- Earnings call transcript Q3 2022

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Operator

Good morning and welcome to the RLI Corp.

Third Quarter Earnings Teleconference. After management’s prepared remarks, we will open the conference up for questions-and-answers.

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

As always, these forward-looking statements are subject to certain factors and uncertainties, which could cause actual results to differ materially. all risk in in Form the supplemented Forms the SEC company's XX-K to be in including should filings, Annual XX-Q, refer factors the described various as reviewed Please carefully. which of Report on with filed that Exchange press announcing X-K the results. Securities third and The company quarter Form the has release a Commission contains

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

to and equity across RLI's EPS exclude investments, be earnings are Maui management definitions and believes operating other that Jim but X-K ahead. I between release are Form a conference Diefenthaler. and operating press in periods, the operating website comparable performance of company's Treasurer, tax Investment operating The reconciliation sale on Chief to gauging now core companies' measures go and Mr. and www.rlicorp.com. turn RLI's RLI's of at operating Additionally, not issued net The Please, over the may X-K useful reporting earnings and available contains Officer related of earnings. will earnings. Form to Aaron earnings

Aaron Diefenthaler

quarter for XXXX. call earnings Victoria. you, third Welcome morning Good RLI's Thank to everyone.

market and Officer; Chief walk Jen usual Craig us on Todd President process, today Klobnak, and for lead CEO; Chief Operating and will product off portfolio commentary results offer through the and Joining Financial are Kliethermes, current our Per Todd Craig condition. Bryant, will Jen financial Officer. quarter. our and

thoughts. your with some then Todd? questions, close will then Craig take will We final

Todd Bryant

in to the experienced securities in morning three all very investment. XX% portfolio. were XX% prior combined we to volatility are quarter business. at year a areas hurricane to bonus property impacted some reinsurance. the XX% compared impacted and losses the continue where the All-in, rates Hurricane on minute, $XX a of experienced by quarter related $XX ago. favorable unrealized combined $X range the from and the earnings. commercial, Both quarter segments access, and ratio tax added experienced conditions contributions everyone. higher prior was we were $XX and I'll Ian, impact our of of and totaled Thanks remains perspective, combined favorable the Executive development. the our as loss all about package Investment small and commercial ratio sales with in year negatively ratio. that was number on first quarter's reported. the in reserve ratio Property strong the of close From advanced From Hurricane with our market of quarter. million of responsible year, elevated a per continue Jen $XX.X $X.XX growth earnings year-to-date experienced Net Maui million $X as is during million segment strong of operating from income to policies a the a releases of most million million losses three development remained of for of or topline investments commercial equity and move that the positive accretive within declined loss share, and liability. Jim quarter the per gains year's Aaron. underwriting impacts, million in Casualty combined are million development, for totaled we reinvestment to Products, operating $XX $X.XX with From million more event posted market segments professional supportive benefits from Ian. liability, minute, XX as surety, a a million net results pre-announced income flow XX% casualty growth high talk in by from miscellaneous the quarter, cash in which net largest the net reflects share our its Ian minority incremental benefit but give realized $XXX perspective, favorable net of from of for to quarter's half the segment's continued. XX.X% current Marine benefit miscellaneous the underwriting year's in landscape favorable with notable bulk points and from strong were $X third were Craig color emergence Combined will periods business. and XX.X%. Apart perspective, of during an losses. general of reserve in reported from level, quarter. In Good the Yesterday, our our

to XX.X%. bonus This increased year-to-date an Moving year, was accruals. impacted increased was ratio to to expense expenses, expense and compared result points our last On basis, X.X our by ratio quarterly incentive-related XX.X%.

during to to XX.X% the and Balance challenged total Turning be written year-to-date minus on quarter by was price. current as traded environment a in and performance as basis. the investments, stocks lower X.X% well minus bonds continue portfolios

the and to cash call, we the income portfolio. yields need flow fixed As have in our without significant increase in of discussed of unrealized welcomed reach are having that sell second offered these to majority --- X.X% spectrum purchase underpin without or the remain portions the operating Today, Strong opportunity for range, high to quarter achievable the to maturities. new yields need in investment credit assets longer the decline down money income. quality

Moving quarter incurred of company's loss driven transaction by earnings This Jim. the largely from an Maui to by in related million result and we equity from Jim expenses was $XX the other our Maui recorded investments, sale.

our $XXX.X our which loss. we of of carrying working Jim. announced, and shares previously this capital in for Maui the increase proceeds amount. in Jim to million, quarter's sale, Prior customary could $XXX.X previous As to subject value other inclusive Maui Final exchange received remain million post-closing adjustments, modestly was

net from this of earnings, amounts the with $X.XX minority gain, loss realized investment. $XXX.X in and sale reflect per or other the quarter, million sales taxes, Our related share

per quarter, up significant value was gain of a to realized inclusive the Lastly, [Indiscernible], from XX% share book of by this year end Jim. Maui heavily transaction was end generated influenced capital. and amount $XX.XX Obviously, the

quarter As expect is our excess always, as we opportunities first forward. first been seen nine the And morning, this preference strong to quarter that, months in our have have the A which of is capital in position of Craig our over approach historically timing quarter to business, evaluate evaluated very the deploy I'll Aaron relative look you, to year. here and we capital year. we've We good everyone. we This the Craig. position of things same we all the regularly Thank follow fourth Todd, good and any the with and Kliethermes good support considered. call All-in-all, doing. turn a and capital to

hearts and foremost, Hurricane with by First Ian. been policyholders our and our are their who've families affected

exchange their insurers on reputational This Stepping to team public what the We lose as possible. fulfill adjusters, in after involvement we're an fair pay helping our and or event. Our restore I help livelihood recover and losses sight to upon we is eliminate covered is them talented claim of and never speak. ground costs, focused and paying for cast damage our their fortuitous a up of as our on needless is businesses This such time and purpose delivering. premium. litigation for our quickly and customers what owe for frequently as the obligations regain industry helps our promise

the part our doing business testament underwriting profit to our focused large diverse on are portfolio We customers both event, the help level of hope very It's and to product the Despite in at quarter. able we report were same. rest this industry and the to overall. the unit is our a an

the on are uncorrelated experience we For can performing to count other that one. typically the product counterbalance well, challenges, several profitability underperforming products

XX% quarter our all and able the quarter year-to-date. Executive Surety time, year-to-date. were of growth remain us for segments At XX% E&S the This helping in and across of same largest were grow we our to total some and Casualty, resulted underwriting profitable which profitability. segments contributors maintain All Products,

continue catastrophe casualty an Ian lead know going over We with capacity spill tight grow to may profitably. Industry see harder may lines. market to we some into property to what This opportunities even exposed forward. losses from

well sheet, Our strong and take I'll occur. high advantage us balance may any color that performing for to to segment. of businesses, disruption it positions Jen by specialty over of broad his turn products portfolio now

Jen Klobnak

the increases Thanks started of Premium property, the rate higher Since on push Hurricane XX% conditions property segments, some the property grew to business were The change premium also deductible. in on pricing hurricane positive and continue including the in XXXX. business renewal. is as to XX% by cumulative in rates we E&S on quarter our exposure. and segment is catastrophe X% than this start up contributor book the rate largest offer portfolio led XXXX, which quarter. perspective, Xst, we rate Craig. is new is and I'll such XXX% hurricane terms and and with terms our To segments. achieving increase January

we litigation, steadily The Ian site can we Hurricane limits growth have we accounts business E&S loss The of renewal division. last new and inflation and for and through loss geographical our and want, with lower been on on Additionally, by weeks. to of improving exposure than potential we our visits manage the the is and discussions but based business spread continuing majority over write our of in producers on our occurred insurers terms focus couple risk on as much accounts. observations and Currently, estimate Property as providing conditions.

should and rules money with storm which are Florida E&S estimated by have of industry's catastrophe visit to the an the one exposed Despite also the nine immediately. be Ian loss, in to We through limits of the in November. advanced first landfall itself of insurers' to place one most months underwriting It the in there through of larger posted that The our due our geographies. sites highest respond still the peak zones, exposed to profits been mitigation division non-cancellation help end is XXXX. to made storm, noted Property with of the able have

in market given the terms Our posturing year the improve market. recognize direct will leaned underwriters property to have likely the that opportunity and Florida reinsurance of this

increases. rate manage are some renewal ensure opportunities cycles. property at Our we entertain to coverage for reinsurance we partners business up can through our producer with We our and X/X, all expecting new comes

prepared based adjust are our appetite away on if the the market walk cost of capacity irrational. and We availability and and willing becomes to will business from

That our expanding in rate third profit. businesses four years. Honolulu Hawaii for in brokers. We've the opportunities staying We're spills appreciation Homeowners' over that Hawaii X%. are where we in Homeowners our celebrated been XX%, team grew book year the front rates with increases In mentioning. agencies segment and an notable September. Division have producing grew We seeing and for while into an of increased event more We achieving our Marine by this worth in our customer same additional market serving The underwriting profitability our obtaining XXth quarter of partner XX%. XXX over service by

presence claims us positive continue local and for Our as our and service and translate a result Hawaii for underwriting to customers.

combined pace was year-to-date. reported year's segment combined to in Although XXX% excellent ratio from on the outperform an is XX% last an improvement year's the last quarter a segment results third was it property and quarter, ratio

Surety our the quarter XX% up Turning was products contributing. with to all in segment, premium

surety the see inflation growth the impact of some to premium. values, on which contract of continue We in our project drives

have initiatives. to cross are added and in We segment opportunities staff marketing through more seeing the

monitor and to funding construction rates given continue labor and time, and interest shortages ongoing the project conditions. this increasing closely overall can that We economic segment impact market,

XX% find be competitive, an to achieved to surety. highly continue selectively continues market in and this combined we will Although ratio, opportunities

especially X% Finally, is Casualty up liability offer business broader grew several terms the XX%. was led carriers quarter, E&S competitive, Northeast, This by where conditions. in of premium which and construction-focused general the truly

opportunities the has growth been driven of Our Northeast. by outside

with we're Both to and Transportation terms have [Ph] opportunities multiple and experienced to service find the portion capacity of buses last specialty the last stable, quarter, to quarter. public see new which appropriate markets year's able to transportation conditions. auto XX of competitive continues in our book sources the auto in Our that Group XX% public A more are emerged product, months. and by very auto is top which the obtain compared growth still was driven in commercial third

we as our Finally, XX% all our relationships grown continue product distribution quarter umbrella personal strengthen with channels. the has in to of

to in transactional state its the are segment's by takes growth and adjust opportunities given Products with trends We our and our states from conditions. closely approval. lag group almost navigate liability to was rate has Executive We watching severity cyber our pricing and the producers Casualty insurance it and longer course. where work growth offset department terms run

side to We are new strong a where including brokers [Ph] public business headwinds the more have from on also dozen months. than many they XX D&O and over experiencing markets, MGAs obtained access last

in our underwriting a X% rate the We have changing this quarter. resulting adjusted market decrease for in

Moving to become walking layer from within some terms unsustainable. the for away another accounts, tower the when even and insurance --

some changes. ratio business in book from quarter. the would have binding impact are X% notable for in the Casualty Ian Casualty as allowing the elevated our is The Excluding included this the this was space and Hurricane quarter. segment segment's premium us The implement Casualty increased grown Overall, authority unit, loss XX% the disruption losses segment. rates general to in

for for with Overall, Casualty product and Craig raise segment call comments. combined to ratio We XX.X% continue a towards terms we And conditions as now quarter. I'll tighten underwriting work coverages back all profitability. GBA for finished for over the rates turn further to some our and the the

Craig Kliethermes

Thank you, Jen.

We of flight capacity, tighter to continue underlying and distribution for quality harder company, will very underwriters. results benefit a and good be believe We ranging take affecting we're to there reinsurers, relationships to insurers, a poised partners, from advantage market. for

Jim We displacement. home expertise ownership. resulting ROI entire thank also our any gain been underwriting didn't want who of are I events for of this great responsiveness this quarter reputations we where Maui we we and have to employee would again from and deep earned catastrophes of sale reputation, the our investment stop associate the benefit as on is Thank care market catastrophic discipline, our great and two Maui will continue our I to is our to accountability be can't to mention you. a owners values from the for care future. a financial share our or of future Jim we for has following remiss forfeited. will occurring, companies. if take shared Maui delivering and Mahalo large team. owners that quarter. remember to of company When history we customers, natural I to if owners, realized continue take the all the strength,

I'll to it back moderator up for Now, questions. turn open will the who

Operator

at question Thank will at you. question-and-answer go Matt from session JPMorgan, Instructions] please first The comes begin ahead. this [Operator time. Carletti Our

line Your is open.

Matt Carletti

JMP. you, morning. questions. Carletti Jen good kind at of Good Hey, of thanks. -- Matt morning. Couple One

the accident to on wanted Jen's loss ratio, follow-up on First there. I comments

Hurricane that as we that it versus would think I you losses nine Ian mentioned the rate, didn't of I be months of kind six it to unchanged is look it? there relatively was strip were that three so like item one run to was some impact other at It we If sticking went from as points, at looks catch. that If out, well XX, two half? kind months first on up.

Todd Bryant

that. it's Todd, take Matt, I'll Hey,

a And -- of from were what's that's that can you it really between get year-to-date look we bit year. I the is what driving which it, to think a more what seeing movement the casualty you're on I than from point I a last underlying bigger better XX little and think the about quarters. is impact, Casualty driver would were the catastrophe

focus I you that. So, at year-to-date of, kind when on take look a really the would,

but is quarters, You -- of a those that cat is losses. can movement the between bit little get large impacts

Matt Carletti

rates of a forward? And have that or could. of That's related quarter and one-time income, little we there earning any step-up a if that therefore might benefit there kind quarter. one shouldn't the largely helpful. great. that this Okay, sustainable largely, then in given was kind us one Is in nice other repeat investment took Net going I just just

Aaron Diefenthaler

four last a Hey its Yes, strong. Thanks Aaron. four, to income pretty quarters just flow consistently last year investment operating question. for Mike, the was back now, work really putting money very we've on seen And basis. it's going the us off comparative over cash

fixed really flow to consistently up larger so both put more than XXXX, being amounts income the pretty just cash yields really new here in plus in anywhere So, of being work money it's of else. combination

Matt Carletti

Great. thank Appreciate thank Awesome. you for the you for Well, it. the caller.

Aaron Diefenthaler

Matt. Thanks

Operator

you very for question. your much Thank

James. comes ahead. Our Greg from go Raymond question Please next Peters as

Sid Parameswar

This on morning. actually Greg. good is Hey, for Sid

and possibly. it any Just there, state for market current property capacity, that looking outlook business? the and Could for the been if you reinsurance change and for of the at an growth outlook on there's just property the in the southeast tightening give and and pricing guys business updated outlook

Jen Klobnak

this Jen. Sid, is

advantage had despite in results year-to-date underwriting a like been of able our this because a is action were by in looking that, to a see but can market, meetings, we here There's to and rate a space standpoint, traveling, growth, from as we to I profit pitch, season EMS reinsurance capacity see reinsurers, that towards think There's So, are reinsurance looking we're as property going are to so and I that This process. went through a with that think number move more a and the that the for you retention an very and to we some some conditions the renewal space other of and such XXXX, take take of southeast continue of we MGAs terms X/X of to year, large negotiate in lot struggle our particular, would their had Florida, doing through a market market to number we make going still currently also think lack next to we event, I in remains business. and from do push that process. we've of to and the capacity on meeting is open division. of

we that's that. in one, your be dependent to process. it will one. own still like can we'd obtain continue what doing But on So, And

be determined. to have you So

Sid Parameswar

Thank you. Got Okay. it.

Operator

question, for very Greg. your much Thank you

question next Markets. from at Our RBC Please go Dwelle ahead. comes Mark Capital

Your line open is

Mark Dwelle

good Yes, morning. of questions. Couple

talked as respect losses tightened is spreading tell? so and market is pretty other hardening over well and expected yet property with to reinsurance any [ph] EN And First has you good at maybe forth. to soon I casualty resulting the signs up to, Or of and how about it any Is too the whether market lines there that's to all? pretty understood. in detail think

Jen Klobnak

Jen. Hey, is Mark, this

we like the a they think to as we listen want to have to I being the terms spillover. Well, let's standpoint, to too But it’s going to happen. about think would years trends, what continuing issues primary for know et talk market. frequency, soon severity, they on that's tell loss re-insurers, accomplish, of I that are that going see. don't just in in of From kind cetera

So time. over at of the can see we nothing that end bleeding from point this

Mark Dwelle

Second that in question, vein casualty. on just staying of kind general same

commented give I of to are of DNO maybe markets a case is think in type the of example seemingly had maybe softening a kind thought period depressed some standpoint? that markets. had in pricing that negative where you market textbook any, would of inflation a been pricing You there mentioned is that you you from be some causing soften? conditions. the that's But color a what guess, market not DNO would on adverse have terms I a additional been social and just economic and new Can the market

Jen Klobnak

Sure Mark.

maybe over people, of and I and and that saw a increases, the thought, issue get so in very some XX%. had significant should is, I get And think here all market you years we rate the of well, rate. of lot three that

had And people have so, we enter.

of number available. of other just is deals The the part it

occurring are be. days deals get If IPOs about There you these many not that to are to less used on. how think

less, less little So insurance bit procured. there's being a

fighting And accounts. everybody's so, for those

of combination factors the soften. those market to think the I is causing So

what that's And seeing. we're so,

Mark Dwelle

lot a to guess to That's third I'm dividends earnings guess the perspective, I optimistic, net income the special thinking consider the Okay. you. bit that, question wanted alluded in Thank his perspective? proceeds not I'm perspective, I one comprehensive potential going Are or And question, my disposition more an or a insight. Jim to little from dividends, remarks. real is, utilization your any prepared I and get of about helpful. use. a Todd, ask But other operating as expense I a -- income or you board you Maui

Todd Bryant

Mark. Todd, This is

all mean, what might on like. think you're be, I think all market I reinsurance right? the at those, about what you're you're looking I forward growth be factors, you consider we may looking going think think to

right, view stat a of we So, this, rating do take base. that some that base, some of of agency some GAAP of

so on ourselves, We have all an internal those of models all in that aspects. it's we do really view

Mark Dwelle

Maybe Maui to That too would there a nearly income differently. asked thinking comprehensive I in accordingly a way a $XX there dividend income with would it of be the behaved? associated about Jim, Gain be and of it, way was $XX If if on probably expensive that. and that operating somebody's has special right, view think

Craig Kliethermes

to I to to talked have at to are look Hey, the then going forward put Todd bit what Mark. us, the mean, grown very then is that be and seen we're and as opportunities all a all we'll much market's was move make Craig. it of said, modeling. use, a about opportunities the our and see preferences out This think look we've decision. going we're and do capital like all we at to to obviously, I your to there going have in to that front want Todd you've

So hopefully that's help.

Mark Dwelle

I Thanks took I've now. shot. best my best shot. all I've color. quarters success my been for this had three trying the Okay. equal for three. I took in

Operator

question, much your for Mark. very Thank you

from next Please Our question go comes at KBW. Shields Meyer ahead.

Meyer Shields

it numbers. back the that completely I I in date date want looking to first an year XX to there the wasn't thanks. comments half at now. XX to increase it from to about Perfect, in year call the Todd's was understand But go to segment. casualty

could view? changing Something talk through the us company what's you

Todd Bryant

bit think a years. an different unallocated Meyer. I don't go ratio a have mean, on not loss core from changing. it standpoint, between from underlying expense and has how a we noise really I little be prior down don't current adjustment of attributed mentioned quarters. changed. loss between But think our view. Again, view I you is our I to view don't may get rabbit a hole is may I want

higher a through part. our XX, than second you has it point from not is a what on But view the is. quarter? So, saw It changed the underlying

Meyer Shields

to The though, how that what could you're That's see explain go cat if question, expense is saying. me, seemed can to into casualty hole. and same on mean, going there? high. I on the I given the Okay. losses I I the hoping you surprised was underlying. I'm rabbit happy ratio for that And But both the if anything unusual

Todd Bryant

This did is bonus crosses was a We we not I this mean, did I that all related and impact there across that unusual. to there onetime related. the have mentioned transaction. segments. some was that

read policy through that home some expense. office expense, seeing You're acquisition, I additional

nothing unusual. So

I a account right? a maybe expense changes the material small that Some those a mix products commission with I all, marginally our bit, will as nothing have personal on ratio. little half umbrella. our Mix A As higher for could, changes, few at grow, mention. of It or point Meyer. of rate they commercial, guess may less they but

Meyer Shields

Okay, fantastic. you so Thank much.

Operator

no At remarks. Kliethermes for very some now over time, for to there your you much are Thank the turn Mr. Craig questions. I'll this conference closing question. further

Craig Kliethermes

finish team. Thank RLI's year quarter you. thank Pretty I joining and entire we'll ownership next strong Thank thank see us. you you. guess. I overall, you Well, want for to Hopefully all to good the

Operator

Ladies gentleman. and

pound concludes disconnect. participating day. today. of call, so for dialing All nice a This X-XXX-XXX-XXXX this may If you parties now do have and ID conference our you you XXXXXX. wish by an Thank the all for access may key for replay with to

RLI (RLI) 20 Oct 222022 Q3 Earnings call transcript