RLI Corp. Reports Record Earnings

Illinois-based RLI Corp. posted quarterly net earnings of $15.4 million ($0.60 per diluted share), a 22 percent per-share improvement over the $10.0 million ($0.49 per diluted share) posted in the second quarter last year.

Both the total dollar and per-share amounts set RLI records. Quarterly operating earnings of $14.1 million ($0.55 per share) were up 20 percent per share from last year’s $9.3 million ($0.46 per share) result, and matched the operating earnings per share record set last quarter. Book value per share finished the quarter at $20.36, up 10 percent since year end.

Through six months, RLI net earnings were $29.8 million ($1.16 per share), versus last year’s $19.1 million ($0.93 per share) posting, a 25 percent per-share gain. Operating earnings of $28.3 million ($1.10 per share) were 31 percent better per share than the $17.2 million ($0.84 per share) result reported at this time last year. These results set mid-year records.

RLI net operating earnings consist 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.

RLI’s quarterly underwriting profits were $7.4 million on a 93.4 net GAAP combined ratio. This result compares to a $2.6 million gain on a 96.8 combined ratio for the same period last year. The company’s property segment drove these results, as it posted a 71.5 combined ratio for the second quarter, an outstanding figure in light of seasonal weather-related claims. The casualty segment continued to record underwriting profits with a 98.5 combined ratio. Surety results stayed level for the quarter, reflected in its combined ratio of 112.0.

“Our 2003 results are benefiting from last year’s premium growth,” said RLI president & CEO Jonathan Michael. “As planned, we’ve also increased our retentions this year, which have boosted net consolidated revenue and earnings.” Net premiums earned grew 39% in the quarter, to $113.6 million.

“The overall insurance marketplace is still very attractive for specialty niche writers such as RLI, and we are well positioned to continue to prosper in this environment.”

Investment income reached $10.9 million, a 14 percent increase over the second quarter of last year. Increased cash flows from operations and the infusion of new capital from 2002’s equity offering drove this increase. Invested asset growth of 8 percent over year end helped push total assets to $1.9 billion.

The company’s consolidated investment portfolio generated a 5.2 percent total return year to date. The equity portfolio registered a 14.6 percent return for the quarter, 10.5 percent year to date. RLI’s bond portfolio continued its strong performance from 2002, generating a total return of 3.1 percent for the second quarter.

Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, posted a $40.7 million gain for the quarter ($1.58 per share). “We have had strong performance across our investment portfolio through the first half of the year,” said Michael. “While there are no guarantees for the near-term performance of the market, we remain committed to enhancing book value growth through a long-term investment philosophy that includes equities.”