RLI Corp. (NYSE:RLI) – RLI Corp. reported second quarter 2022 net loss of $2.2 million (-$0.05 per share), compared to net earnings of $81.8 million ($1.79 per share) for the second quarter of 2021. Operating earnings⁽¹⁾ for the second quarter of 2022 were $67.4 million ($1.49 per share), compared to $49.9 million ($1.09 per share) for the same period in 2021.

	Second Quarter					Year to Date
Earnings Per Diluted Share	2022			2021		2022		2021
Net earnings (loss)	$	(0.05	)	$	1.79	$	1.00	$	3.39
Operating earnings ⁽¹⁾	$	1.49		$	1.09	$	2.91	$	1.96
(1) See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

Underwriting income⁽¹⁾ of $56.0 million on a combined ratio⁽¹⁾ of 80.2.
17% increase in gross premiums written.
11% increase in net investment income.
Favorable development in prior years' loss reserves, resulting in a $20.9 million net increase in underwriting income.
Book value per share of $23.02, a decrease of 13% (inclusive of dividends) from year-end 2021.

"We are pleased with our positive mid-year operating results, as top line premium and underwriting profitability remained strong in the second quarter," said RLI Corp. President & CEO Craig Kliethermes. "All of our underwriting segments positively contributed to the 17 percent growth in gross premium and 80 combined ratio that we achieved in the quarter. Market conditions continue to offer opportunities for our talented underwriters within their given niche markets. Despite the decline in book value due to the impact from the investment portfolio, we continue to generate capital through operating earnings, which were $1.49 per share. Our strong operating performance is a testament to the dedication of our employee owners and their commitment to our customers."

Underwriting Income

RLI achieved $56.0 million of underwriting income in the second quarter of 2022 on an 80.2 combined ratio, compared to $36.6 million on an 84.8 combined ratio in 2021.

Results for the second quarter of both years include favorable development in prior years' loss reserves, which resulted in a $20.9 million and $27.5 million net increase to underwriting income for 2022 and 2021, respectively.

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

Underwriting Income⁽¹⁾

Combined Ratio⁽¹⁾

(in millions)

2022

2021

2022

2021

Casualty

21.5

26.4

Casualty

87.9

83.1

Property

26.1

8.9

Property

65.0

84.1

Surety

8.4

1.3

Surety

72.9

95.6

Total

56.0

36.6

Total

80.2

84.8

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

Other Income

Net investment income for the quarter increased 10.9% to $18.5 million, compared to the same period in 2021. The investment portfolio's total return was -6.1% for the quarter and -10.4% for the six months ended June 30, 2022.

RLI's comprehensive loss was $99.8 million for the quarter (-$2.20 per share), compared to $97.0 million ($2.12 per share) of comprehensive earnings for the same quarter in 2021. In addition to net earnings, comprehensive loss included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Equity in earnings of Maui Jim, Inc. (Maui Jim), a producer of premium sunglasses, was $8.5 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc. (Prime), a specialty insurance company, was $3.6 million. Comparatively, for the second quarter of 2021, equity in earnings of unconsolidated investees from Maui Jim and Prime was $10.6 million and $3.6 million, respectively.

Dividends Paid in Second Quarter of 2022

On June 21, 2022, the company paid a regular quarterly dividend of $0.26 per share, a $0.01 increase over the prior quarter. RLI's cumulative dividends total more than $510 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 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 2022 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

On July 11, 2022, RLI was named as one of the insurance industry's top performing companies by Ward benchmarking, a business unit of Aon, for the 32^nd consecutive year. RLI is one of only two property-casualty insurers to be recognized as a Ward's 50^® Top P&C Performer every year since the list's inception in 1991.

As previously announced, RLI has agreed to sell its minority interest in Maui Jim, Inc. RLI's net after-tax proceeds from the sale will be approximately $500 million, with the final proceeds to be determined at closing, based on adjustments to the purchase price for working capital and other items. The sale is expected to close in the second half of 2022.

At 10 a.m. central daylight time (CDT) tomorrow, July 21, 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/945644532.

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, 2021.

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 47 consecutive years and delivered underwriting profits for 26 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 June 30,						Six Months Ended June 30,
(Dollars in millions, except per share amounts)			2022			2021			2022			2021
Favorable development in casualty prior years' reserves			$	17.3		$	29.2		$	44.9		$	57.5
Favorable development in property prior years' reserves			$	3.9		$	3.8		$	17.3		$	9.9
Favorable (unfavorable) development in surety prior years' reserves			$	3.0		$	(2.7	)	$	7.5		$	0.1

Net incurred losses related to:
	2022 storms		$	(3.0	)	$	-		$	(5.0	)	$	-
	2021 and prior events		$	-		$	(5.9	)	$	-		$	(21.9	)

			Operating Earnings Per Share
			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022			2021
Operating Earnings Per Share⁽¹⁾			$	1.49		$	1.09		$	2.91		$	1.96

Specific items included in operating earnings per share:^{(2) (3)}
	Net favorable development in casualty prior years' reserves		$	0.26		$	0.46		$	0.67		$	0.88
	Net favorable development in property prior years' reserves		$	0.06		$	0.05		$	0.27		$	0.13
	Net favorable (unfavorable) development in surety prior years' reserves		$	0.05		$	(0.06	)	$	0.11		$	(0.02	)

	Net incurred losses related to:
		2022 storms	$	(0.05	)	$	-		$	(0.08	)	$	-
		2021 and prior events	$	-		$	(0.09	)	$	-		$	(0.32	)

(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.


RLI CORP
2022 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	Three Months Ended June 30,										Six Months Ended June 30,
SUMMARIZED INCOME STATEMENT DATA:		2022			2021		% Change					2022				2021			% Change
Net premiums earned	$	282,810		$	241,000			17.3		%	$	551,962			$	469,595				17.5		%
Net investment income		18,472			16,661			10.9		%		36,355				33,085				9.9		%
Net realized gains		12,804			36,463			(64.9	)	%		18,392				50,613				(63.7	)	%
Net unrealized gains (losses) on equity securities		(100,994	)		3,956		NM					(128,804	)			32,118			NM
Consolidated revenue	$	213,092		$	298,080			(28.5	)	%	$	477,905			$	585,411				(18.4	)	%
Loss and settlement expenses		117,914			107,026			10.2		%		223,438				211,918				5.4		%
Policy acquisition costs		89,615			77,235			16.0		%		174,902				152,225				14.9		%
Insurance operating expenses		19,325			20,148			(4.1	)	%		38,188				38,944				(1.9	)	%
Interest expense on debt		2,011			1,904			5.6		%		4,021				3,805				5.7		%
General corporate expenses		2,435			3,686			(33.9	)	%		5,798				7,028				(17.5	)	%
Total expenses	$	231,300		$	209,999			10.1		%	$	446,347			$	413,920				7.8		%
Equity in earnings of unconsolidated investees		11,654			13,940			(16.4	)	%		20,413				20,364				0.2		%
Earnings (loss) before income taxes	$	(6,554	)	$	102,021		NM				$	51,971			$	191,855				(72.9	)	%
Income tax expense (benefit)		(4,315	)		20,206		NM					6,287				37,028				(83.0	)	%
Net earnings (loss)	$	(2,239	)	$	81,815		NM				$	45,684			$	154,827				(70.5	)	%

Other comprehensive earnings (loss), net of tax		(97,563	)		15,177		NM					(213,144	)			(29,570	)		NM
Comprehensive earnings (loss)	$	(99,802	)	$	96,992		NM				$	(167,460	)		$	125,257			NM

Operating earnings⁽¹⁾:
Net earnings (loss)	$	(2,239	)	$	81,815		NM				$	45,684			$	154,827				(70.5	)	%
Less:
Realized gains		(12,804	)		(36,463	)		(64.9	)	%		(18,392	)			(50,613	)			(63.7	)	%
Income tax on realized gains		2,689			7,656			(64.9	)	%		3,862				10,628				(63.7	)	%
Unrealized (gains) losses on equity securities		100,994			(3,956	)	NM					128,804				(32,118	)		NM
Income tax on unrealized gains (losses) on equity securities		(21,209	)		831		NM					(27,049	)			6,745			NM
Operating earnings	$	67,431		$	49,883			35.2		%	$	132,909			$	89,469				48.6		%

Return on Equity:
Net earnings (trailing four quarters)											14.4			%		24.7		%
Comprehensive earnings (trailing four quarters)											-6.1			%		23.5		%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		45,354			45,715							45,748				45,703

Net earnings (loss) per share	$	(0.05	)	$	1.79		NM				$	1.00			$	3.39				(70.5	)	%
Less:
Realized gains		(0.28	)		(0.80	)		(65.0	)	%		(0.40	)			(1.11	)			(64.0	)	%
Income tax on realized gains		0.06			0.17			(64.7	)	%		0.08				0.23				(65.2	)	%
Unrealized (gains) losses on equity securities		2.23			(0.09	)	NM					2.82				(0.70	)		NM
Income tax on unrealized gains (losses) on equity securities		(0.47	)		0.02		NM					(0.59	)			0.15			NM
EPS from operations⁽¹⁾	$	1.49		$	1.09			36.7		%	$	2.91			$	1.96				48.5		%

Comprehensive earnings (loss) per share	$	(2.20	)	$	2.12		NM				$	(3.66	)		$	2.74			NM

Cash dividends per share - ordinary	$	0.26		$	0.25			4.0		%	$	0.51			$	0.49				4.1		%

Net Cash Flow provided by Operations	$	131,631		$	104,222			26.3		%	$	170,645			$	164,509				3.7		%

(1) See discussion above: Non-GAAP and Performance Measures.
NM = Not Meaningful


RLI CORP
2022 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	June 30,		December 31,
		2022		2021	% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	2,280,909	$	2,409,887		(5.4	)	%
(amortized cost - $2,480,480 at 6/30/22)
(amortized cost - $2,346,267 at 12/31/21)
Equity securities, at fair value		487,995		613,776		(20.5	)	%
(cost - $327,246 at 6/30/22)
(cost - $324,501 at 12/31/21)
Other invested assets		51,018		50,501		1.0		%
Cash and cash equivalents		113,044		88,804		27.3		%
Total investments and cash	$	2,932,966	$	3,162,968		(7.3	)	%

Premiums and reinsurance balances receivable		191,391		167,279		14.4		%
Ceded unearned premiums		132,417		130,916		1.1		%
Reinsurance balances recoverable on unpaid losses		666,730		608,086		9.6		%
Deferred policy acquisition costs		123,055		103,553		18.8		%
Property and equipment		50,955		52,161		(2.3	)	%
Investment in unconsolidated investees		187,310		171,311		9.3		%
Goodwill and intangibles		53,562		53,562		0.0		%
Other assets		63,377		58,466		8.4		%
Total assets	$	4,401,763	$	4,508,302		(2.4	)	%

Unpaid losses and settlement expenses	$	2,150,519	$	2,043,555		5.2		%
Unearned premiums		754,192		680,444		10.8		%
Reinsurance balances payable		39,291		42,851		(8.3	)	%
Funds held		101,983		89,773		13.6		%
Income taxes - deferred		2,389		83,509		(97.1	)	%
Long-term debt		199,769		199,676		0.0		%
Accrued expenses		68,052		98,274		(30.8	)	%
Other liabilities		41,380		40,859		1.3		%
Total liabilities	$	3,357,575	$	3,278,941		2.4		%
Shareholders' equity		1,044,188		1,229,361		(15.1	)	%
Total liabilities & shareholders' equity	$	4,401,763	$	4,508,302		(2.4	)	%

OTHER DATA:
Common shares outstanding (in 000's)		45,369		45,289

Book value per share	$	23.02	$	27.14		(15.2	)	%
Closing stock price per share	$	116.59	$	112.10		4.0		%

Statutory surplus	$	1,249,906	$	1,240,649		0.7		%

RLI CORP
2022 FINANCIAL HIGHLIGHTS
UNDERWRITING SEGMENT DATA
(Unaudited)
(Dollars in thousands, except per share amounts)

Three Months Ended June 30,
			GAAP					GAAP					GAAP					GAAP
	Casualty		Ratios			Property		Ratios			Surety		Ratios			Total		Ratios
2022

Gross premiums written	$	248,315				$	135,848				$	34,626				$	418,789
Net premiums written		201,247					100,356					32,716					334,319
Net premiums earned		177,123					74,690					30,997					282,810
Net loss & settlement expenses		94,250		53.2	%		20,477		27.4	%		3,187		10.3	%		117,914		41.7	%
Net operating expenses		61,431		34.7	%		28,108		37.6	%		19,401		62.6	%		108,940		38.5	%
Underwriting income⁽¹⁾	$	21,442		87.9	%	$	26,105		65.0	%	$	8,409		72.9	%	$	55,956		80.2	%

2021

Gross premiums written	$	236,329				$	91,911				$	30,744				$	358,984
Net premiums written		183,436					69,943					29,107					282,486
Net premiums earned		156,195					55,865					28,940					241,000
Net loss & settlement expenses		74,421		47.6	%		24,311		43.5	%		8,294		28.7	%		107,026		44.4	%
Net operating expenses		55,336		35.5	%		22,675		40.6	%		19,372		66.9	%		97,383		40.4	%
Underwriting income⁽¹⁾	$	26,438		83.1	%	$	8,879		84.1	%	$	1,274		95.6	%	$	36,591		84.8	%

Six Months Ended June 30,
			GAAP					GAAP					GAAP					GAAP
	Casualty		Ratios			Property		Ratios			Surety		Ratios			Total		Ratios
2022

Gross premiums written	$	464,136				$	245,446				$	68,366				$	777,948
Net premiums written		376,860					182,351					64,998					624,209
Net premiums earned		348,879					142,130					60,953					551,962
Net loss & settlement expenses		178,099		51.0	%		40,840		28.7	%		4,499		7.4	%		223,438		40.5	%
Net operating expenses		121,691		34.9	%		52,709		37.1	%		38,690		63.5	%		213,090		38.6	%
Underwriting income⁽¹⁾	$	49,089		85.9	%	$	48,581		65.8	%	$	17,764		70.9	%	$	115,434		79.1	%

2021

Gross premiums written	$	425,225				$	166,448				$	62,206				$	653,879
Net premiums written		332,327					125,929					59,219					517,475
Net premiums earned		304,965					107,507					57,123					469,595
Net loss & settlement expenses		144,668		47.4	%		55,948		52.0	%		11,302		19.8	%		211,918		45.1	%
Net operating expenses		108,992		35.8	%		43,685		40.7	%		38,492		67.4	%		191,169		40.7	%
Underwriting income⁽¹⁾	$	51,305		83.2	%	$	7,874		92.7	%	$	7,329		87.2	%	$	66,508		85.8	%

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

Category: Earnings Release

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RLI Reports Second Quarter 2022 Results