RLI - Earnings call transcript Q3 2019

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Operator

Good morning and welcome ladies and gentlemen to the RLI Corp.

Third Quarter Earnings Teleconference. At the request of the company, we will open the conference up for questions and answers after the presentation.

Before we get started let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs, and expectations for the future.

As always these forward-looking statements are subject to certain risk factors which could cause actual results to differ materially.

listed Report company's should on carefully. are including SEC be factors Annual the Form risk in various the filings reviewed These XX-K which company third quarter the X-K that The the results. a Exchange contained announcing and Commission with release press filed has Securities Form

per earnings of earnings may earnings net the equity consist the RLI's earnings reference and financial share after-tax or earnings make which from realized of operations management securities. unrealized losses the call results. from RLI operating elimination of and are per operations on to gains after during and share non-GAAP measures gains losses or operating after-tax

management but company's operating Form X-K X-K RLI's available core periods, may gauging not operating in contains a be at are earnings. the The reconciliation another that's are and Form these www.rlicorp.com, of The believes between net comparable earnings. useful definition and reporting operating performance earnings release www.rlicorp.com. across to website press measures company's

like conference go ahead turn now Please I the Michael. RLI's over Chairman CEO, Jonathan sir. would to and Mr. to

Jonathan Michael

good you Thank morning. and

to we you want Many a maintained over know and for Relations he started Diefenthaler, our Aaron member I recently core to the he's Investor and introduce Investment of taken nearly asset of years. invested eight you get portfolio. our responsibility has for Chief already Before been Officer. AD Aaron team

our Aaron? started we'll remarks. glad at be of us end to then get and questions will prepared Aaron the answer

Aaron Diefenthaler

Financial Thanks earnings and Craig Kliethermes, Officer; President Bryant, and Operating from Jon. for by Officer. Welcome joined RLI's are Jon, to third quarter Chief we Apart call Chief XXXX. Todd

results. opening comments give some the on Todd brief quarter's will financial First,

market conditions. will Craig operations talk Next about and

close and final open to questions with Todd? we the will then he As Jon some referenced, thoughts. call will

Todd Bryant

in $X.XX side the good and quarter. improvements premiums XX% share, as up last underwriting written of advanced were accompanied momentum the per quarter Thanks the on and production XX% we increased earnings by year. income Last same third Notable period both in investment morning from night operating reported Aaron everyone. gross

for Cash the $XX.XX flow from grown million on million $XXX per $XX year-to-date dividends. XX% At value since of and a quarter book has share, operations remained strong year-end inclusive at basis.

From a accelerated the participated previously eight XX% repositioning. products The portfolio topline announced majority up The excluding written in over quarter. premiums experienced in mentioned, quarters our were and growth we've trend as recently. in standpoint, gross has exits of this diversified

and from quarters By segment, up casualty and X% submission about increased trends. the two a property was both. premiums and in in the will XX% improved prior rate Craig talk products improved minute. advanced modestly quarter XX% conditions as declined more Surety environment counts the in market our

combined posted From underwriting a a to XX.X ratio perspective an year XX.X compared we ago. of

X.X declined. declined increased as points reserve ratio loss casualty benefits prior Our year's development losses and from

services and from reserve benefits From prior losses million. with catastrophe expenses perspective, Net to which $XX as transportation. umbrella, year's Dorian of million segment favorable a often excess liability of and Imelda development general casualty, we totaled was Hurricane Tropical reserve Storm professional liability, in referred from amounts notable majority while $X totaled the

in and a point drivers auto-related basis. points For an From cautious prior half one product standpoint more expense particularly reserving remain one and quarter, a recent expense initiatives adding our the on years, on with to to periods. growth the on have exposures, we comparative to relative and approach performance-based outsized in those basis, compensation improved ratio newer of year-to-date

impact which Overall, are to including we expense our addition, pleased on of has of each the surety we ratio. technology, the our an continue with also within In underwriting invest segments. in segment performance

results. continues deliver year, solid our the portfolio to of quarters three first the For diversified

was up for on last second again value return X.X% came dividends call. the positive offered Investment quarter the bonds mentioned in the despite and results both which investments, growth in our X% to income book as quarter, and in at to On being total contributed third some stocks recognized quarter.

primary the going income book billion lower XX% a drove be income or year-end value investment to will $XX.XX for performance and growth share, all-in-all near support quarter. forward now for Portfolio up solid with Operating dividends. well reinvestment established, $X adjusted rates per from

I'll to with the that, And turn Craig? over call Craig.

Craig Kliethermes

Thanks, X% Todd, premiums and we accounts by A growth morning, and top everyone. with Year-to-date, quarter XX.X good pretty XX line ratio. reported with a XX% all combined combined. good up

liability, been product has broadly exposed casualty, many are of marine beneficiaries We automobile liability, management access observed disruption catastrophe that in lines. and

painted and for color inflation have our the is Pain use and long. markets. cost continues improving masters, with canvas. chosen the significant sable brush come being old in appetite, RLI, with for disciplined presence lost stability which many, the environment, market is ourselves broad tip to line At to who We to enhanced an underwriter, value pricing back our a With our momentum. a creating by long knowledge and too top rate felt who in hairbrush of consistency and a fine teams under underwriting claim deep pride from we by

quarter. a transportation segment. businesses provide were Rates ratio. a our basis limits largest liability In XXX we Let and quarter casualty, little management points combined grew rate excess are where detail in across increased larger casualty increases casualty more by XX than me liability, reporting better deployed. felt than our X% for The more XX%, while last the

Growth significant a become points more limits attachment was casualty rates, widespread in of higher we Increasing greater portfolio, commonplace. shortening extent market have retrenchment. have and a our absorbed to where but

also We a and towel throwing in few in the see competitors geographies. classes select

information welcome these wherever social We environment, but in inflation, and cautious this the from share immune remain available. navigated we underwriters to the before. experienced claims regularly staff have opportunity who not rate take are of who have we so We and impact waters

liability Casualty know of creates looking underwriting environment, select underpriced how compensation workers competitive. generally flows there with Despite that very companies for but are the is a still lot exist risk that a priced. claim appropriately still Opportunities more to are limits that coverage's up, business for lower we primary remain find submission and which opportunity, home.

is improving of that levels and of record casualty, track rate a we that are we at have for long teams from success. a Overall products pleased growth coming experienced are established realizing in with that growth lot

wind In combined A grew quarter for XX% XX slightly the increases moderate few events property, catastrophe we ratio. the in Overall, in catastrophe rates wind-related up a resulted across an X% larger Marine quarter. for our reported the and and portfolio with of losses products. amount ocean were

moderate, rate our in relatively first its earthquake years. realized increase Albeit six business quarterly

in We see to flow segment. continue this across all property products increased submission

ratio. our most X% also a line, remains reasons. most consistently for top down been Growth were the XX segment, challenged decision bit but while exit program also profitable we surety, a In on by combined to market the our hindered underwriting conditions. reporting by an This has

All products surety our profitable. of remained groups major

and prudent We feel mind accounts continue some competition to mode new our is widen see and pretty a existing approach this write opportunistically space to our aggressive and relationships in business.

Overall, and growth a most portfolio profit diversified quarter represented our for good of is us. Underwriting products. of across

approach We market stick to the the basics skillful come disciplined to day. let resolution where continue of our the us claim carry underwriting to can and and

know focus we At we and what works. on RLI fundamentals the

foregoing and means being bets to but boring courage forging others avoiding some, the boring beautiful. could different of glitter path, convictions Sometimes and to your your is having be the big own

good and get RLI to the hard who shareholders for another commitment of they thank to associates all I of differentiating for put in deliver owner’s work performance. our bored result our want never

turn it it to open now questions back who I'll Aaron for up

Aaron Diefenthaler

Craig. can now take Operator Thanks we some questions.

Operator

now question our session begin. Mr. Instructions] first question-and-answer from Christopher Please take open. with We’ll now [Operator The line ahead you. go is ahead your sir. your go now will Campbell. Please Thank question. Campbell

Christopher Campbell

Hello?

Jonathan Michael

hear you. can We

Christopher Campbell

great. Okay,

So, working. yeah, sorry. handset The just a few wasn’t

just So, the had guess bit you about a I little talked rates.

what your guess rates there at just commercial looking we're this were if auto, So I quarter?

Jonathan Michael

in which we've rate we again achieve I years. For able were general over business, three pace last the to is transportation the quarter, about increase this achieved mean double-digit the

Christopher Campbell

isn't I lines Okay, the rate? great. looking back right curious, chart in shows on each and where year segment. have was that at calendar deck overview product need there And pie accident or pie of, your of anything that deck, now a breakdown slide kind you year that guys basis within the how you would profitable is was more like an I that just

Craig Kliethermes

is a every little performing this in I always front mean me. have And, we don't to pie better. I product like I chart But the we’d Chris available. be mean rate we'd bit it's of like in Craig. have get Look, obviously, products that to if

of are out working would eight So nine said there's products performing product always those before we're always I a XX or mean what on. of I say that I is well

not who performing Sometimes the XX underwriters problems know it quarter-to-quarter. or they pretty two who are is of addressing But we're good changes and for our sure think out of I that one from aware are. they about

Christopher Campbell

new benefit going sustainable rates the of should rates you've competitor then obviously, days about be how lines then able your where few And mean, I growth impact some submissions in XXXX, mode a higher was discipline. does higher increased to a it. how ago submissions and from from have back and that been this Lloyd's the to Got reading production, discipline. like I benefited that guess in Because about I thinking we year?

Craig Kliethermes

there. I present but I market the Chris I've mean I itself this something of the predict is attended think like write lot when some I I pain I presents to people wish Obviously it can't. opportunities these about the I've future the the out advantage of Craig. could there's seen But of we'd conferences. take a mean and conferences themselves.

space think obviously is fear -- some or anytime talk in about with long-tail I concerned. There some people dealing themselves of people. liability, there's think reveal you claims I not excess yet and may inflation which liabilities, some in have always that a hit bit -- reserves in concern may And bigger little you're widespread that

little we're hoping a lasting. So that's longer

Christopher Campbell

social Okay, you your losses? creeping any any of got inflation of to see own it. kind guys And have into started

Craig Kliethermes

seen I most standpoint, from I say think data a I we've would Well, that mean, -- yet. don't

Although, our claim about I anecdotally, has would concern tell some that. expressed department you that

closely regards continue somewhat causality as we it as that rate and to in watching be long to booking our concern. in to we'll try and have ratios take are we So cautious

Christopher Campbell

Got close kind XX you last then it. the a curious since share like getting of one Okay. and around just splits have last in And was past, are one, one guys now. guys just done stock you

split? potential think So, about we stock how a should

Jonathan Michael

to -- just that mean doesn't Michael. is a really lot whole This it me. So, Jon

thinking a not we're stock about split. So,

Christopher Campbell

of in the Okay. All questions. for thanks Well, the quarter. great. luck right, all fourth Best

Jonathan Michael

Appreciate Chris.

Craig Kliethermes

Chris. Thanks,

Operator

our Instructions] will proceed with question [Operator you. Please Thank with We Randy Binner. now next ahead. go

Randy Binner

good Thanks. morning. Hey,

I social guess And inflation trial specifically, I it's have a question. about on the So, bar. follow-up Chris'

was it a things Or anecdotal we in from the the that factor read, for casualty rate it trial success bar always is guess the getting same all is it's of And more for is pretty interesting as worse But significant me risk be so, talked I before? I've certainly now. change more, hard considered to bar trial it's tell, to Or much. significant? if involvement really it's and changed The casualty prosecuting to it's about because, claims. claims me

Craig Kliethermes

anecdotal or would of do bar better of before. Craig. that is you get than of focused. job in for results it. our have sharing strategies but be our than our heard ways TV yet, They don't there they through department Randy, your maybe communicating fairly but this good you with I mean, I narrowly And a necessarily to the plan a and past, I it stories and share their I think that comment that far, kind -- this the what out they strategies other conferences that watching had or in whether there's I've from is lot skilled there are can number again from core growing see small, attorneys would claims we're a

of they some circumstances, a extracting they've And big in they right right plaintiff, limits defendant, with done the run pain. high a job a across of and I set good I the think jurisdiction, of facts when the exposure have right set may think be when particularly good

the is. $X a in change settlement just in I in think immune general, the is of people also every billionaires of in what day to this you mean, million of I million have $X what that a I value become regards or hear about $X we've is country think, been in more what worth. and got mentality I value to lot people think there's

So you a jury. that of put front in

a do they think I people. job anchoring good

people desensitizing I of a setting done they've good to generally juries' with job the think and money. value the psychology

that big And of like certainly, haven't of to probably watch. to I'd probably limits, so an don't hand bigger out eight concern digit we that have. want felt the so area I rise. an out people and seven very juries we say think the put But verdicts digit, some We willingness fortunately on area it's is other

Randy Binner

the right. surplus One is, kind activity quantification two color. higher I year-to-date that quantify much up. looking of versus how follow excess and just appreciate period? this do All quarter questions have activity I to and flow of submission like you is lends the year-ago submission

Craig Kliethermes

I admitted people specialty a little only just the in surety. actually here. X/X want in mean, a space, so our that. do mean digit placeholder just the business sure frankly, E&S E&S or mean actually to that. mean, seen seen make increases sure business other spaces high I in I understand submissions in increases X/X that think is our I I we space I rate a put higher Randy, of make we've in we've I E&S. submissions I have single want at just than to the space. of is in

see but more for -- casualty the in property submissions we've matter an increase that side the in certainly, and So recently. side

Randy Binner

the it high the similar of that you level single-digit? Is growth --

Craig Kliethermes

Yes. Yes.

Randy Binner

Okay. for And Was property casualty quote overall. overall then X% said overall number? did rate casualty there increase? you You an

Craig Kliethermes

was X%. did Randy, I it

Randy Binner

a Thanks super. right, lot. All

Operator

next our question Please Bobman. go ahead. take now Ronald We'll from

Ronald Bobman

you're results. thanks did book there? liability Congrats profile where you management opportunity the Again on a of Hi the seeing and lot. sort

Craig Kliethermes

Craig is this Ron, Kliethermes.

You medical. said

Ronald Bobman

Management.

Craig Kliethermes

our Yes I'm that executive we to as sorry. group. liability, so Management refer sometimes products

Liability, confuse So as felt products. obviously to Employment I includes well I I don't as that’s want A, D&O pretty public private, broad fiduciary that Practices Side mean anybody. mean, Fidelity

line. there a portfolio pretty much across-the-board and of product pull pretty So seeing we're submission increased products diverse that rates it's increased mean in I

Ronald Bobman

And are your profile? you. limits and where you play do primary only me. for it what Thank That's

Craig Kliethermes

$XX -- million could out we Well limits. typically would put we have

typically than million as high Side A for probably Although And fairly in It ABC, are less $XX makes public but it's portfolio. the those ABC half go a two little million as up rare. Side A of that and $XX that's on be would probably in we group. biggest public ABC products could with

And higher business pretty the excess public basis by attachment primarily, a we a that play ABC and on through is much. significantly only would typically excess of points. reinsured we book that little share quarter Side A but an way

Ronald Bobman

down Thank you. done. basis? Where net does a you the reinsurance truly Then bring on I'm

Craig Kliethermes

I believe, we XX%. play

Jonathan Michael

XX%.

Craig Kliethermes

of XX% on share quarter basis. a that

Ronald Bobman

Thanks Great. luck. gentlemen. Continue the good

Jonathan Michael

you. Thank

Operator

Please to go our from Instructions] next Inglis. ahead [Operator sir. question We'll now Jamie go

James Inglis

the what business is Michael footprint towards got I be using morning Good or I might businesses in probably expand product to it, would from selectively -- think our Jon to mean guys. refer sort to where business distribution a footprint. to can capital about question to grow I'm some the profitable distribution? as geographic but our says, release usual need generated And -- do that as want or you line I of does where park

Jonathan Michael

out lines used really we we're we've a That's in be know means. up it and of is what was No, what have to on what business we know. I expanding quite that means certain And meant grow bit. but to we really grow what it what focusing

Craig Kliethermes

too point, in referenced the initiatives and year, of some in Jon's we mature little bit a maybe going to you coverages we're calls lot point to growth go newer of today. growth if probably X.X seeing had X back might back a It Jon's years those some more

James Inglis

it. Got

Great, you. Okay. thank

Operator

ahead. next Thank Please question Dwelle. our Mark you. go take We'll from now

Mark Dwelle

question be duration whatever yet. a hasn't of here investment class contemplating about there? you Is a either interest anything Aaron had give I'll an view morning. you're to in standpoint rates, from jump thinking or chance in shifts in Good might quality any since anything or lower he there

Aaron Diefenthaler

case present us for It's Mark. time at really the the not

work to growth referenced to to put stronger And Todd portfolio. portfolio the a income provide. in the as happy can cash operating to flow the is support we have meaningful profile are We that

to we maintain reach are not yield any that way. making so And major other try to shifts or for in

Mark Dwelle

Okay.

or some in and a gross is premiums recent Is numbers like casualty than the for the any Second to kind bit written reason the proportion something the property particular mix was question, written little this that? but that a premiums net maybe lower segment of run or rates. of question, there both

Aaron Diefenthaler

get a Yeah, -- that from time nothing we'll is in shift particular. a time. is There mix little to

over from occasion different premium look bit. a material but if on different you periods, had some have reinstatement at points, changes amounts Mark, of outside the mix We nothing small of

Mark Dwelle

line A submission everybody cetera Okay. flow, then. question XX-yard XX-yard may so baseball use are now? zone? and environment? for analogy, mean, you on kind Craig we right the just the market we the feel uses looking always I market a Are of say red the are pricing this environment, mean, of football of tone the the are charactering Where the you're in analogy, I would I you on at we et line as

Todd Bryant

City that. Mark be before fans Todd, this of could answers so this is any a Kansas he he is that by Chiefs colored

Craig Kliethermes

I I wish question. to I Craig. Yeah. don't know. This answer had this is an

mean, lot on. so certainly I like -- it and feels need hear cost just about different, are lot the started. but So the talking feels I a this can't a hopeful loss rate we're I prostrate reinsurers a mean up I still they early versus before, that say little inflation getting I'm it for

Mark Dwelle

Okay.

of start down a successful Just the touch drive.

Craig Kliethermes

line clear be like in City. we on start to the just Kansas But to XX-yard

Mark Dwelle

Yeah.

on time one the relative actually have it's your long are XX. the for and peers, last this asking Jonathan. you that are for been I've to probably You of I some certainly that is already I question guess a

go this might Board year? dividend, us of And can that they the kind a for time they'll things just special should the this about? that be payment decision, often -- thing your make of into thinking later you what Just such the rehearse year where of a is considers the

Jonathan Michael

it than means a if be. be stock Well, we then it otherwise what would suggested dividend less Mark, split would have as

rather use no, I've back b; it then So, to cannot the we our said this and in a; grow before: do then business our would that we existing our business, give that capital would use shareholders. would be, to capital, we event expand to those our things the

things Board those will are at. management's are that our the at. So looking be looking that Those things the

So consider that time question. room think everybody for kind split, don't I the thanks when But about this just but because splits. stock well knows they'll so, I a much in that comes, as of of the spoke

Mark Dwelle

more No for Thanks. Thanks. Sure. Okay. me.

Operator

[Operator Instructions] question and you our please gentlemen. Thank now Schmitt, ahead. go Jeff ladies Schmidt. We'll from next take

Jeff Schmidt

morning Hi. everyone. Good

the growth average I guess REITS was you what Looking would what the exits been premium you was GL casualty the said at the the there that excluding prime quarter share XX%, growth lowering I that? and healthcare growth recent that rate exclude X%, of if think facility four have

Craig Kliethermes

been in it would've Yes – it would've XX%. the been quarter

Jeff Schmidt

quarter, you be it may guess cost what quarter, that mean that looking surprised I'm high. had guess, pretty underlying rate, I what dropping that more? It is some isn't new the the loss there? it around with combined last at X% which I X% Okay. is which there posture what's in I not shift like, I – to drop mix more on was year. casualty know last X% conservative is if it XX%. now, business trend looks last is what was just rate But business. see seems

Craig Kliethermes

Jeff, Kliethermes. this is Craig

Just clear, is increase about the to so casualty rate X%. be year-to-date for

cautious. little have we I and more a to for just be – think So

a severity what we've I at cost or regards or think think for our inflation we're to least to in assumptions the casualty point, we're about I cost up on inflation about assuming. by so X% severity our is so portfolio loss upped loss

only loss assuming point we above inflation. about what really a are is So cost

bottom earning to line not see drop either. So you a of going lot the premium that until start you're to

that. Todd to if wants anything to know don't I add So

Todd Bryant

the – bulk. I think going side. I kind open had be with cont that that's and commercial to had that of with the continue in cautious going auto to my to We're we're growth

Jeff Schmidt

that? talk any being renewed you on or any a how you not over business, of just into And hearing E&S sort some of some seeing Okay. E&S, and about people question are standard is seeing business kicking the are

Craig Kliethermes

kicked sorry, is being over? I'm that is over not or kicked being Yes, it

Jeff Schmidt

It not market. pushing renewing into was they're insure it by written of and then it standard sort the E&S it and

Craig Kliethermes

think Jeff because you're so know, for test good sure whole You certainly, in concentrated But E&S industry I'm is our not the litmus I I space. in don't still even from underwriters construction seeing the space, business we're mean habitational really disruption much admitting space. hear I in probably field, that seeing more than in I we're in do space. our the we failures our complaining and about a

space really I on can't our going our exiting comment So way. some or

Jeff Schmidt

Okay. Thank you.

Operator

no the Michael. Jonathan Ladies conference Thank gentlemen, turn to now questions, would are you. back I and there further if to like Mr.

Jonathan Michael

Thank you for all attending.

we rate certainly This quarter advantage We're have now. satisfying quarter for got it grindstone line quarter are. of some and the and to certainly to We've We We year-to-date. for so well-positioned top we're Nice was our things, this. nice underwriters. increases experienced growth, like well-positioned us. a that just noses for do to tailwind take and where the speak

for this And So thanks Thanks. morning. joining us next quarter. we'll to again talk you

Todd Bryant

Thank you.

Operator

replay if number concludes for number for day. now dialing again X-XXX-XXX-XXXX access to the by the a Thank XXXXXXX. Ladies ID and your disconnect. parties XXXXXXX. conference is the nice may you and you call This ID have an gentlemen, with and today. you participation Once do for may is All our so this X-XXX-XXX-XXXX of wish

Jonathan Michael	Chairman & Chief Executive Officer
Aaron Diefenthaler	Chief Investment Officer
Todd Bryant	Chief Financial Officer
Craig Kliethermes	President &Chief Operating Officer
Christopher Campbell	Keefe, Bruyette, & Woods, Inc.
Randy Binner	B. Riley FBR
Ronald Bobman	Capital Returns Management
Jamie Inglis	Philo Smith & Co
Mark Dwelle	RBC Capital Markets
Jeff Schmidt	William Blair & Company

RLI (RLI) 17 Oct 192019 Q3 Earnings call transcript