Earnings call transcript Q1 2023

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Operator

Good morning and welcome to the RLI Corp.

First 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 that reflect their intentions, 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. of risk the in XX-K annual in XX-Q, the SEC company's as to reviewed Forms including be filings, report all refer factors the described various supplemented carefully. Please should which on Form The Securities Exchange company release third Commission the press and quarter the has results. Form contains with a announcing filed X-K that

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

and earnings and XXXX. to due Maui not Jim www.rlicorp.com. XXXX performances measures and RLI's across a operating operating core earnings. are to the at Form the equity in earnings sale excluded available management in RLI's X-K and release at of and are of EPS operating quarter website earnings. The operating useful reconciliation are the third gauging of for taxes Additionally, comparable reporting these definitions company's the earnings believes contains investment We between related press from net but may of operating X-K The Form be other periods the companies'

Diefenthaler. now I Aaron conference go Please Investment Mr. over turn Treasurer, ahead. the Officer will to RLI, and Chief

Aaron Diefenthaler

XXXX. call Officer; President Financial Megan. to -- Good and earnings Operating Klobnak, first for us We Jen Bryant, and Chief you, today Thank morning Chief welcome Craig CEO; and joining Officer. quarter Todd are Kliethermes, RLI's

offer financial to and performance off market with lead Craig summary portfolio. detail in will our product on quarter. the related current Todd our of conditions Jen usual, will As a

will take then and We thoughts. final will questions close with Craig some your

Todd?

Todd Bryant

on we Investment and underwriting reported in in, quarter we earnings income. realized investment Thanks, results growth income XX.X% strong All and quarter. XX% of $X.XX is the reflect invested as capital a The quarter was asset Realized Yesterday, of up escrow gains and was The for up operating asset transaction. property combined and experienced from nicely good flow sale morning, posted payout quarter advanced million, the $XX and of the performance escrowed as Operating which rates the base. cash continued way. line improved represents per for this from a majority we supportive from continued the everyone. share. Maui ratio in these gains of all substantially a million were first quarter's Aaron of income larger were and of the reinvestment XX% and Jim top led elevated growth. amounts surety growth working the $XX

equity posted in $XX Also the portfolio the unrealized million gains. quarter, of

have between results. can a this From As equity line large impact mentioned can which in in XX.X% net an movements occasions, prices perspective, periods with earnings income on significant was in was quarter's comparative and combined you results quarter. the ratio underwriting see last on year's again numerous the

underlying ratio for both points declined results and casualty. Our loss improved as X property

Property low the versus last losses to spread attritional segment's year, and points X X added remained loss much losses a storm While base. revenue across ratio higher were points

year accident by point materially due year to the shifts improved X.X loss initial as ratios ago. For a from largely underlying different mix casualty, ratio not current are loss

of development benefited in marine, a multiple favorable experienced accident favorable emergence from and $XX From Casati loss product lines perspective, across million the year's reserves loss segments years. favorable $XX and admitted reductions. as majority lines million E&S development. prior posted property over Property of posted all X

in of between level periods. which modestly segment's million, the explains favorable reserve increase the surety, below ratio For $X the year's majority development loss was last

of reflective same to Our remains and a the quarter's are reserving results consistent the approach process.

our operating year, of quarterly on influenced of last incentive-related by expenses. points to to increase. the amounts equity were X.X amounts this nearly increased expense points notably, XX.X%. to year. X quarter return book last first account Most ratio significantly compared Moving Elevated and for to Compared from up value growth

to in and In to investments -- addition, million. experience both We we our despite volatility, of increased to X.X%, people have improve and contributing comprehensive at with growth, support were $XXX returns investment submarket both quarterly technology efficiencies. drive earnings customer and stocks positive bonds

in opportunities amounts purchase for the and averaged in high-quality and year the of retreat with more over focus flow the cash yields than change in There still March, to found yields our quarter. has on bond were we Although fixed strategy a investment significant last a to bonds. little accretive X.X% meaningful income been putting work

adjusting and $X increased comparison million year's share. is book last largely XX% portfolio, earnings influenced to over quarter which per to in the share that traditional per results. were the dividends, for investment our earnings comprehensive Incorporating Jim from Away value down invest Maui contributed sale of $XX.XX but by

XXXX. and purposes, the highlighted start release year we for strong a last of for our noted have Jim comparative all, in operating to the year. good in very Maui and from All quarter earnings earnings excluded As calculation press in operating

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

Craig Kliethermes

to very and you, top line last sub-XX Thank a similar and and I'm ratio, very to XXXX year. combined morning, pleased with Todd continued Aaron with everyone. growth start good our double-digit

people, test. deliver and our the allow March is make of quality our RLI decisions diversity owners associate to customers underwriting benefit of and the for These a product disciplined testament in our ability our attributes long-term best to the to our the metal shareholders. of culture. the continued portfolio believes Our

be We a a the uncertainty in of fair have lines through remains and capital shortfalls stable in appetite particularly of exposed and There much cycles. a amount wheels of all businesses. consistent risk market resolve economic dislocation, industry, catastrophe market with to the

and up even with be exposures. to momentum greater wind continue Rates for earthquake

markets to although costs their are better primary finding to behave the passing competition for over of there creating too many reinsurers general be the a liability job market are tougher irrationally some surety in the businesses, as We that along is reluctance and our capacity. concern to seems and markets We doing rates We healthy their very where discipline and is our prefer availability and the compete our to of where think portfolio pervasive. competitors We and to discerning talented measured smart risk. more are and cover adequately risk-taking poised underwriters grow tag in price capacity. are appreciate

I'm where to it more opportunities. portfolio Jen lot and the over on best going we're talk can to turn our provide a Jen? who about color seeing

Jen Klobnak

Southeast fairly segment Property was again the for positive The XX% the top segment and line change of for the produced rates were Hurricane in a was double-digit XX% which Craig. string to continues claim going while to quarterly ratio up continues drove you, be for Thank increases property the quarter. XX%, headline the Rate quarter combined a XXXX. results rate once market. fourth back the quarter The quiet. activity of

has With the limited. exposure premiums, driver rate growth been a primary of

in for a seen the Florida market multiple competitors some participate to creates carriers capacity new to events have and We risk, in including continue ROI. on not their quite manage which time space closely

hurricane are costs to At property shifts in claim remained as the report we that of now our and market. resolution have X/X strong business to the admitted Submission day, are claims are happy closed. risk of from the the end in the E&S

thriving proving responsive is being quarter. and solutions. solid Marine Florida to continues insurers Marine XX% successfully [ph] folks producers steady reinspect to to go-to and our in visit are results, location Hawaii totaling quietly well. a Hawaii any by examiners and to X% grew market. E&S tailored as homeowners property address providing the and by to our rate issues. Marine in our and service a partner claim We our XX% continue With Marine again, dynamic superior Our Groenland increases deliver for by be

overall. to believe healthy but our see during and property Our going segment expect forward. the continued well growth Hawaii some Homeowners We perform experienced product we losses opportunities to quarter continues is

an of XX segment's the combined continue premium as excess was areas The our decrease was our disciplines ratio. exited million the markets underperforming umbrella, of market Effective willingness car changes demonstrate combined profitable to a demonstrated we appetite. portfolio. flat $XX their to or participation by quota it products our reinsurance to rebalance quarter. the are to results stems grow, impact with opportunities premium January personal liability grew of and with we where Prime's are X, needed back consistent right share disruptive while several changing The these energy treaty. Conversely, Growth when reduced first X%, in Producing about Casualty align leading on in portions underwriting this as or portfolio better competitors from appetite market. a produced to risk

are target by monitoring have our closely. region. and manage up form, XX% we rate this partners and premium was Pulp refreshed growth regular policy work we growth to with Here, producer increases our

commercial well efforts the which focuses group package our growth engineers packages was This also liability as ramped architects growth rise. achieved premiums in group quarter Steady small professional X% for coverages marketing up and professional services in produced contractors. gross and by on and first as

a products executive is remains Our where market, tougher group D&O the public in under pressure. sector

have We mouths our are these market in XX that last with and competitors to brokers XX said providing believe the linked feed. new are entered this of One more entrants brokers months. the new to party

XX% down we're outside able of premium rate but D&O. the EPG achieve decreases experienced Our to in We quarter. public growth was X%

more quarter. by the excess start our we of projects and primary vary issues delays Finally, Northeast the private most to the impacted. geographic in with exert financing, These in Project the needed efforts and region, to are permits obtain project first construction having and owners casualty saw E&S business liability supplies. being

generally as who entered has competition provide space the New broader coverage well.

and grew ratio. were with for produced business monitoring but the Surety the Premium to a we work XX on X% able rate and by flow. it to construction X% The down trend X%, it's premium obtain In information on closely asset. the combined a submission too are to call early group segment monitor industry we our although to quarter, the XX% was increases primary producers continuing and

and in increased on inflation efforts new businesses focus surety, contract building growth contract accounts materials winning While to are in and our through support surety service. we a continues marketing excellent commercial also

ahead. are for in the a financial we believe we are and of off market, have year health solid the While accounts XXXX, segment in several financial gotten growth more we principles deteriorated. within robust to conditions be our off the With this and economic opportunities competition may results watching moderate closely whose start

turn I'll the over back to call Craig. now, And

Craig Kliethermes

very us fall spring good Thanks, quarters. A giving more the start good the year. into to momentum Jen. going catastrophe-exposed and It's

the the also the counterpunch We around proven with but the required, patient its us ability to selection. market could uncertainty. speed our gives consistent underwriting and market. navigate narrow in associates better be as patient execute be our to like continue to when which confidence required approach strong and knowledge grow and from disruptions our risks comes and to underwriting derived people, Armor, we value will from invest that time. the can and when balance in sheet deep and customer vigilant speed is relationships have skill. opportunities adapt The and Boxer we risk continue will technology customer we and to over remain skill to amid uncertainty added We The bring RLI profits and

generated to RLI of up our for thank associate is work. Keep this quarter. great want different the all I works. be different they RLI, it okay to because owners the And results

now any questions. the over for back I'll call turn operator the to

Operator

Thank you. Instructions] begin question Greg time comes will first at from Peters. [Operator this The question-and-answer session Our

Unidentified Analyst

for This is Greg. Sid on

trying the that to the sounds there's segment, the lines and growth. Just the guess, on timing get there have exited about a we with exited. to provided Jen, lines sense, are like additional where great just in Casualty talk wanted And I previously been it we're you on then detail

set outlook to Casualty the in growth just, So trying our guess, segment. for I

Jen Klobnak

Yes. Thanks for question. the

liability So of business. excess liability a was primary year. business, the that exited in last that still product We we not bond terms write energy a that's

So X. we have effective January

wrote we of liability and between million $XX year, million premium. last $XX think I excess

about roughly. the million $X in quarter So that first of was

And the assume. another And that's first the of we of towards probably rest our It quarters so end that the throughout down slow part so weighted reinsurance that the was you'll of prime year, just did X towards last see year. the year.

half we we that took our of so XXXX. And used to do participation in

it's So more impacted year, premium the well. spread. And our as we see that would evenly that throughout

Operator

you. Thank

Our Shields. question line comes from the next Meyer

Meyer Shields

Great. I'm coming through? sorry, Fantastic. I'm Okay.

that has entering until I'm focus And to public mentioned Sorry you're we've Jen, does seeing? that company now match business for XX now, they you are space. limited D&O. their or carriers looking the that. heard attack up been to what fairly And other soften? of lines wondering, to about Or

Jen Klobnak

the Yes. question, Thanks for Meyer.

participate in seeing think I them public mostly are D&O. we

carriers of competitors the a new are mix So XX and lot a of MGAs.

much other space, no mostly Some so. we're warranty folks public private which as been in. focused also it's you're as business of anywhere ready Russian haven't now, to the for general the those parts been play They the competition for P&L. longer we're of come in but focused that on such right, yet on But

Meyer Shields

Okay, in we grows? is thinking trends you this talked change as the we past how that of impact the that an that's wondering know to in should climate increase are annual about specifically, helpful. addition And in I'm And I about book property expect but from loss inflation? there

Jen Klobnak

change, perils Well, provide increases would connected as increased we've through time few form are some change, lot a over activity such climate last We of the have that some climate say for I years in coverage of of terms to in the been rate which changes. for seen that don't flood. we and adjusting

of So do risk portfolio. have a very we lot in example WildFire. are would The where have but we at aware Wildfire our another that don't of we be

that really charge So your I've we try to question. underwrite that. would and say, for forgotten I risk to now

Meyer Shields

affected How about the trend with of ban that? loss

Jen Klobnak

Yes, thank you.

terms this of to loss in is So measure. impossible trend,

loans in precision is because, no pricing and that's a various within a or lot but some other We of calculations that our topic payrolls for there's that know, have benchmark factors around tool you evolving. as put

large to high-level of kind you I'm a that So answer give on going one. a

Craig Kliethermes

we've we been that focus time material lot making recently costs that sure get only add had and do but front increased on of the valuations a correct spend The thing that. there's the really effort always there increase on things we I'd an a like end, an because is of

reevaluated at and of on renewal we property. kind insurers we've and accounts at our about making So our the portfolio our entire right look sure conversations have brokers a get with valuations

Operator

you. Thank

next Mark comes Dwelle. question from Our

Mark Dwelle

what kind I'm going Meyer about. build on of asked just to

is of peak would might the property Or be, it the property or whatever previously? or I say quake risk still it Hawaii been all it to would zone you've for with safe additional writing, that now So been Southeast that your kind be know, don't exposures? California have

Jen Klobnak

Well, that's it. It depends good you how question. on measure a

whether using As it it, there's ways to comes lot measure you to you're risk, of or a limits. a when know, exposed using catastrophe model

you balanced overall as far California so that is ranking. falling And between the answer would a Southeast and that in lot of with ways, exposure earthquake can that fairly say question behind Hawaii I our as

exposure So that to brought we've line with would say our more be hurricane I earthquakes. up in

of I manage use. various Although we months, would last has our the as say we few metrics exposure in tremendously of these in particular, the that all growth slowed

Mark Dwelle

To the of property sort are not atypical. there's been exposures, you guess, extent you've what you're or writing, typically maybe adding where I writing limits

Jen Klobnak

like the million Well, the $X million there can be areas to area. typical. or even at in limit We down $X.X highest concentrated Florida look and Hesta

to that stay really producers the have limit And lease so so that we And open to they amount our of do capacity business we we're get provide. to trying with can can a quote. new that, for dollar

good see cycle. the can business continue So throughout to some we

Mark Dwelle

as you writer Are a are part primary an excess participating you tower? or -- of primarily

Jen Klobnak

participating. has very a our business portion Historically, carriers' been bit towers excess where in more so with lot primary. carriers lot limits a on we've of grown focused they're in of the that with the of providing The a change and now less is just other portfolio

prefer area of of as enjoy that as we seen the lot we've grow business So excess and our far but in still book primary a portfolio.

Craig Kliethermes

will XX% XX%, excess primarily predominantly Still mean... be

Mark Dwelle

I comments, wheels just dislocation. very suppose. you one cap the Cart helpful. the question, extensively quizzed on being as there's then And the where the in other businesses your portion, that's you I've Okay, most Craig, areas and mentioned

thoughts in any you're of share on seeing environments you increase the in business might most could the where the Wheels you of dislocations are have are what those of areas. sense some kind some what acute like collectively maybe rate So and

Jen Klobnak

jump actually I'll Yes. in.

And competition. our lot I that at there's diverse. auto said parts, other If of you Transportation There are a pretty is the look is are of division. the parts I that unit exposure, when main healthy very our still in auto would space it say business

challenging XXXX non-admitted why an that is don't So most both basis I but trucking don't of appreciate the a lull. was understand actually market, on and that admitted the section people market

that down that And they and insurers but for be so the losses going every were forward. assume incorporate losses there day. pricing in year down will reality, into that But are excess

to because some to And little so charge say the of you're a trucking. you and need that it's to a experiencing to healthier. market there frustrating on areas other more are new charge the you market us are to it We markets claims issues. cover in is entering have yesterday heard one going that. about cover, And need I'd and

We have a public portfolio.

those specialty a auto commercial little that some have We bit from sample. are and healthier

were in on achieve the we X% rate able to portfolio. first transportation the Overall, change an quarter,

The little other are. our exposure umbrella various but a couple Bristol area on they being product and And a years primary more with ago, assume departments rate people a would get the where insurance auto state to we losses losses there, we're we portfolio. fight the And of aren't that have now these focus. are some happening be to trying again, in

competitors carriers, factors And inflation about previously. again, do that and we've with that in see other talked the so we social struggling market, other

a new very growth it always bit disruptive So But that's at and been in opportunity. market. a to watch we We've RLI, see we closely. growing for continue with

Operator

Thank you.

question next Our Casey comes from Alexander.

Casey Alexander

how of seeing exposure give in of overview us obvious you're whole the your situation. managing reinsurance you're you're markets? the in relative the could you property and an reinsurance to Just change how of prices an dealing if in with markets wondering was overview what in kind I increase

Jen Klobnak

We but we to get it our cost We're that to change. higher a X you. Sure. by us. rate cost. reinsurance renew was did see cover the reinsurance We that that Obviously, to were be for to market firm. coverage able some with at was January extent along our continuing passing Thank challenging and able is

So parts from we various renewals do portfolio. through of have our January that July on happened

our X, treaty They're and focused. were April that renewals our services recently, -- both those So a renewed property not which engineers, professional we better. Surety on group and is architects

be change on rate and our going what's a know so And market, manageable we challenging to talking will there. area. But property brokers the to was from about continue hearing that the from in pretty

throughout move as we as on in so treaty. for a book exposure to contemplating be And means year, our be you it's force put risk because the think it that about subject are we the which we XX today, year's will to cat next months going

knew increasing so we like pricing we our be last will consider frame, rates around for next And to year, the just going we were XXXX, April-May be in that going time up. to And that paying that year, started exposure. more benchmark

try we in do process we an some so some again possible. forecasting spend think fact. But it's in up a we as to this And potential process for with the hoping more organized time. there's coming the reinsurers, lot forecast manageable touch have as to visits I'm to stay similar rates this But we year up and we extent. go our

now New In some a actually team we York have in reinsurers meeting fact, office. our with right

monitor to we contact forward as accommodate and So that we'll as we can. going go take on we what's

Operator

Our next Jamie question from comes [ph].

Unidentified Analyst

And have really you big signaled this Other haven't as talked has the back you want at and of But guessing as wondering about have focus. guys in past I companies there you've area. some a wondering changing way changes ratio I'm the look reported I'm property conditions structured geographic get Is -- if guys changes? way changed don't part in would of those capacity -- you And to in the and/or to well. what some book If you to you how [indiscernible] loss made etcetera. I'm made? book? hadn't And have what's what sense there been your terms or and is quantify your a industry

Jen Klobnak

or a I question. that the I last question asked would the our hail play seeing a portfolio. there. so, week because tornado in were that Yes, E&S into things what I am in impact? we go that's our back in And fair myself in larger say habitational losses of the ago and is these couple day, a losses. pre-announcements little XX About good I years experienced amount space, We a property so saying keep of

some terms there that. frankly, if losses at look But needed. our And and from get you participation we history, so back the we our reduced couldn't we because, conditions had we

perils. exposure And our so Texas, a we say lot books to areas. Florida, really California, concentration those have to I those less of would kind that in is --

And of so peril-specific lot really ways. in it's and -- a

when depending don't so just through, you events see have these we on the the And depending on come different region, concentrations. coverage,

like events Now occur. more losses we to this expect of when happen,

We but needs. hail issues have received some a headline that damage, few claims root nothing is

Operator

are turn There you. further Thank Craig remarks. Kliethermes conference Mr. questions. to I for closing over the no now will

Craig Kliethermes

Well, and joining look forward thank deliver you to you for We're continue all glad us. all could we Thanks. talking again. with to

Operator

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

RLI (RLI) 20 Apr 232023 Q1 Earnings call transcript