RLI Corp. (NYSE:RLI) – RLI Corp. reported third quarter 2023 net earnings of $13.5 million ($0.29 per share), compared to $439.9 million ($9.61 per share) for the third quarter of 2022, which included $437.7 million from the sale of RLI's investment in Maui Jim, Inc.

Operating earnings⁽¹⁾⁽²⁾ for the third quarter of 2023 were $28.3 million ($0.61 per share), compared to $23.0 million ($0.50 per share) for the same period in 2022.


	Third Quarter				Year to Date
Earnings Per Diluted Share	2023		2022		2023		2022
Net earnings	$	0.29	$	9.61	$	4.12	$	10.61
Operating earnings ^{(1) (2)}	$	0.61	$	0.50	$	3.40	$	3.15

(1)	See discussion below: Non-GAAP and Performance Measures.
(2)	Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings per share in 2022 due to the sale of RLI's investment in Maui Jim in the third quarter of 2022.

Highlights for the quarter included:

Underwriting income⁽¹⁾ of $4.2 million on a combined ratio⁽¹⁾ of 98.7.
11% increase in gross premiums written.
50% increase in net investment income.
Favorable development in prior years' loss reserves, resulting in a $19.8 million net increase in underwriting income.
Losses from Hawaiian wildfires, resulting in a $58.2 million net decrease in underwriting income.
Book value per share of $28.47, an increase of 13% (inclusive of dividends) from year-end 2022.

"We have been working diligently to help our policyholders recover from the devastating Hawaiian wildfires that occurred in the quarter," said RLI Corp. President & CEO Craig Kliethermes. "This event contributed 17 points to our combined ratio. Despite this impact, our diversified portfolio delivered underwriting profitability and an 11% increase in gross premiums written. Growth in investment income supported $0.61 per share of operating income, while book value per share increased to $28.47. Recent catastrophes reinforce RLI's purpose to protect and serve policyholders in times of need. I would like to thank our associate owners, and especially our claim and Hawaii-based teams, for providing unparalleled service to our insureds and agents."

Underwriting Income

RLI achieved $4.2 million of underwriting income in the third quarter of 2023 on a 98.7 combined ratio, compared to $8.8 million on a 97.0 combined ratio in 2022.

Results for both years include favorable development in prior years' loss reserves, which resulted in a $19.8 million and $29.0 million net increase to underwriting income for 2023 and 2022, respectively. The favorable development in 2023 was offset by a $58.2 million net reduction to underwriting income for Hawaiian wildfire losses, compared to $34.8 million of hurricane losses in 2022.

The following table highlights underwriting income and combined ratios by segment for the third quarter.


Underwriting Income (Loss)⁽¹⁾							Combined Ratio⁽¹⁾
(in millions)	2023			2022				2023	2022
Casualty	$	18.7		$	11.3		Casualty	90.1	93.7
Property		(20.7	)		(8.3	)	Property	121.8	110.3
Surety		6.2			5.8		Surety	81.7	81.4
Total	$	4.2		$	8.8		Total	98.7	97.0

(1)	See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 50.3% to $32.0 million, compared to the same period in 2022. The investment portfolio's total return was -1.7% for the quarter and 2.2% for the nine months ended September 30, 2023.

RLI's comprehensive loss was $43.3 million for the quarter (-$0.94 per share), compared to comprehensive earnings of $358.6 million ($7.84 per share) for the same quarter in 2022. In addition to net earnings, comprehensive loss included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates. Comprehensive earnings for 2022 were elevated from the sale of RLI's investment in Maui Jim.

Dividends Paid in Third Quarter of 2023

On September 20, 2023, the company paid a regular quarterly dividend of $0.27 per share, the same amount as the prior quarter. RLI's cumulative dividends total more than $764 million paid over the last five years.

Non-GAAP and Performance Measures

Management has included certain non-generally accepted accounting principles (non-GAAP) financial measures in presenting the company's results. Management believes that these non-GAAP measures further explain the company's results of operations and allow for a more complete understanding of the underlying trends in the company's business. These measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles (GAAP). In addition, our definitions of these items may not be comparable to the definitions used by other companies.

Operating earnings and operating earnings per share (EPS) consist of our GAAP net earnings adjusted by net realized gains/(losses), net unrealized gains/(losses) on equity securities and taxes related thereto. Additionally, equity in earnings of Maui Jim and the related taxes were excluded from operating earnings and operating EPS for 2022 due to the sale of RLI's investment in the third quarter of 2022. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and operating EPS. A reconciliation of the operating earnings and operating EPS to the comparable GAAP financial measures is included in the 2023 financial highlights below.

Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting loss and settlement expenses, policy acquisition costs and insurance operating expenses from net premium earned, which are all GAAP financial measures. The combined ratio, which is derived from components of underwriting income, is a performance measure commonly used by property and casualty insurance companies and is calculated as the sum of loss and settlement expenses, policy acquisition costs and insurance operating expenses, divided by net premiums earned, which are all GAAP measures.

Other News

At 10 a.m. central daylight time (CDT) tomorrow, October 24, 2023, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at https://events.q4inc.com/attendee/461007055.

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) including, without limitation, statements reflecting our current expectations about the future performance of our company or our business segments or about future market conditions. These statements 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 Annual Report for the year ended December 31, 2022.

About RLI

RLI Corp. (NYSE:RLI) is a specialty insurer serving niche property, casualty and surety markets. The company provides deep underwriting expertise and superior service to commercial and personal lines customers nationwide. RLI's products are offered through its insurance subsidiaries – RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company. All of RLI's insurance subsidiaries are rated A+ (Superior) by AM Best Company. RLI has paid and increased regular dividends for 48 consecutive years and delivered underwriting profits for 27 consecutive years. To learn more about RLI, visit www.rlicorp.com.

Supplemental disclosure regarding the earnings impact of specific items:


	Reserve Development and Catastrophe Losses,
	Net of Reinsurance
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in millions, except per share amounts)	2023			2022			2023			2022
Favorable development in casualty prior years' reserves	$	22.1		$	28.2		$	67.0		$	72.9
Favorable (unfavorable) development in property prior years' reserves	$	(1.9	)	$	3.3		$	14.3		$	20.8
Favorable development in surety prior years' reserves	$	0.8		$	1.8		$	8.2		$	9.3

Net incurred losses related to:
2023 storms	$	(5.0	)	$	—		$	(27.0	)	$	—
Hawaiian wildfires	$	(51.6	)	$	—		$	(51.6	)	$	—
2022 and prior events	$	1.4		$	(40.0	)	$	4.5		$	(45.0	)
Reinstatement premium from Hawaiian wildfires	$	(14.4	)	$	—		$	(14.4	)	$	—

	Operating Earnings Per Share
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Operating Earnings Per Share^{(1) (2)}	$	0.61		$	0.50		$	3.40		$	3.15

Specific items included in operating earnings per share:^{(3) (4)}
Net favorable development in casualty prior years' reserves	$	0.33		$	0.44		$	1.00		$	1.11
Net favorable (unfavorable) development in property prior years' reserves	$	(0.04	)	$	0.04		$	0.20		$	0.31
Net favorable development in surety prior years' reserves	$	0.01		$	0.02		$	0.12		$	0.13

Net incurred losses related to:
2023 storms	$	(0.07	)	$	—		$	(0.40	)	$	—
Hawaiian wildfires (incurred loss and reinstatement premium)	$	(0.97	)	$	—		$	(0.97	)	$	—
2022 and prior events	$	0.02		$	(0.60	)	$	0.06		$	(0.68	)

(1)	See discussion above: Non-GAAP and Performance Measures.
(2)	Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings per share in 2022 due to the sale of RLI's investment in Maui Jim in the third quarter of 2022.
(3)	Includes incentive and profit sharing-related impacts which affected policy acquisition, insurance operating and general corporate expenses.
(4)	Reserve development reflects changes from previously estimated losses.

RLI CORP 2023 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)

	Three Months Ended September 30,									Nine Months Ended September 30,
SUMMARIZED INCOME STATEMENT DATA:	2023			2022			% Change			2023				2022				% Change
Net premiums earned	$	318,409		$	291,468		9.2		%	$	948,412			$	843,430			12.4		%
Net investment income		31,963			21,270		50.3		%		87,835				57,625			52.4		%
Net realized gains		6,558			573,170		(98.9	)	%		26,758				591,562			(95.5	)	%
Net unrealized gains (losses) on equity securities		(25,236	)		(26,414	)	(4.5	)	%		15,474				(155,218	)		NM
Consolidated revenue	$	331,694		$	859,494		(61.4	)	%	$	1,078,479			$	1,337,399			(19.4	)	%
Loss and settlement expenses		189,558			165,089		14.8		%		457,989				388,527			17.9		%
Policy acquisition costs		103,013			96,977		6.2		%		307,083				271,879			12.9		%
Insurance operating expenses		21,591			20,606		4.8		%		70,002				58,794			19.1		%
Interest expense on debt		1,873			2,013		(7.0	)	%		5,928				6,034			(1.8	)	%
General corporate expenses		2,372			2,755		(13.9	)	%		10,805				8,553			26.3		%
Total expenses	$	318,407		$	287,440		10.8		%	$	851,807			$	733,787			16.1		%
Equity in earnings (loss) of unconsolidated investees		1,732			(17,352	)	NM				7,169				3,061			134.2		%
Earnings before income taxes	$	15,019		$	554,702		(97.3	)	%	$	233,841			$	606,673			(61.5	)	%
Income tax expense		1,483			114,809		(98.7	)	%		43,842				121,096			(63.8	)	%
Net earnings	$	13,536		$	439,893		(96.9	)	%	$	189,999			$	485,577			(60.9	)	%

Other comprehensive earnings (loss), net of tax		(56,834	)		(81,248	)	(30.0	)	%		(38,848	)			(294,392	)		(86.8	)	%
Comprehensive earnings (loss)	$	(43,298	)	$	358,645		NM			$	151,151			$	191,185			(20.9	)	%

Operating earnings⁽¹⁾:
Net earnings	$	13,536		$	439,893		(96.9	)	%	$	189,999			$	485,577			(60.9	)	%
Less:
Net realized gains		(6,558	)		(573,170	)	(98.9	)	%		(26,758	)			(591,562	)		(95.5	)	%
Income tax on realized gains		1,377			121,199		(98.9	)	%		5,619				125,061			(95.5	)	%
Net unrealized (gains) losses on equity securities		25,236			26,414		(4.5	)	%		(15,474	)			155,218			NM
Income tax on unrealized gains (losses) on equity securities		(5,299	)		(5,547	)	(4.5	)	%		3,250				(32,596	)		NM
Equity in earnings of Maui Jim		—			17,993		(100.0	)	%		—				3,121			(100.0	)	%
Income tax on equity in earnings of Maui Jim		—			(3,778	)	(100.0	)	%		—				(655	)		(100.0	)	%
Operating earnings⁽²⁾	$	28,292		$	23,004		23.0		%	$	156,636			$	144,164			8.7		%

Return on Equity:
Net earnings (trailing four quarters)											22.1		%		47.8		%
Comprehensive earnings (trailing four quarters)											20.3		%		22.2		%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		46,065			45,775						46,067				45,775

Net earnings per share⁽²⁾	$	0.29		$	9.61		(97.0	)	%	$	4.12			$	10.61			(61.2	)	%
Less:
Net realized gains		(0.14	)		(12.53	)	(98.9	)	%		(0.58	)			(12.93	)		(95.5	)	%
Income tax on realized gains		0.03			2.65		(98.9	)	%		0.13				2.73			(95.2	)	%
Net unrealized (gains) losses on equity securities		0.55			0.58		(5.2	)	%		(0.34	)			3.39			NM
Income tax on unrealized gains (losses) on equity securities		(0.12	)		(0.12	)	—		%		0.07				(0.71	)		NM
Equity in earnings of Maui Jim		—			0.39		(100.0	)	%		—				0.07			(100.0	)	%
Income tax on equity in earnings of Maui Jim		—			(0.08	)	(100.0	)	%		—				(0.01	)		(100.0	)	%
Operating earnings per share⁽¹⁾⁽²⁾	$	0.61		$	0.50		22.0		%	$	3.40			$	3.15			7.9		%

Comprehensive earnings (loss) per share	$	(0.94	)	$	7.84		NM			$	3.28			$	4.18			(21.5	)	%

Cash dividends per share - ordinary	$	0.27		$	0.26		3.8		%	$	0.80			$	0.77			3.9		%

Net Cash Flow provided by Operations	$	85,030		$	112,241		(24.2	)	%	$	328,625			$	282,886			16.2		%

(1)	See discussion above: Non-GAAP and Performance Measures.
(2)	Equity in earnings of Maui Jim and the related taxes were excluded from operating earnings and operating earnings per share in 2022 due to the sale of RLI's investment in Maui Jim in the third quarter of 2022.

NM = Not Meaningful

RLI CORP 2023 FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)

	September 30,		December 31,
	2023		2022		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	2,717,627	$	2,666,950	1.9		%
(amortized cost - $3,046,785 at 9/30/23)
(amortized cost - $2,945,273 at 12/31/22)
Equity securities, at fair value		534,436		498,382	7.2		%
(cost - $347,772 at 9/30/23)
(cost - $328,019 at 12/31/22)
Short-term investments		125,032		36,229	245.1		%
Other invested assets		59,730		47,922	24.6		%
Cash and cash equivalents		18,445		22,818	(19.2	)	%
Total investments and cash	$	3,455,270	$	3,272,301	5.6		%

Accrued investment income		25,328		21,259	19.1		%
Premiums and reinsurance balances receivable		225,821		189,501	19.2		%
Ceded unearned premiums		111,072		138,457	(19.8	)	%
Reinsurance balances recoverable on unpaid losses		820,954		740,089	10.9		%
Deferred policy acquisition costs		150,666		127,859	17.8		%
Property and equipment		48,596		49,573	(2.0	)	%
Investment in unconsolidated investees		56,110		58,275	(3.7	)	%
Goodwill and intangibles		53,562		53,562	0.0		%
Income taxes - deferred		51,403		40,269	27.6		%
Other assets		84,744		75,923	11.6		%
Total assets	$	5,083,526	$	4,767,068	6.6		%

Unpaid losses and settlement expenses	$	2,488,695	$	2,315,637	7.5		%
Unearned premiums		906,139		785,085	15.4		%
Reinsurance balances payable		56,570		61,100	(7.4	)	%
Funds held		103,424		101,144	2.3		%
Income taxes - current		5,546		—	NM
Debt		100,000		199,863	(50.0	)	%
Accrued expenses		85,640		94,869	(9.7	)	%
Other liabilities		38,421		32,029	20.0		%
Total liabilities	$	3,784,435	$	3,589,727	5.4		%
Shareholders' equity		1,299,091		1,177,341	10.3		%
Total liabilities & shareholders' equity	$	5,083,526	$	4,767,068	6.6		%

OTHER DATA:
Common shares outstanding (in 000's)		45,626		45,470

Book value per share	$	28.47	$	25.89	10.0		%
Closing stock price per share	$	135.89	$	131.27	3.5		%

Statutory surplus	$	1,509,538	$	1,437,324	5.0		%

RLI CORP 2023 FINANCIAL HIGHLIGHTS UNDERWRITING SEGMENT DATA (Unaudited) (Dollars in thousands, except per share amounts)

Three Months Ended September 30,
			GAAP					GAAP				GAAP				GAAP
	Casualty		Ratios		Property			Ratios		Surety		Ratios		Total		Ratios
2023

Gross premiums written	$	254,307			$	158,590				$	36,427			$	449,324
Net premiums written		207,177				93,207					34,340				334,724
Net premiums earned		189,305				94,988					34,116				318,409
Net loss & settlement expenses		101,750	53.7	%		81,932		86.3	%		5,876	17.2	%		189,558	59.5	%
Net operating expenses		68,885	36.4	%		33,727		35.5	%		21,992	64.5	%		124,604	39.2	%
Underwriting income (loss)⁽¹⁾	$	18,670	90.1	%	$	(20,671	)	121.8	%	$	6,248	81.7	%	$	4,247	98.7	%

2022

Gross premiums written	$	240,366			$	126,083				$	37,301			$	403,750
Net premiums written		192,615				90,961					35,256				318,832
Net premiums earned		179,615				80,844					31,009				291,468
Net loss & settlement expenses		100,714	56.1	%		59,347		73.4	%		5,028	16.2	%		165,089	56.6	%
Net operating expenses		67,572	37.6	%		29,805		36.9	%		20,206	65.2	%		117,583	40.4	%
Underwriting income (loss)⁽¹⁾	$	11,329	93.7	%	$	(8,308	)	110.3	%	$	5,775	81.4	%	$	8,796	97.0	%


Nine Months Ended September 30,
			GAAP				GAAP				GAAP				GAAP
	Casualty		Ratios		Property		Ratios		Surety		Ratios		Total		Ratios
2023

Gross premiums written	$	723,198			$	539,325			$	109,777			$	1,372,300
Net premiums written		597,356				395,903				103,591				1,096,850
Net premiums earned		562,384				285,596				100,432				948,412
Net loss & settlement expenses		296,633	52.7	%		149,508	52.3	%		11,848	11.8	%		457,989	48.3	%
Net operating expenses		208,273	37.1	%		102,499	35.9	%		66,313	66.0	%		377,085	39.7	%
Underwriting income (loss)⁽¹⁾	$	57,478	89.8	%	$	33,589	88.2	%	$	22,271	77.8	%	$	113,338	88.0	%

2022

Gross premiums written	$	704,502			$	371,529			$	105,667			$	1,181,698
Net premiums written		569,475				273,312				100,254				943,041
Net premiums earned		528,494				222,974				91,962				843,430
Net loss & settlement expenses		278,813	52.8	%		100,187	44.9	%		9,527	10.4	%		388,527	46.1	%
Net operating expenses		189,263	35.8	%		82,514	37.0	%		58,896	64.0	%		330,673	39.2	%
Underwriting income (loss)⁽¹⁾	$	60,418	88.6	%	$	40,273	81.9	%	$	23,539	74.4	%	$	124,230	85.3	%

(1)	See discussion above: Non-GAAP and Performance Measures.

Category: Earnings Release

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