RLI REPORTS FOURTH QUARTER AND YEAR-END 2021 RESULTS

PEORIA, ILLINOIS, January 26, 2022 - RLI Corp. (NYSE: RLI) - RLI Corp. reported fourth quarter 2021 net earnings of $95.3 million ($2.08 per share), compared to $83.8 million ($1.84 per share) for the fourth quarter of 2020. Operating earnings(1) for the fourth quarter of 2021 were $57.7 million ($1.26 per share), compared to $34.0 million ($0.75 per share) for the same period in 2020.

Fourth Quarter

Year to Date

Earnings Per Diluted Share

2021

2020

2021

2020

Net earnings

$

2.08

$

1.84

$

6.11

$

3.46

Operating earnings (1)

$

1.26

$

0.75

$

3.87

$

2.59

(1)

See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

•

Underwriting income(1) of $49.7 million on a combined ratio(1) of 80.7.

•

12% increase in gross premiums written.

•

Favorable development in prior years' loss reserves, resulting in a $24.2 million net increase in underwriting income.

•

Special dividend of $2.00 per share, representing $90.6 million returned to shareholders.

Highlights for the year included:

•

Underwriting income(1) of $129.9 million on a combined ratio(1) of 86.8.

•

19% increase in gross premiums written.

•

Favorable development in prior years' loss reserves, resulting in a $106.5 million net increase in underwriting income.

•

26th consecutive year of underwriting profit(1).

•

Book value per share of $27.14, an increase of 20% (inclusive of dividends) from year-end 2020.

"We are pleased to report excellent fourth quarter and year-end results," said RLI Corp. President & CEO Craig Kliethermes. "Our focus on organic growth resulted in a 19% increase in gross premium and an 87 combined ratio for the year. For the quarter, light catastrophe activity and favorable reserve development drove positive underwriting results, and we benefitted from solid investment returns. In 2021, we achieved our 26th consecutive year of underwriting profit, and shared our success in the form of a $2 special dividend. The total capital returned to shareholders now exceeds $1.1 billion over the last ten years, a testament to our consistent financial performance."

"Our accomplishments are a direct result of our underwriting discipline and the dedication of our talented employee owners. We believe our people and culture have been foundational to our success and will continue to play an important role in the long-term sustainability of our company. I want to thank our Chairman, Jon Michael, for his outstanding leadership as CEO of our organization over the past 20 years. It has been an honor to work with him, and I am humbled to carry on the vision and legacy of RLI's founder, Jerry Stephens."

Underwriting Income

RLI achieved $49.7 million of underwriting income in the fourth quarter of 2021 on an 80.7 combined ratio, compared to $27.0 million on an 88.0 combined ratio in 2020.

--more--

For the year, RLI achieved $129.9 million of underwriting income on an 86.8 combined ratio, compared to $69.6 million on a 92.0 combined ratio in 2020. Results for both years include favorable development in prior years' loss reserves, which resulted in a $106.5 million and $84.0 million net increase to underwriting income for 2021 and 2020, respectively. The favorable development in 2021 was partially offset by a $50.2 million net reduction to underwriting income for hurricane and storm losses, compared to $49.3 million in 2020.

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

Underwriting Income (Loss)(1)

Combined Ratio(1)

(in millions)

2021

2020

2021

2020

Casualty

$

95.5

$

44.4

Casualty

84.9

92.2

Property

11.3

(3.2

)

Property

95.1

101.7

Surety

23.1

28.4

Surety

80.0

74.8

Total

$

129.9

$

69.6

Total

86.8

92.0

(1)

See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 7.7% to $17.9 million, compared to the same period in 2020. For the year ended December 31, 2021, net investment income was $68.9 million, compared to $67.9 million for the same period in 2020. The investment portfolio's total return was 1.5% for the quarter and 4.7% for the year.

RLI's comprehensive earnings were $78.2 million for the quarter ($1.71 per share), compared to $89.9 million ($1.97 per share) for the same quarter in 2020. Full-year comprehensive earnings were $220.5 million ($4.82 per share), compared to $213.3 million ($4.70 per share) in 2021. In addition to net earnings, comprehensive earnings (loss) included after-tax unrealized gains/(losses) from the fixed income portfolio.

Equity in earnings of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was $3.1 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $5.3 million. Comparatively, for the fourth quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was ($1.1) million and $3.1 million, respectively. For the year ended December 31, 2021, equity in earnings of unconsolidated investees was $22.8 million from Maui Jim and $17.0 million from Prime, compared to $10.4 million and $10.8 million, respectively, for the prior year.

Special and Regular Dividends

On December 20, 2021, the company paid a special cash dividend of $2.00 per share and a regular quarterly dividend of $0.25 per share for a combined total of $101.9 million. RLI has paid dividends for 182 consecutive quarters and increased regular dividends in each of the last 46 years. Over the last 10 years, the company has returned $1.13 billion to shareholders and the regular quarterly dividend has grown an average of 5.2% per year.

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 earnings per share (EPS) from operations consist of our GAAP net earnings adjusted by the net realized gains/(losses), net unrealized gains/(losses) on equity securities and taxes related thereto. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. A reconciliation of the operating earnings and EPS from operations to the comparable GAAP financial measures is included in the 2021 financial highlights below.

--more--

2

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

During the fourth quarter, the company's A+ (Superior) financial strength rating was affirmed by AM Best Company for the company's insurance subsidiaries - RLI Insurance Company, Mt. Hawley Insurance Company and Contractors Bonding and Insurance Company.

At 10 a.m. central standard time (CST) tomorrow, January 27, 2022, 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/214990165.

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, 2020.

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 46 consecutive years and delivered underwriting profits for 26 consecutive years. To learn more about RLI, visit www.rlicorp.com.

Media Contact

Aaron Diefenthaler

Vice President, Chief Investment Officer & Treasurer

309-693-5846

Aaron.Diefenthaler@rlicorp.com

3

Supplemental disclosure regarding the earnings impact of specific items:

Reserve Development and Catastrophe Losses,

Net of Reinsurance

Three Months Ended December 31,

Year Ended December 31,

(Dollars in millions, except per share amounts)

2021

2020

2021

2020

Favorable development in casualty prior years' reserves

$

25.7

$

25.4

$

109.5

$

76.0

Favorable development in property prior years' reserves

$

-

$

0.6

$

8.4

$

5.8

Favorable development in surety prior years' reserves

$

3.2

$

1.9

$

5.8

$

12.9

Net incurred losses related to:

2021 storms

$

-

$

-

$

(25.0

)

$

-

2021 hurricanes

$

-

$

-

$

(34.0

)

$

-

2020 and prior events(4)

$

-

$

(18.0

)

$

2.2

$

(73.1

)

Operating Earnings Per Share

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

Operating Earnings Per Share(1)

$

1.26

$

0.75

$

3.87

$

2.59

Specific items included in operating earnings per share:(2) (3)

Net favorable development in casualty prior years' reserves

$

0.40

$

0.40

$

1.72

$

1.15

Net favorable development in property prior years' reserves

$

-

$

-

$

0.07

$

0.05

Net favorable development in surety prior years' reserves

$

0.02

$

0.02

$

0.03

$

0.19

Net incurred losses related to:

2021 storms

$

-

$

-

$

(0.37

)

$

-

2021 hurricanes

$

-

$

-

$

(0.50

)

$

-

2020 and prior events(4)

$

-

$

(0.26

)

$

0.03

$

(1.10

)

(1)

See discussion above: Non-GAAP and Performance Measures.

(2)

Includes incentive and profit sharing-related impacts which affected policy acquisition, insurance operating and general corporate expenses.

(3)

Reserve development reflects changes from previously estimated losses.

(4)

Includes COVID-19 reserves established in 2020.

4

RLI CORP

2021 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

Year Ended December 31,

SUMMARIZED INCOME STATEMENT DATA:

2021

2020

% Change

2021

2020

% Change

Net premiums earned

$

257,919

$

224,801

14.7

%

$

980,903

$

865,747

13.3

%

Net investment income

17,933

16,655

7.7

%

68,862

67,893

1.4

%

Net realized gains

11,780

3,330

NM

64,222

17,885

NM

Net unrealized gains on equity securities

35,732

59,665

(40.1

)

%

65,258

32,101

103.3

%

Consolidated revenue

$

323,364

$

304,451

6.2

%

$

1,179,245

$

983,626

19.9

%

Loss and settlement expenses

101,028

103,065

(2.0

)

%

456,602

442,884

3.1

%

Policy acquisition costs

84,794

73,002

16.2

%

317,468

286,438

10.8

%

Insurance operating expenses

22,403

21,691

3.3

%

76,907

66,828

15.1

%

Interest expense on debt

1,966

1,902

3.4

%

7,677

7,603

1.0

%

General corporate expenses

3,797

3,848

(1.3

)

%

13,330

10,265

29.9

%

Total expenses

$

213,988

$

203,508

5.1

%

$

871,984

$

814,018

7.1

%

Equity in earnings of unconsolidated investees

7,653

1,874

NM

37,060

20,233

83.2

%

Earnings before income taxes

$

117,029

$

102,817

13.8

%

$

344,321

$

189,841

81.4

%

Income tax expense

21,745

19,012

14.4

%

64,967

32,750

98.4

%

Net earnings

$

95,284

$

83,805

13.7

%

$

279,354

$

157,091

77.8

%

Other comprehensive earnings (loss), net of tax

(17,078

)

6,129

NM

(58,888

)

56,219

NM

Comprehensive earnings

$

78,206

$

89,934

(13.0

)

%

$

220,466

$

213,310

3.4

%

Operating earnings(1):

Net earnings

$

95,284

$

83,805

13.7

%

$

279,354

$

157,091

77.8

%

Less:

Realized gains

(11,780

)

(3,330

)

NM

(64,222

)

(17,885

)

NM

Income tax on realized gains

2,474

699

NM

13,487

3,756

NM

Unrealized gains on equity securities

(35,732

)

(59,665

)

(40.1

)

%

(65,258

)

(32,101

)

103.3

%

Income tax on unrealized gains on equity securities

7,503

12,531

(40.1

)

%

13,703

6,741

103.3

%

Operating earnings

$

57,749

$

34,040

69.7

%

$

177,064

$

117,602

50.6

%

Return on Equity:

Net earnings

23.2

%

15.1

%

Comprehensive earnings

18.3

%

20.5

%

Per Share Data:

Diluted:

Weighted average shares outstanding (in 000's)

45,730

45,565

45,712

45,376

Net earnings per share

$

2.08

$

1.84

13.0

%

$

6.11

$

3.46

76.6

%

Less:

Realized gains

(0.26

)

(0.07

)

NM

(1.40

)

(0.39

)

NM

Income tax on realized gains

0.05

0.02

150.0

%

0.30

0.08

NM

Unrealized gains on equity securities

(0.77

)

(1.32

)

(41.7

)

%

(1.44

)

(0.71

)

102.8

%

Income tax on unrealized gains on equity securities

0.16

0.28

(42.9

)

%

0.30

0.15

100.0

%

EPS from operations(1)

$

1.26

$

0.75

68.0

%

$

3.87

$

2.59

49.4

%

Comprehensive earnings per share

$

1.71

$

1.97

(13.2

)

%

$

4.82

$

4.70

2.6

%

Cash dividends per share - ordinary

$

0.25

$

0.24

4.2

%

$

0.99

$

0.95

4.2

%

Cash dividends per share - special

$

2.00

$

1.00

100.0

%

$

2.00

$

1.00

100.0

%

Net Cash Flow provided by Operations

$

104,464

$

100,015

4.4

%

$

384,905

$

263,259

46.2

%

(1)

See discussion above: Non-GAAP and Performance Measures.

NM = Not Meaningful

5

RLI CORP

2021 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

December 31,

December 31,

2021

2020

% Change

SUMMARIZED BALANCE SHEET DATA:

Fixed income, at fair value

$

2,409,887

$

2,196,626

9.7

%

(amortized cost - $2,346,267 at 12/31/21)

(amortized cost - $2,061,467 at 12/31/20)

Equity securities, at fair value

613,776

524,006

17.1

%

(cost - $324,501 at 12/31/21)

(cost - $293,190 at 12/31/20)

Other invested assets

50,501

54,232

(6.9

)

%

Cash and cash equivalents

88,804

62,217

42.7

%

Total investments and cash

$

3,162,968

$

2,837,081

11.5

%

Premiums and reinsurance balances receivable

167,279

174,628

(4.2

)

%

Ceded unearned premiums

130,916

113,488

15.4

%

Reinsurance balances recoverable on unpaid losses

608,086

443,729

37.0

%

Deferred policy acquisition costs

103,553

88,425

17.1

%

Property and equipment

52,161

51,406

1.5

%

Investment in unconsolidated investees

171,311

128,382

33.4

%

Goodwill and intangibles

53,562

53,719

(0.3

)

%

Other assets

58,466

47,627

22.8

%

Total assets

$

4,508,302

$

3,938,485

14.5

%

Unpaid losses and settlement expenses

$

2,043,555

$

1,750,049

16.8

%

Unearned premiums

680,444

586,386

16.0

%

Reinsurance balances payable

42,851

42,265

1.4

%

Funds held

89,773

81,747

9.8

%

Income taxes - deferred

83,509

80,235

4.1

%

Long-term debt

199,676

149,489

33.6

%

Accrued expenses

98,274

75,925

29.4

%

Other liabilities

40,859

36,411

12.2

%

Total liabilities

$

3,278,941

$

2,802,507

17.0

%

Shareholders' equity

1,229,361

1,135,978

8.2

%

Total liabilities & shareholders' equity

$

4,508,302

$

3,938,485

14.5

%

OTHER DATA:

Common shares outstanding (in 000's)

45,289

45,143

Book value per share

$

27.14

$

25.16

7.9

%

Closing stock price per share

$

112.10

$

104.15

7.6

%

Statutory surplus

$

1,240,649

$

1,121,592

10.6

%

6

RLI CORP

2021 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

Three Months Ended December 31,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2021

Gross premiums written

$

213,563

$

91,270

$

32,396

$

337,229

Net premiums written

163,796

68,443

29,166

261,405

Net premiums earned

165,822

63,444

28,653

257,919

Net loss & settlement expenses

82,820

49.9

%

18,281

28.8

%

(73

)

-0.3

%

101,028

39.2

%

Net operating expenses

61,737

37.3

%

25,179

39.7

%

20,281

70.8

%

107,197

41.5

%

Underwriting income (loss)(1)

$

21,265

87.2

%

$

19,984

68.5

%

$

8,445

70.5

%

$

49,694

80.7

%

2020

Gross premiums written

$

196,118

$

74,227

$

30,239

$

300,584

Net premiums written

146,623

54,718

28,506

229,847

Net premiums earned

147,884

48,605

28,312

224,801

Net loss & settlement expenses

72,107

48.8

%

26,961

55.5

%

3,997

14.1

%

103,065

45.8

%

Net operating expenses

53,753

36.3

%

20,950

43.1

%

19,990

70.6

%

94,693

42.2

%

Underwriting income (loss)(1)

$

22,024

85.1

%

$

694

98.6

%

$

4,325

84.7

%

$

27,043

88.0

%

Twelve Months Ended December 31,

GAAP

GAAP

GAAP

GAAP

Casualty

Ratios

Property

Ratios

Surety

Ratios

Total

Ratios

2021

Gross premiums written

$

871,584

$

347,866

$

127,904

$

1,347,354

Net premiums written

674,709

262,816

120,008

1,057,533

Net premiums earned

633,639

231,837

115,427

980,903

Net loss & settlement expenses

311,627

49.2

%

129,924

56.0

%

15,051

13.0

%

456,602

46.5

%

Net operating expenses

226,493

35.7

%

90,613

39.1

%

77,269

67.0

%

394,375

40.3

%

Underwriting income (loss)(1)

$

95,519

84.9

%

$

11,300

95.1

%

$

23,107

80.0

%

$

129,926

86.8

%

2020

Gross premiums written

$

749,409

$

268,769

$

118,254

$

1,136,432

Net premiums written

583,244

196,603

112,241

892,088

Net premiums earned

569,521

183,720

112,506

865,747

Net loss & settlement expenses

322,099

56.6

%

111,356

60.6

%

9,429

8.4

%

442,884

51.2

%

Net operating expenses

202,995

35.6

%

75,546

41.1

%

74,725

66.4

%

353,266

40.8

%

Underwriting income (loss)(1)

$

44,427

92.2

%

$

(3,182

)

101.7

%

$

28,352

74.8

%

$

69,597

92.0

%

(1)

See discussion above: Non-GAAP and Performance Measures.

7

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RLI Corporation published this content on 26 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 January 2022 22:18:39 UTC.