||||||
Quoted Prices in | Significant Other | Significant | ||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||
(in thousands) | Identical Assets | Inputs | Inputs | |||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||
Trading securities | ||||||||||||||
Corporate | $ | — | $ | — | $ | — | $ | — | ||||||
Mortgage-backed | — | 7 | — | 7 | ||||||||||
ABS/CMBS* | — | — | — | — | ||||||||||
U.S. government | — | — | — | — | ||||||||||
Total trading securities | $ | — | $ | 7 | $ | — | $ | 7 | ||||||
Available-for-sale securities | ||||||||||||||
U.S. agency | $ | — | $ | 11,759 | $ | — | $ | 11,759 | ||||||
Corporate | — | 580,708 | — | 580,708 | ||||||||||
Mortgage-backed | — | 250,387 | — | 250,387 | ||||||||||
ABS/CMBS* | — | 77,329 | — | 77,329 | ||||||||||
Non-U.S. govt. & agency | — | 9,367 | — | 9,367 | ||||||||||
U.S. government | — | 16,713 | — | 16,713 | ||||||||||
Municipal | — | 432,319 | — | 432,319 | ||||||||||
Equity | 375,788 | — | — | 375,788 | ||||||||||
Total available-for-sale securities | $ | 375,788 | $ | 1,378,582 | $ | — | $ | 1,754,370 | ||||||
Total | $ | 375,788 | $ | 1,378,589 | $ | — | $ | 1,754,377 | ||||||
*Asset-backed & commercial mortgage-backed |
STOCK_BASED_COMPENSATION_Table
STOCK BASED COMPENSATION (Tables) | 9 Months Ended | |||||||||||
Sep. 30, 2013 | ||||||||||||
STOCK BASED COMPENSATION | ||||||||||||
Schedule of stock option activity | ||||||||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2013 | 1,472,602 | $ | 44.45 | |||||||||
Options granted | 291,100 | $ | 72.62 | |||||||||
Options exercised | (380,681 | ) | $ | 34.36 | $ | 17,211 | ||||||
Options canceled/forfeited | (22,440 | ) | $ | 51.86 | ||||||||
Outstanding options at September 30, 2013 | 1,360,581 | $ | 53.18 | 5.65 | $ | 46,590 | ||||||
Exercisable options at September 30, 2013 | 530,331 | $ | 42.18 | 4.35 | $ | 23,995 | ||||||
Weighted | ||||||||||||
Weighted | Average | Aggregate | ||||||||||
Number of | Average | Remaining | Intrinsic | |||||||||
Options | Exercise | Contractual | Value | |||||||||
Outstanding | Price | Life | (in 000’s) | |||||||||
Outstanding options at January 1, 2012 | 1,280,866 | $ | 43.23 | |||||||||
Options granted | 292,900 | $ | 68.46 | |||||||||
Options exercised | (63,721 | ) | $ | 40.29 | $ | 1,966 | ||||||
Options canceled/forfeited | (3,120 | ) | $ | 45.84 | ||||||||
Outstanding options at September 30, 2012 | 1,506,925 | $ | 48.26 | 5.32 | $ | 28,385 | ||||||
Exercisable options at September 30, 2012 | 738,945 | $ | 40.78 | 4.33 | $ | 19,125 | ||||||
Schedule of stock option assumptions for fair value estimate | ||||||||||||
2013 | 2012 | |||||||||||
Weighted-average fair value of grants | $ | 13.17 | $ | 13.13 | ||||||||
Risk-free interest rates | 0.8 | % | 0.9 | % | ||||||||
Dividend yield | 2 | % | 1.93 | % | ||||||||
Expected volatility | 25.41 | % | 25.64 | % | ||||||||
Expected option life | 5.23 years | 5.39 years | ||||||||||
OPERATING_SEGMENT_INFORMATION_
OPERATING SEGMENT INFORMATION (Tables) | 9 Months Ended | |||||||||||||
Sep. 30, 2013 | ||||||||||||||
OPERATING SEGMENT INFORMATION | ||||||||||||||
Schedule of revenues and net earnings by segment | SEGMENT DATA (in thousands) | |||||||||||||
For the Three-Month Periods | For the Nine-Month Periods | |||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||
REVENUES | REVENUES | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Net premiums earned: | ||||||||||||||
Casualty | $ | 83,966 | $ | 68,194 | $ | 235,307 | $ | 197,409 | ||||||
Property | 52,705 | 54,741 | 147,305 | 151,581 | ||||||||||
Surety | 27,031 | 27,008 | 79,794 | 79,817 | ||||||||||
Segment totals before income taxes | $ | 163,702 | $ | 149,943 | $ | 462,406 | $ | 428,807 | ||||||
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 | ||||||||||
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 | ||||||||||
Total consolidated revenue | $ | 188,299 | $ | 169,645 | $ | 520,162 | $ | 489,380 | ||||||
NET EARNINGS | NET EARNINGS | |||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||
Casualty | $ | 20,799 | $ | 10,806 | $ | 39,517 | $ | 22,409 | ||||||
Property | 6,468 | (310 | ) | 19,614 | 11,317 | |||||||||
Surety | 4,551 | 8,034 | 18,044 | 21,368 | ||||||||||
Net underwriting income | $ | 31,818 | $ | 18,530 | $ | 77,175 | $ | 55,094 | ||||||
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 | ||||||||||
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 | ||||||||||
General corporate expense and interest on debt | (3,670 | ) | (3,611 | ) | (10,773 | ) | (10,438 | ) | ||||||
Equity in earnings of unconsolidated investee | 2,564 | 1,859 | 10,696 | 8,928 | ||||||||||
Total earnings before income taxes | $ | 55,309 | $ | 36,480 | $ | 134,854 | $ | 114,157 | ||||||
Income tax expense | 17,662 | 11,017 | 42,458 | 35,908 | ||||||||||
Total net earnings | $ | 37,647 | $ | 25,463 | $ | 92,396 | $ | 78,249 | ||||||
Schedule of net premiums earned by major product type | ||||||||||||||
For the Three-Month Periods | For the Nine-Month Periods | |||||||||||||
Ended September 30, | Ended September 30, | |||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||
Casualty | ||||||||||||||
General liability | $ | 20,342 | $ | 21,556 | $ | 61,139 | $ | 63,449 | ||||||
Commercial and personal umbrella | 22,247 | 17,430 | 61,803 | 50,337 | ||||||||||
Commercial transportation | 13,463 | 8,583 | 35,594 | 25,252 | ||||||||||
P&C package business | 7,643 | 7,479 | 22,671 | 21,334 | ||||||||||
Executive products | 4,550 | 3,914 | 13,175 | 11,666 | ||||||||||
Professional services | 11,021 | 7,386 | 30,092 | 19,704 | ||||||||||
Medical professional liability | 2,674 | — | 5,136 | — | ||||||||||
Other | 2,026 | 1,846 | 5,697 | 5,667 | ||||||||||
Total | $ | 83,966 | $ | 68,194 | $ | 235,307 | $ | 197,409 | ||||||
Property | ||||||||||||||
Commercial property | $ | 18,938 | $ | 18,640 | $ | 57,813 | $ | 55,285 | ||||||
Marine | 14,242 | 14,026 | 43,898 | 44,591 | ||||||||||
Crop reinsurance | 11,846 | 9,876 | 19,501 | 15,992 | ||||||||||
Property reinsurance | 2,848 | 6,826 | 12,503 | 20,193 | ||||||||||
Other property | 4,831 | 5,373 | 13,590 | 15,520 | ||||||||||
Total | $ | 52,705 | $ | 54,741 | $ | 147,305 | $ | 151,581 | ||||||
Surety | ||||||||||||||
Miscellaneous | $ | 9,590 | $ | 10,026 | $ | 28,559 | $ | 29,600 | ||||||
Contract | 7,025 | 6,835 | 20,137 | 19,507 | ||||||||||
Commercial | 5,857 | 5,574 | 17,285 | 16,536 | ||||||||||
Oil and Gas | 4,559 | 4,573 | 13,813 | 14,174 | ||||||||||
Total | $ | 27,031 | $ | 27,008 | $ | 79,794 | $ | 79,817 | ||||||
Grand Total | $ | 163,702 | $ | 149,943 | $ | 462,406 | $ | 428,807 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||
Share data in Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Apr. 30, 2011 | Apr. 30, 2011 | Sep. 30, 2013 | Apr. 30, 2011 | Sep. 30, 2013 | Nov. 30, 2012 |
CBIC and Rockbridge | CBIC and Rockbridge | Surety segment | Surety segment | Casualty and Surety segment | Casualty and Surety segment | Casualty | Casualty | Casualty | ||||||
Acquisitions prior to 2011 | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Contractors Bonding and Insurance Company | Rockbridge | Rockbridge | ||||||||
INTANGIBLE ASSETS | ||||||||||||||
Goodwill and intangibles | $75,140,000 | $75,140,000 | $76,113,000 | $32,600,000 | $16,300,000 | |||||||||
Goodwill | 26,200,000 | 12,400,000 | ||||||||||||
Goodwill acquired | 15,100,000 | 5,300,000 | ||||||||||||
Indefinite Lived Intangible Assets Acquired | 8,800,000 | |||||||||||||
Impairment of assets | 0 | |||||||||||||
Definite-lived intangible assets, net of amortization | 3,400,000 | 3,900,000 | ||||||||||||
Amortization of intangible assets | 400,000 | 1,000,000 | ||||||||||||
Basic EPS, Income (Numerator) | ||||||||||||||
Income available to common shareholders | 37,647,000 | 25,463,000 | 92,396,000 | 78,249,000 | ||||||||||
Diluted EPS, Income (Numerator) | ||||||||||||||
Income available to common shareholders | $37,647,000 | $25,463,000 | $92,396,000 | $78,249,000 | ||||||||||
Basic EPS, Weighted Average Shares (Denominator) | ||||||||||||||
Number of shares outstanding | 21,422 | 21,218 | 21,337 | 21,207 | ||||||||||
Effect of Dilutive Securities, Shares (Denominator) | ||||||||||||||
Stock options (in shares) | 351 | 268 | 328 | 312 | ||||||||||
Diluted EPS, Weighted Average Shares (Denominator) | ||||||||||||||
Number of shares outstanding | 21,773 | 21,486 | 21,665 | 21,519 | ||||||||||
Basic EPS, Per Share Amount | ||||||||||||||
Basic net earnings per share (in dollars per share) | $1.76 | $1.20 | $4.33 | $3.69 | ||||||||||
Diluted EPS, Per Share Amount | ||||||||||||||
Diluted earnings per share (in dollars per share) | $1.73 | $1.19 | $4.26 | $3.64 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Tax rate used (as a percent) | 35.00% | |||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||
Beginning balance | $143,170 | |||
Ending balance | 125,296 | 125,296 | ||
Unrealized Gains and Losses on Available-for-Sale Securities | ||||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||
Beginning balance | 127,242 | 133,991 | 143,170 | 117,325 |
Other comprehensive earnings before reclassifications | 5,203 | 25,127 | -5,354 | 50,066 |
Amounts reclassified from accumulated other comprehensive earnings | -7,149 | -4,080 | -12,520 | -12,353 |
Net current-period other comprehensive earnings | -1,946 | 21,047 | -17,874 | 37,713 |
Ending balance | $125,296 | $155,038 | $125,296 | $155,038 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Amount Reclassified from Accumulated Other Comprehensive Earnings | ||||
Net realized investment gains | $10,999 | $5,481 | $18,425 | $17,389 |
Other-than-temporary impairment (OTTI) losses on investments | -1,156 | |||
Earnings before income taxes | 55,309 | 36,480 | 134,854 | 114,157 |
Income tax expense | -17,662 | -11,017 | -42,458 | -35,908 |
Net earnings | 37,647 | 25,463 | 92,396 | 78,249 |
Reclassifications out of accumulated other comprehensive earnings | Unrealized gains and losses on available-for-sale securities | ||||
Amount Reclassified from Accumulated Other Comprehensive Earnings | ||||
Net realized investment gains | 10,998 | 6,278 | 19,261 | 20,161 |
Other-than-temporary impairment (OTTI) losses on investments | -1,156 | |||
Earnings before income taxes | 10,998 | 6,278 | 19,261 | 19,005 |
Income tax expense | -3,849 | -2,198 | -6,741 | -6,652 |
Net earnings | $7,149 | $4,080 | $12,520 | $12,353 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Amortized Cost | ||
Due in one year or less | $12,910 | |
Due after one year through five years | 146,264 | |
Due after five years through 10 years | 616,368 | |
Due after 10 years | 242,961 | |
Total | 1,359,943 | |
Fair Value | ||
Due in one year or less | 13,014 | |
Due after one year through five years | 155,143 | |
Due after five years through 10 years | 627,254 | |
Due after 10 years | 238,030 | |
Total | 1,379,012 | 1,378,582 |
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3) | ||
INVESTMENTS | ||
Total assets at fair value | 0 | |
Fixed income securities | ||
Available-for-sale | ||
Cost or Amortized Cost | 1,359,943 | 1,294,350 |
Gross Unrealized Gains | 41,930 | 84,615 |
Gross Unrealized Losses | -22,861 | -383 |
Fair Value | 1,379,012 | 1,378,582 |
U.S. agency | ||
Available-for-sale | ||
Cost or Amortized Cost | 8,537 | 11,609 |
Gross Unrealized Gains | 52 | 150 |
Gross Unrealized Losses | -130 | |
Fair Value | 8,459 | 11,759 |
Corporate | ||
Available-for-sale | ||
Cost or Amortized Cost | 474,628 | 535,437 |
Gross Unrealized Gains | 23,746 | 45,497 |
Gross Unrealized Losses | -6,850 | -226 |
Fair Value | 491,524 | 580,708 |
Mortgage-backed | ||
Available-for-sale | ||
Cost or Amortized Cost | 247,317 | 234,629 |
Gross Unrealized Gains | 7,722 | 15,758 |
Gross Unrealized Losses | -3,475 | |
Fair Value | 251,564 | 250,387 |
ABS/CMBS | ||
Available-for-sale | ||
Cost or Amortized Cost | 94,123 | 72,681 |
Gross Unrealized Gains | 1,609 | 4,648 |
Gross Unrealized Losses | -1,725 | |
Fair Value | 94,007 | 77,329 |
Non-U.S. govt. & agency | ||
Available-for-sale | ||
Cost or Amortized Cost | 11,414 | 8,410 |
Gross Unrealized Gains | 469 | 957 |
Gross Unrealized Losses | -16 | |
Fair Value | 11,867 | 9,367 |
U.S. government | ||
Available-for-sale | ||
Cost or Amortized Cost | 17,090 | 16,358 |
Gross Unrealized Gains | 253 | 355 |
Fair Value | 17,343 | 16,713 |
Municipal | ||
Available-for-sale | ||
Cost or Amortized Cost | 506,834 | 415,226 |
Gross Unrealized Gains | 8,079 | 17,250 |
Gross Unrealized Losses | -10,665 | -157 |
Fair Value | 504,248 | 432,319 |
Mtge/ABS/CMBS | ||
Amortized Cost | ||
Total | 341,440 | |
Fair Value | ||
Total | 345,571 | |
Equity securities | ||
Available-for-sale | ||
Cost or Amortized Cost | 218,656 | 240,287 |
Gross Unrealized Gains | 173,861 | 136,376 |
Gross Unrealized Losses | -361 | -875 |
Fair Value | $392,156 | $375,788 |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Held-to-Maturity Debt Securities | ||
Amortized Cost/Carrying Value | $651 | $11,728 |
Fair Value | 695 | |
Amortized Cost | ||
Due after one year through five years | 651 | |
Total amortized cost | 651 | 11,728 |
Fair value | ||
Due after one year through five years | 695 | |
Fair Value | 695 | |
Fixed income securities | ||
Held-to-Maturity Debt Securities | ||
Amortized Cost/Carrying Value | 651 | 11,728 |
Gross Unrecognized Gains | 44 | 140 |
Fair Value | 695 | 11,868 |
Amortized Cost | ||
Total amortized cost | 651 | 11,728 |
Fair value | ||
Fair Value | 695 | 11,868 |
U.S. agency | ||
Held-to-Maturity Debt Securities | ||
Amortized Cost/Carrying Value | 10,076 | |
Gross Unrecognized Gains | 74 | |
Fair Value | 10,150 | |
Amortized Cost | ||
Total amortized cost | 10,076 | |
Fair value | ||
Fair Value | 10,150 | |
Municipal | ||
Held-to-Maturity Debt Securities | ||
Amortized Cost/Carrying Value | 651 | 1,652 |
Gross Unrecognized Gains | 44 | 66 |
Fair Value | 695 | 1,718 |
Amortized Cost | ||
Total amortized cost | 651 | 1,652 |
Fair value | ||
Fair Value | $695 | $1,718 |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Dec. 31, 2011 |
In Thousands, unless otherwise specified | ||||
INVESTMENTS | ||||
Unrealized losses relative to total invested assets (as a percent) | 1.20% | |||
Fair value | ||||
Less than 12 months | $615,058 | $88,007 | ||
12 Months and Greater | 946 | 960 | ||
Total Fair value | 616,004 | 88,967 | ||
Cost or amortized Cost | ||||
Less than 12 months | 638,269 | 89,232 | ||
12 months and greater | 957 | 993 | ||
Total Cost or Amortized Cost | 639,226 | 90,225 | ||
Unrealized Loss | ||||
Less than 12 months | -23,211 | -1,225 | ||
12 Months and Greater | -11 | -33 | ||
Total Unrealized Loss | -23,222 | -1,258 | ||
Cash and Short-term Investments | ||||
Cash | 87,398 | 44,314 | 31,301 | 81,184 |
Short-term investments, at cost | 22,994 | 30,462 | ||
Maximum | ||||
Unrealized Loss | ||||
Fair value of trading securities | 100 | |||
Debt securities | ||||
Fair value | ||||
Less than 12 months | 608,017 | 71,800 | ||
12 Months and Greater | 946 | 960 | ||
Total Fair value | 608,963 | 72,760 | ||
Cost or amortized Cost | ||||
Less than 12 months | 630,867 | 72,150 | ||
12 months and greater | 957 | 993 | ||
Total Cost or Amortized Cost | 631,824 | 73,143 | ||
Unrealized Loss | ||||
Less than 12 months | -22,850 | -350 | ||
12 Months and Greater | -11 | -33 | ||
Total Unrealized Loss | -22,861 | -383 | ||
Percent to Total | 100.00% | |||
Debt securities | NAIC Rating 1 | AAA/AA/A | Aaa/Aa/A | ||||
Fair value | ||||
Total Fair value | 576,292 | |||
Cost or amortized Cost | ||||
Total Cost or Amortized Cost | 597,964 | |||
Unrealized Loss | ||||
Total Unrealized Loss | -21,672 | |||
Percent to Total | 94.80% | |||
Debt securities | NAIC Rating 2 | BBB | Baa | ||||
Fair value | ||||
Total Fair value | 31,703 | |||
Cost or amortized Cost | ||||
Total Cost or Amortized Cost | 32,870 | |||
Unrealized Loss | ||||
Total Unrealized Loss | -1,167 | |||
Percent to Total | 5.10% | |||
Debt securities | NAIC Rating 3 | BB | Ba | ||||
Fair value | ||||
Total Fair value | 968 | |||
Cost or amortized Cost | ||||
Total Cost or Amortized Cost | 990 | |||
Unrealized Loss | ||||
Total Unrealized Loss | -22 | |||
Percent to Total | 0.10% | |||
U.S. Government | ||||
Fair value | ||||
Less than 12 months | 749 | |||
Total Fair value | 749 | |||
Cost or amortized Cost | ||||
Less than 12 months | 749 | |||
Total Cost or Amortized Cost | 749 | |||
U.S. Agency | ||||
Fair value | ||||
Less than 12 months | 3,866 | |||
Total Fair value | 3,866 | |||
Cost or amortized Cost | ||||
Less than 12 months | 3,996 | |||
Total Cost or Amortized Cost | 3,996 | |||
Unrealized Loss | ||||
Less than 12 months | -130 | |||
Total Unrealized Loss | -130 | |||
Non-U.S. govt. & agency | ||||
Fair value | ||||
Less than 12 months | 2,985 | |||
Total Fair value | 2,985 | |||
Cost or amortized Cost | ||||
Less than 12 months | 3,001 | |||
Total Cost or Amortized Cost | 3,001 | |||
Unrealized Loss | ||||
Less than 12 months | -16 | |||
Total Unrealized Loss | -16 | |||
Mortgage-backed | ||||
Fair value | ||||
Less than 12 months | 92,321 | |||
Total Fair value | 92,321 | |||
Cost or amortized Cost | ||||
Less than 12 months | 95,796 | |||
Total Cost or Amortized Cost | 95,796 | |||
Unrealized Loss | ||||
Less than 12 months | -3,475 | |||
Total Unrealized Loss | -3,475 | |||
ABS/CMBS | ||||
Fair value | ||||
Less than 12 months | 50,376 | 18 | ||
Total Fair value | 50,376 | 18 | ||
Cost or amortized Cost | ||||
Less than 12 months | 52,101 | 18 | ||
Total Cost or Amortized Cost | 52,101 | 18 | ||
Unrealized Loss | ||||
Less than 12 months | -1,725 | |||
Total Unrealized Loss | -1,725 | |||
Corporate | ||||
Fair value | ||||
Less than 12 months | 175,314 | 35,969 | ||
12 Months and Greater | 960 | |||
Total Fair value | 175,314 | 36,929 | ||
Cost or amortized Cost | ||||
Less than 12 months | 182,164 | 36,162 | ||
12 months and greater | 993 | |||
Total Cost or Amortized Cost | 182,164 | 37,155 | ||
Unrealized Loss | ||||
Less than 12 months | -6,850 | -193 | ||
12 Months and Greater | -33 | |||
Total Unrealized Loss | -6,850 | -226 | ||
Municipal | ||||
Fair value | ||||
Less than 12 months | 283,155 | 35,064 | ||
12 Months and Greater | 946 | |||
Total Fair value | 284,101 | 35,064 | ||
Cost or amortized Cost | ||||
Less than 12 months | 293,809 | 35,221 | ||
12 months and greater | 957 | |||
Total Cost or Amortized Cost | 294,766 | 35,221 | ||
Unrealized Loss | ||||
Less than 12 months | -10,654 | -157 | ||
12 Months and Greater | -11 | |||
Total Unrealized Loss | -10,665 | -157 | ||
Equity securities | ||||
Fair value | ||||
Less than 12 months | 7,041 | 16,207 | ||
Total Fair value | 7,041 | 16,207 | ||
Cost or amortized Cost | ||||
Less than 12 months | 7,402 | 17,082 | ||
Total Cost or Amortized Cost | 7,402 | 17,082 | ||
Unrealized Loss | ||||
Less than 12 months | -361 | -875 | ||
Total Unrealized Loss | ($361) | ($875) |
INVESTMENTS_Details_4
INVESTMENTS (Details 4) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Fixed income securities in unrealized loss positions | |||
Unrealized Loss | ($23,222,000) | ($1,258,000) | |
Other-than-temporary impairment charges for equity securities no longer intended to be held until recovery | 1,200,000 | ||
Other-than-temporary impairment (OTTI) losses recognized in net earnings or other comprehensive earnings | 0 | 1,200,000 | |
Debt securities | |||
Fixed income securities in unrealized loss positions | |||
Number of unrealized loss positions | 288 | ||
Unrealized Loss | 22,900,000 | ||
Number of securities in unrealized loss positions for 12 months or longer | 1 | ||
Debt securities | Maximum | |||
Fixed income securities in unrealized loss positions | |||
Unrealized losses as percentage of fixed income portfolio cost basis | 1.70% | ||
Common stock security | |||
Fixed income securities in unrealized loss positions | |||
Number of unrealized loss positions | 3 | ||
Unrealized Loss | $400,000 | ||
Number of securities in unrealized loss positions for 12 months or longer | 0 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Assets measured at Fair Value | ||
Transfers in (out of) level 1 | $0 | |
Transfers in (out of) level 2 | 0 | |
Fair value measured on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 392,156,000 | 375,788,000 |
Total assets at fair value | 392,156,000 | 375,788,000 |
Fair value measured on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 392,156,000 | 375,788,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Trading securities | 7,000 | |
Available-for-sale securities | 1,379,012,000 | 1,378,582,000 |
Total assets at fair value | 1,379,012,000 | 1,378,589,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Corporate | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 491,524,000 | 580,708,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Mortgage-backed | ||
Assets measured at Fair Value | ||
Trading securities | 7,000 | |
Available-for-sale securities | 251,564,000 | 250,387,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ABS/CMBS | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 94,007,000 | 77,329,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Non-U.S. govt. & agency | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 11,867,000 | 9,367,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 17,343,000 | 16,713,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. agency | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 8,459,000 | 11,759,000 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 504,248,000 | 432,319,000 |
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3) | ||
Assets measured at Fair Value | ||
Total assets at fair value | 0 | |
Fair value measured on recurring basis | Total | ||
Assets measured at Fair Value | ||
Trading securities | 7,000 | |
Available-for-sale securities | 1,771,168,000 | 1,754,370,000 |
Total assets at fair value | 1,771,168,000 | 1,754,377,000 |
Fair value measured on recurring basis | Total | Corporate | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 491,524,000 | 580,708,000 |
Fair value measured on recurring basis | Total | Mortgage-backed | ||
Assets measured at Fair Value | ||
Trading securities | 7,000 | |
Available-for-sale securities | 251,564,000 | 250,387,000 |
Fair value measured on recurring basis | Total | ABS/CMBS | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 94,007,000 | 77,329,000 |
Fair value measured on recurring basis | Total | Non-U.S. govt. & agency | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 11,867,000 | 9,367,000 |
Fair value measured on recurring basis | Total | U.S. government | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 17,343,000 | 16,713,000 |
Fair value measured on recurring basis | Total | U.S. agency | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 8,459,000 | 11,759,000 |
Fair value measured on recurring basis | Total | Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale securities | 504,248,000 | 432,319,000 |
Fair value measured on recurring basis | Total | Equity | ||
Assets measured at Fair Value | ||
Available-for-sale securities | $392,156,000 | $375,788,000 |
STOCK_BASED_COMPENSATION_Detai
STOCK BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | 9 Months Ended | 41 Months Ended | 3 Months Ended | ||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2005 | Sep. 30, 2013 | Sep. 30, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | |
RLI Corp. Long-Term Incentive Plan (LTIP) and Omnibus Stock Plan | Omnibus Stock Plan | Omnibus Stock Plan | RLI Corp. Long-Term Incentive Plan (LTIP) | RLI Corp. Long-Term Incentive Plan (LTIP) | RLI Corp. Long-Term Incentive Plan (LTIP) | Outside Directors' Stock Option Plan (the director's plan) | |||||
Outside director | |||||||||||
Stock based compensation | |||||||||||
Shares authorized for grant | 1,500,000 | 2,000,000 | 2,000,000 | ||||||||
Stock options granted to date (in shares) | 1,228,726 | 1,131,000 | |||||||||
Award vesting period | 5 years | ||||||||||
Term of options | 8 years | ||||||||||
Term of options granted prior to 2009 | 10 years | ||||||||||
Age and period of service of the participant to be eligible for retirement | 75 years | ||||||||||
Weighted Number of Options Outstanding | |||||||||||
Outstanding options at the beginning of the period (in shares) | 1,472,602 | 1,280,866 | |||||||||
Options granted (in shares) | 291,100 | 292,900 | 291,100 | ||||||||
Options exercised (in shares) | -380,681 | -63,721 | |||||||||
Options canceled/forfeited (in shares) | -22,440 | -3,120 | |||||||||
Outstanding options at the end of the period (in shares) | 1,360,581 | 1,506,925 | 1,360,581 | 1,506,925 | |||||||
Exercisable options at the end of the period (in shares) | 530,331 | 738,945 | 530,331 | 738,945 | |||||||
Weighted Average Exercise Price | |||||||||||
Outstanding options at the beginning of the period (in dollars per share) | $44.45 | $43.23 | |||||||||
Options granted (in dollars per share) | $72.62 | $68.46 | |||||||||
Options exercised (in dollars per share) | $34.36 | $40.29 | |||||||||
Options canceled/forfeited (in dollars per share) | $51.86 | $45.84 | |||||||||
Outstanding options at the end of the period (in dollars per share) | $53.18 | $48.26 | $53.18 | $48.26 | |||||||
Exercisable options at the end of the period (in dollars per share) | $42.18 | $40.78 | $42.18 | $40.78 | |||||||
Weighted Average Remaining Contractual Life | |||||||||||
Weighted-average remaining contractual term of options outstanding | 5 years 7 months 24 days | 5 years 3 months 25 days | |||||||||
Weighted-average remaining contractual term of exercisable options | 4 years 4 months 6 days | 4 years 3 months 29 days | |||||||||
Aggregate Intrinsic Value | |||||||||||
Options exercised (in dollars) | $17,211,000 | $1,966,000 | |||||||||
Outstanding options at the end of the period (in dollars) | 46,590,000 | 28,385,000 | 46,590,000 | 28,385,000 | |||||||
Exercisable options at the end of the period (in dollars) | 23,995,000 | 19,125,000 | 23,995,000 | 19,125,000 | |||||||
Weighted average fair value of options granted (in dollars per share) | $13.17 | $13.13 | |||||||||
Stock-based compensation expenses (in dollars) | 1,000,000 | 900,000 | 2,800,000 | 2,700,000 | 100,000 | ||||||
Income tax benefit from stock-based compensation (in dollars) | 300,000 | 300,000 | 1,000,000 | 900,000 | |||||||
Unrecognized stock-based compensation expense (in dollars) | 5,100,000 | 5,100,000 | |||||||||
Weighted average grant date assumptions and weighted average fair value | |||||||||||
Weighted-average fair value of grants (in dollars per share) | $13.17 | $13.13 | |||||||||
Risk-free interest rates (as a percent) | 0.80% | 0.90% | |||||||||
Dividend yield (as a percent) | 2.00% | 1.93% | |||||||||
Expected volatility (as a percent) | 25.41% | 25.64% | |||||||||
Expected option life | 5 years 2 months 23 days | 5 years 4 months 20 days | |||||||||
Period for which annualized dividends is considered to calculate dividend yield | 5 years | ||||||||||
Restricted shares issued per recipient (in dollars) | $10,000 | ||||||||||
Restriction period | 1 year | ||||||||||
Restricted shares issued | 1,160 |
OPERATING_SEGMENT_INFORMATION_1
OPERATING SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
REVENUES | ||||
Segment totals before income taxes | $163,702 | $149,943 | $462,406 | $428,807 |
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 |
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 |
Consolidated revenue | 188,299 | 169,645 | 520,162 | 489,380 |
NET EARNINGS | ||||
Net underwriting income | 31,818 | 18,530 | 77,175 | 55,094 |
Net investment income | 13,598 | 14,221 | 39,331 | 44,340 |
Net realized gains | 10,999 | 5,481 | 18,425 | 16,233 |
General corporate expense and interest on debt | -3,670 | -3,611 | -10,773 | -10,438 |
Equity in earnings of unconsolidated investee | 2,564 | 1,859 | 10,696 | 8,928 |
Earnings before income taxes | 55,309 | 36,480 | 134,854 | 114,157 |
Income tax expense | 17,662 | 11,017 | 42,458 | 35,908 |
Net earnings | 37,647 | 25,463 | 92,396 | 78,249 |
Casualty | ||||
REVENUES | ||||
Segment totals before income taxes | 83,966 | 68,194 | 235,307 | 197,409 |
NET EARNINGS | ||||
Net underwriting income | 20,799 | 10,806 | 39,517 | 22,409 |
Property | ||||
REVENUES | ||||
Segment totals before income taxes | 52,705 | 54,741 | 147,305 | 151,581 |
NET EARNINGS | ||||
Net underwriting income | 6,468 | -310 | 19,614 | 11,317 |
Surety | ||||
REVENUES | ||||
Segment totals before income taxes | 27,031 | 27,008 | 79,794 | 79,817 |
NET EARNINGS | ||||
Net underwriting income | $4,551 | $8,034 | $18,044 | $21,368 |
OPERATING_SEGMENT_INFORMATION_2
OPERATING SEGMENT INFORMATION (Details 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Revenue by major product | ||||
Net premiums earned | $163,702 | $149,943 | $462,406 | $428,807 |
Casualty | ||||
Revenue by major product | ||||
Net premiums earned | 83,966 | 68,194 | 235,307 | 197,409 |
Casualty | General liability | ||||
Revenue by major product | ||||
Net premiums earned | 20,342 | 21,556 | 61,139 | 63,449 |
Casualty | Commercial and personal umbrella | ||||
Revenue by major product | ||||
Net premiums earned | 22,247 | 17,430 | 61,803 | 50,337 |
Casualty | Commercial transportation | ||||
Revenue by major product | ||||
Net premiums earned | 13,463 | 8,583 | 35,594 | 25,252 |
Casualty | P&C package business | ||||
Revenue by major product | ||||
Net premiums earned | 7,643 | 7,479 | 22,671 | 21,334 |
Casualty | Executive products | ||||
Revenue by major product | ||||
Net premiums earned | 4,550 | 3,914 | 13,175 | 11,666 |
Casualty | Professional services | ||||
Revenue by major product | ||||
Net premiums earned | 11,021 | 7,386 | 30,092 | 19,704 |
Casualty | Medical professional liability | ||||
Revenue by major product | ||||
Net premiums earned | 2,674 | 5,136 | ||
Casualty | Other | ||||
Revenue by major product | ||||
Net premiums earned | 2,026 | 1,846 | 5,697 | 5,667 |
Property | ||||
Revenue by major product | ||||
Net premiums earned | 52,705 | 54,741 | 147,305 | 151,581 |
Property | Commercial property | ||||
Revenue by major product | ||||
Net premiums earned | 18,938 | 18,640 | 57,813 | 55,285 |
Property | Marine | ||||
Revenue by major product | ||||
Net premiums earned | 14,242 | 14,026 | 43,898 | 44,591 |
Property | Crop reinsurance | ||||
Revenue by major product | ||||
Net premiums earned | 11,846 | 9,876 | 19,501 | 15,992 |
Property | Property reinsurance | ||||
Revenue by major product | ||||
Net premiums earned | 2,848 | 6,826 | 12,503 | 20,193 |
Property | Other property | ||||
Revenue by major product | ||||
Net premiums earned | 4,831 | 5,373 | 13,590 | 15,520 |
Surety | ||||
Revenue by major product | ||||
Net premiums earned | 27,031 | 27,008 | 79,794 | 79,817 |
Surety | Miscellaneous | ||||
Revenue by major product | ||||
Net premiums earned | 9,590 | 10,026 | 28,559 | 29,600 |
Surety | Contract | ||||
Revenue by major product | ||||
Net premiums earned | 7,025 | 6,835 | 20,137 | 19,507 |
Surety | Commercial | ||||
Revenue by major product | ||||
Net premiums earned | 5,857 | 5,574 | 17,285 | 16,536 |
Surety | Oil and Gas | ||||
Revenue by major product | ||||
Net premiums earned | $4,559 | $4,573 | $13,813 | $14,174 |
ACQUISITION_Details
ACQUISITION (Details) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 0 Months Ended | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Nov. 02, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | |
Casualty | Casualty | Casualty | Casualty | Rockbridge | Rockbridge | Rockbridge | Rockbridge | |||||
state | Casualty | Casualty | ||||||||||
Business acquisition | ||||||||||||
Number of states in which coverage is offered to individual physicians and physician groups | 50 | |||||||||||
Total business acquisition consideration | $16,700,000 | |||||||||||
Business acquisition consideration paid in cash | 15,500,000 | |||||||||||
Present value of an earn-out agreement to be paid in future years | 1,200,000 | 1,200,000 | ||||||||||
Premiums written | 3,500,000 | 11,500,000 | ||||||||||
Premiums Earned, Net | $163,702,000 | $149,943,000 | $462,406,000 | $428,807,000 | $83,966,000 | $68,194,000 | $235,307,000 | $197,409,000 | $2,700,000 | $5,100,000 |
SUBSEQUENT_EVENT_Details
SUBSEQUENT EVENT (Details) (Senior notes maturing September 15, 2023, USD $) | 0 Months Ended |
In Millions, unless otherwise specified | Sep. 25, 2013 |
Senior notes maturing September 15, 2023 | |
SUBSEQUENT EVENT | |
Issue of senior notes by public debt offering | $150 |
Stated interest rate, payable semi-annually (as a percent) | 4.88% |
Maturity period | 10 years |