EX-99.1 3 a2108588zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

NEWS RELEASE

[RLI LOGO]

RLI Insurance Company
9025 N. Lindbergh Dr. / Peoria, IL 61615-1431
Phone: 309-692-1000 / Fax: 309-692-1068

        w w w. r l i c o r p.c o m

FOR IMMEDIATE RELEASE

CONTACT: Aaron Jacoby
(309) 693-5880
Aaron_Jacoby@rlicorp.com
www.rlicorp.com

RLI begins year with 59% earnings increase

        PEORIA, ILLINOIS, April 17, 2003—RLI Corp. (NYSE: RLI)—RLI Corp. reported quarterly net earnings of $14.4 million ($0.56 per diluted share), a 59% gain over the $9.1 million ($0.45 per diluted share) posted in the same quarter last year. This result includes quarterly operating earnings of $14.2 million ($0.55 per diluted share) which were up 78% from last year's $7.9 million ($0.39 per share) result. All total dollar and per share results set RLI records.

        RLI operating earnings consists of net earnings after the elimination of after-tax realized investment gains/losses. This measure is useful in gauging core operating performance across reporting periods, but may not be comparable to other companies' definitions of operating earnings.

Record underwriting profits

        The company posted quarterly underwriting profits of $9.7 million—RLI's most profitable quarter ever—on a 91.2 net GAAP combined ratio. This result compares to a $2.5 million gain on a 96.6 combined ratio for the same period last year. Property profits led the way, benefiting from a 58.7 combined ratio for the first three months of the year. The casualty segment registered profits on the strength of an improved combined ratio. Surety business was down quarter to quarter, but slightly improved over year-end results.

        Net premiums earned grew 47% in the quarter, to $109.1 million, driving a 42% increase in consolidated revenue. Gross premiums written also grew; the $173.9 million result was an 11% improvement.

        "Another quarter of record earnings is exactly how we prefer to start the year," said RLI President & CEO Jonathan E. Michael. "The boost in consolidated results shows the benefits of our favorable underwriting and our efforts to control expenses.

        "Our property segment turned in extraordinary profits this quarter, as our underwriting strategy resulted in a much improved loss ratio. Premium writings were essentially flat because of competitive pressures in our domestic fire line and our conservative underwriting strategy in California earthquake business. Net premiums written were up 8% due to slightly increased retentions, and net earned premiums grew by 38%. We believe growth in property rates is slowing, but this segment should continue to be profitable going forward.

        "Casualty business was not only profitable this quarter, it continued to grow; we anticipate this growth will continue, if at a somewhat slower pace. Surety postings are down due to the narrowed focus in our contract surety line.

        "We are benefiting from the significant momentum gained from last year's premium volume growth. While we anticipate that 2003 will present a very good marketplace for excess and surplus lines companies, it is not likely to be as robust as in the prior twelve months. We'll choose our growth opportunities carefully and continue to prefer profit over volume, a core tenet of our business strategy."

-more-

Investment income surges

        Investment income grew to record levels in the first three months of 2003, reaching $10.7 million, a 17% increase over last year. This growth was attributable to increased cash flows from operations and the infusion of new capital from 2002's equity offering. Invested asset growth of 24% over the same period last year helped push total assets to $1.77 billion.

        The company's consolidated investment portfolio generated a 0.4% total return year to date. The equity portfolio registered a -3.6% return for the quarter, which slightly trailed the S&P 500 Index's return of -3.2%. RLI's bond portfolio continued its strong performance from 2002, generating a total return of 1.6% for the first quarter of 2003.

        Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, posted a $9.0 million gain for the quarter ($.35 per share). This result was 17% less than the $10.8 million ($0.53 per share) level from the same period last year.

        As of March 31, 2003, $101.1 million of cumulative unrealized gains remained in the RLI investment portfolio. Over the past 20 years, the equity portfolio has generated a 12.3% average annual return.

        During the quarter, the company's directors declared a $0.09 per share cash dividend. The dividend was paid on April 15, 2003, to shareholders of record as of March 31, 2003.

        At 3:15 p.m. CDT today, April 17, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion through the Internet at RLI's website, www.rlicorp.com, or through http://www.firstcallevents.com/service/ajwz377363749gf12.html.

        Except for historical information, this news release may include forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) which are subject to certain risk factors that could cause actual results to differ materially. Various risk factors that could affect future results are listed in the company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2002.

        RLI Corp., through its subsidiaries RLI Insurance Company, Mt. Hawley Insurance Company, Underwriters Indemnity Company and Planet Indemnity Company, underwrites selected property and casualty insurance products. For additional information, contact RLI Director, Corporate Development Aaron Jacoby at (309) 693-5880 or at aaron_jacoby@rlicorp.com.

2


RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)

 
   Three Months Ended March 31,
  
 
   2003
   2002
   % Change
  
SUMMARIZED INCOME STATEMENT DATA:                  
Net premiums earned   $ 109,146   $ 74,102   47.3 %
Net investment income     10,660     9,085   17.3 %
Net realized investment gains     409     1,787   -77.1 %
   
 
 
 
  Consolidated revenue     120,215     84,974   41.5 %

Loss and settlement expenses
 
 
63,286
 
 
43,114
 
46.8
%
Policy acquisition costs     29,504     22,826   29.3 %
Other insurance expenses     6,684     5,613   19.1 %
Interest expense on debt     243     424   -42.7 %
General corporate expenses     1,117     1,030   8.4 %
   
 
 
 
  Total expenses     100,834     73,007   38.1 %

Equity in earnings of unconsolidated investee
 
 
1,176
 
 
533
 
120.6
%
   
 
 
 

Earnings before income taxes
 
 
20,557
 
 
12,500
 
64.5
%
Income tax expense     6,121     3,395   80.3 %
   
 
 
 
  Net Earnings   $ 14,436   $ 9,105   58.6 %
   
 
 
 
Other comprehensive earnings (loss), net of tax     (5,417 )   1,700   -418.6 %
   
 
 
 
Comprehensive earnings   $ 9,019   $ 10,805   -16.5 %
   
 
 
 

Operating Earnings:(1)
 
 
 
 
 
 
 
 
 
Net Earnings   $ 14,436   $ 9,105   58.6 %
Realized gains, net of tax     266     1,162   -77.1 %
   
 
 
 
  Net operating earnings   $ 14,170   $ 7,943   78.4 %
   
 
 
 

Return on Equity:
 
 
 
 
 
 
 
 
 
  Net earnings (trailing four quarters)     10.6 %   10.0 %    
   
 
     
  Comprehensive earnings (trailing four quarters)     3.1 %   8.9 %    
   
 
     

Per Share Data(2)
 
 
 
 
 
 
 
 
 

Diluted:
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding (in 000's)     25,654     20,347      

EPS from operations(1)
 
$
0.55
 
$
0.39
 
41.0
%
Realized gains, net of tax     0.01     0.06   -83.3 %
   
 
 
 
Net earnings per share   $ 0.56   $ 0.45   24.4 %
   
 
 
 
Comprehensive earnings per share   $ 0.35   $ 0.53   -34.0 %
   
 
 
 
Cash dividends per share   $ 0.09   $ 0.08   12.5 %
(1)
Net operating earnings and EPS from operations consist of our net earnings reduced by after-tax realized investment gains/losses. This measure is useful in gauging our core operating performance across reporting periods, but may not be comparable to the definition of operating earnings used by all companies.

(2)
Prior year's per share data has been stated to reflect the 2-for-1 stock split that occurred on October 15, 2002.

3

RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)

 
   Three Months Ended March 31,
  
 
   2003
   2002
   % Change
  
Total Gross Sales                  
Gross premiums written   $ 173,924     156,308   11.3 %
Net investment income     10,660     9,085   17.3 %
Net realized investment gains     409     1,787   -77.1 %
   
 
 
 
  Total   $ 184,993   $ 167,180   10.7 %
   
 
 
 
 
   March 31,
2003
   December 31,
2002
   % Change
  
SUMMARIZED BALANCE SHEET DATA:                  
Fixed income and short-term investments   $ 817,858   $ 772,685   5.8 %
  (amortized cost—$797,084 at 3/31/03)                  
  (amortized cost—$753,458 at 12/31/02)                  
Equity securities     218,085     227,342   -4.1 %
   
 
 
 
  (cost—$137,126 at 3/31/03)                  
  (cost—$136,282 at 12/31/02)                  
  Total investments     1,035,943     1,000,027   3.6 %

Premiums and reinsurance balances receivable
 
 
124,972
 
 
122,258
 
2.2
%
Ceded unearned premiums     91,325     95,406   -4.3 %
Reinsurance recoverable on unpaid losses     357,436     340,886   4.9 %
Deferred acquisition costs     59,068     60,102   -1.7 %
Property and equipment     17,657     17,757   -0.6 %
Investment in unconsolidated investee     26,382     25,261   4.4 %
Goodwill     27,882     27,882   0.0 %
Other assets     30,794     29,748   3.5 %
   
 
 
 
  Total assets   $ 1,771,459   $ 1,719,327   3.0 %
   
 
 
 

Unpaid losses and settlement expenses
 
 
778,547
 
 
732,838
 
6.2
%
Unearned premiums     343,672     350,803   -2.0 %
Reinsurance balances payable     80,555     78,231   3.0 %
Short-term debt     48,223     54,356   -11.3 %
Income taxes—deferred     22,726     26,022   -12.7 %
Other liabilities     24,348     20,522   18.6 %
   
 
 
 
  Total liabilities     1,298,071     1,262,772   2.8 %
  Shareholders' equity     473,388     456,555   3.7 %
   
 
 
 
  Total liabilities & shareholders' equity   $ 1,771,459   $ 1,719,327   3.0 %
   
 
 
 

Common shares outstanding (in 000's)
 
 
25,117
 
 
24,681
 
 
 

Book Value per share
 
$
18.85
 
$
18.50
 
1.9
%
Closing stock price per share   $ 26.87   $ 27.90   -3.7 %

4

RLI CORP.
2003 FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)

UNDERWRITING SEGMENT DATA
(in thousands)

 
   Property
   GAAP
Ratios
   Surety
   GAAP
Ratios
   Casualty
   GAAP
Ratios
   Total
   GAAP
Ratios
  
Three Months Ended March 31,                                          
2003                                          

Gross premium written
 
$
48,159
 
 
 
$
13,559
 
 
 
$
112,206
 
 
 
$
173,924
 
 
 
Net premium written     26,521         11,209         68,366         106,096      
Net premium earned     27,332         12,353         69,461         109,146      
Net loss & settlement expenses     6,473   23.7 %   6,276   50.8 %   50,537   72.8 %   63,286   58.0 %
Net operating expenses     9,579   35.0 %   7,870   63.7 %   18,739   27.0 %   36,188   33.2 %
   
 
 
 
 
 
 
 
 
  Underwriting income(loss)   $ 11,280   58.7 % $ (1,793 ) 114.5 % $ 185   99.8 % $ 9,672   91.2 %

2002
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premium written   $ 49,189       $ 16,140       $ 90,979       $ 156,308      
Net premium written     24,615         14,257         46,804         85,676      
Net premium earned     19,853         12,235         42,014         74,102      
Net loss & settlement expenses     9,269   46.7 %   4,176   34.1 %   29,669   70.6 %   43,114   58.2 %
Net operating expenses     7,804   39.3 %   7,949   65.0 %   12,686   30.2 %   28,439   38.4 %
   
 
 
 
 
 
 
 
 
  Underwriting income(loss)   $ 2,780   86.0 % $ 110   99.1 % $ (341 ) 100.8 % $ 2,549   96.6 %

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