EX-99.1 2 a05-12392_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 second quarter earnings set records

 

PEORIA, ILLINOIS, July 19, 2005 – RLI Corp. (NYSE: RLI) – RLI Corp. second quarter net earnings of $34.4 million ($1.31 per diluted share) were 87% higher than the $18.4 million ($0.71 per diluted share) the company reported in the same quarter last year. Through June 30, net earnings grew 80%, to $63.7 million ($2.43 per share) versus $35.3 million ($1.35 per share).  All net earnings results set both quarterly and mid-year records.

 

Quarterly operating earnings of $31.5 million ($1.20 per share) were 84% better than last year’s $17.1 million ($0.66 per share) result. Through six months, operating earnings rose 81%, to $58.9 million ($2.25 per share) from $32.5 million ($1.25 per share). Both mid-year net and operating earnings set records.

 

The quarter and mid-year results include certain favorable developments from prior year loss reserves. During the quarter, positive development on prior accident year casualty loss reserves resulted in additional pretax underwriting earnings of $16.1 million, or $0.40 per share. Mid-year results also include positive first quarter development on prior accident year casualty loss reserves, which added earnings of $9.1 million, or $0.23 per share. Additionally, as third quarter 2004 Southeast U.S. hurricane losses did not develop as expected, first quarter 2005 results were improved by $3.8 million ($2.8 million in casualty and $1.0 million in property), or $0.10 per share. These developments include bonus-related accruals which affected other insurance and general corporate expenses.

 

Since year end, shareholders’ equity grew 9%, to $676.8 million; book value per share was $26.57, up 8%; assets rose by 5%, to $2.6 billion.

 

Profitable underwriting continues in all segments

 

RLI reported a second quarter underwriting profit of $29.6 million on a 76.1 net GAAP combined ratio versus the $11.8 million gain on a 90.7 combined ratio for the same period last year. Casualty recorded a 74.1 combined ratio. The property segment registered a 74.2 combined ratio. The surety segment recorded a 93.5 combined ratio.

 

Net premiums earned were down 3% in the quarter, to $123.7 million. Consolidated revenue of $142.7 million and gross premiums written of $199.4 million were both flat for the quarter.

 

RLI reported year-to-date underwriting profit of $56.0 million on a 77.4 net GAAP combined ratio versus the $22.6 million gain on a 91.1 combined ratio for the same period last year. Casualty recorded a 77.3 combined ratio. The property segment recorded a 68.0 combined ratio. The surety segment recorded a 94.0 combined ratio.

 

Net premiums earned were down 2% in the six months ended June 30, 2005, to $247.7 million. Consolidated revenue of $284.4 million was up slightly over last year and gross premiums written of $365.5 were off 4%.

 

“Softening insurance markets require underwriters to be more selective,” said RLI Corp. President & CEO Jonathan E. Michael. “Our experienced underwriters selected the best opportunities and, where prudent, exercised restraint, which delivered profitable results in every business segment.

 

“The casualty segment continues to perform well. The quarter’s positive reserve development stems from casualty business written between 2002 through 2004. This business is developing better than expected and we are adjusting our reserves to reflect that positive experience. Although casualty premium production is relatively flat in 2005, we believe the business will continue to be profitable as pricing has remained relatively stable.

 

“Property premiums are reduced due to a softening pricing environment. This segment continues to deliver solid profitability. Our surety segment again showed marked progress, due to new business and continued underwriting improvements,” said Michael.

 

—more—

 


 

Other income

 

Investment income for the second quarter reached $14.7 million, a 10% increase over last year due to continued positive operating cash flows. For the six month period ended June 30, 2005, investment income was $29.3 million, up 14% over last year. We anticipate a slowing growth rate in our investment income as we continue to increase our allocation to tax-exempt securities. These securities offer lower pre-tax yields, but are anticipated to remain attractive on an after-tax basis.

 

Due to a strong performance by the company’s bond portfolio, the consolidated investment portfolio’s total return for the quarter was 2.9%. The bond portfolio’s return was 3.1% and the equity portfolio’s return was 2.2%. For the six month period, the portfolio’s total return was 2.3% based on a bond portfolio return of 2.6% and an equity portfolio return of 1.3%.

 

Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $48.1 million for the quarter, or $1.83 per share. Year-to-date comprehensive earnings were $59.8 million, or $2.28 per share.

 

  During the quarter, equity in earnings of unconsolidated investees of $4.5 million included $3.9 million related to Maui Jim. The second quarter of 2004 showed income of $1.8 million related exclusively to Maui Jim; the growth in the current quarter was driven by higher seasonal sales and continued strong operating performance.

 

Other RLI news

 

On July 10, Hurricane Dennis struck the Gulf Coast. Based on projections by the company’s catastrophe management systems and actual claim activity to date, the company does not expect its losses to be significant. Customers who have suffered a loss should immediately notify their insurance agent of the claim and have it reported to RLI, or they can contact RLI directly by phone (800-444-0406), fax (309-692-6796) or by email at new_claim@rlicorp.com. Customers should be prepared to provide their policy number and as much information as possible regarding damage to their property.

 

On July 15, the company surpassed $100 million in paid dividends. The $0.16 per share dividend – 14% higher than the prior dividend – brought RLI’s cumulative cash payments to shareholders to more than $104 million through 116 consecutive dividends. Over the last five years, the company’s quarterly dividend has grown by an average of 16.4% per year and 11.9% per year over the past decade. Mergent’s Dividend Achievers currently ranks RLI 171st among 11,000 public companies for 10-year average dividend growth rate.

 

During the second quarter, A. M. Best Company reaffirmed the financial strength rating of A+ (Superior) of RLI Insurance Company, Mt. Hawley Insurance Company and RLI Indemnity Company. All of these ratings have a stable outlook. Standard & Poor’s continues to rate RLI’s insurance subsidiaries as A+ (Strong).

 

At 3:15 p.m. CDT today, July 19, 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.

 

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.

 

2


 

RLI CORP.

2005 FINANCIAL HIGHLIGHTS

(Dollars in thousands, except per share amounts)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2005

 

2004

 

% Change

 

2005

 

2004

 

% Change

 

SUMMARIZED INCOME STATEMENT DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

$

123,674

 

$

126,876

 

-2.5

%

$

247,714

 

$

252,774

 

-2.0

%

Net investment income

 

14,666

 

13,362

 

9.8

%

29,278

 

25,677

 

14.0

%

Net realized investment gains

 

4,389

 

1,887

 

132.6

%

7,373

 

4,323

 

70.6

%

Consolidated revenue

 

142,729

 

142,125

 

0.4

%

284,365

 

282,774

 

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and settlement expenses

 

49,323

 

73,554

 

-32.9

%

105,842

 

148,785

 

-28.9

%

Policy acquisition costs

 

35,572

 

34,030

 

4.5

%

67,436

 

66,825

 

0.9

%

Other insurance expenses

 

9,176

 

7,513

 

22.1

%

18,434

 

14,565

 

26.6

%

Interest expense on debt

 

1,854

 

1,666

 

11.3

%

3,664

 

3,406

 

7.6

%

General corporate expenses

 

1,710

 

1,164

 

46.9

%

3,614

 

2,449

 

47.6

%

Total expenses

 

97,635

 

117,927

 

-17.2

%

198,990

 

236,030

 

-15.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated investees

 

4,515

 

1,838

 

145.6

%

5,774

 

3,072

 

88.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

49,609

 

26,036

 

90.5

%

91,149

 

49,816

 

83.0

%

Income tax expense

 

15,214

 

7,669

 

98.4

%

27,447

 

14,506

 

89.2

%

Net Earnings

 

$

34,395

 

$

18,367

 

87.3

%

$

63,702

 

$

35,310

 

80.4

%

Other comprehensive earnings (loss), net of tax

 

13,659

 

(21,981

)

162.1

%

(3,858

)

(14,394

)

73.2

%

Comprehensive earnings (loss)

 

$

48,054

 

$

(3,614

)

1429.7

%

$

59,844

 

$

20,916

 

186.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Earnings:(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Earnings

 

$

34,395

 

$

18,367

 

87.3

%

$

63,702

 

$

35,310

 

80.4

%

Less: Realized investment gains, net of tax

 

2,852

 

1,227

 

132.4

%

4,792

 

2,810

 

70.5

%

Operating earnings

 

$

31,543

 

$

17,140

 

84.0

%

$

58,910

 

$

32,500

 

81.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (trailing four quarters)

 

 

 

 

 

 

 

16.4

%

14.0

%

 

 

Comprehensive earnings (trailing four quarters)

 

 

 

 

 

 

 

19.5

%

12.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in 000's)

 

26,275

 

26,035

 

 

 

26,244

 

26,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS from operations (1)

 

$

1.20

 

$

0.66

 

81.8

%

$

2.25

 

$

1.25

 

80.0

%

Realized gains, net of tax

 

0.11

 

0.05

 

120.0

%

0.18

 

0.10

 

80.0

%

Net earnings per share

 

$

1.31

 

$

0.71

 

84.5

%

$

2.43

 

$

1.35

 

80.0

%

Comprehensive earnings (loss) per share

 

$

1.83

 

$

(0.14

)

1407.1

%

$

2.28

 

$

0.80

 

185.0

%

Cash dividends per share

 

$

0.16

 

$

0.13

 

23.1

%

$

0.30

 

$

0.24

 

25.0

%

 

(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.

 

3


 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2005

 

2004

 

% Change

 

2005

 

2004

 

% Change

 

Total Gross Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

199,410

 

199,643

 

-0.1

%

$

365,545

 

382,555

 

-4.4

%

Net investment income

 

14,666

 

13,362

 

9.8

%

29,278

 

25,677

 

14.0

%

Net realized investment gains

 

4,389

 

1,887

 

132.6

%

7,373

 

4,323

 

70.6

%

Total

 

$

218,465

 

$

214,892

 

1.7

%

$

402,196

 

$

412,555

 

-2.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash Flow from Operations

 

$

47,331

 

$

64,028

 

-26.1

%

$

78,346

 

$

97,045

 

-19.3

%

 

 

 

June 30,

 

December 31,

 

 

 

 

 

2005

 

2004

 

% Change

 

SUMMARIZED BALANCE SHEET DATA:

 

 

 

 

 

 

 

Fixed income and short-term investments

 

$

1,298,316

 

$

1,253,843

 

3.5

%

(amortized cost - $1,280,917 at 6/30/05)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Equity securities

 

316,092

 

315,875

 

0.1

%

(cost - $176,531 at 6/31/05)

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

Total investments

 

1,614,408

 

1,569,718

 

2.8

%

 

 

 

 

 

 

 

 

Premiums and reinsurance balances receivable

 

140,387

 

146,667

 

-4.3

%

Ceded unearned premiums

 

101,637

 

101,446

 

0.2

%

Reinsurance recoverable on unpaid losses

 

535,668

 

464,180

 

15.4

%

Deferred acquisition costs

 

68,661

 

67,146

 

2.3

%

Property and equipment

 

19,746

 

18,335

 

7.7

%

Investment in unconsolidated investees

 

49,250

 

43,398

 

13.5

%

Goodwill

 

26,214

 

26,214

 

0.0

%

Other assets

 

30,702

 

31,671

 

-3.1

%

Total assets

 

$

2,586,673

 

$

2,468,775

 

4.8

%

 

 

 

 

 

 

 

 

Unpaid losses and settlement expenses

 

1,217,565

 

1,132,599

 

7.5

%

Unearned premiums

 

366,564

 

367,205

 

-0.2

%

Reinsurance balances payable

 

84,601

 

78,062

 

8.4

%

Short-term debt

 

36,824

 

46,839

 

-21.4

%

Long-term debt - bonds payable

 

100,000

 

100,000

 

0.0

%

Income taxes - deferred

 

38,309

 

38,966

 

-1.7

%

Other liabilities

 

66,045

 

81,443

 

-18.9

%

Total liabilities

 

1,909,908

 

1,845,114

 

3.5

%

Shareholders' equity

 

676,765

 

623,661

 

8.5

%

Total liabilities & shareholders' equity

 

$

2,586,673

 

$

2,468,775

 

4.8

%

 

 

 

 

 

 

 

 

Common shares outstanding (in 000's)

 

25,468

 

25,316

 

 

 

 

 

 

 

 

 

 

 

Book Value per share

 

$

26.57

 

$

24.64

 

7.8

%

Closing stock price per share

 

$

44.60

 

$

41.57

 

7.3

%

 

 

 

 

 

 

 

 

Statutory Surplus

 

$

663,784

 

$

605,967

 

9.5

%

 

4


 

UNDERWRITING SEGMENT DATA

(in thousands)

 

 

 

Property

 

GAAP
Ratios

 

Surety

 

GAAP
Ratios

 

Casualty

 

GAAP
Ratios

 

Total

 

GAAP
Ratios

 

Three Months Ended June 30,
2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

49,129

 

 

 

$

16,833

 

 

 

$

133,448

 

 

 

$

199,410

 

 

 

Net premium written

 

27,904

 

 

 

15,329

 

 

 

92,861

 

 

 

136,094

 

 

 

Net premium earned

 

20,913

 

 

 

12,537

 

 

 

90,224

 

 

 

123,674

 

 

 

Net loss & settlement expenses

 

6,774

 

32.4

%

3,946

 

31.5

%

38,603

 

42.8

%

49,323

 

39.9

%

Net operating expenses

 

8,749

 

41.8

%

7,779

 

62.0

%

28,220

 

31.3

%

44,748

 

36.2

%

Underwriting income(loss)

 

$

5,390

 

74.2

%

$

812

 

93.5

%

$

23,401

 

74.1

%

$

29,603

 

76.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

52,321

 

 

 

$

15,033

 

 

 

$

132,289

 

 

 

$

199,643

 

 

 

Net premium written

 

28,285

 

 

 

14,115

 

 

 

96,001

 

 

 

138,401

 

 

 

Net premium earned

 

24,125

 

 

 

11,986

 

 

 

90,765

 

 

 

126,876

 

 

 

Net loss & settlement expenses

 

6,529

 

27.1

%

4,629

 

38.6

%

62,396

 

68.7

%

73,554

 

58.0

%

Net operating expenses

 

9,412

 

39.0

%

7,458

 

62.2

%

24,673

 

27.2

%

41,543

 

32.7

%

Underwriting income(loss)

 

$

8,184

 

66.1

%

$

(101

)

100.8

%

$

3,696

 

95.9

%

$

11,779

 

90.7

%

 

UNDERWRITING SEGMENT DATA

(in thousands)

 

 

 

Property

 

GAAP
Ratios

 

Surety

 

GAAP
Ratios

 

Casualty

 

GAAP
Ratios

 

Total

 

GAAP
Ratios

 

Six Months Ended June 30,
2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

80,648

 

 

 

$

30,605

 

 

 

$

254,292

 

 

 

$

365,545

 

 

 

Net premium written

 

43,045

 

 

 

28,107

 

 

 

175,730

 

 

 

246,882

 

 

 

Net premium earned

 

42,046

 

 

 

24,837

 

 

 

180,831

 

 

 

247,714

 

 

 

Net loss & settlement expenses

 

13,055

 

31.0

%

7,978

 

32.1

%

84,809

 

46.9

%

105,842

 

42.7

%

Net operating expenses

 

15,540

 

37.0

%

15,363

 

61.9

%

54,967

 

30.4

%

85,870

 

34.7

%

Underwriting income(loss)

 

$

13,451

 

68.0

%

$

1,496

 

94.0

%

$

41,055

 

77.3

%

$

56,002

 

77.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premium written

 

$

102,140

 

 

 

$

27,955

 

 

 

$

252,460

 

 

 

$

382,555

 

 

 

Net premium written

 

52,532

 

 

 

25,849

 

 

 

183,186

 

 

 

261,567

 

 

 

Net premium earned

 

49,507

 

 

 

23,415

 

 

 

179,852

 

 

 

252,774

 

 

 

Net loss & settlement expenses

 

14,700

 

29.7

%

9,049

 

38.6

%

125,036

 

69.5

%

148,785

 

58.9

%

Net operating expenses

 

18,678

 

37.7

%

14,493

 

61.9

%

48,219

 

26.8

%

81,390

 

32.2

%

Underwriting income(loss)

 

$

16,129

 

67.4

%

$

(127

)

100.5

%

$

6,597

 

96.3

%

$

22,599

 

91.1

%

 

5