Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 15, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 001-09463 | |
Entity Registrant Name | RLI Corp | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 37-0889946 | |
Entity Address, Address Line One | 9025 North Lindbergh Drive | |
Entity Address, City or Town | Peoria | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 61615 | |
City Area Code | 309 | |
Local Phone Number | 692-1000 | |
Title of 12(b) Security | Common Stock $0.01 par value | |
Trading Symbol | RLI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 45,055,164 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000084246 | |
Amendment Flag | false |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings and Comprehensive Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Net premiums earned | $ 216,630 | $ 211,255 | $ 640,946 | $ 623,485 |
Net investment income | 16,543 | 17,532 | 51,238 | 51,095 |
Net realized gains | 1,512 | 3,211 | 14,555 | 17,043 |
Net unrealized gains (losses) on equity securities | 28,126 | 4,906 | (27,564) | 47,214 |
Consolidated revenue | 262,811 | 236,904 | 679,175 | 738,837 |
Losses and settlement expenses | 127,596 | 108,990 | 339,819 | 307,206 |
Policy acquisition costs | 71,032 | 71,552 | 213,436 | 214,586 |
Insurance operating expenses | 16,850 | 16,982 | 45,137 | 50,597 |
Interest expense on debt | 1,901 | 1,861 | 5,701 | 5,583 |
General corporate expenses | 2,668 | 2,583 | 6,417 | 9,142 |
Total expenses | 220,047 | 201,968 | 610,510 | 587,114 |
Equity in earnings of unconsolidated investees | 8,745 | 4,011 | 18,359 | 17,793 |
Earnings before income taxes | 51,509 | 38,947 | 87,024 | 169,516 |
Income tax expense: | ||||
Income tax expense | 9,122 | 6,623 | 13,738 | 31,252 |
Net earnings | 42,387 | 32,324 | 73,286 | 138,264 |
Other comprehensive earnings, net of tax | 9,550 | 15,341 | 50,090 | 72,506 |
Comprehensive earnings | $ 51,937 | $ 47,665 | $ 123,376 | $ 210,770 |
Basic: | ||||
Basic net earnings per share | $ 0.94 | $ 0.72 | $ 1.63 | $ 3.09 |
Basic comprehensive earnings per share | 1.15 | 1.06 | 2.74 | 4.72 |
Diluted: | ||||
Diluted net earnings per share | 0.93 | 0.71 | 1.62 | 3.06 |
Diluted comprehensive earnings per share | $ 1.14 | $ 1.05 | $ 2.72 | $ 4.66 |
Weighted average number of common shares outstanding: | ||||
Basic | 45,014 | 44,823 | 44,962 | 44,689 |
Diluted | 45,426 | 45,349 | 45,339 | 45,192 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Available-for-sale, at fair value (amortized cost of $2,030,979 and allowance for credit losses of $632 at 9/30/20) (amortized cost of $1,915,278 and allowance for credit losses of $0 at 12/31/19) | $ 2,159,795 | $ 1,983,086 |
Equity securities, at fair value (cost - $280,337 at 9/30/20 and $262,131 at 12/31/19) | 455,956 | 460,630 |
Other invested assets | 59,988 | 70,441 |
Cash | 70,589 | 46,203 |
Total investments and cash | 2,746,328 | 2,560,360 |
Accrued investment income | 15,685 | 14,587 |
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $17,246 at 9/30/20 and $16,682 at 12/31/19 | 159,427 | 160,369 |
Ceded unearned premium | 102,902 | 93,656 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $8,097 at 9/30/20 and $9,402 at 12/31/19 | 399,960 | 384,517 |
Deferred policy acquisition costs | 89,818 | 85,044 |
Property and equipment, at cost, net of accumulated depreciation of $67,555 at 9/30/20 and $62,703 at 12/31/19 | 52,113 | 53,121 |
Investment in unconsolidated investees | 128,154 | 103,836 |
Goodwill and intangibles | 53,821 | 54,127 |
Other assets | 44,293 | 36,104 |
TOTAL ASSETS | 3,792,501 | 3,545,721 |
Liabilities | ||
Unpaid losses and settlement expenses | 1,686,876 | 1,574,352 |
Unearned premiums | 570,754 | 540,213 |
Reinsurance balances payable | 31,646 | 25,691 |
Funds held | 79,774 | 83,358 |
Income taxes-deferred | 66,008 | 56,727 |
Bonds payable, long-term debt | 149,442 | 149,302 |
Accrued expenses | 46,516 | 66,626 |
Other liabilities | 62,145 | 54,064 |
TOTAL LIABILITIES | 2,693,161 | 2,550,333 |
Shareholders’ Equity | ||
Common stock ($0.01 par value) (Shares authorized - 200,000,000 at 9/30/20 and 100,000,000 at 12/31/19) (67,985,378 shares issued, 45,055,164 shares outstanding at 9/30/20) (67,799,229 shares issued, 44,869,015 shares outstanding at 12/31/19) | 680 | 678 |
Paid-in capital | 332,629 | 321,190 |
Accumulated other comprehensive earnings | 102,585 | 52,473 |
Retained earnings | 1,056,445 | 1,014,046 |
Deferred compensation | 7,703 | 7,980 |
Less: Treasury shares at cost (22,930,214 shares at 9/30/20 and 12/31/19) | (400,702) | (400,979) |
TOTAL SHAREHOLDERS’ EQUITY | 1,099,340 | 995,388 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ 3,792,501 | $ 3,545,721 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Available-for-sale, amortized cost | $ 2,030,979 | $ 1,915,278 |
Available-for-sale, allowance for credit losses | 632 | 0 |
Equity securities, cost | 280,337 | 262,131 |
Premiums and reinsurance balances receivable, allowances for uncollectible amounts | 17,246 | 16,682 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 8,097 | 9,402 |
Property and equipment, accumulated depreciation | $ 67,555 | $ 62,703 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 200,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 67,985,378 | 67,799,229 |
Common stock, shares outstanding (in shares) | 45,055,164 | 44,869,015 |
Treasury stock, shares (in shares) | 22,930,214 | 22,930,214 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Total | Cumulative Effect, Period of Adoption, Adjustment | Common stock | Paid-in Capital | Accumulated Other Comprehensive Earnings (Loss) | Accumulated Other Comprehensive Earnings (Loss)Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings | Retained EarningsCumulative Effect, Period of Adoption, Adjustment | Deferred Compensation | Treasury Stock at Cost |
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2018 | $ 806,842 | $ 674 | $ 305,660 | $ (14,572) | $ 908,079 | $ 8,354 | $ (401,353) | |||
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 | 44,504,043 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 65,473 | 65,473 | ||||||||
Other comprehensive earnings (loss), net of tax | 29,301 | 29,301 | ||||||||
Deferred compensation | (1,039) | 1,039 | ||||||||
Share-based compensation | 2,892 | $ 1 | 2,891 | |||||||
Share-based compensation (in shares) | 50,213 | |||||||||
Dividends and dividend equivalents | (9,803) | (9,803) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2019 | 894,705 | $ 675 | 308,551 | 14,729 | 963,749 | 7,315 | (400,314) | |||
Shares, Outstanding, Ending Balance at Mar. 31, 2019 | 44,554,256 | |||||||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2018 | 806,842 | $ 674 | 305,660 | (14,572) | 908,079 | 8,354 | (401,353) | |||
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 | 44,504,043 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 138,264 | |||||||||
Other comprehensive earnings (loss), net of tax | 72,506 | |||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2019 | 999,620 | $ 678 | 318,092 | 57,934 | 1,015,915 | 7,788 | (400,787) | |||
Shares, Outstanding, Ending Balance at Sep. 30, 2019 | 44,832,088 | |||||||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Mar. 31, 2019 | 894,705 | $ 675 | 308,551 | 14,729 | 963,749 | 7,315 | (400,314) | |||
Shares, Outstanding, Beginning Balance at Mar. 31, 2019 | 44,554,256 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 40,467 | 40,467 | ||||||||
Other comprehensive earnings (loss), net of tax | 27,864 | 27,864 | ||||||||
Deferred compensation | 215 | (215) | ||||||||
Share-based compensation | 7,217 | $ 2 | 7,215 | |||||||
Share-based compensation (in shares) | 232,941 | |||||||||
Dividends and dividend equivalents | (10,305) | (10,305) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jun. 30, 2019 | 959,948 | $ 677 | 315,766 | 42,593 | 993,911 | 7,530 | (400,529) | |||
Shares, Outstanding, Ending Balance at Jun. 30, 2019 | 44,787,197 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 32,324 | 32,324 | ||||||||
Other comprehensive earnings (loss), net of tax | 15,341 | 15,341 | ||||||||
Deferred compensation | 258 | (258) | ||||||||
Share-based compensation | 2,327 | $ 1 | 2,326 | |||||||
Share-based compensation (in shares) | 44,891 | |||||||||
Dividends and dividend equivalents | (10,320) | (10,320) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2019 | 999,620 | $ 678 | 318,092 | 57,934 | 1,015,915 | 7,788 | (400,787) | |||
Shares, Outstanding, Ending Balance at Sep. 30, 2019 | 44,832,088 | |||||||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2019 | $ 995,388 | $ 1,095 | $ 678 | 321,190 | 52,473 | $ 22 | 1,014,046 | $ 1,073 | 7,980 | (400,979) |
Shares, Outstanding, Beginning Balance at Dec. 31, 2019 | 44,869,015 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | |||||||||
Net earnings (loss) | $ (61,267) | (61,267) | ||||||||
Other comprehensive earnings (loss), net of tax | (13,031) | (13,031) | ||||||||
Deferred compensation | (1,010) | 1,010 | ||||||||
Share-based compensation | 3,863 | $ 1 | 3,862 | |||||||
Share-based compensation (in shares) | 53,641 | |||||||||
Dividends and dividend equivalents | (10,343) | (10,343) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2020 | 915,705 | $ 679 | 325,052 | 39,464 | 943,509 | 6,970 | (399,969) | |||
Shares, Outstanding, Ending Balance at Mar. 31, 2020 | 44,922,656 | |||||||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2019 | 995,388 | $ 1,095 | $ 678 | 321,190 | 52,473 | $ 22 | 1,014,046 | $ 1,073 | 7,980 | (400,979) |
Shares, Outstanding, Beginning Balance at Dec. 31, 2019 | 44,869,015 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 73,286 | |||||||||
Other comprehensive earnings (loss), net of tax | 50,090 | |||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2020 | 1,099,340 | $ 680 | 332,629 | 102,585 | 1,056,445 | 7,703 | (400,702) | |||
Shares, Outstanding, Ending Balance at Sep. 30, 2020 | 45,055,164 | |||||||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Mar. 31, 2020 | 915,705 | $ 679 | 325,052 | 39,464 | 943,509 | 6,970 | (399,969) | |||
Shares, Outstanding, Beginning Balance at Mar. 31, 2020 | 44,922,656 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 92,166 | 92,166 | ||||||||
Other comprehensive earnings (loss), net of tax | 53,571 | 53,571 | ||||||||
Deferred compensation | 630 | (630) | ||||||||
Share-based compensation | 810 | 810 | ||||||||
Share-based compensation (in shares) | 29,946 | |||||||||
Dividends and dividend equivalents | (10,794) | (10,794) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Jun. 30, 2020 | 1,051,458 | $ 679 | 325,862 | 93,035 | 1,024,881 | 7,600 | (400,599) | |||
Shares, Outstanding, Ending Balance at Jun. 30, 2020 | 44,952,602 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net earnings (loss) | 42,387 | 42,387 | ||||||||
Other comprehensive earnings (loss), net of tax | 9,550 | 9,550 | ||||||||
Deferred compensation | 103 | (103) | ||||||||
Share-based compensation | 6,768 | $ 1 | 6,767 | |||||||
Share-based compensation (in shares) | 102,562 | |||||||||
Dividends and dividend equivalents | (10,823) | (10,823) | ||||||||
Stockholders' Equity Attributable to Parent, Ending Balance at Sep. 30, 2020 | $ 1,099,340 | $ 680 | $ 332,629 | $ 102,585 | $ 1,056,445 | $ 7,703 | $ (400,702) | |||
Shares, Outstanding, Ending Balance at Sep. 30, 2020 | 45,055,164 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Statement Of Stockholders Equity [Abstract] | ||||||
Cash dividends paid per common share | $ 0.24 | $ 0.24 | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.22 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Statement Of Cash Flows [Abstract] | ||
Net cash provided by operating activities | $ 163,244 | $ 186,762 |
Purchase of: | ||
Fixed income securities, available-for-sale | (368,586) | (380,813) |
Equity securities | (62,643) | (73,072) |
Property and equipment | (4,969) | (4,056) |
Other | (15,095) | (12,154) |
Proceeds from sale of: | ||
Fixed income securities, available-for-sale | 68,229 | 173,120 |
Equity securities | 66,185 | 47,799 |
Other | 3,136 | 2,057 |
Proceeds from call or maturity of: | ||
Fixed income securities, available-for-sale | 199,036 | 106,241 |
Net proceeds from sale (purchase) of short-term investments | 6,016 | |
Net cash used in investing activities | (114,707) | (134,862) |
Cash Flows from Financing Activities | ||
Cash dividends paid | (31,931) | (30,428) |
Proceeds from stock option exercises | 7,780 | 12,436 |
Net cash used in financing activities | (24,151) | (17,992) |
Net increase in cash | 24,386 | 33,908 |
Cash at the beginning of the period | 46,203 | 30,140 |
Cash at the end of the period | $ 70,589 | $ 64,048 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
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 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 2019 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, 2020 and the results of operations of RLI Corp. (the Company) 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. Certain reclassifications were made to 2019 to conform to the classifications used in the current 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 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Previous guidance delayed the recognition of credit losses until it was probable a loss had been incurred. This update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses, but is limited to the amount by which fair value is less than amortized cost. We adopted ASU 2016-13 on January 1, 2020 using the modified-retrospective approach. The standard applied to three of the Company’s balance sheet accounts: available-for-sale fixed income securities, premiums receivable and reinsurance balances recoverable. The impact of this standard was and is expected to continue to be immaterial, as our fixed income portfolio is weighted towards higher rated bonds (83 percent rated A or better at September 30, 2020 and 85 percent at December 31, 2019), we purchase reinsurance from financially strong reinsurers, we have a long history of collecting premium receivables through various economic cycles and we had previously maintained an allowance for uncollectible premium and reinsurance balances. In total, the cumulative-effect adjustment made to the balance sheet as of the beginning of the year resulted in a $1.1 million increase to retained earnings and an increase to accumulated other comprehensive earnings of less than $0.1 million. C. REINSURANCE Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of our legal liability to our policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continuously monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid balances recoverable from the reinsurer are specifically identified and charged to earnings in the form of an allowance for uncollectible amounts. We subject our remaining reinsurance balances receivable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, and record an additional allowance for unrecoverable amounts from reinsurers. This credit allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $15.9 million and $8.1 million, respectively, at September 30, 2020. At December 31, 2019, the amounts were $15.7 million and $9.4 million, respectively. Adoption of ASU 2016-13 resulted in a $1.3 million decrease to the allowance for uncollectible amounts on reinsurance recoverables in 2020, while other changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs or recoveries were applied to the allowances in the first nine months of 2020. D. INTANGIBLE ASSETS The composition of goodwill and intangible assets at September 30, 2020 and December 31, 2019 is detailed in the following table: September 30, December 31, (in thousands) 2020 2019 Goodwill Surety $ 40,816 $ 40,816 Casualty 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,776 at 9/30/20 and $3,470 at 12/31/19 259 565 Total intangibles $ 7,759 $ 8,065 Total goodwill and intangibles $ 53,821 $ 54,127 All definite-lived intangible assets are amortized based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the third quarter of 2020 and $0.3 million for the nine months ended September 30, 2020, the same as for the comparable periods in 2019. Annual impairment assessments were performed on our goodwill and state insurance license indefinite-lived intangible asset during the second quarter of 2020. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of September 30, 2020 that would suggest an updated impairment test would be needed for our goodwill and intangible assets. 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 Months For the Three Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 42,387 45,014 $ 0.94 $ 32,324 44,823 $ 0.72 Effect of Dilutive Securities Stock options and restricted stock units — 412 — 526 Diluted EPS Earnings available to common shareholders $ 42,387 45,426 $ 0.93 $ 32,324 45,349 $ 0.71 Anti-dilutive options excluded from diluted EPS 339 — For the Nine Months For the Nine Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 73,286 44,962 $ 1.63 $ 138,264 44,689 $ 3.09 Effect of Dilutive Securities Stock options and restricted stock units — 377 — 503 Diluted EPS Earnings available to common shareholders $ 73,286 45,339 $ 1.62 $ 138,264 45,192 $ 3.06 Anti-dilutive options excluded from diluted EPS 339 277 F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio. In reporting other comprehensive earnings on a net basis, we used the federal statutory tax rate of 21 percent. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense of $2.5 million and $4.1 million for the third quarter of 2020 and 2019, respectively. For the nine-month periods ended September 30, 2020 and 2019, other comprehensive earnings is net of tax expense of $13.3 million and $19.3 million, respectively. Unrealized gains, net of tax, on the fixed income portfolio were $50.1 million for the first nine months of 2020, compared to $72.5 million during the same period last year. The unrealized gains were attributable to declining interest rates in both periods, which increased the fair value of securities held in the fixed income portfolio. 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: (in thousands) For the Three Months For the Nine Months Ended September 30, Ended September 30, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 2020 2019 Beginning balance $ 93,035 $ 42,593 $ 52,473 $ (14,572 ) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) — — 22 — Adjusted beginning balance $ 93,035 $ 42,593 $ 52,495 $ (14,572 ) Other comprehensive earnings before reclassifications 10,412 16,231 52,264 74,414 Amounts reclassified from accumulated other comprehensive earnings (862 ) (890 ) (2,174 ) (1,908 ) Net current-period other comprehensive earnings $ 9,550 $ 15,341 $ 50,090 $ 72,506 Ending balance $ 102,585 $ 57,934 $ 102,585 $ 57,934 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 795 $ — Credit losses on or the sale 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 (in thousands) Comprehensive Earnings For the Three Months For the Nine Months Component of Accumulated Ended September 30, Ended September 30, Affected line item in the Other Comprehensive Earnings 2020 2019 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 738 $ 1,126 $ 3,356 $ 2,415 Net realized gains 353 — (604 ) — Credit losses presented within net realized gains $ 1,091 $ 1,126 $ 2,752 $ 2,415 Earnings before income taxes (229 ) (236 ) (578 ) (507 ) Income tax expense $ 862 $ 890 $ 2,174 $ 1,908 Net earnings G. FAIR VALUE MEASUREMENTS 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 value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring 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. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. 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 widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ 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 employs a multi-dimensional model which uses standard inputs including (listed in approximate 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 are deemed Level 2. Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue 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 used to determine the cash flows for each tranche, benchmark yields, pre-payment 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. Regulation D Private Placement Securities: All Regulation D privately placed bonds are classified as corporate securities and deemed Level 3. The pricing vendor evaluation methodology for these securities includes a combination of observable and unobservable inputs. Observable inputs include public corporate spread matrices classified by sector, rating and average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value measurement. For all of our fixed income securities classified as Level 2, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. If discrepancies are found in our comparisons, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 securities provided by our pricing services are reasonable. Common Stock: As of September 30, 2020, all of our common stock holdings were traded on an exchange. Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). 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. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy. H. RISKS AND UNCERTAINTIES Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-19 pandemic may continue to result in significant disruptions in economic activity and financial markets. The cumulative effects of any public health outbreak could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, reduce the market value of invested assets held by the Company or negatively impact the fair value of our goodwill. Catastrophe Exposures Our catastrophe reinsurance treaty renewed on January 1, 2020. We purchased limits of $400 million in excess of $25 million first-dollar retention for earthquakes in California, $425 million in excess of $25 million first-dollar retention for earthquakes outside of California and $275 million in excess of $25 million first-dollar retention for all other perils. These amounts are subject to certain co-participations by the Company on losses in excess of the $25 million retentions. On March 1, 2020, we purchased $100 million of additional catastrophe reinsurance protection on top of the previously described coverage. This increases the limits to $500 million for earthquakes in California, $525 million for earthquakes outside of California and $375 for all other perils, all of which are still subject to $25 million first-dollar retentions and certain co-participations in excess of the retentions. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2020 | |
Investments Debt And Equity Securities [Abstract] | |
Investments | 2. INVESTMENTS Our investments are primarily composed of fixed income debt securities and common stock equity securities. We carry our equity securities at fair value and categorize all of our debt securities as available-for-sale, which are carried at fair value. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. The following is a summary of the disposition of fixed income and equity securities for the nine-month periods ended September 30, 2020 and 2019: Sales Proceeds Gross Realized Net Realized (in thousands) From Sales Gains Losses Gain (Loss) 2020 Available-for-sale $ 68,621 $ 4,959 $ (1,518 ) $ 3,441 Equities 66,185 22,172 (8,756 ) 13,416 2019 Available-for-sale $ 174,767 $ 3,689 $ (1,393 ) $ 2,296 Equities 48,650 15,575 (1,184 ) 14,391 Calls/Maturities Gross Realized Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2020 Available-for-sale $ 199,036 $ 525 $ (10 ) $ 515 2019 Available-for-sale $ 106,241 $ 133 $ (14 ) $ 119 FAIR VALUE MEASUREMENTS Assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 are summarized below: As of September 30, 2020 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 190,204 $ — $ 190,204 U.S. agency — 33,180 — 33,180 Non-U.S. govt. & agency — 10,831 — 10,831 Agency MBS — 396,852 — 396,852 ABS/CMBS* — 208,282 — 208,282 Corporate — 793,012 11,925 804,937 Municipal — 515,509 — 515,509 Total fixed income securities - available-for-sale $ — $ 2,147,870 $ 11,925 $ 2,159,795 Equity securities 455,956 — — 455,956 Other invested assets 10,620 — — 10,620 Total $ 466,576 $ 2,147,870 $ 11,925 $ 2,626,371 As of December 31, 2019 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 193,661 $ — $ 193,661 U.S. agency — 38,855 — 38,855 Non-U.S. govt. & agency — 7,628 — 7,628 Agency MBS — 420,165 — 420,165 ABS/CMBS* — 224,870 — 224,870 Corporate — 690,297 1,770 692,067 Municipal — 405,840 — 405,840 Total fixed income securities - available-for-sale $ — $ 1,981,316 $ 1,770 $ 1,983,086 Equity securities 460,630 — — 460,630 Total $ 460,630 $ 1,981,316 $ 1,770 $ 2,443,716 * Non-agency asset-backed and commercial mortgage-backed The following table summarizes changes in the balance of Regulation D private placement fixed income securities whose fair value was measured using significant unobservable inputs (Level 3). (in thousands) Level 3 Securities Balance as of January 1, 2020 $ 1,770 Net realized and unrealized gains (losses) Included in net earnings as a part of: Net investment income (15 ) Net realized gains (109 ) Included in other comprehensive earnings (76 ) Total net realized and unrealized gains (losses) $ (200 ) Purchases 10,355 Balance as of September 30, 2020 $ 11,925 Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in net realized gains $ (109 ) Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings $ (76 ) The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of September 30, 2020 were as follows: September 30, 2020 (in thousands) Amortized Cost Fair Value Due in one year or less $ 85,018 $ 86,151 Due after one year through five years 475,999 502,636 Due after five years through 10 years 548,599 597,377 Due after 10 years 341,315 368,497 Mtge/ABS/CMBS* 580,048 605,134 Total available-for-sale $ 2,030,979 $ 2,159,795 * Mortgage-backed, asset-backed and commercial mortgage-backed The amortized cost and fair value of available-for-sale securities at September 30, 2020 and December 31, 2019 are presented in the tables below. Amortized cost does not include the $14.5 million and $13.5 million of accrued interest receivable as of September 30, 2020 and December 31, 2019, respectively. September 30, 2020 Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair (in thousands) Cost Losses Gains Losses Value U.S. government $ 175,259 $ — $ 14,981 $ (36 ) $ 190,204 U.S. agency 28,921 — 4,259 — 33,180 Non-U.S. govt. & agency 10,307 — 524 — 10,831 Agency MBS 376,536 — 20,617 (301 ) 396,852 ABS/CMBS* 203,511 (19 ) 5,347 (557 ) 208,282 Corporate 750,250 (613 ) 58,731 (3,431 ) 804,937 Municipal 486,195 — 29,587 (273 ) 515,509 Total Fixed Income $ 2,030,979 $ (632 ) $ 134,046 $ (4,598 ) $ 2,159,795 * Non-agency asset-backed and commercial mortgage-backed December 31, 2019 Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair (in thousands) Cost Losses Gains Losses Value U.S. government $ 186,699 $ — $ 6,994 $ (32 ) $ 193,661 U.S. agency 36,535 — 2,362 (42 ) 38,855 Non-U.S. govt. & agency 7,333 — 295 — 7,628 Agency MBS 411,808 — 8,920 (563 ) 420,165 ABS/CMBS* 222,832 — 2,514 (476 ) 224,870 Corporate 659,640 — 33,245 (818 ) 692,067 Municipal 390,431 — 16,131 (722 ) 405,840 Total Fixed Income $ 1,915,278 $ — $ 70,461 $ (2,653 ) $ 1,983,086 * Non-agency asset-backed and commercial mortgage-backed Allowance for Credit Losses and Unrealized Losses on Fixed Income Securities We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required the recognition of a reversible allowance for credit losses on available-for-sale fixed income securities. See note 1. B. for more information on the adoption of the ASU. Available-for-sale securities in the fixed income portfolio are subjected to several criteria to determine if those securities should be included in the allowance for expected credit loss evaluation, including: • Changes in technology that may impair the earnings potential of the investment, • The discontinuance of a segment of business that may affect future earnings potential, • Reduction of or non-payment of interest and/or principal, • Specific concerns related to the issuer’s industry or geographic area of operation, • Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and • Downgrades in credit quality by a major rating agency. If changes in interest rates and credit spreads do not reasonably explain the unrealized loss for an available-for-sale security or if any of the criteria above indicate a potential credit loss, the security is subjected to a discounted cash flow analysis. Inputs into the discounted cash flow analysis include prepayment assumptions for structured securities, default rates and recoverability rates based on credit rating. The allowance for any security is limited to the amount that the securities fair value is below amortized cost. As of September 30, 2020, the discounted cash flow analysis resulted in an allowance for credit losses on 29 securities. The following table presents changes in the allowance for expected credit losses on available-for-sale securities: Three Months Ended Nine Months Ended (in thousands) September 30, 2020 September 30, 2020 Beginning balance $ 985 $ — Increase to allowance from securities for which credit losses were not previously recorded 17 780 Reduction from securities sold during the period (6 ) (117 ) Reductions from intent to sell securities (186 ) (186 ) Net increase (decrease) from securities that had an allowance at the beginning of the period (178 ) 155 Balance as of September 30, $ 632 $ 632 Net realized gains included $0.6 million of losses on fixed income securities for which we no longer had the intent to hold until recovery and the cost basis was written down to fair value. All fixed income securities continue to pay the expected coupon payments. We believe we will recover the amortized cost basis of available-for-sale securities that remain in an unrealized loss position. Prior to the adoption of ASU 2016-13, we conducted reviews of fixed income securities with unrealized losses to evaluate whether an impairment was other-than-temporary. Any credit-related impairment on fixed income securities we did not plan to sell and we were not more likely than not to be required to sell were recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. We did not recognize any other-than-temporary impairment losses in earnings on the fixed income portfolio in the first nine months of 2019. As of September 30, 2020, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 234 securities with an unrealized loss position for which an allowance for credit losses had not been recorded. The $4.6 million in associated unrealized losses represents 0.2 percent of the fixed income portfolio’s cost basis and 0.2 nrealized losses increased through the first nine months of 2020, as increased credit spreads more than offset declines in interest rates during the period, primarily in the corporate portfolio. The following table illustrates the total value of fixed income securities that were in an unrealized loss position as of September 30, 2020, after factoring in the allowance for credit losses, and December 31, 2019. September 30, 2020 December 31, 2019 (in thousands) < 12 Mos. 12 Mos. & Greater Total < 12 Mos. 12 Mos. & Greater Total U.S. government Fair value $ 5,900 $ — $ 5,900 $ 2,505 $ 8,463 $ 10,968 Amortized cost 5,936 — 5,936 2,506 8,494 11,000 Unrealized loss $ (36 ) $ — $ (36 ) $ (1 ) $ (31 ) $ (32 ) U.S. agency Fair value $ — $ — $ — $ 6,794 $ — $ 6,794 Amortized cost — — — 6,836 — 6,836 Unrealized loss $ — $ — $ — $ (42 ) $ — $ (42 ) Agency MBS Fair value $ 45,929 $ 244 $ 46,173 $ 21,548 $ 41,718 $ 63,266 Amortized cost 46,229 245 46,474 21,664 42,165 63,829 Unrealized loss $ (300 ) $ (1 ) $ (301 ) $ (116 ) $ (447 ) $ (563 ) ABS/CMBS* Fair value $ 35,837 $ 14,586 $ 50,423 $ 74,968 $ 18,036 $ 93,004 Amortized cost 36,236 14,744 50,980 75,332 18,148 93,480 Unrealized loss $ (399 ) $ (158 ) $ (557 ) $ (364 ) $ (112 ) $ (476 ) Corporate Fair value $ 107,521 $ 4,669 $ 112,190 $ 16,478 $ 9,348 $ 25,826 Amortized cost 110,664 4,957 115,621 16,950 9,694 26,644 Unrealized loss $ (3,143 ) $ (288 ) $ (3,431 ) $ (472 ) $ (346 ) $ (818 ) Municipal Fair value $ 32,681 $ — $ 32,681 $ 47,018 $ — $ 47,018 Amortized cost 32,954 — 32,954 47,740 — 47,740 Unrealized loss $ (273 ) $ — $ (273 ) $ (722 ) $ — $ (722 ) Total fixed income Fair value $ 227,868 $ 19,499 $ 247,367 $ 169,311 $ 77,565 $ 246,876 Amortized cost 232,019 19,946 251,965 171,028 78,501 249,529 Unrealized loss $ (4,151 ) $ (447 ) $ (4,598 ) $ (1,717 ) $ (936 ) $ (2,653 ) * Non-agency asset-backed and commercial mortgage-backed The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at September 30, 2020 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 $ 152,119 $ 150,542 $ (1,577 ) 34.3 % 2 BBB Baa 25,884 25,436 (448 ) 9.7 % 3 BB Ba 26,706 26,052 (654 ) 14.2 % 4 B B 42,998 41,372 (1,626 ) 35.4 % 5 CCC Caa 4,086 3,810 (276 ) 6.0 % 6 CC or lower Ca or lower 172 155 (17 ) 0.4 % Total $ 251,965 $ 247,367 $ (4,598 ) 100.0 % Unrealized Gains and Losses on Equity Securities Unrealized gains recognized on equity securities still held as of September 30, 2020 were $28.7 million during the third quarter, while unrealized losses were $14.1 million during the first nine months of 2020. Comparatively, unrealized gains recognized on equity securities still held as of September 30, 2019 were $6.9 million during the third quarter and $61.7 million during the first nine months of 2019. Other Invested Assets We had $60.0 million of other invested assets at September 30, 2020, compared to $70.4 million at the end of 2019. Other invested assets include investments in low income housing tax credit partnerships (LIHTC), membership in the Federal Home Loan Bank of Chicago (FHLBC), investments in private funds and investments in restricted stock. Our LIHTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investment’s net asset value. Restricted stock is carried at quoted market prices, as the restrictions expire within one year. Our LIHTC interests had a balance of $21.0 million at September 30, 2020, compared to $23.3 million at December 31, 2019 and recognized a total tax benefit of $0.9 million during the third quarter of 2020, compared to $0.6 million in the prior year. For the nine-month periods ended September 30, 2020 and 2019, our LIHTC interest recognized a total benefit of $2.6 million and $1.9 million, respectively. Our unfunded commitment for our LIHTC investments totaled $4.7 million at September 30, 2020 and will be paid out in installments through 2035. As of September 30, 2020, $13.7 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides. As of and during the nine-month period ended September 30, 2020, there were no outstanding borrowings with the FHLBC. Our investments in private funds totaled $26.5 million at September 30, 2020, compared to $46.0 million at December 31, 2019, and we had $8.3 million of associated unfunded commitments at September 30, 2020. Our interest in private funds is generally restricted from being transferred or otherwise redeemed without prior consent by the respective entities. During the first quarter of 2020, one of the private funds transitioned into a publicly traded common stock. Short-term restrictions, limiting our ability to sell without prior approval, were established and remain in place. Our investment in restricted stock was $10.6 million as of September 30, 2020. For our remaining investments in private funds, the timed dissolution of the partnerships would trigger redemption. Cash Cash consists of uninvested balances in bank accounts. We had a cash balance of $70.6 million at September 30, 2020, compared to $46.2 million at the end of 2019. |
Historical Loss And LAE Develop
Historical Loss And LAE Development | 9 Months Ended |
Sep. 30, 2020 | |
Historical Loss And L A E Development Disclosure [Abstract] | |
HISTORICAL LOSS AND LAE DEVELOPMENT | 3. HISTORICAL LOSS AND LAE DEVELOPMENT The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first nine months of 2020 and 2019: For the Nine Months Ended September 30, (in thousands) 2020 2019 Unpaid losses and LAE at beginning of year Gross $ 1,574,352 $ 1,461,348 Ceded (384,517 ) (364,999 ) Net $ 1,189,835 $ 1,096,349 Adoption impact of ASU 2016-13 on reinsurance balances recoverable $ (1,345 ) $ — Increase (decrease) in incurred losses and LAE Current accident year $ 409,867 $ 362,395 Prior accident years (70,048 ) (55,189 ) Total incurred $ 339,819 $ 307,206 Loss and LAE payments for claims incurred Current accident year $ (49,337 ) $ (51,270 ) Prior accident years (192,056 ) (176,957 ) Total paid $ (241,393 ) $ (228,227 ) Net unpaid losses and LAE at September 30 $ 1,286,916 $ 1,175,328 Unpaid losses and LAE at September 30 Gross $ 1,686,876 $ 1,557,358 Ceded (399,960 ) (382,030 ) Net $ 1,286,916 $ 1,175,328 We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required financial assets, including reinsurance balances recoverable, to be presented at the net amount expected to be collected. We previously maintained an allowance for uncollectible reinsurance balances prior to the adoption of this update. However, in order to comply with the updated requirements, we released $1.3 million of the allowance on uncollectible reinsurance balances upon adoption. The implementation guidance required the cumulative-effect adjustment be made to the beginning balance of retained earnings, rather than through net earnings like historical changes have and ongoing modifications will continue to be recorded. See note 1. B. for more information on the adoption of the ASU. For the first nine months of 2020, incurred losses and LAE included $70.0 million of favorable development on prior years’ loss reserves. The majority of products experienced modest amounts of favorable development on prior accident years, with notable contributions from transportation, general liability, executive products, marine and surety. No products experienced significant adverse development. For the first nine months of 2019, incurred losses and LAE included $55.2 million of favorable development on prior years’ loss reserves. Transportation, general liability, commercial excess and personal umbrella, professional services, small commercial and surety were drivers of the favorable development. Executive products experienced adverse development. Actuarial models base future emergence on historic experience, with adjustments for current trends, and the appropriateness of these assumptions involved more uncertainty as of September 30, 2020. We expect there will be impacts to the timing of loss emergence and ultimate loss ratios for certain coverages we underwrite as a result of the spread of COVID-19 and the related economic shutdown. The industry is experiencing new issues, including the postponement of civil court cases, the extension of various statutes of limitations, changes in settlement trends and a significant reduction in economic activity and insured exposure in some classes. Our booked reserves include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in loss reserve deficiencies and reduce earnings in future periods. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 4. INCOME TAXES Our effective tax rate for the three and nine months ended September 30, 2020 was 17.7 percent and 15.8 percent, respectively, compared to 17.0 percent and 18.4 percent, respectively, for the same periods in 2019. Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective rate was lower for the nine-month period in 2020 due to investment tax credits recognized using the flow-through method of accounting, whereby income taxes payable and income tax expense were reduced. Additionally, lower levels of pretax earnings caused tax-favored adjustments to be larger on a percentage basis in 2020 compared to the prior year. For the three-month period, a higher level of pretax earnings in 2020 resulted in a higher effective tax rate. Income tax expense attributable to income from operations for the three and nine-month periods ended September 30, 2020 and 2019 differed from the amounts computed by applying the U.S. federal tax rate of 21 percent to pretax income by the items detailed in the below table. In interim periods, income taxes are adjusted to reflect the effective tax rate we anticipate for the year, with adjustments flowing through the other items, net line. For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in thousands) Amount % Amount % Amount % Amount % Provision for income taxes at the statutory rate of 21% $ 10,817 21.0 % $ 8,179 21.0 % $ 18,275 21.0 % $ 35,598 21.0 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (848 ) (1.6 ) % (614 ) (1.6 ) % (2,141 ) (2.4 ) % (3,546 ) (2.1 ) % Tax exempt interest income (324 ) (0.6 ) % (276 ) (0.7 ) % (960 ) (1.1 ) % (930 ) (0.6 ) % Dividends received deduction (221 ) (0.4 ) % (218 ) (0.6 ) % (705 ) (0.8 ) % (635 ) (0.4 ) % Investment tax credit (316 ) (0.6 ) % — 0.0 % (1,766 ) (2.0 ) % — 0.0 % ESOP dividends paid deduction (134 ) (0.3 ) % (136 ) (0.3 ) % (403 ) (0.5 ) % (413 ) (0.2 ) % Nondeductible expenses 275 0.5 % 243 0.6 % 639 0.7 % 1,166 0.7 % Other items, net (127 ) (0.3 ) % (555 ) (1.4 ) % 799 0.9 % 12 0.0 % Total tax expense $ 9,122 17.7 % $ 6,623 17.0 % $ 13,738 15.8 % $ 31,252 18.4 % |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
STOCK BASED COMPENSATION | 5. STOCK BASED COMPENSATION Our RLI Corp. Long-Term Incentive Plan (2010 LTIP) was in place from 2010 to 2015. The 2010 LTIP provided for equity-based compensation, including stock options, up to a maximum of 4,000,000 shares of common stock (subject to adjustment for changes in our capitalization and other events). Between 2010 and 2015, we granted 2,878,000 stock options under the 2010 LTIP. The 2010 LTIP was replaced in 2015. In 2015, our shareholders approved the 2015 RLI Corp. Long-Term Incentive Plan (2015 LTIP), which provides for equity-based compensation and replaced the 2010 LTIP. In conjunction with the adoption of the 2015 LTIP, effective May 7, 2015, options were no longer granted under the 2010 LTIP. Awards under the 2015 LTIP may be in the form of restricted stock, restricted stock units, stock options (non-qualified only), stock appreciation rights, performance units as well as other stock-based awards. Eligibility under the 2015 LTIP is limited to employees and directors of the Company or any affiliate. The granting of awards under the 2015 LTIP is solely at the discretion of the board of directors. The maximum number of shares of common stock available for distribution under the 2015 LTIP is 4,000,000 shares (subject to adjustment for changes in our capitalization and other events). Since the plan’s approval in 2015, we have awarded 2,576,867 stock options and restricted stock units under the 2015 LTIP. Stock Options Under the 2015 LTIP, as under the 2010 LTIP, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant (subject to adjustments for changes in our capitalization, special dividends and other events as set forth in such plans). Options generally vest and become exercisable ratably over a five-year For most participants, 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 nine-month periods ended September 30, 2020 and 2019: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2020 1,667,290 $ 62.52 Options granted 275,977 93.39 Options exercised (177,045 ) 49.13 $ 7,639 Options canceled/forfeited (6,410 ) 73.42 Outstanding options at September 30, 2020 1,759,812 $ 68.67 5.14 $ 29,740 Exercisable options at September 30, 2020 807,570 $ 59.03 3.82 $ 20,054 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2019 1,964,880 $ 54.24 Options granted 324,525 81.27 Options exercised (493,615 ) 45.61 $ 18,157 Options canceled/forfeited (59,050 ) 60.92 Outstanding options at September 30, 2019 1,736,740 $ 61.52 5.43 $ 54,515 Exercisable options at September 30, 2019 622,290 $ 52.78 4.03 $ 24,975 Through 2019, the majority of our annual stock option grants were authorized at our regular board meeting in May. In addition, quarterly grants to certain retirement eligible employees were historically authorized at the May meeting. Since stock option grants to retirement eligible employees are fully expensed when issued, the approach allowed for a more even expense distribution throughout the year. In 2020, the annual stock option grants and quarterly grants to retirement eligible employees were authorized at the August board meeting to allow the Company additional time to assess the financial impact of the COVID-19 pandemic. In the first nine months of 2020, 275,977 stock options were granted with a weighted average exercise price of $93.39 and a weighted average fair value of $13.33. We recognized $1.3 million of expense in the third quarter of 2020 and $2.8 million in the first nine months of 2020 related to options vesting. Since options granted under our 2015 LTIP are non-qualified, we recorded a tax benefit of $0.3 million in the third quarter of 2020 and $0.6 million in the first nine months of 2020 related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $5.6 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $1.2 million of compensation expense in the third quarter of 2019 and $3.6 million in the first nine months of 2019. We recorded a tax benefit of $0.2 million in the third quarter of 2019 and $0.7 million in the first nine months of 2019 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: 2020 2019 Weighted-average fair value of grants $ 13.33 $ 13.47 Risk-free interest rates 0.41 % 2.41 % Dividend yield 2.30 % 2.69 % Expected volatility 22.67 % 22.71 % Expected option life 4.96 years 4.95 years The risk-free rate was determined based on U.S. treasury yields that most closely approximated the option’s expected life. The dividend yield was determined based on the average annualized quarterly dividends paid during the most recent five-year period and incorporated a consideration for special dividends paid in recent history. The expected volatility was calculated based on the median of the rolling volatilities for the expected life of the options. The expected option life was 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. Restricted Stock Units In addition to stock options, restricted stock units (RSUs) are granted with a value equal to the closing stock price of the Company’s stock on the dates the units are granted. These units generally have a three-year As of September 30, 2020, 58,420 RSUs have been granted to employees under the 2015 LTIP and 41,826 remain outstanding. We recognized $0.2 million of expense on these units in the third quarter of 2020 and $0.5 million in the first nine months of 2020. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $1.6 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $0.3 million in the third quarter of 2019 and $0.6 million in the first nine months of 2019. In 2020 and 2019, each outside director was granted a whole number of RSUs with a fair market value corresponding to $50,000 on the date of grant as part of annual director compensation. Director RSUs vest on the earlier of one year from the date of grant or the next annual shareholders meeting. As of September 30, 2020, 20,445 restricted stock units have been granted to directors under the 2015 LTIP and 5,375 remain outstanding. We recognized $0.1 million of compensation expense on these units in the third quarter of 2020 and $0.2 million in the first nine months of 2020. Comparatively, we recognized $0.1 million of compensation expense on these units in the third quarter of 2019 and $0.5 million in the first nine months of 2019. |
Operating Segment Information
Operating Segment Information | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Operating Segment Information | 6. 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. For the Three Months For the Nine Months Revenues Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Casualty $ 143,002 $ 140,423 $ 421,637 $ 415,667 Property 45,380 41,476 135,115 120,194 Surety 28,248 29,356 84,194 87,624 Net premiums earned $ 216,630 $ 211,255 $ 640,946 $ 623,485 Net investment income 16,543 17,532 51,238 51,095 Net realized gains 1,512 3,211 14,555 17,043 Net unrealized gains (losses) on equity securities 28,126 4,906 (27,564 ) 47,214 Total consolidated revenue $ 262,811 $ 236,904 $ 679,175 $ 738,837 Net Earnings (in thousands) 2020 2019 2020 2019 Casualty $ 13,993 $ 2,370 $ 22,403 $ 14,652 Property (19,951 ) 6,202 (3,876 ) 14,012 Surety 7,110 5,159 24,027 22,432 Net underwriting income $ 1,152 $ 13,731 $ 42,554 $ 51,096 Net investment income 16,543 17,532 51,238 51,095 Net realized gains 1,512 3,211 14,555 17,043 Net unrealized gains (losses) on equity securities 28,126 4,906 (27,564 ) 47,214 General corporate expense and interest on debt (4,569 ) (4,444 ) (12,118 ) (14,725 ) Equity in earnings of unconsolidated investees 8,745 4,011 18,359 17,793 Earnings before income taxes $ 51,509 $ 38,947 $ 87,024 $ 169,516 Income tax expense 9,122 6,623 13,738 31,252 Net earnings $ 42,387 $ 32,324 $ 73,286 $ 138,264 The following table further summarizes revenues by major product type within each operating segment: For the Three Months For the Nine Months Net Premiums Earned Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Casualty Commercial excess and personal umbrella $ 46,404 $ 35,959 $ 128,813 $ 102,580 General liability 22,747 25,005 69,396 74,240 Professional services 21,422 20,816 63,501 60,390 Commercial transportation 15,130 21,067 47,454 61,979 Small commercial 16,009 13,927 47,433 40,430 Executive products 6,387 7,026 20,693 19,476 Other casualty 14,903 16,623 44,347 56,572 Total $ 143,002 $ 140,423 $ 421,637 $ 415,667 Property Marine $ 19,687 $ 19,033 $ 59,976 $ 54,633 Commercial property 20,168 17,098 58,371 50,248 Specialty personal 4,794 4,948 14,730 14,324 Other property 731 397 2,038 989 Total $ 45,380 $ 41,476 $ 135,115 $ 120,194 Surety Commercial $ 10,543 $ 10,851 $ 32,287 $ 32,638 Miscellaneous 10,547 10,998 31,562 33,880 Contract 7,158 7,507 20,345 21,106 Total $ 28,248 $ 29,356 $ 84,194 $ 87,624 Grand Total $ 216,630 $ 211,255 $ 640,946 $ 623,485 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Leases | 7. LEASES Right-of-use (ROU) assets are included in the other assets line item and lease liabilities are included in the other liabilities line item of the consolidated balance sheet. We determine if a contract contains a lease at inception and recognize operating lease ROU assets and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Lease agreements may include options to extend or terminate. The options are exercised at our discretion and are included in operating lease liabilities if it is reasonably certain the option will be exercised. Lease agreements have lease and non-lease components, which are accounted for as a single lease component. Operating lease cost for future minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease cost is expensed in the period in which the obligation is incurred. Sublease income is recognized on a straight-line basis over the sublease term. The Company’s operating lease obligations are for branch office facilities. The components of lease expense and other lease information as of and during the three and nine-month periods ended September 30, 2020 and 2019 are as follows: For the Three Months For the Nine Months Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Operating lease cost $ 1,364 $ 1,423 $ 4,140 $ 4,349 Variable lease cost 338 321 1,014 1,530 Sublease income (96 ) — (139 ) — Total lease cost $ 1,606 $ 1,744 $ 5,015 $ 5,879 Cash paid for amounts included in measurement of lease liabilities Operating cash outflows from operating leases $ 1,480 $ 1,438 $ 4,470 $ 4,234 ROU assets obtained in exchange for new operating lease liabilities $ — $ 427 $ 15 $ 1,378 Reduction to ROU assets resulting from reduction to lease liabilities $ 18 $ — $ 18 $ 1,279 Other non-cash reductions to ROU assets $ — $ — $ 1,192 $ — (in thousands) September 30, 2020 December 31, 2019 Operating lease ROU assets $ 17,385 $ 22,335 Operating lease liabilities $ 20,388 $ 24,475 Weighted-average remaining lease term - operating leases 4.07 years 4.69 years Weighted-average discount rate - operating leases 2.32 % 2.33 % Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows: (in thousands) September 30, 2020 2020 $ 1,494 2021 5,937 2022 5,904 2023 4,424 2024 2,334 2025 802 Thereafter 564 Total future minimum lease payments $ 21,459 Less imputed interest (1,071 ) Total operating lease liability $ 20,388 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
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 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 2019 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, 2020 and the results of operations of RLI Corp. (the Company) 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. Certain reclassifications were made to 2019 to conform to the classifications used in the current 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. |
Adopted Accounting Standards | B. ADOPTED ACCOUNTING STANDARDS ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Previous guidance delayed the recognition of credit losses until it was probable a loss had been incurred. This update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses, but is limited to the amount by which fair value is less than amortized cost. We adopted ASU 2016-13 on January 1, 2020 using the modified-retrospective approach. The standard applied to three of the Company’s balance sheet accounts: available-for-sale fixed income securities, premiums receivable and reinsurance balances recoverable. The impact of this standard was and is expected to continue to be immaterial, as our fixed income portfolio is weighted towards higher rated bonds (83 percent rated A or better at September 30, 2020 and 85 percent at December 31, 2019), we purchase reinsurance from financially strong reinsurers, we have a long history of collecting premium receivables through various economic cycles and we had previously maintained an allowance for uncollectible premium and reinsurance balances. In total, the cumulative-effect adjustment made to the balance sheet as of the beginning of the year resulted in a $1.1 million increase to retained earnings and an increase to accumulated other comprehensive earnings of less than $0.1 million. |
Reinsurance | C. REINSURANCE Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of our legal liability to our policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continuously monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid balances recoverable from the reinsurer are specifically identified and charged to earnings in the form of an allowance for uncollectible amounts. We subject our remaining reinsurance balances receivable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, and record an additional allowance for unrecoverable amounts from reinsurers. This credit allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $15.9 million and $8.1 million, respectively, at September 30, 2020. At December 31, 2019, the amounts were $15.7 million and $9.4 million, respectively. Adoption of ASU 2016-13 resulted in a $1.3 million decrease to the allowance for uncollectible amounts on reinsurance recoverables in 2020, while other changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs or recoveries were applied to the allowances in the first nine months of 2020. |
Intangible Assets | D. INTANGIBLE ASSETS The composition of goodwill and intangible assets at September 30, 2020 and December 31, 2019 is detailed in the following table: September 30, December 31, (in thousands) 2020 2019 Goodwill Surety $ 40,816 $ 40,816 Casualty 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,776 at 9/30/20 and $3,470 at 12/31/19 259 565 Total intangibles $ 7,759 $ 8,065 Total goodwill and intangibles $ 53,821 $ 54,127 All definite-lived intangible assets are amortized based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the third quarter of 2020 and $0.3 million for the nine months ended September 30, 2020, the same as for the comparable periods in 2019. Annual impairment assessments were performed on our goodwill and state insurance license indefinite-lived intangible asset during the second quarter of 2020. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of September 30, 2020 that would suggest an updated impairment test would be needed for our goodwill and intangible assets. |
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 Months For the Three Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 42,387 45,014 $ 0.94 $ 32,324 44,823 $ 0.72 Effect of Dilutive Securities Stock options and restricted stock units — 412 — 526 Diluted EPS Earnings available to common shareholders $ 42,387 45,426 $ 0.93 $ 32,324 45,349 $ 0.71 Anti-dilutive options excluded from diluted EPS 339 — For the Nine Months For the Nine Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 73,286 44,962 $ 1.63 $ 138,264 44,689 $ 3.09 Effect of Dilutive Securities Stock options and restricted stock units — 377 — 503 Diluted EPS Earnings available to common shareholders $ 73,286 45,339 $ 1.62 $ 138,264 45,192 $ 3.06 Anti-dilutive options excluded from diluted EPS 339 277 |
Comprehensive Earnings | F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio. In reporting other comprehensive earnings on a net basis, we used the federal statutory tax rate of 21 percent. Other comprehensive earnings, as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense of $2.5 million and $4.1 million for the third quarter of 2020 and 2019, respectively. For the nine-month periods ended September 30, 2020 and 2019, other comprehensive earnings is net of tax expense of $13.3 million and $19.3 million, respectively. Unrealized gains, net of tax, on the fixed income portfolio were $50.1 million for the first nine months of 2020, compared to $72.5 million during the same period last year. The unrealized gains were attributable to declining interest rates in both periods, which increased the fair value of securities held in the fixed income portfolio. 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: (in thousands) For the Three Months For the Nine Months Ended September 30, Ended September 30, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 2020 2019 Beginning balance $ 93,035 $ 42,593 $ 52,473 $ (14,572 ) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) — — 22 — Adjusted beginning balance $ 93,035 $ 42,593 $ 52,495 $ (14,572 ) Other comprehensive earnings before reclassifications 10,412 16,231 52,264 74,414 Amounts reclassified from accumulated other comprehensive earnings (862 ) (890 ) (2,174 ) (1,908 ) Net current-period other comprehensive earnings $ 9,550 $ 15,341 $ 50,090 $ 72,506 Ending balance $ 102,585 $ 57,934 $ 102,585 $ 57,934 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 795 $ — Credit losses on or the sale 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 (in thousands) Comprehensive Earnings For the Three Months For the Nine Months Component of Accumulated Ended September 30, Ended September 30, Affected line item in the Other Comprehensive Earnings 2020 2019 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 738 $ 1,126 $ 3,356 $ 2,415 Net realized gains 353 — (604 ) — Credit losses presented within net realized gains $ 1,091 $ 1,126 $ 2,752 $ 2,415 Earnings before income taxes (229 ) (236 ) (578 ) (507 ) Income tax expense $ 862 $ 890 $ 2,174 $ 1,908 Net earnings |
Fair Value Measurements | G. FAIR VALUE MEASUREMENTS 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 value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring 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. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. 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 widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ 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 employs a multi-dimensional model which uses standard inputs including (listed in approximate 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 are deemed Level 2. Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue 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 used to determine the cash flows for each tranche, benchmark yields, pre-payment 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. Regulation D Private Placement Securities: All Regulation D privately placed bonds are classified as corporate securities and deemed Level 3. The pricing vendor evaluation methodology for these securities includes a combination of observable and unobservable inputs. Observable inputs include public corporate spread matrices classified by sector, rating and average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value measurement. For all of our fixed income securities classified as Level 2, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. If discrepancies are found in our comparisons, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 securities provided by our pricing services are reasonable. Common Stock: As of September 30, 2020, all of our common stock holdings were traded on an exchange. Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). 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. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy. |
Risk And Uncertainties | H. RISKS AND UNCERTAINTIES Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The COVID-19 pandemic may continue to result in significant disruptions in economic activity and financial markets. The cumulative effects of any public health outbreak could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, reduce the market value of invested assets held by the Company or negatively impact the fair value of our goodwill. Catastrophe Exposures Our catastrophe reinsurance treaty renewed on January 1, 2020. We purchased limits of $400 million in excess of $25 million first-dollar retention for earthquakes in California, $425 million in excess of $25 million first-dollar retention for earthquakes outside of California and $275 million in excess of $25 million first-dollar retention for all other perils. These amounts are subject to certain co-participations by the Company on losses in excess of the $25 million retentions. On March 1, 2020, we purchased $100 million of additional catastrophe reinsurance protection on top of the previously described coverage. This increases the limits to $500 million for earthquakes in California, $525 million for earthquakes outside of California and $375 for all other perils, all of which are still subject to $25 million first-dollar retentions and certain co-participations in excess of the retentions. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Goodwill and Intangible Assets | September 30, December 31, (in thousands) 2020 2019 Goodwill Surety $ 40,816 $ 40,816 Casualty 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,776 at 9/30/20 and $3,470 at 12/31/19 259 565 Total intangibles $ 7,759 $ 8,065 Total goodwill and intangibles $ 53,821 $ 54,127 |
Schedule of Reconciliation of Numerator and Denominator of the Basic and Diluted Earnings Per Share Computations | For the Three Months For the Three Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 42,387 45,014 $ 0.94 $ 32,324 44,823 $ 0.72 Effect of Dilutive Securities Stock options and restricted stock units — 412 — 526 Diluted EPS Earnings available to common shareholders $ 42,387 45,426 $ 0.93 $ 32,324 45,349 $ 0.71 Anti-dilutive options excluded from diluted EPS 339 — For the Nine Months For the Nine Months Ended September 30, 2020 Ended September 30, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings available to common shareholders $ 73,286 44,962 $ 1.63 $ 138,264 44,689 $ 3.09 Effect of Dilutive Securities Stock options and restricted stock units — 377 — 503 Diluted EPS Earnings available to common shareholders $ 73,286 45,339 $ 1.62 $ 138,264 45,192 $ 3.06 Anti-dilutive options excluded from diluted EPS 339 277 |
Schedule of Changes in the Balance of Each Component of Accumulated Other Comprehensive Earnings | (in thousands) For the Three Months For the Nine Months Ended September 30, Ended September 30, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 2020 2019 Beginning balance $ 93,035 $ 42,593 $ 52,473 $ (14,572 ) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) — — 22 — Adjusted beginning balance $ 93,035 $ 42,593 $ 52,495 $ (14,572 ) Other comprehensive earnings before reclassifications 10,412 16,231 52,264 74,414 Amounts reclassified from accumulated other comprehensive earnings (862 ) (890 ) (2,174 ) (1,908 ) Net current-period other comprehensive earnings $ 9,550 $ 15,341 $ 50,090 $ 72,506 Ending balance $ 102,585 $ 57,934 $ 102,585 $ 57,934 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 795 $ — |
Schedule of Effects of Reclassifications out of Accumulated Other Comprehensive Earnings | Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three Months For the Nine Months Component of Accumulated Ended September 30, Ended September 30, Affected line item in the Other Comprehensive Earnings 2020 2019 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 738 $ 1,126 $ 3,356 $ 2,415 Net realized gains 353 — (604 ) — Credit losses presented within net realized gains $ 1,091 $ 1,126 $ 2,752 $ 2,415 Earnings before income taxes (229 ) (236 ) (578 ) (507 ) Income tax expense $ 862 $ 890 $ 2,174 $ 1,908 Net earnings |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investments Debt And Equity Securities [Abstract] | |
Schedule of Disposition of Fixed Maturities and Equities | Sales Proceeds Gross Realized Net Realized (in thousands) From Sales Gains Losses Gain (Loss) 2020 Available-for-sale $ 68,621 $ 4,959 $ (1,518 ) $ 3,441 Equities 66,185 22,172 (8,756 ) 13,416 2019 Available-for-sale $ 174,767 $ 3,689 $ (1,393 ) $ 2,296 Equities 48,650 15,575 (1,184 ) 14,391 Calls/Maturities Gross Realized Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2020 Available-for-sale $ 199,036 $ 525 $ (10 ) $ 515 2019 Available-for-sale $ 106,241 $ 133 $ (14 ) $ 119 |
Fair Value, Assets Measured on Recurring Basis | As of September 30, 2020 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 190,204 $ — $ 190,204 U.S. agency — 33,180 — 33,180 Non-U.S. govt. & agency — 10,831 — 10,831 Agency MBS — 396,852 — 396,852 ABS/CMBS* — 208,282 — 208,282 Corporate — 793,012 11,925 804,937 Municipal — 515,509 — 515,509 Total fixed income securities - available-for-sale $ — $ 2,147,870 $ 11,925 $ 2,159,795 Equity securities 455,956 — — 455,956 Other invested assets 10,620 — — 10,620 Total $ 466,576 $ 2,147,870 $ 11,925 $ 2,626,371 As of December 31, 2019 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 193,661 $ — $ 193,661 U.S. agency — 38,855 — 38,855 Non-U.S. govt. & agency — 7,628 — 7,628 Agency MBS — 420,165 — 420,165 ABS/CMBS* — 224,870 — 224,870 Corporate — 690,297 1,770 692,067 Municipal — 405,840 — 405,840 Total fixed income securities - available-for-sale $ — $ 1,981,316 $ 1,770 $ 1,983,086 Equity securities 460,630 — — 460,630 Total $ 460,630 $ 1,981,316 $ 1,770 $ 2,443,716 * Non-agency asset-backed and commercial mortgage-backed |
Summary of Changes in Balance of Level 3 Securities | (in thousands) Level 3 Securities Balance as of January 1, 2020 $ 1,770 Net realized and unrealized gains (losses) Included in net earnings as a part of: Net investment income (15 ) Net realized gains (109 ) Included in other comprehensive earnings (76 ) Total net realized and unrealized gains (losses) $ (200 ) Purchases 10,355 Balance as of September 30, 2020 $ 11,925 Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in net realized gains $ (109 ) Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings $ (76 ) |
Schedule of Contractual Maturity of Securities | September 30, 2020 (in thousands) Amortized Cost Fair Value Due in one year or less $ 85,018 $ 86,151 Due after one year through five years 475,999 502,636 Due after five years through 10 years 548,599 597,377 Due after 10 years 341,315 368,497 Mtge/ABS/CMBS* 580,048 605,134 Total available-for-sale $ 2,030,979 $ 2,159,795 * Mortgage-backed, asset-backed and commercial mortgage-backed |
Schedule of Amortized Cost and Fair Value of Available-for-sale Securities | September 30, 2020 Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair (in thousands) Cost Losses Gains Losses Value U.S. government $ 175,259 $ — $ 14,981 $ (36 ) $ 190,204 U.S. agency 28,921 — 4,259 — 33,180 Non-U.S. govt. & agency 10,307 — 524 — 10,831 Agency MBS 376,536 — 20,617 (301 ) 396,852 ABS/CMBS* 203,511 (19 ) 5,347 (557 ) 208,282 Corporate 750,250 (613 ) 58,731 (3,431 ) 804,937 Municipal 486,195 — 29,587 (273 ) 515,509 Total Fixed Income $ 2,030,979 $ (632 ) $ 134,046 $ (4,598 ) $ 2,159,795 * Non-agency asset-backed and commercial mortgage-backed December 31, 2019 Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair (in thousands) Cost Losses Gains Losses Value U.S. government $ 186,699 $ — $ 6,994 $ (32 ) $ 193,661 U.S. agency 36,535 — 2,362 (42 ) 38,855 Non-U.S. govt. & agency 7,333 — 295 — 7,628 Agency MBS 411,808 — 8,920 (563 ) 420,165 ABS/CMBS* 222,832 — 2,514 (476 ) 224,870 Corporate 659,640 — 33,245 (818 ) 692,067 Municipal 390,431 — 16,131 (722 ) 405,840 Total Fixed Income $ 1,915,278 $ — $ 70,461 $ (2,653 ) $ 1,983,086 * Non-agency asset-backed and commercial mortgage-backed |
Schedule of Debt Securities Available-for-sale Allowance for Credit Loss | Three Months Ended Nine Months Ended (in thousands) September 30, 2020 September 30, 2020 Beginning balance $ 985 $ — Increase to allowance from securities for which credit losses were not previously recorded 17 780 Reduction from securities sold during the period (6 ) (117 ) Reductions from intent to sell securities (186 ) (186 ) Net increase (decrease) from securities that had an allowance at the beginning of the period (178 ) 155 Balance as of September 30, $ 632 $ 632 |
Schedule of Securities in an Unrealized Loss Position Segregated by Type and Length of Time in an Unrealized Loss Position | September 30, 2020 December 31, 2019 (in thousands) < 12 Mos. 12 Mos. & Greater Total < 12 Mos. 12 Mos. & Greater Total U.S. government Fair value $ 5,900 $ — $ 5,900 $ 2,505 $ 8,463 $ 10,968 Amortized cost 5,936 — 5,936 2,506 8,494 11,000 Unrealized loss $ (36 ) $ — $ (36 ) $ (1 ) $ (31 ) $ (32 ) U.S. agency Fair value $ — $ — $ — $ 6,794 $ — $ 6,794 Amortized cost — — — 6,836 — 6,836 Unrealized loss $ — $ — $ — $ (42 ) $ — $ (42 ) Agency MBS Fair value $ 45,929 $ 244 $ 46,173 $ 21,548 $ 41,718 $ 63,266 Amortized cost 46,229 245 46,474 21,664 42,165 63,829 Unrealized loss $ (300 ) $ (1 ) $ (301 ) $ (116 ) $ (447 ) $ (563 ) ABS/CMBS* Fair value $ 35,837 $ 14,586 $ 50,423 $ 74,968 $ 18,036 $ 93,004 Amortized cost 36,236 14,744 50,980 75,332 18,148 93,480 Unrealized loss $ (399 ) $ (158 ) $ (557 ) $ (364 ) $ (112 ) $ (476 ) Corporate Fair value $ 107,521 $ 4,669 $ 112,190 $ 16,478 $ 9,348 $ 25,826 Amortized cost 110,664 4,957 115,621 16,950 9,694 26,644 Unrealized loss $ (3,143 ) $ (288 ) $ (3,431 ) $ (472 ) $ (346 ) $ (818 ) Municipal Fair value $ 32,681 $ — $ 32,681 $ 47,018 $ — $ 47,018 Amortized cost 32,954 — 32,954 47,740 — 47,740 Unrealized loss $ (273 ) $ — $ (273 ) $ (722 ) $ — $ (722 ) Total fixed income Fair value $ 227,868 $ 19,499 $ 247,367 $ 169,311 $ 77,565 $ 246,876 Amortized cost 232,019 19,946 251,965 171,028 78,501 249,529 Unrealized loss $ (4,151 ) $ (447 ) $ (4,598 ) $ (1,717 ) $ (936 ) $ (2,653 ) * Non-agency asset-backed and 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 $ 152,119 $ 150,542 $ (1,577 ) 34.3 % 2 BBB Baa 25,884 25,436 (448 ) 9.7 % 3 BB Ba 26,706 26,052 (654 ) 14.2 % 4 B B 42,998 41,372 (1,626 ) 35.4 % 5 CCC Caa 4,086 3,810 (276 ) 6.0 % 6 CC or lower Ca or lower 172 155 (17 ) 0.4 % Total $ 251,965 $ 247,367 $ (4,598 ) 100.0 % |
Historical Loss And LAE Devel_2
Historical Loss And LAE Development (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Historical Loss And L A E Development Disclosure [Abstract] | |
Schedule of Reconciliation of Unpaid Losses and Settlement Expenses (LAE) | For the Nine Months Ended September 30, (in thousands) 2020 2019 Unpaid losses and LAE at beginning of year Gross $ 1,574,352 $ 1,461,348 Ceded (384,517 ) (364,999 ) Net $ 1,189,835 $ 1,096,349 Adoption impact of ASU 2016-13 on reinsurance balances recoverable $ (1,345 ) $ — Increase (decrease) in incurred losses and LAE Current accident year $ 409,867 $ 362,395 Prior accident years (70,048 ) (55,189 ) Total incurred $ 339,819 $ 307,206 Loss and LAE payments for claims incurred Current accident year $ (49,337 ) $ (51,270 ) Prior accident years (192,056 ) (176,957 ) Total paid $ (241,393 ) $ (228,227 ) Net unpaid losses and LAE at September 30 $ 1,286,916 $ 1,175,328 Unpaid losses and LAE at September 30 Gross $ 1,686,876 $ 1,557,358 Ceded (399,960 ) (382,030 ) Net $ 1,286,916 $ 1,175,328 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Reconciliation of Income Tax Expense Attributable to Income from Operations with Amounts Computed by Applying U.S. Federal Tax Rate to Pretax Income from Continuing Operations | For the Three Months Ended September 30, For the Nine Months Ended September 30, 2020 2019 2020 2019 (in thousands) Amount % Amount % Amount % Amount % Provision for income taxes at the statutory rate of 21% $ 10,817 21.0 % $ 8,179 21.0 % $ 18,275 21.0 % $ 35,598 21.0 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (848 ) (1.6 ) % (614 ) (1.6 ) % (2,141 ) (2.4 ) % (3,546 ) (2.1 ) % Tax exempt interest income (324 ) (0.6 ) % (276 ) (0.7 ) % (960 ) (1.1 ) % (930 ) (0.6 ) % Dividends received deduction (221 ) (0.4 ) % (218 ) (0.6 ) % (705 ) (0.8 ) % (635 ) (0.4 ) % Investment tax credit (316 ) (0.6 ) % — 0.0 % (1,766 ) (2.0 ) % — 0.0 % ESOP dividends paid deduction (134 ) (0.3 ) % (136 ) (0.3 ) % (403 ) (0.5 ) % (413 ) (0.2 ) % Nondeductible expenses 275 0.5 % 243 0.6 % 639 0.7 % 1,166 0.7 % Other items, net (127 ) (0.3 ) % (555 ) (1.4 ) % 799 0.9 % 12 0.0 % Total tax expense $ 9,122 17.7 % $ 6,623 17.0 % $ 13,738 15.8 % $ 31,252 18.4 % |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of Option Activity | The following tables summarize option activity for the nine-month periods ended September 30, 2020 and 2019: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2020 1,667,290 $ 62.52 Options granted 275,977 93.39 Options exercised (177,045 ) 49.13 $ 7,639 Options canceled/forfeited (6,410 ) 73.42 Outstanding options at September 30, 2020 1,759,812 $ 68.67 5.14 $ 29,740 Exercisable options at September 30, 2020 807,570 $ 59.03 3.82 $ 20,054 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2019 1,964,880 $ 54.24 Options granted 324,525 81.27 Options exercised (493,615 ) 45.61 $ 18,157 Options canceled/forfeited (59,050 ) 60.92 Outstanding options at September 30, 2019 1,736,740 $ 61.52 5.43 $ 54,515 Exercisable options at September 30, 2019 622,290 $ 52.78 4.03 $ 24,975 |
Summary of Weighted Average Grant-date Assumptions and Weighted Average Fair Values | 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: 2020 2019 Weighted-average fair value of grants $ 13.33 $ 13.47 Risk-free interest rates 0.41 % 2.41 % Dividend yield 2.30 % 2.69 % Expected volatility 22.67 % 22.71 % Expected option life 4.96 years 4.95 years |
Operating Segment Information (
Operating Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Summary of Selected Information by Operating Segment | Selected information by operating segment is presented in the table below. Additionally, the table reconciles segment totals to total earnings and total revenues. For the Three Months For the Nine Months Revenues Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Casualty $ 143,002 $ 140,423 $ 421,637 $ 415,667 Property 45,380 41,476 135,115 120,194 Surety 28,248 29,356 84,194 87,624 Net premiums earned $ 216,630 $ 211,255 $ 640,946 $ 623,485 Net investment income 16,543 17,532 51,238 51,095 Net realized gains 1,512 3,211 14,555 17,043 Net unrealized gains (losses) on equity securities 28,126 4,906 (27,564 ) 47,214 Total consolidated revenue $ 262,811 $ 236,904 $ 679,175 $ 738,837 Net Earnings (in thousands) 2020 2019 2020 2019 Casualty $ 13,993 $ 2,370 $ 22,403 $ 14,652 Property (19,951 ) 6,202 (3,876 ) 14,012 Surety 7,110 5,159 24,027 22,432 Net underwriting income $ 1,152 $ 13,731 $ 42,554 $ 51,096 Net investment income 16,543 17,532 51,238 51,095 Net realized gains 1,512 3,211 14,555 17,043 Net unrealized gains (losses) on equity securities 28,126 4,906 (27,564 ) 47,214 General corporate expense and interest on debt (4,569 ) (4,444 ) (12,118 ) (14,725 ) Equity in earnings of unconsolidated investees 8,745 4,011 18,359 17,793 Earnings before income taxes $ 51,509 $ 38,947 $ 87,024 $ 169,516 Income tax expense 9,122 6,623 13,738 31,252 Net earnings $ 42,387 $ 32,324 $ 73,286 $ 138,264 |
Summary of Revenue by Major Product Type | The following table further summarizes revenues by major product type within each operating segment: For the Three Months For the Nine Months Net Premiums Earned Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Casualty Commercial excess and personal umbrella $ 46,404 $ 35,959 $ 128,813 $ 102,580 General liability 22,747 25,005 69,396 74,240 Professional services 21,422 20,816 63,501 60,390 Commercial transportation 15,130 21,067 47,454 61,979 Small commercial 16,009 13,927 47,433 40,430 Executive products 6,387 7,026 20,693 19,476 Other casualty 14,903 16,623 44,347 56,572 Total $ 143,002 $ 140,423 $ 421,637 $ 415,667 Property Marine $ 19,687 $ 19,033 $ 59,976 $ 54,633 Commercial property 20,168 17,098 58,371 50,248 Specialty personal 4,794 4,948 14,730 14,324 Other property 731 397 2,038 989 Total $ 45,380 $ 41,476 $ 135,115 $ 120,194 Surety Commercial $ 10,543 $ 10,851 $ 32,287 $ 32,638 Miscellaneous 10,547 10,998 31,562 33,880 Contract 7,158 7,507 20,345 21,106 Total $ 28,248 $ 29,356 $ 84,194 $ 87,624 Grand Total $ 216,630 $ 211,255 $ 640,946 $ 623,485 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of Components of Lease Expense and Other lease Information | The Company’s operating lease obligations are for branch office facilities. The components of lease expense and other lease information as of and during the three and nine-month periods ended September 30, 2020 and 2019 are as follows: For the Three Months For the Nine Months Ended September 30, Ended September 30, (in thousands) 2020 2019 2020 2019 Operating lease cost $ 1,364 $ 1,423 $ 4,140 $ 4,349 Variable lease cost 338 321 1,014 1,530 Sublease income (96 ) — (139 ) — Total lease cost $ 1,606 $ 1,744 $ 5,015 $ 5,879 Cash paid for amounts included in measurement of lease liabilities Operating cash outflows from operating leases $ 1,480 $ 1,438 $ 4,470 $ 4,234 ROU assets obtained in exchange for new operating lease liabilities $ — $ 427 $ 15 $ 1,378 Reduction to ROU assets resulting from reduction to lease liabilities $ 18 $ — $ 18 $ 1,279 Other non-cash reductions to ROU assets $ — $ — $ 1,192 $ — (in thousands) September 30, 2020 December 31, 2019 Operating lease ROU assets $ 17,385 $ 22,335 Operating lease liabilities $ 20,388 $ 24,475 Weighted-average remaining lease term - operating leases 4.07 years 4.69 years Weighted-average discount rate - operating leases 2.32 % 2.33 % |
Schedule of Future Minimum Lease Payments under Non-cancellable Leases | Future minimum lease payments under non-cancellable leases as of September 30, 2020 were as follows: (in thousands) September 30, 2020 2020 $ 1,494 2021 5,937 2022 5,904 2023 4,424 2024 2,334 2025 802 Thereafter 564 Total future minimum lease payments $ 21,459 Less imputed interest (1,071 ) Total operating lease liability $ 20,388 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Accounting Standards - Additional Information (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Percentage Of Fixed Income Portfolio Rated A Or Better | 83.00% | 85.00% |
Accumulated other comprehensive earnings | $ 102,585,000 | $ 52,473,000 |
Retained earnings | $ 1,056,445,000 | 1,014,046,000 |
Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | ||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Retained earnings | 1,100,000 | |
Maximum | Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | ||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
Accumulated other comprehensive earnings | $ 100,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Reinsurance - Additional Information (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | |
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
Amount of allowance for uncollectible amounts on paid recoverables | $ 15,900,000 | $ 15,700,000 | |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 8,097,000 | $ 9,402,000 | |
Financing Receivable, Allowance for Credit Loss, Writeoff | 0 | ||
Financing Receivable, Allowance for Credit Loss, Recovery | $ 0 | ||
Accounting Standards Update 2016-13 | |||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
Adoption impact of ASU 2016-13 on reinsurance balances recoverable | $ 1,345,000 | ||
Accounting Standards Update 2016-13 | Cumulative Effect, Period of Adoption, Adjustment | |||
New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |||
Adoption impact of ASU 2016-13 on reinsurance balances recoverable | $ 1,300,000 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Intangible Assets - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Business Acquisition [Line Items] | |||||
Goodwill | $ 46,062,000 | $ 46,062,000 | $ 46,062,000 | ||
Indefinite-lived intangibles - state insurance licenses | 7,500,000 | 7,500,000 | 7,500,000 | ||
Definite-lived intangibles, net of accumulated amortization of $3,776 at 9/30/20 and $3,470 at 12/31/19 | 259,000 | 259,000 | 565,000 | ||
Total intangibles | 7,759,000 | 7,759,000 | 8,065,000 | ||
Goodwill and intangibles | 53,821,000 | 53,821,000 | 54,127,000 | ||
Amortization of intangible assets | 100,000 | $ 100,000 | 300,000 | $ 300,000 | |
Impairment of indefinite-lived intangible assets | 0 | ||||
Surety Segment | |||||
Business Acquisition [Line Items] | |||||
Goodwill | 40,816,000 | 40,816,000 | 40,816,000 | ||
Goodwill, Impairment Loss | 0 | ||||
Casualty | |||||
Business Acquisition [Line Items] | |||||
Goodwill | $ 5,246,000 | 5,246,000 | $ 5,246,000 | ||
Goodwill, Impairment Loss | $ 0 |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Intangible Assets - Schedule of Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Business Acquisition [Line Items] | ||
Goodwill | $ 46,062 | $ 46,062 |
Indefinite-lived intangibles - state insurance licenses | 7,500 | 7,500 |
Definite-lived intangibles, net of accumulated amortization of $3,776 at 9/30/20 and $3,470 at 12/31/19 | 259 | 565 |
Total intangibles | 7,759 | 8,065 |
Goodwill and intangibles | 53,821 | 54,127 |
Surety Segment | ||
Business Acquisition [Line Items] | ||
Goodwill | 40,816 | 40,816 |
Casualty | ||
Business Acquisition [Line Items] | ||
Goodwill | $ 5,246 | $ 5,246 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Intangible Assets - Schedule of Goodwill and Intangible Assets (Parenthetical) (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Accumulated amortization of definite-lived intangibles | $ 3,776 | $ 3,470 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Schedule of Reconciliation of Numerator and Denominator of the Basic and Diluted Earnings Per Share Computations (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Basic EPS, Income (Numerator) | ||||
Income available to common shareholders | $ 42,387 | $ 32,324 | $ 73,286 | $ 138,264 |
Diluted EPS, Income (Numerator) | ||||
Income available to common shareholders | $ 42,387 | $ 32,324 | $ 73,286 | $ 138,264 |
Basic EPS, Weighted Average Shares (Denominator) | ||||
Number of shares outstanding | 45,014 | 44,823 | 44,962 | 44,689 |
Effect of Dilutive Securities, Shares (Denominator) | ||||
Stock options and restricted stock units | 412 | 526 | 377 | 503 |
Diluted EPS, Weighted Average Shares (Denominator) | ||||
Number of shares outstanding | 45,426 | 45,349 | 45,339 | 45,192 |
Earnings Per Share, Diluted, Other Disclosures | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 339 | 339 | 277 | |
Basic EPS, Per Share Amount | ||||
Basic net earnings per share (in dollars per share) | $ 0.94 | $ 0.72 | $ 1.63 | $ 3.09 |
Diluted EPS, Per Share Amount | ||||
Diluted earnings per share (in dollars per share) | $ 0.93 | $ 0.71 | $ 1.62 | $ 3.06 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Comprehensive Earnings - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
COMPREHENSIVE EARNINGS | ||||||||
Tax rate used (as a percent) | 21.00% | 21.00% | 21.00% | 21.00% | ||||
Other comprehensive income (loss), tax | $ 2,500 | $ 4,100 | $ 13,300 | $ 19,300 | ||||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||||||
Net current-period other comprehensive earnings (loss) | $ 9,550 | $ 53,571 | $ (13,031) | $ 15,341 | $ 27,864 | $ 29,301 | $ 50,090 | $ 72,506 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Schedule of Changes in the Balance of Each Component of Accumulated Other Comprehensive Earnings (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Changes in the balance of each component of accumulated other comprehensive earnings | ||||||||
Beginning balance | $ 52,473 | $ 52,473 | ||||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | |||||||
Net current-period other comprehensive earnings | $ 9,550 | $ 53,571 | $ (13,031) | $ 15,341 | $ 27,864 | $ 29,301 | 50,090 | $ 72,506 |
Ending balance | 102,585 | 102,585 | ||||||
Balance of securities for which an allowance for credit losses has been recognized in net earnings | 795 | 795 | ||||||
Unrealized Gains and Losses on Available-for-Sale Securities | ||||||||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||||||
Beginning balance | 93,035 | 52,473 | 42,593 | (14,572) | 52,473 | (14,572) | ||
Other comprehensive earnings before reclassifications | 10,412 | 16,231 | 52,264 | 74,414 | ||||
Amounts reclassified from accumulated other comprehensive earnings | (862) | (890) | (2,174) | (1,908) | ||||
Ending balance | 102,585 | 93,035 | 57,934 | 42,593 | 102,585 | 57,934 | ||
Unrealized Gains and Losses on Available-for-Sale Securities | Cumulative Effect, Period of Adoption, Adjustment | ||||||||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||||||
Beginning balance | 22 | $ 22 | ||||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | |||||||
Unrealized Gains and Losses on Available-for-Sale Securities | Cumulative Effect, Period of Adoption, Adjusted Balance | ||||||||
Changes in the balance of each component of accumulated other comprehensive earnings | ||||||||
Beginning balance | $ 93,035 | $ 52,495 | $ 42,593 | $ (14,572) | $ 52,495 | $ (14,572) | ||
Ending balance | $ 93,035 | $ 42,593 |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Schedule of Effects of Reclassifications out of Accumulated Other Comprehensive Earnings (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Reclassification Adjustment Out of Accumulated Other Comprehensive Income | ||||||||
Net realized gains | $ 1,512 | $ 3,211 | $ 14,555 | $ 17,043 | ||||
Credit losses on available-for-sale securities | 178 | (155) | ||||||
Earnings before income taxes | 51,509 | 38,947 | 87,024 | 169,516 | ||||
Income tax expense | (9,122) | (6,623) | (13,738) | (31,252) | ||||
Net earnings | 42,387 | $ 92,166 | $ (61,267) | 32,324 | $ 40,467 | $ 65,473 | 73,286 | 138,264 |
Unrealized Gains and Losses on Available-for-Sale Securities | Reclassification out of Accumulated Other Comprehensive Income | ||||||||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income | ||||||||
Net realized gains | 738 | 1,126 | 3,356 | 2,415 | ||||
Credit losses on available-for-sale securities | 353 | (604) | ||||||
Earnings before income taxes | 1,091 | 1,126 | 2,752 | 2,415 | ||||
Income tax expense | (229) | (236) | (578) | (507) | ||||
Net earnings | $ 862 | $ 890 | $ 2,174 | $ 1,908 |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Catastrophe Exposures - Additional Information (Details) - USD ($) $ in Millions | Mar. 01, 2020 | Feb. 29, 2020 |
Liability For Catastrophe Claims [Line Items] | ||
First-dollar retention | $ 25 | $ 25 |
Additional catastrophe reinsurance | 100 | |
California Earthquake | ||
Liability For Catastrophe Claims [Line Items] | ||
Catastrophe reinsurance | 500 | 400 |
First-dollar retention | 25 | |
Non-California Earthquake | ||
Liability For Catastrophe Claims [Line Items] | ||
Catastrophe reinsurance | 525 | 425 |
First-dollar retention | 25 | |
Other Perils | ||
Liability For Catastrophe Claims [Line Items] | ||
Catastrophe reinsurance | $ 375 | 275 |
First-dollar retention | $ 25 |
Investments - Disposition of Fi
Investments - Disposition of Fixed Income and Equity Securities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
SALES | Debt Securities | Available for sale securities | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | $ 68,621 | $ 174,767 |
Gross Realized Gains | 4,959 | 3,689 |
Gross Realized Losses | (1,518) | (1,393) |
Net Realized Gain (Loss) | 3,441 | 2,296 |
SALES | Equity Securities | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | 66,185 | 48,650 |
Gross Realized Gains | 22,172 | 15,575 |
Gross Realized Losses | (8,756) | (1,184) |
Net Realized Gain (Loss) | 13,416 | 14,391 |
CALLS/MATURITIES | Debt Securities | Available for sale securities | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | 199,036 | 106,241 |
Gross Realized Gains | 525 | 133 |
Gross Realized Losses | (10) | (14) |
Net Realized Gain (Loss) | $ 515 | $ 119 |
Investments - Assets Measured a
Investments - Assets Measured at Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets measured at Fair Value | ||
Available-for-sale fixed income | $ 2,159,795 | $ 1,983,086 |
Equity securities | 455,956 | 460,630 |
Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 515,509 | 405,840 |
Fair Value Measured on Recurring Basis | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 2,159,795 | 1,983,086 |
Equity securities | 455,956 | 460,630 |
Other invested assets | 10,620 | |
Total assets at fair value | 2,626,371 | 2,443,716 |
Fair Value Measured on Recurring Basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets measured at Fair Value | ||
Equity securities | 455,956 | 460,630 |
Other invested assets | 10,620 | |
Total assets at fair value | 466,576 | 460,630 |
Fair Value Measured on Recurring Basis | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 2,147,870 | 1,981,316 |
Total assets at fair value | 2,147,870 | 1,981,316 |
Fair Value Measured on Recurring Basis | Significant Unobservable Inputs (Level 3) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 11,925 | 1,770 |
Total assets at fair value | 11,925 | 1,770 |
Fair Value Measured on Recurring Basis | U.S. government | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 190,204 | 193,661 |
Fair Value Measured on Recurring Basis | U.S. government | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 190,204 | 193,661 |
Fair Value Measured on Recurring Basis | U.S. Agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 33,180 | 38,855 |
Fair Value Measured on Recurring Basis | U.S. Agency | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 33,180 | 38,855 |
Fair Value Measured on Recurring Basis | Non-U.S. govt. & agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 10,831 | 7,628 |
Fair Value Measured on Recurring Basis | Non-U.S. govt. & agency | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 10,831 | 7,628 |
Fair Value Measured on Recurring Basis | Agency MBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 396,852 | 420,165 |
Fair Value Measured on Recurring Basis | Agency MBS | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 396,852 | 420,165 |
Fair Value Measured on Recurring Basis | ABS/CMBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 208,282 | 224,870 |
Fair Value Measured on Recurring Basis | ABS/CMBS | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 208,282 | 224,870 |
Fair Value Measured on Recurring Basis | Corporate Debt | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 804,937 | 692,067 |
Fair Value Measured on Recurring Basis | Corporate Debt | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 793,012 | 690,297 |
Fair Value Measured on Recurring Basis | Corporate Debt | Significant Unobservable Inputs (Level 3) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 11,925 | 1,770 |
Fair Value Measured on Recurring Basis | Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 515,509 | 405,840 |
Fair Value Measured on Recurring Basis | Municipal | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | $ 515,509 | $ 405,840 |
Investments - Summary of Change
Investments - Summary of Changes in Balance of Level 3 securities (Details) - Regulation D Private Placement Fixed Income Securities $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Summary of changes in Level 3 securities | |
Beginning balance | $ 1,770 |
Net investment income | (15) |
Net realized gains | (109) |
Included in other comprehensive earnings | (76) |
Total net realized and unrealized gains (losses) | (200) |
Purchases | 10,355 |
Ending balance | 11,925 |
Other Comprehensive Earnings (Loss) | |
Summary of changes in Level 3 securities | |
Change in unrealized gains (losses) during the period for Level 3 assets held at period-end | (76) |
Net Realized Gains (Losses) | |
Summary of changes in Level 3 securities | |
Change in unrealized gains (losses) during the period for Level 3 assets held at period-end | $ (109) |
Investments - Amortized Cost an
Investments - Amortized Cost and Fair Value of Available-for-sale Fixed Income Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Amortized Cost | ||
Due in one year or less | $ 85,018 | |
Due after one year through five years | 475,999 | |
Due after five years through 10 years | 548,599 | |
Due after 10 years | 341,315 | |
Mtge/ABS/CMBS* | 580,048 | |
Total available-for-sale | 2,030,979 | $ 1,915,278 |
Fair Value | ||
Due in one year or less | 86,151 | |
Due after one year through five years | 502,636 | |
Due after five years through 10 years | 597,377 | |
Due after 10 years | 368,497 | |
Mtge/ABS/CMBS* | 605,134 | |
Total available-for-sale | $ 2,159,795 | $ 1,983,086 |
Investments - Additional Inform
Investments - Additional Information (Details) | 9 Months Ended | ||
Sep. 30, 2020USD ($)security | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Investment Holdings [Line Items] | |||
Accrued investment income | $ 15,685,000 | $ 14,587,000 | |
Debt Securities | |||
Investment Holdings [Line Items] | |||
Accrued investment income | $ 14,500,000 | 13,500,000 | |
Number of debt securities for which there is an allowance for credit losses | security | 29 | ||
Net realized gains | $ 600,000 | ||
Other-than-temporary impairment loss, debt securities, available-for-sale, recognized in earnings | $ 0 | ||
Number of debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded | security | 234 | ||
Unrealized loss | $ 4,598,000 | $ 2,653,000 | |
Unrealized losses as percentage of fixed income portfolio cost basis | 0.20% | ||
Unrealized losses relative to total invested assets (as a percent) | 0.20% | ||
Number of unrealized loss positions | security | 263 | ||
Number of securities in unrealized loss positions for 12 months or longer | security | 29 |
Investments - Amortized Cost _2
Investments - Amortized Cost and Fair Value of Available-for-sale Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | $ 2,030,979 | $ 1,915,278 | |
Allowance for Credit Losses | (632) | $ (985) | 0 |
Gross Unrealized Gains | 134,046 | 70,461 | |
Gross Unrealized Losses | (4,598) | (2,653) | |
Fair Value | 2,159,795 | 1,983,086 | |
U.S. government | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 175,259 | 186,699 | |
Gross Unrealized Gains | 14,981 | 6,994 | |
Gross Unrealized Losses | (36) | (32) | |
Fair Value | 190,204 | 193,661 | |
U.S. Agency | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 28,921 | 36,535 | |
Gross Unrealized Gains | 4,259 | 2,362 | |
Gross Unrealized Losses | (42) | ||
Fair Value | 33,180 | 38,855 | |
Non-U.S. govt. & agency | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 10,307 | 7,333 | |
Gross Unrealized Gains | 524 | 295 | |
Fair Value | 10,831 | 7,628 | |
Agency MBS | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 376,536 | 411,808 | |
Gross Unrealized Gains | 20,617 | 8,920 | |
Gross Unrealized Losses | (301) | (563) | |
Fair Value | 396,852 | 420,165 | |
ABS/CMBS | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 203,511 | 222,832 | |
Allowance for Credit Losses | (19) | ||
Gross Unrealized Gains | 5,347 | 2,514 | |
Gross Unrealized Losses | (557) | (476) | |
Fair Value | 208,282 | 224,870 | |
Corporate Debt | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 750,250 | 659,640 | |
Allowance for Credit Losses | (613) | ||
Gross Unrealized Gains | 58,731 | 33,245 | |
Gross Unrealized Losses | (3,431) | (818) | |
Fair Value | 804,937 | 692,067 | |
Municipal | |||
Schedule Of Available For Sale Securities [Line Items] | |||
Total available-for-sale | 486,195 | 390,431 | |
Gross Unrealized Gains | 29,587 | 16,131 | |
Gross Unrealized Losses | (273) | (722) | |
Fair Value | $ 515,509 | $ 405,840 |
Investments - Schedule of Debt
Investments - Schedule of Debt Securities Available-for-sale Allowance for Credit Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Investments Debt And Equity Securities [Abstract] | ||
Beginning balance | $ 985 | $ 0 |
Increase to allowance from securities for which credit losses were not previously recorded | 17 | 780 |
Reduction from securities sold during the period | (6) | (117) |
Reductions from intent to sell securities | (186) | (186) |
Net increase (decrease) from securities that had an allowance at the beginning of the period | (178) | 155 |
Balance as of September 30, | $ 632 | $ 632 |
Investments - Summary of the To
Investments - Summary of the Total Value of Fixed Income Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 | |
U.S. government | |||
Fair value | |||
Less than 12 months | $ 5,900 | $ 2,505 | |
12 months and greater | 8,463 | ||
Total Fair Value | 5,900 | 10,968 | |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 5,936 | 2,506 | |
12 months and greater | 8,494 | ||
Total Cost or Amortized Cost | 5,936 | 11,000 | |
Unrealized loss | |||
Less than 12 months | (36) | (1) | |
12 months and greater | (31) | ||
Total Unrealized Loss | (36) | (32) | |
U.S. Agency | |||
Fair value | |||
Less than 12 months | 6,794 | ||
Total Fair Value | 6,794 | ||
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 6,836 | ||
Total Cost or Amortized Cost | 6,836 | ||
Unrealized loss | |||
Less than 12 months | (42) | ||
Total Unrealized Loss | (42) | ||
Agency MBS | |||
Fair value | |||
Less than 12 months | 45,929 | 21,548 | |
12 months and greater | 244 | 41,718 | |
Total Fair Value | 46,173 | 63,266 | |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 46,229 | 21,664 | |
12 months and greater | 245 | 42,165 | |
Total Cost or Amortized Cost | 46,474 | 63,829 | |
Unrealized loss | |||
Less than 12 months | (300) | (116) | |
12 months and greater | (1) | (447) | |
Total Unrealized Loss | (301) | (563) | |
ABS/CMBS | |||
Fair value | |||
Less than 12 months | [1] | 35,837 | 74,968 |
12 months and greater | [1] | 14,586 | 18,036 |
Total Fair Value | [1] | 50,423 | 93,004 |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | [1] | 36,236 | 75,332 |
12 months and greater | [1] | 14,744 | 18,148 |
Total Cost or Amortized Cost | [1] | 50,980 | 93,480 |
Unrealized loss | |||
Less than 12 months | [1] | (399) | (364) |
12 months and greater | [1] | (158) | (112) |
Total Unrealized Loss | [1] | (557) | (476) |
Corporate Debt | |||
Fair value | |||
Less than 12 months | 107,521 | 16,478 | |
12 months and greater | 4,669 | 9,348 | |
Total Fair Value | 112,190 | 25,826 | |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 110,664 | 16,950 | |
12 months and greater | 4,957 | 9,694 | |
Total Cost or Amortized Cost | 115,621 | 26,644 | |
Unrealized loss | |||
Less than 12 months | (3,143) | (472) | |
12 months and greater | (288) | (346) | |
Total Unrealized Loss | (3,431) | (818) | |
Municipal | |||
Fair value | |||
Less than 12 months | 32,681 | 47,018 | |
Total Fair Value | 32,681 | 47,018 | |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 32,954 | 47,740 | |
Total Cost or Amortized Cost | 32,954 | 47,740 | |
Unrealized loss | |||
Less than 12 months | (273) | (722) | |
Total Unrealized Loss | (273) | (722) | |
Debt Securities | |||
Fair value | |||
Less than 12 months | 227,868 | 169,311 | |
12 months and greater | 19,499 | 77,565 | |
Total Fair Value | 247,367 | 246,876 | |
Cost or amortized Cost | |||
Amortized cost, less than 12 months | 232,019 | 171,028 | |
12 months and greater | 19,946 | 78,501 | |
Total Cost or Amortized Cost | 251,965 | 249,529 | |
Unrealized loss | |||
Less than 12 months | (4,151) | (1,717) | |
12 months and greater | (447) | (936) | |
Total Unrealized Loss | $ (4,598) | $ (2,653) | |
[1] | Non-agency asset-backed and commercial mortgage-backed |
Investments - Unrealized Losses
Investments - Unrealized Losses (Details) - Debt Securities - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 251,965 | $ 249,529 |
Fair value | ||
Total Fair Value | 247,367 | 246,876 |
Unrealized Loss | ||
Total Unrealized Loss | $ (4,598) | $ (2,653) |
Percent to Total | 100.00% | |
NAIC Rating 1 | AAA/AA/A | Aaa/Aa/A | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 152,119 | |
Fair value | ||
Total Fair Value | 150,542 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (1,577) | |
Percent to Total | 34.30% | |
NAIC Rating 2 | BBB | Baa | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 25,884 | |
Fair value | ||
Total Fair Value | 25,436 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (448) | |
Percent to Total | 9.70% | |
NAIC Rating 3 | BB | Ba | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 26,706 | |
Fair value | ||
Total Fair Value | 26,052 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (654) | |
Percent to Total | 14.20% | |
NAIC Rating 4 | B | B | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 42,998 | |
Fair value | ||
Total Fair Value | 41,372 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (1,626) | |
Percent to Total | 35.40% | |
NAIC Rating 5 | CCC | Caa | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 4,086 | |
Fair value | ||
Total Fair Value | 3,810 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (276) | |
Percent to Total | 6.00% | |
NAIC Six Rating Member | Standard Poors CC Or Lower Member | Ca | ||
Cost or amortized Cost | ||
Total Cost or Amortized Cost | $ 172 | |
Fair value | ||
Total Fair Value | 155 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (17) | |
Percent to Total | 0.40% |
Investments - Allowance for Cre
Investments - Allowance for Credit Losses, Unrealized Losses on Securities (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Equity Securities | ||||
Investment Holdings [Line Items] | ||||
Unrealized gains (losses) on equity securities still held | $ 28.7 | $ 6.9 | $ (14.1) | $ 61.7 |
Investments - Debt and Short-te
Investments - Debt and Short-term Investments (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Investment Holdings [Line Items] | |||||
Other Investments | $ 59,988,000 | $ 59,988,000 | $ 70,441,000 | ||
Investment in Federal Home Loan Bank Stock | us-gaap:AssetPledgedAsCollateralMember | us-gaap:AssetPledgedAsCollateralMember | |||
Cash and Short-term Investments | |||||
Cash | $ 70,589,000 | $ 70,589,000 | 46,203,000 | ||
FHLBC | |||||
Investment Holdings [Line Items] | |||||
Investments pledged as collateral | 13,700,000 | 13,700,000 | |||
Federal Home Loan Bank Borrowings, Fair Value Disclosure | 0 | 0 | |||
Investment In Low Income Housing Tax Credit Partnership Net Of Amortization | |||||
Investment Holdings [Line Items] | |||||
Other Investments | 21,000,000 | 21,000,000 | 23,300,000 | ||
Total tax benefit on investments in housing tax credit partnership | 900,000 | $ 600,000 | 2,600,000 | $ 1,900,000 | |
Qualified Affordable Housing Project Investments, Commitment | 4,700,000 | 4,700,000 | |||
Investment in Private Funds | |||||
Investment Holdings [Line Items] | |||||
Other Investments | 26,500,000 | 26,500,000 | $ 46,000,000 | ||
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments | 8,300,000 | 8,300,000 | |||
Investment in Restricted Stock | |||||
Investment Holdings [Line Items] | |||||
Other Investments | $ 10,600,000 | $ 10,600,000 |
Historical Loss and LAE Devel_3
Historical Loss and LAE Development - Schedule of Reconciliation of Unpaid Losses and Settlement Expenses (LAE) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Jan. 01, 2020 | |
Unpaid losses and LAE at beginning of year | |||
Gross | $ 1,574,352 | $ 1,461,348 | |
Ceded | (384,517) | (364,999) | |
Net | 1,189,835 | 1,096,349 | |
Increase (decrease) in incurred losses and LAE | |||
Current accident year | 409,867 | 362,395 | |
Prior accident years | (70,048) | (55,189) | |
Total incurred | 339,819 | 307,206 | |
Loss and LAE payments for claims incurred | |||
Current accident year | (49,337) | (51,270) | |
Prior accident years | (192,056) | (176,957) | |
Total paid | (241,393) | (228,227) | |
Net | 1,286,916 | 1,175,328 | |
Unpaid losses and LAE at September 30 | |||
Gross | 1,686,876 | 1,557,358 | |
Ceded | (399,960) | (382,030) | |
Net | $ 1,286,916 | $ 1,175,328 | |
Accounting Standards Update 2016-13 | |||
Adoption impact of ASU 2016-13 | |||
Adoption impact of ASU 2016-13 on reinsurance balances recoverable | $ (1,345) |
Historical Loss and LAE Devel_4
Historical Loss and LAE Development - Additional Information (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Jan. 01, 2020 | |
Ceded Credit Risk [Line Items] | |||
Favorable development on prior years’ loss reserves | $ 70,048 | $ 55,189 | |
Accounting Standards Update 2016-13 | |||
Ceded Credit Risk [Line Items] | |||
Allowance on uncollectible reinsurance balances released upon adoption | $ (1,345) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate reconciliation, percent, total | 17.70% | 17.00% | 15.80% | 18.40% |
U.S. federal tax rate | 21.00% | 21.00% | 21.00% | 21.00% |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation of Income Tax Expense Attributable to Income from Operations with Amounts Computed by Applying U.S. Federal Tax Rate to Pretax Income from Continuing Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Reconciliation of income tax expense reported to amount computed by applying the U.S. federal tax rate | ||||
Provision for income taxes at the statutory rate | $ 10,817 | $ 8,179 | $ 18,275 | $ 35,598 |
Excess tax benefit on share-based compensation | (848) | (614) | (2,141) | (3,546) |
Tax exempt interest income | (324) | (276) | (960) | (930) |
Dividends received deduction | (221) | (218) | (705) | (635) |
Investment tax credit | (316) | (1,766) | ||
ESOP dividends paid deduction | (134) | (136) | (403) | (413) |
Nondeductible expenses | 275 | 243 | 639 | 1,166 |
Other items, net | (127) | (555) | 799 | 12 |
Total tax expense | $ 9,122 | $ 6,623 | $ 13,738 | $ 31,252 |
Reconciliation of income tax expense rate to the U.S. federal tax rate | ||||
Tax rate used (as a percent) | 21.00% | 21.00% | 21.00% | 21.00% |
Excess tax benefit on share-based compensation (as a percent) | (1.60%) | (1.60%) | (2.40%) | (2.10%) |
Effective rate reduction due to tax exempt interest income (as a percent) | (0.60%) | (0.70%) | (1.10%) | (0.60%) |
Effective rate reduction due to dividend received (as a percent) | (0.40%) | (0.60%) | (0.80%) | (0.40%) |
Effective rate reduction due to investment tax credit (as a percent) | (0.60%) | (0.00%) | (2.00%) | (0.00%) |
Effective rate reduction due to dividend paid to ESOP (as a percent) | (0.30%) | (0.30%) | (0.50%) | (0.20%) |
Effective rate reduction due to nondeductible expenses (as a percent) | 0.50% | 0.60% | 0.70% | 0.70% |
Effective rate reduction due to other items, net (as a percent) | (0.30%) | (1.40%) | 0.90% | 0.00% |
Total tax expense | 17.70% | 17.00% | 15.80% | 18.40% |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 60 Months Ended | 65 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | May 06, 2015 | Sep. 30, 2020 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Options granted (in shares) | 275,977 | 324,525 | |||||
Award vesting period | 5 years | ||||||
Term of options | 8 years | ||||||
Age and period of service of the participant to be eligible for retirement | 75 years | ||||||
Weighted average exercise price | $ 93.39 | $ 81.27 | |||||
Weighted-average fair value | $ 13.33 | $ 13.47 | |||||
Stock-based compensation expenses | $ 1,300,000 | $ 1,200,000 | $ 2,800,000 | $ 3,600,000 | |||
Income tax benefit from stock-based compensation | 300,000 | 200,000 | 600,000 | 700,000 | |||
Unrecognized stock-based compensation expense | 5,600,000 | $ 5,600,000 | $ 5,600,000 | ||||
Restricted Stock Units (RSUs) | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Award vesting period | 3 years | ||||||
Age and period of service of the participant to be eligible for retirement | 75 years | ||||||
Stock-based compensation expenses | 200,000 | 300,000 | $ 500,000 | 600,000 | |||
Unrecognized stock-based compensation expense | $ 1,600,000 | $ 1,600,000 | $ 1,600,000 | ||||
RSUs Granted | 58,420 | ||||||
RSUs Outstanding | 41,826 | 41,826 | 41,826 | ||||
Restricted Stock Units (RSUs) | Outside director | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Award vesting period | 1 year | ||||||
Stock-based compensation expenses | $ 100,000 | $ 100,000 | $ 200,000 | $ 500,000 | |||
RSUs Granted | 20,445 | ||||||
RSUs Outstanding | 5,375 | 5,375 | 5,375 | ||||
Grant date fair value of RSUs | $ 50,000 | $ 50,000 | |||||
RLI Corp. Long-Term Incentive Plan (2010 LTIP) | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Shares authorized for grant | 4,000,000 | ||||||
Options granted (in shares) | 2,878,000 | ||||||
RLI Corp. Long-Term Incentive Plan (2015 LTIP) | |||||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||||
Shares authorized for grant | 4,000,000 | 4,000,000 | 4,000,000 | ||||
Options granted (in shares) | 2,576,867 |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Option Activity (Details) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | |
Weighted Number of Options Outstanding | ||
Outstanding options, Beginning Balance | shares | 1,667,290 | 1,964,880 |
Options granted (in shares) | shares | 275,977 | 324,525 |
Options exercised | shares | (177,045) | (493,615) |
Options canceled/forfeited | shares | (6,410) | (59,050) |
Outstanding options, Ending Balance | shares | 1,759,812 | 1,736,740 |
Exercisable options, Ending Balance | shares | 807,570 | 622,290 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price, Outstanding options | $ / shares | $ 62.52 | $ 54.24 |
Weighted Average Exercise Price, Options granted | $ / shares | 93.39 | 81.27 |
Weighted Average Exercise Price, Options exercised | $ / shares | 49.13 | 45.61 |
Weighted Average Exercise Price, Options canceled/forfeited | $ / shares | 73.42 | 60.92 |
Weighted Average Exercise Price, Outstanding options | $ / shares | 68.67 | 61.52 |
Weighted Average Exercise Price, Exercisable options | $ / shares | $ 59.03 | $ 52.78 |
Weighted Average Remaining Contractual Life | ||
Weighted Average Remaining Contractual Life, Outstanding options | 5 years 1 month 20 days | 5 years 5 months 4 days |
Weighted Average Remaining Contractual Life, Exercisable options | 3 years 9 months 25 days | 4 years 10 days |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value, Options exercised | $ | $ 7,639 | $ 18,157 |
Aggregate Intrinsic Value, Outstanding options | $ | 29,740 | 54,515 |
Aggregate Intrinsic Value, Exercisable options | $ | $ 20,054 | $ 24,975 |
Stock Based Compensation - Su_2
Stock Based Compensation - Summary of Weighted Average Grant-date Assumptions and Weighted Average Fair Values (Details) - $ / shares | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Weighted average grant date assumptions and weighted average fair value | ||
Weighted-average fair value of grants | $ 13.33 | $ 13.47 |
Risk-free interest rates | 0.41% | 2.41% |
Dividend yield | 2.30% | 2.69% |
Expected volatility | 22.67% | 22.71% |
Expected option life | 4 years 11 months 15 days | 4 years 11 months 12 days |
Operating Segment Information -
Operating Segment Information - Summary of Selected Information by Operating Segment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | ||||||||
Net premiums earned | $ 216,630 | $ 211,255 | $ 640,946 | $ 623,485 | ||||
Net investment income | 16,543 | 17,532 | 51,238 | 51,095 | ||||
Net realized gains | 1,512 | 3,211 | 14,555 | 17,043 | ||||
Net unrealized gains (losses) on equity securities | 28,126 | 4,906 | (27,564) | 47,214 | ||||
Consolidated revenue | 262,811 | 236,904 | 679,175 | 738,837 | ||||
Net Earnings | ||||||||
Net underwriting income | 1,152 | 13,731 | 42,554 | 51,096 | ||||
Net investment income | 16,543 | 17,532 | 51,238 | 51,095 | ||||
Net realized gains | 1,512 | 3,211 | 14,555 | 17,043 | ||||
Net unrealized gains (losses) on equity securities | 28,126 | 4,906 | (27,564) | 47,214 | ||||
General corporate expense and interest on debt | (4,569) | (4,444) | (12,118) | (14,725) | ||||
Equity in earnings of unconsolidated investees | 8,745 | 4,011 | 18,359 | 17,793 | ||||
Earnings before income taxes | 51,509 | 38,947 | 87,024 | 169,516 | ||||
Income tax expense | 9,122 | 6,623 | 13,738 | 31,252 | ||||
Net earnings | 42,387 | $ 92,166 | $ (61,267) | 32,324 | $ 40,467 | $ 65,473 | 73,286 | 138,264 |
Casualty Segment | ||||||||
Revenues | ||||||||
Net premiums earned | 143,002 | 140,423 | 421,637 | 415,667 | ||||
Net Earnings | ||||||||
Net underwriting income | 13,993 | 2,370 | 22,403 | 14,652 | ||||
Property Segment | ||||||||
Revenues | ||||||||
Net premiums earned | 45,380 | 41,476 | 135,115 | 120,194 | ||||
Net Earnings | ||||||||
Net underwriting income | (19,951) | 6,202 | (3,876) | 14,012 | ||||
Surety Segment | ||||||||
Revenues | ||||||||
Net premiums earned | 28,248 | 29,356 | 84,194 | 87,624 | ||||
Net Earnings | ||||||||
Net underwriting income | $ 7,110 | $ 5,159 | $ 24,027 | $ 22,432 |
Operating Segment Information_2
Operating Segment Information - Summary of Revenue by Major Product Type (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment Reporting Information [Line Items] | ||||
Net premiums earned | $ 216,630 | $ 211,255 | $ 640,946 | $ 623,485 |
Casualty Segment | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 143,002 | 140,423 | 421,637 | 415,667 |
Casualty Segment | Commercial excess and personal umbrella | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 46,404 | 35,959 | 128,813 | 102,580 |
Casualty Segment | General liability | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 22,747 | 25,005 | 69,396 | 74,240 |
Casualty Segment | Professional services | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 21,422 | 20,816 | 63,501 | 60,390 |
Casualty Segment | Commercial transportation | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 15,130 | 21,067 | 47,454 | 61,979 |
Casualty Segment | Small commercial | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 16,009 | 13,927 | 47,433 | 40,430 |
Casualty Segment | Executive products | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 6,387 | 7,026 | 20,693 | 19,476 |
Casualty Segment | Other casualty | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 14,903 | 16,623 | 44,347 | 56,572 |
Property Segment | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 45,380 | 41,476 | 135,115 | 120,194 |
Property Segment | Marine | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 19,687 | 19,033 | 59,976 | 54,633 |
Property Segment | Commercial property | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 20,168 | 17,098 | 58,371 | 50,248 |
Property Segment | Specialty personal | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 4,794 | 4,948 | 14,730 | 14,324 |
Property Segment | Other property | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 731 | 397 | 2,038 | 989 |
Surety Segment | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 28,248 | 29,356 | 84,194 | 87,624 |
Surety Segment | Commercial | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 10,543 | 10,851 | 32,287 | 32,638 |
Surety Segment | Miscellaneous | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | 10,547 | 10,998 | 31,562 | 33,880 |
Surety Segment | Contract | ||||
Segment Reporting Information [Line Items] | ||||
Net premiums earned | $ 7,158 | $ 7,507 | $ 20,345 | $ 21,106 |
Leases - Schedule of Components
Leases - Schedule of Components of Lease Expense and Other lease Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Leases [Abstract] | |||||
Operating lease cost | $ 1,364 | $ 1,423 | $ 4,140 | $ 4,349 | |
Variable lease cost | 338 | 321 | 1,014 | 1,530 | |
Sublease income | (96) | (139) | |||
Total lease cost | 1,606 | 1,744 | 5,015 | 5,879 | |
Cash paid for amounts included in measurement of lease liabilities | |||||
Operating cash outflows from operating leases | 1,480 | 1,438 | 4,470 | 4,234 | |
ROU assets obtained in exchange for new operating lease liabilities | $ 427 | 15 | 1,378 | ||
Reduction to ROU assets resulting from reduction to lease liabilities | 18 | 18 | $ 1,279 | ||
Other non-cash reductions to ROU assets | 1,192 | ||||
Operating lease ROU assets | $ 17,385 | $ 17,385 | $ 22,335 | ||
Operating Lease, Right-of-Use Asset, Statement of Financial Position | us-gaap:OtherAssets | us-gaap:OtherAssets | us-gaap:OtherAssets | ||
Operating lease liabilities | $ 20,388 | $ 20,388 | $ 24,475 | ||
Operating Lease, Liability, Statement of Financial Position | us-gaap:OtherLiabilities | us-gaap:OtherLiabilities | us-gaap:OtherLiabilities | ||
Weighted-average remaining lease term - operating leases | 4 years 25 days | 4 years 25 days | 4 years 8 months 8 days | ||
Weighted-average discount rate - operating leases | 2.32% | 2.32% | 2.33% |
Leases - Schedule of Future Min
Leases - Schedule of Future Minimum Lease Payments under Non-cancellable Leases (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Future minimum lease payments under non-cancellable leases | ||
2020 | $ 1,494 | |
2021 | 5,937 | |
2022 | 5,904 | |
2023 | 4,424 | |
2024 | 2,334 | |
2025 | 802 | |
Thereafter | 564 | |
Total future minimum lease payments | 21,459 | |
Less imputed interest | (1,071) | |
Operating lease liabilities | $ 20,388 | $ 24,475 |