EX-99.1 2 a05-17771_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS RELEASE

 

 

RLI Corp.

9025 N. Lindbergh Dr. ½ Peoria, IL 61615-1499

Phone: 309-692-1000 ½ Fax: 309-692-1068

www.rlicorp.com

 

FOR IMMEDIATE RELEASE

 

CONTACT: Aaron Jacoby

 

 

(309) 693-5880

 

 

Aaron_Jacoby@rlicorp.com

 

 

www.rlicorp.com

 

RLI posts solid third quarter results

 

PEORIA, ILLINOIS, October 18, 2005 — RLI Corp. (NYSE: RLI) – RLI Corp. reported third quarter net earnings of $25.3 million ($0.96 per diluted share), compared to $8.3 million ($0.32 per diluted share) reported in the same quarter last year. Through September 30, net earnings were $89.0 million ($3.39 per share) versus $43.6 million ($1.67 per share) last year.  Highlights for the third quarter include:

 

•                  Operating income of $20.7 million ($0.78 per share) compared to $5.1 million ($0.20 per share) last year.

•                  Combined ratio of 89.5 across all segments.

•                  Losses from Hurricanes Katrina and Rita of $17.0 million pretax ($0.42 per share).

•                  Hurricane losses in the third quarter of 2004 of $17.3 million pretax ($0.43 per share) from four Southeastern U.S. hurricanes.

•                  Favorable loss development from prior years’ casualty loss reserves of $16.9 million pretax ($0.42 per share).

 

Both the hurricane losses and the favorable loss development include bonus-related impacts which affected other insurance and general corporate expenses.

 

“We are pleased to report solid results for the quarter. Losses from Hurricanes Katrina and Rita are within our previous loss estimate for Katrina alone,” said RLI Corp. President & CEO Jonathan E. Michael. “It may be too soon to predict the impact of the hurricanes on future rates, but we expect January reinsurance renewal pricing to increase, which should ultimately filter down to primary rates.

 

“The quarter’s positive reserve development stems from casualty business written in 2003 and 2004. These adjustments reflect that this business is continuing to develop better than expected.”

 

Year-to-date results improve by 112%

 

Operating income through September 30 was $79.6 million ($3.03 per share) versus $37.6 million ($1.44 per share) last year. Year-to-date results factor in:

 

•                  Losses from Hurricanes Katrina and Rita of $17.0 million pretax ($0.42 per share).

•                  Favorable development of $3.8 million pretax ($0.10 per share) from four Southeastern U.S. hurricanes that occurred in the third quarter of 2004.  Hurricane losses from the same four hurricanes were $17.3 million pretax ($0.43 per share) in the year-to-date period ended September 30, 2004.

•                  Favorable loss development from prior years’ casualty loss reserves of $42.1 million pretax ($1.04 per share).

 

Since year end, shareholders’ equity grew 10.0%, to $686.1 million; book value per share was $26.91, up 9%; assets rose by 8%, to $2.7 billion.

 

Successful underwriting results

 

RLI reported third quarter underwriting income of $13.3 million representing an 89.5 net GAAP combined ratio versus the $7.1 million loss representing a 105.6 combined ratio for the same period last year. The quarter’s hurricanes negatively affected the combined ratio by 13.7 points while the quarter’s favorable loss reserve development positively affected the combined ratio by 13.5 points. Casualty recorded a 78.9 combined ratio, the property segment registered a 127.4 combined ratio, and the surety segment recorded a 93.8 combined ratio for the quarter.

 

— more —

 


 

Net premiums earned were down 1% quarter over quarter, to $126.1 million. Consolidated revenue of $149.2 million and gross premiums written of $192.0 million were both up slightly for the quarter compared to the third quarter of 2004.

 

RLI reported year-to-date underwriting income of $69.3 million representing an 81.5 net GAAP combined ratio versus the $15.5 million underwriting income representing a 96.0 combined ratio for the same period last year. Casualty recorded a 77.9 combined ratio, the property segment recorded an 89.3 combined ratio, and the surety segment recorded a 93.9 combined ratio for the nine months ended September 30, 2005.

 

Net premiums earned were down 2% in the nine months ended September 30, to $373.8 million. Consolidated revenue of $433.5 million was up slightly over last year and gross premiums written of $557.6 million were 3% lower.

 

“Casualty premiums are off slightly for the quarter and year as we’re seeing increased competition in our program business,” said Michael. “But we believe the segment will continue to be profitable as the pricing environment remains favorable. Property production is up markedly in the quarter, as our new marine business gathers momentum and commercial property production has improved. We welcome this sign of growth in a traditionally profitable segment. Our surety segment has now expanded for the sixth consecutive quarter and this quarter’s underwriting performance was particularly strong,” said Michael.

 

Other income

 

Investment income for the third quarter reached $15.9 million, a 16% increase over the third quarter of last year due to continued positive operating cash flows. For the nine month period ended September 30, investment income was $45.1 million, up 15% over the same period last year.

 

The consolidated investment portfolio’s total return for the quarter was 0.4%. The bond portfolio lost 0.3% and the equity portfolio’s return was 2.8%. For the nine month period, the portfolio’s total return was 2.7% based on a bond portfolio return of 2.4% and an equity portfolio return of 4.2%.

 

Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $13.2 million for the quarter, or $0.50 per share. Year-to-date comprehensive earnings were $73.0 million, or $2.78 per share.

 

During the quarter, equity in earnings of unconsolidated investees of $2.6 million included $1.9 million related to Maui Jim. The third quarter of 2004 showed income of $1.3 million related exclusively to Maui Jim.  Year to date, equity in earnings of unconsolidated investees of $8.4 million included $6.8 million related to Maui Jim compared to $4.4 million related exclusively to Maui Jim in the same period last year.  Higher seasonal sales and continued strong operating performance drove the growth in the current quarter and year to date periods versus the comparable periods of 2004.

 

Other RLI news

 

During the quarter, Moody’s Investors Service upgraded its senior debt rating for RLI Corp. to Baa2 as well as the insurance financial strength ratings for RLI’s insurance subsidiaries to A2. The outlook for the ratings is stable.

 

In addition, for the 15th consecutive year, RLI was also named to the Ward’s 50, a respected benchmark of the industry’s top performing insurance companies. The analysis recognizes companies that have excelled in balancing safety, consistency and performance for a five-year period, then benchmarks their performance with the industry overall.

 

At 3:15 p.m. CDT today, October 18, 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.

 

2


 

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, 2004.

 

RLI, a specialty insurance company celebrating its 40th anniversary in 2005, offers a diversified portfolio of property and casualty coverages and surety bonds serving “niche” or underserved markets. RLI operates in all 50 states from 18 office locations. The company’s talented associates have delivered underwriting profits in 24 of the last 28 years, including the last nine.

 

For additional information, contact RLI Vice President, Corporate Development Aaron Jacoby at (309) 693-5880 or at aaron_jacoby@rlicorp.com, or visit our website at www.rlicorp.com.

 

3


 

RLI CORP.

2005 FINANCIAL HIGHLIGHTS

(Dollars in thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2005

 

2004

 

% Change

 

2005

 

2004

 

% Change

 

SUMMARIZED INCOME STATEMENT DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$

126,129

 

$

128,018

 

-1.5

%

$

373,843

 

$

380,792

 

-1.8

%

Net investment income

 

15,855

 

13,654

 

16.1

%

45,133

 

39,331

 

14.8

%

Net realized investment gains

 

7,194

 

4,903

 

46.7

%

14,567

 

9,226

 

57.9

%

Consolidated revenue

 

149,178

 

146,575

 

1.8

%

433,543

 

429,349

 

1.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and settlement expenses

 

69,835

 

95,578

 

-26.9

%

175,677

 

244,363

 

-28.1

%

Policy acquisition costs

 

34,835

 

32,771

 

6.3

%

102,271

 

99,596

 

2.7

%

Other insurance expenses

 

8,196

 

6,797

 

20.6

%

26,630

 

21,362

 

24.7

%

Interest expense on debt

 

1,753

 

1,722

 

1.8

%

5,417

 

5,128

 

5.6

%

General corporate expenses

 

1,496

 

1,074

 

39.3

%

5,110

 

3,523

 

45.0

%

Total expenses

 

116,115

 

137,942

 

-15.8

%

315,105

 

373,972

 

-15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated investees

 

2,617

 

1,294

 

102.2

%

8,391

 

4,366

 

92.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

35,680

 

9,927

 

259.4

%

126,829

 

59,743

 

112.3

%

Income tax expense

 

10,353

 

1,670

 

519.9

%

37,800

 

16,176

 

133.7

%

Net Earnings

 

$

25,327

 

$

8,257

 

206.7

%

$

89,029

 

$

43,567

 

104.3

%

Other comprehensive earnings (loss), net of tax

 

(12,130

)

13,088

 

-192.7

%

(15,988

)

(1,306

)

-1124.2

%

Comprehensive earnings (loss)

 

$

13,197

 

$

21,345

 

-38.2

%

$

73,041

 

$

42,261

 

72.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Earnings:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings

 

$

25,327

 

$

8,257

 

206.7

%

$

89,029

 

$

43,567

 

104.3

%

Less: Realized investment gains, net of tax

 

4,677

 

3,187

 

46.8

%

9,469

 

5,997

 

57.9

%

Operating earnings

 

$

20,650

 

$

5,070

 

307.3

%

$

79,560

 

$

37,570

 

111.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (trailing four quarters)

 

 

 

 

 

 

 

18.5

%

10.6

%

 

 

Comprehensive earnings (trailing four quarters)

 

 

 

 

 

 

 

17.5

%

12.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in 000’s)

 

26,346

 

26,064

 

 

 

26,278

 

26,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS from operations (1)

 

$

0.78

 

$

0.20

 

290.0

%

$

3.03

 

$

1.44

 

110.4

%

Realized gains, net of tax

 

0.18

 

0.12

 

50.0

%

0.36

 

0.23

 

56.5

%

Net earnings per share

 

$

0.96

 

$

0.32

 

200.0

%

$

3.39

 

$

1.67

 

103.0

%

Comprehensive earnings (loss) per share

 

$

0.50

 

$

0.82

 

-39.0

%

$

2.78

 

$

1.62

 

71.6

%

Cash dividends per share

 

$

0.16

 

$

0.13

 

23.1

%

$

0.46

 

$

0.37

 

24.3

%

 

(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.

 

4


 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2005

 

2004

 

% Change

 

2005

 

2004

 

% Change

 

Total Gross Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

192,023

 

191,538

 

0.3

%

$

557,568

 

574,093

 

-2.9

%

Net investment income

 

15,855

 

13,654

 

16.1

%

45,133

 

39,331

 

14.8

%

Net realized investment gains

 

7,194

 

4,903

 

46.7

%

14,567

 

9,226

 

57.9

%

Total

 

$

215,072

 

$

210,095

 

2.4

%

$

617,268

 

$

622,650

 

-0.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flow from Operations

 

$

69,271

 

$

78,272

 

-11.5

%

$

147,617

 

$

175,317

 

-15.8

%

 

 

 

September 30,

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

% Change

 

 

 

 

 

 

 

SUMMARIZED BALANCE SHEET DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed income and short-term investments

 

$

1,343,171

 

$

1,253,843

 

7.1

%

 

 

 

 

 

 

(amortized cost - $1,344,370 at 9/30/05)

 

 

 

 

 

 

 

 

 

 

 

 

 

(amortized cost - $1,237,361 at 12/31/04)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

328,945

 

315,875

 

4.1

%

 

 

 

 

 

 

(cost - $189,810 at 9/30/05)

 

 

 

 

 

 

 

 

 

 

 

 

 

(cost - $169,479 at 12/31/04)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments

 

1,672,116

 

1,569,718

 

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums and reinsurance balances receivable

 

118,025

 

146,667

 

-19.5

%

 

 

 

 

 

 

Ceded unearned premiums

 

106,015

 

101,446

 

4.5

%

 

 

 

 

 

 

Reinsurance recoverable on unpaid losses

 

570,348

 

464,180

 

22.9

%

 

 

 

 

 

 

Deferred acquisition costs

 

69,771

 

67,146

 

3.9

%

 

 

 

 

 

 

Property and equipment

 

19,846

 

18,335

 

8.2

%

 

 

 

 

 

 

Investment in unconsolidated investees

 

51,879

 

43,398

 

19.5

%

 

 

 

 

 

 

Goodwill

 

26,214

 

26,214

 

0.0

%

 

 

 

 

 

 

Other assets

 

35,792

 

31,671

 

13.0

%

 

 

 

 

 

 

Total assets

 

$

2,670,006

 

$

2,468,775

 

8.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

1,286,057

 

1,132,599

 

13.5

%

 

 

 

 

 

 

Unearned premiums

 

373,998

 

367,205

 

1.8

%

 

 

 

 

 

 

Reinsurance balances payable

 

91,328

 

78,062

 

17.0

%

 

 

 

 

 

 

Short-term debt

 

21,120

 

46,839

 

-54.9

%

 

 

 

 

 

 

Long-term debt - bonds payable

 

100,000

 

100,000

 

0.0

%

 

 

 

 

 

 

Income taxes - deferred

 

22,853

 

38,966

 

-41.4

%

 

 

 

 

 

 

Other liabilities

 

88,567

 

81,443

 

8.7

%

 

 

 

 

 

 

Total liabilities

 

1,983,923

 

1,845,114

 

7.5

%

 

 

 

 

 

 

Shareholders’ equity

 

686,083

 

623,661

 

10.0

%

 

 

 

 

 

 

Total liabilities & shareholders’ equity

 

$

2,670,006

 

$

2,468,775

 

8.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding (in 000’s)

 

25,500

 

25,316

 

 

 

 

 

 

 

 

 

Book Value per share

 

$

26.91

 

$

24.64

 

9.2

%

 

 

 

 

 

 

Closing stock price per share

 

$

46.26

 

$

41.57

 

11.3

%

 

 

 

 

 

 

Statutory Surplus

 

$

685,415

 

$

605,967

 

13.1

%

 

 

 

 

 

 

 

5


 

UNDERWRITING SEGMENT DATA

(in thousands)

 

 

 

 

 

GAAP

 

 

 

GAAP

 

 

 

GAAP

 

 

 

GAAP

 

 

 

Property

 

Ratios

 

Surety

 

Ratios

 

Casualty

 

Ratios

 

Total

 

Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

45,643

 

 

 

$

17,057

 

 

 

$

129,323

 

 

 

$

192,023

 

 

 

Net premium written

 

27,565

 

 

 

15,554

 

 

 

86,067

 

 

 

129,186

 

 

 

Net premium earned

 

23,614

 

 

 

12,987

 

 

 

89,528

 

 

 

126,129

 

 

 

Net loss & settlement expenses

 

21,971

 

93.0

%

4,117

 

31.7

%

43,747

 

48.9

%

69,835

 

55.4

%

Net operating expenses

 

8,118

 

34.4

%

8,066

 

62.1

%

26,847

 

30.0

%

43,031

 

34.1

%

Underwriting income(loss)

 

$

(6,475

)

127.4

%

$

804

 

93.8

%

$

18,934

 

78.9

%

$

13,263

 

89.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

39,857

 

 

 

$

14,921

 

 

 

$

136,760

 

 

 

$

191,538

 

 

 

Net premium written

 

20,861

 

 

 

13,269

 

 

 

94,609

 

 

 

128,739

 

 

 

Net premium earned

 

23,951

 

 

 

12,188

 

 

 

91,879

 

 

 

128,018

 

 

 

Net loss & settlement expenses

 

21,911

 

91.5

%

4,874

 

40.0

%

68,793

 

74.9

%

95,578

 

74.7

%

Net operating expenses

 

8,243

 

34.4

%

7,275

 

59.7

%

24,050

 

26.2

%

39,568

 

30.9

%

Underwriting income(loss)

 

$

(6,203

)

125.9

%

$

39

 

99.7

%

$

(964

)

101.1

%

$

(7,128

)

105.6

%

 

UNDERWRITING SEGMENT DATA

(in thousands)

 

 

 

 

 

GAAP

 

 

 

GAAP

 

 

 

GAAP

 

 

 

GAAP

 

 

 

Property

 

Ratios

 

Surety

 

Ratios

 

Casualty

 

Ratios

 

Total

 

Ratios

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

126,291

 

 

 

$

47,662

 

 

 

$

383,615

 

 

 

$

557,568

 

 

 

Net premium written

 

70,610

 

 

 

43,661

 

 

 

261,797

 

 

 

376,068

 

 

 

Net premium earned

 

65,660

 

 

 

37,824

 

 

 

270,359

 

 

 

373,843

 

 

 

Net loss & settlement expenses

 

35,026

 

53.3

%

12,095

 

32.0

%

128,556

 

47.6

%

175,677

 

47.0

%

Net operating expenses

 

23,658

 

36.0

%

23,429

 

61.9

%

81,814

 

30.3

%

128,901

 

34.5

%

Underwriting income(loss)

 

$

6,976

 

89.3

%

$

2,300

 

93.9

%

$

59,989

 

77.9

%

$

69,265

 

81.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

141,997

 

 

 

$

42,876

 

 

 

$

389,220

 

 

 

$

574,093

 

 

 

Net premium written

 

73,393

 

 

 

39,118

 

 

 

277,795

 

 

 

390,306

 

 

 

Net premium earned

 

73,458

 

 

 

35,603

 

 

 

271,731

 

 

 

380,792

 

 

 

Net loss & settlement expenses

 

36,611

 

49.8

%

13,923

 

39.1

%

193,829

 

71.3

%

244,363

 

64.2

%

Net operating expenses

 

26,921

 

36.6

%

21,768

 

61.1

%

72,269

 

26.6

%

120,958

 

31.8

%

Underwriting income(loss)

 

$

9,926

 

86.4

%

$

(88

)

100.2

%

$

5,633

 

97.9

%

$

15,471

 

96.0

%

 

6