RLI - Earnings call transcript Q4 2019

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Operator

Good morning and welcome ladies and gentlemen to the RLI Corp. Fourth 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 Annual company's which Report reviewed are including SEC should Factors carefully. the in on Risk in various the filings be These Form XX-K Exchange X-K has fourth announcing the a company results. contains Form The Securities press filed quarter and Commission release that the with

earnings earnings measures earnings may management net of equity or after-tax consist RLI's earnings and and financial share of during from from operations of to operating the securities. unrealized results. the RLI share call which per realized operations and reference losses on earnings gains make elimination per after are non-GAAP operating losses or gains 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 other www.rlicorp.com. are and Form these at of The believes between net comparable earnings. useful definitions and reporting operating performance earnings release across to website press measures company's

the over RLI’s please I’d now Aaron and conference Sir, to Chief like Vice Investment go Diefenthaler. ahead. Treasurer, Officer turn to President,

Aaron Diefenthaler

of good XXXX. and call first earnings quarter financial New the Year, to covering RLI’s you morning. results of Welcome through Thank the fourth

Craig today and Michael, Jon us & President Officer. Chairman Officer Joining Chief and Operating Todd CEO, Financial are Chief Bryant, Kliethermes,

Todd discuss results. comments operations will give on then some financial Craig and will opening the quarter’s market conditions.

with the We and thoughts. final some close to Todd? will will call open Jon questions

Todd Bryant

Aaron. Thanks, Good morning, everyone.

as increased of to from years up and reserves. $X.XX we catastrophes benign continued largely for outpace share as activity from fairly base. earnings benefits night, prior Investment same by quarter driven storms year. per loss operating other favorable year’s period Result reflects our prior Last income well XXXX asset reported fourth accident the XX% last increased from

basis XX% of strong written advanced year-to-date for $XX dividends. $XX.XX, million up million year share at quarter remained flow quarter premiums operations inclusive on and cash book a ended X% the and value at $XXX the Gross from per and the in

in premiums up Craig will the from market products in was both written and the of on premium top-line in and a previously Net in these talk A excluding growth and was up XX% year mentioned, portfolio quarter of our ended basis. the standpoint, majority basis the full-year exits minute. conditions repositioning. more in X% about up products But a on gross decisions, X%. announced and diversified a quarter as a year-to-date experienced XX% and quarter

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

year’s catastrophe ratio loss points prior declined increased. development and from XX Our benefits reserve as losses declined

losses our to points only elevated about Hurricane that You modestly the year points the ratio. storm This and combined property quarter’s added may Michael XX during activity to added about fourth losses from last recall combined quarter ratio year. two

for $XX $XX prior benefits in perspective, From million a expenses, were million benefits nearly net XXXX. reserve full-year quarter a year’s and totaled million basis from recorded up on of the $XX

favorable favorable From of development full-year casualty experience. a the majority and majority both quarter the perspective, a where the segment in products for of was posted reserve

on particularly to more in relative and with growth our product those For remain periods. outsized we reserving prior to exposures, auto-related years, cautious continue recent newer approach initiatives, to

increase basis. for to the book and to ratio and significantly and of compared performance-based ROE in improved last show during metrics drive bonus expense growth a the on programs account they Moving year. incentive our expenses, compensation, value operating full-year quarter accrued that majority Amounts the under

amounts in general represent the the these expense increase XXXX. addition, In of in bulk corporate

segments. we’re of each of with the Overall, performance pleased our underwriting

results. to deliver continues portfolio solid diversified Our

that the and The XX.X%. the book year. fourth up in like what in for total year continued X% at XX look puts ended the next strong front, equities center portfolio return the quarter yield value and over We positive On the growth and were markets. and increases capital for ended investment a up XX% the Fixed year income to very December income for have contributors growth months. the income now investment of stabilized will saw

in higher in of basis, core both Maui quarter for seasonal and Jim Results and well for have the our quarter net experienced Prime they of a earnings to results and full-year is on reflective well. the both Prime of a Outside up improved which the growth reflect investments was perform Jim portfolio, share continued expected. results, revenue Maui lower profits. are and

couple year. premium milestones both solid in we and top-line as quarter $X good We a billion statutory surpassed of a All-in-all, and achieved surplus.

reporting represents of and Our which our underwriting XXth was combined consecutive XXXX, XX.X profit. year ratio for

the in our resulted which to shareholders and Our of form Operating in year ended operating special December. the XX%. income capital excess generation of in was returned $X in performance over ROE needs a strong dividend investment current

In marked paying our year of XXXX, dividend. consecutive increasing our we quarterly XXth or

billion With $X.X dividends the over special the we returned dividends, last shareholders in have to XX years. our over

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

Craig Kliethermes

Todd, everyone. you, morning, and good Thank

for more on reshaping of the recording ratio X% year-to-date quarter mentioned, the our portfolio. this have we as headwinds quarter combined periods. little Todd top-line while a top-line previously both of X% XX did As grew announced We the a for and result a

Growth XXXX. was optimistic ongoing for in over our XX% we underwriters pulse cautiously the our into as on the market Overall, businesses. quarter is move

are and and momentum get positive of portions differentiated continue most portfolio. the We to the in increases rate see are of casualty across most property rate greatest the opportunities the distressed market. The to

of for the the rate whether rate increases market drawing in is the the the anchor underwriter solely market caution underperformance. often We rate Large The doesn't of counts. are the about on but adequate conclusions result size increase of risk. significant or found conditions the submission increases disciplined in size

confidence more cycle, having appetite execute with offer we're experienced underwriters consistent a We’re in to a beneficial. at will and color are I segment. point the by little

rates quarter. and the Both grew for periods. line personal combined rate XX% top and commercial good quarter generating We quarters. Growth up the business of Group the Executive and was have been for liability year for over two In seeing ratio for grown combination increases X% XX consecutive XX% for double-digit quarter a our while casualty, year. exposure, ongoing in line reported and nearly excess we the for X% where growth XX% bottom both We're in also results. have Products from the

Small liability as at a result rapid of business growing market. also admitted is retrenchment pace contractors’ primary the a in

this Our was able the transportation for the book third for the consecutive year. struggled on to quarter top-line double-digit but increases rate quarter achieve and

to see variation achieve rate market continue is blemish. business We to on easier the little with in where

up varying activity bigger and Overall, X% and for quarter with for year are the required. depending on casualty rates significantly realization loss were second rate X% the limits

treaty X/X overall, reinsurance our up were than underlying on and is covered more place our X% X% rates increases. to did casualty rate We largest which our by

year. property, quarter year-to-date. quarter in are This was In up the for and we underlying portfolio the XX% products the mid-single-digits Rates for quarter XX growth for and the segment. XX% the across all for both XX ratio We the the achieved the grew for year. combined a and

signs of marine, hopeful business. some earthquake momentum price and seeing wind, in increasing We’re

New plentiful at rate are levels business much coming opportunities as acceptable more is the to market us.

and seeded was X% were recent Cat rate able our per treaties to treaty given rates the catastrophe XX%. at reinsurance X% up X/X. reinsurance placed our We in we're property the reflecting we per increases years X% risk more outcome to to while underlying A have about where and up achieve. loss risk activity experience fair loss both

our decreasing X% the X% to disruption energy of larger with quarter still as no able as for challenge taking activity see the as competitors achieve be attributed XX offshore was building for top-line is growth the accounts. and longer combined a of top-line that segment fit the some Surety, seen losses In typically challenged and appetite Most we’ve larger year. on off and XX for an couple to which but may some our the exiting programs to capacity for level-off. were are well outstanding We ratio quarter starting our year. accounts of most this We

continue disciplined existing broaden for underwriters to to Our be looking relationships. opportunities

year of premium. Overall, and billion gross profit $X of topped XXth consecutive completed we written underwriting our

claim and of on underwriting and diversified talent We continue portfolio to and base build product narrow a our broad experts. deep

steadiness established horses this and before track. experienced like the have muddy have jockeys execute a been confidence in to We position and who and on

purposeful. on of associate performance on for to want our quarter owners delivering again be continue and another differentiating great all work. I and being continues year will We to this thank once to prudent different

open up call we it for the can With that, questions. operator,

Operator

you, session sir. question-and- will [Operator Thank answer The begin this Instructions]. at time.

will question first come FBR. Our Randy from with B. Riley Binner

Randy Binner

should we corporate were meaning the would at? by I accrual Hey, hit about a we or to of is a similar If the something of there in fourth EPS XXXX accrual driven good level in G&A that morning. level is to similar the roughly we line. Thanks. wanted see else profitability ask quarter it bonus expect look

Todd Bryant

Randy, it's Todd. Hey,

from if larger at driver I comprehensive really so types from be those I and combined terms expenses. think on $X roughly think of think similar. would we're those you again fairly in what’s is standpoint -- that of at the It's ratio things, it were a of of standpoint reasonable the with it's earnings, going we really where

Randy Binner

the holding this Prime on the was investment the higher that and was Okay then in reason level kind continuing quarter? profitability of at company what but

Todd Bryant

Yes, they Randy, Todd growth -- significant. again. has been Their

are were double mean considerably profits last revenue they up nearly is year. I and what net So and nearly

Prime. what's great there. year that's going for on So Great --

Randy Binner

enabled double Okay. their revs? And them that I'm sorry, just about what is it market to

Todd Bryant

things. of mean, I more going are Yes, they rate much I from just and a their standpoint there business, couple seeing a think they I so -- opportunity more I think think, is are way. seeing distress

Randy Binner

Okay.

Craig Kliethermes

of theirs, business. is necessarily deemed I ROI, Craig. of -- resort. but of more last -- is as this that's they specific I a something something is target this is not distressed Randy, it mean, a are target be target market to mean, Yes, much we their the we that's

Randy Binner

non-admitted if in opening then, activity maybe different is quantify last that And markets resort you covered where relative speaking you of or missed periods? but can it markets, and you script, Okay. -- of to previous submission discuss I can your

Craig Kliethermes

excess frankly, that are the mean, I up greater overall more XX% of what collectively, submissions lines up, that's business I'm year-to-date some we're seeing lines about Sure, our little Randy. for specialty of in are is quarter, and and so book maybe in a portfolio, business. mean, our I This -- XX% our our even the the to which space. E&S of is mean, than actually, submissions I admitted surplus we're seeing say, I going Craig. on of

Randy Binner

just more. I'll just -- one And do

a is lines? With the new executive called category in out you that that casualty products,

Craig Kliethermes

it's be it our and fiduciary, cyber D&O. I but how our fidelity, is know in D&O other mean, Q, public I very K I and it management is apologize. liability it products, descriptive, it in we of half of I could there, some and define but not think, covers EPLI, basically that's but private

Randy Binner

small like business medium-size smaller a businesses on is focus and to tend board? the across or that Does it

Craig Kliethermes

public the I bigger accounts. Well, where obviously, public right both. of we it is, Obviously, part accounts. play excess has on most think of is you're the seeing That's that bigger -- typically We, in now disruption though. the market D&O those most

Operator

Thank you.

with question comes KBW. next from Our Christopher Campbell

Christopher Campbell

I the loss like we I question just second guess you year It's any in guess just seen line? of give what surety. that development. seeing color in quarter you're can prior first activity on in is terms haven't the us

Todd Bryant

$X Hey, mean, that up I in can a the year, I I think Chris. million It's Todd. full little down mean, and move it's bit. range.

to I is think accident anything year don't there's I ratio their call know very if loss particular mean, I out solid. of. current So,

one ratio. any particular a or conclusions solid So, think draw to I a two or and quarter very on from combined basis, don't loss anything still there's

Christopher Campbell

Because it. there. that some I got you had exiting Craig think, mentioned in I were -- the of Okay, know programs all

those develop know didn't of if could was potential a I there so, adversely. that And some

Todd Bryant

the programs, expect don't No, think I all. exited at that we

Christopher Campbell

Okay.

Todd Bryant

wasn't wasn’t performance. due -- It it to loss

Christopher Campbell

What got was it. to, That's due Todd? Okay, helpful. that

Todd Bryant

think, we don't I there's Yes, I an to that if with about, program so, a standpoint. actually program from want that a specific mean, about. I we it's product feel an talk pretty I it's would individual individual relationship. know anything mean, good

that in working we're things area. on some So,

Christopher Campbell

Okay.

So, we would no the of book? the that through broader read rest trends

Todd Bryant

not all. at No,

Christopher Campbell

one last lines and contributing years were one strong strong What the in Okay. accident obviously reserves, segment? Wonderful. which this releases that quarter. And most to just casualty on then, really the the are

Todd Bryant

I -- I standpoint. mean, accident even I through there some for Transportation It certainly XXXX, mean in line is all it excess decent -- pretty very XXXX. a liability. tail I bit [ph] more it's little mean cup the GL but favorable amount. Randy, XXXX, broad, Yes. the is is from is It standpoint, from fairly year is shorter and widespread a is in an mean, broad. is way the XXXX, stuff, a

Operator

you. Thank

Schmitt Jeff from comes with question William next Blair. Our

Jeff Schmitt

Hi, levels? the good that construction. morning, loss you're what in book which is the looking? everyone. discuss of Can you rate there, and how seeing Question just mean, past on said E&S I the think I maybe in in you've of construction book, activity market terms is majority

Craig Kliethermes

Sure, a admitted mean, we -- Jeff. primary I is the and on E&S side, Craig. construction play both basis, and and excess. the construction space This in liability the

So, it little geographically. vary and mean, does bit, I a also

that product been box exits within that haven't we opportunity start mean, and CBIC space we we it's be bought I really regionally with, the years we've some that's in admitted, acquired -- and an it's that on underwritten some business for underwriter, there's primary loosened, when created back team. same to us much business happens been of focused competitors and just to pretty that same some more a

to advantage of else's either decision we that's take or just someone So, like misfortune to opportunity exit. an feel

move very, very for it's the mean, across country, the E&S into on I E&S construction still the the you As most space, competitive so business, primary side, part.

it regionally. excess, then really depends And

is Some sometimes $XX because think been talking $X I past. I of in competitive, limits. still to the limits, we think, excess; that, driven Part places, then you're million that typically more it's get million have rate about although able we're

are finding rates, -- increases we're for they required. greatest the any what business are opportunities raise So, excess and construction seeing so our where on the limits you're to that's is you're space, where place space. on casualty Rate, opportunity having people rate getting

Jeff Schmitt

focused Which regions on? is more that

Craig Kliethermes

country, -- more the across momentum across I Well, country. recently, seeing I broadly I it's the we're think think mean,

Jeff Schmitt

then I your -- was Right construction [indiscernible]? think

Craig Kliethermes

more Metro than areas difficult are areas. than rural --

Jeff Schmitt

there about completely a REITs, forward exited of, which and in should be thinking facility books going I just then, the were that I have there? drag expect think there? And moved is to the Okay. underperforming you out not healthcare mean or then GL you more some

Craig Kliethermes

year, we mean, was Jeff, couple that it of some months, it call quickly. of we last So, very this during fairly we because exiting were -- I'll I that for, the I were beginning announced in of a last declining the that at was did business have we say, year but although year, think, still

mean, we that a headwind, think, after bit but I big of not but it's in much have So, that, might it's little I gone. quarter, pretty next

Jeff Schmitt

much Okay. then, in have you And do exposure the market? habitational

Craig Kliethermes

figure money. lot of to business habitational we out make how used we to a and couldn't Jeff, write

it and major in surplus So, player we are not admitted really on or a excess lines excess whether habitational basis. or space, be

Although, there's disruption there. a yes, big

Operator

Thank you.

phone Our line Mark next question RBC with comes please from open; the Dwelle sure mute. is we'll Capital your your Markets. response, Hearing make on next. to not is no Mark, move

comes Our next Returns. Ron with Bobman from Capital question

Ron Bobman

Could the the and think, commercial top-line and think you the struggled expand I in auto that? about, to behind I was comment on what was it you're dynamic referring quarter your

Craig Kliethermes

yes, in Ron, is this accounts we mean, Craig. a little I write bigger business. that

continue I business of to mean, we're don't classes write to able I'll I a or bit. number there. whether we're So, a rate broad, few, write get a say, fair move in we few a of little can top-line mean, the we increases.

from more I'll than So, we especially see time, in very say, still space, some it's the time or the we truck competition would want, like, still very, in to competitive. -- but

top-line product so, could line. good it good. I The wouldn't anything rate into guess, in the I to given rate be in a And lumpy, and -- particular read was continue be that little feel product. line But bottom good very mean a I very we quarter line, about necessarily that increases

Operator

conference Jonathan If now you. there I Michael. back turn are will Mr. questions, to no the Thank further

Jon Michael

call. and you Thank attending the thanks for

for the It's $X mark time ever. billion to first a X% eclipse Premiums the satisfying year. very advanced

in basically. these you of stakeholders to for profitability. increase share Combined delivering $X XX% value of to book per to for us in ratio once underwriting a low-XXs. the and ability associates want XXth year our billion results. to again faith for So, deliver accountable hold say thank all a I and our our to in all continuing consecutive big having to you of thank

We'll Thanks after again again. you first to talk quarter. the

Operator

dialing do if by access an (XXX) the so of gentlemen, call, ID number you XXX-XXXX may you replay and Ladies this X for XXXXXXX. wish to with

you disconnect. and parties may conference today. all our participating All a Thank concludes This nice have now for for day.

RLI (RLI) 23 Jan 202019 Q4 Earnings call transcript