RLI Corp. (NYSE:RLI) – RLI Corp. reported second quarter 2023 net earnings of $77.7 million ($1.69 per share), compared to a net loss of $2.2 million ($0.05 per share) for the second quarter of 2022. Operating earnings⁽¹⁾⁽²⁾ for the second quarter of 2023 were $53.3 million ($1.16 per share), compared to $60.7 million ($1.34 per share) for the same period in 2022.


	Second Quarter					Year to Date
Earnings Per Diluted Share	2023		2022			2023		2022
Net earnings (loss)	$	1.69	$	(0.05	)	$	3.83	$	1.00
Operating earnings ^{(1) (2)}	$	1.16	$	1.34		$	2.79	$

(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 $41.2 million on a combined ratio⁽¹⁾ of 87.2.
21% increase in gross premiums written.
56% increase in net investment income.
Favorable development in prior years' loss reserves, resulting in a $17.0 million net increase in underwriting income.
Losses from second quarter storms, resulting in a $15.5 million net decrease in underwriting income.
Book value per share of $29.65, an increase of 17% (inclusive of dividends) from year-end 2022.

"We are pleased to report an 87 combined ratio for the quarter and an 83 combined ratio year to date," said RLI Corp. President & CEO Craig Kliethermes. "All three product segments contributed to our strong results. Our property segment continues to experience hard market conditions, which drove significant premium growth in the quarter. Casualty and surety segment premiums increased slightly, as product exits, market conditions and underwriting discipline moderated growth. Our profitability and growth in book value highlight the benefits of our diverse product portfolio and continued focus on responsible underwriting."

Underwriting Income

RLI achieved $41.2 million of underwriting income in the second quarter of 2023 on an 87.2 combined ratio, compared to $56.0 million on an 80.2 combined ratio in 2022.

Results for both years include favorable development in prior years' loss reserves, which resulted in a $17.0 million and $20.9 million net increase to underwriting income from 2023 and 2022, respectively.

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


Underwriting Income⁽¹⁾					Combined Ratio⁽¹⁾
(in millions)	2023		2022			2023	2022
Casualty	$	7.0	$	21.5	Casualty	96.3	87.9
Property		25.9		26.1	Property	74.6	65.0
Surety		8.3		8.4	Surety	75.0	72.9
Total	$	41.2	$	56.0	Total	87.2	80.2

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

Other Income

Net investment income for the quarter increased 55.8% to $28.8 million, compared to the same period in 2022. The investment portfolio's total return was 1.1% for the quarter and 3.9% for the six months ended June 30, 2023.

RLI's comprehensive earnings were $57.9 million for the quarter ($1.26 per share), compared to a comprehensive loss of $99.8 million ($2.20 per share) for the same quarter in 2022. In addition to net earnings, comprehensive earnings included after-tax unrealized losses from the fixed income portfolio, due to rising interest rates.

Dividends Paid in Second Quarter of 2023

On June 20, 2023, the company paid a regular quarterly dividend of $0.27 per share, a $0.01 increase over the prior quarter. RLI's cumulative dividends total more than $761 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

On July 11, 2023, RLI was named as one of the insurance industry's top performing companies by Ward Benchmarking, a business unit of Aon, for the 33rd consecutive year. RLI is the only property & casualty insurance company to be recognized as a Ward's 50® P&C Top Performer every year since the list's inception in 1991.

At 10 a.m. central daylight time (CDT) tomorrow, July 25, 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/705943023.

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						Six Months Ended
	June 30,						June 30,
(Dollars in millions, except per share amounts)	2023			2022			2023			2022
Favorable development in casualty prior years' reserves	$	9.0		$	17.3		$	44.9		$	44.9
Favorable development in property prior years' reserves	$	3.5		$	3.9		$	16.1		$	17.3
Favorable development in surety prior years' reserves	$	4.2		$	3.0		$	7.4		$	7.5

Net incurred losses related to:
2023 storms	$	(18.0	)	$	—		$	(22.0	)	$	—
2022 and prior events	$	3.0		$	(3.0	)	$	3.1		$	(5.0	)

	Operating Earnings Per Share
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Operating Earnings Per Share^{(1) (2)}	$	1.16		$	1.34		$	2.79		$	2.65

Specific items included in operating earnings per share:^{(3) (4)}
Net favorable development in casualty prior years' reserves	$	0.14		$	0.26		$	0.66		$	0.67
Net favorable development in property prior years' reserves	$	0.05		$	0.06		$	0.24		$	0.27
Net favorable development in surety prior years' reserves	$	0.07		$	0.05		$	0.11		$	0.11

Net incurred losses related to:
2023 storms	$	(0.27	)	$	—		$	(0.32	)	$	—
2022 and prior events	$	0.04		$	(0.05	)	$	0.04		$	(0.08	)

(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 June 30,									Six Months Ended June 30,
SUMMARIZED INCOME STATEMENT DATA:	2023			2022			% Change			2023				2022				% Change
Net premiums earned	$	322,280		$	282,810		14.0		%	$	630,003			$	551,962			14.1		%
Net investment income		28,788			18,472		55.8		%		55,872				36,355			53.7		%
Net realized gains		5,580			12,804		(56.4	)	%		20,200				18,392			9.8		%
Net unrealized gains (losses) on equity securities		25,214			(100,994	)	NM				40,710				(128,804	)		NM
Consolidated revenue	$	381,862		$	213,092		79.2		%	$	746,785			$	477,905			56.3		%
Loss and settlement expenses		153,943			117,914		30.6		%		268,431				223,438			20.1		%
Policy acquisition costs		102,626			89,615		14.5		%		204,070				174,902			16.7		%
Insurance operating expenses		24,510			19,325		26.8		%		48,411				38,188			26.8		%
Interest expense on debt		2,047			2,011		1.8		%		4,055				4,021			0.8		%
General corporate expenses		4,219			2,435		73.3		%		8,433				5,798			45.4		%
Total expenses	$	287,345		$	231,300		24.2		%	$	533,400			$	446,347			19.5		%
Equity in earnings of unconsolidated investees		1,514			11,654		(87.0	)	%		5,437				20,413			(73.4	)	%
Earnings (loss) before income taxes	$	96,031		$	(6,554	)	NM			$	218,822			$	51,971			NM
Income tax expense (benefit)		18,379			(4,315	)	NM				42,359				6,287			NM
Net earnings (loss)	$	77,652		$	(2,239	)	NM			$	176,463			$	45,684			NM

Other comprehensive earnings (loss), net of tax		(19,721	)		(97,563	)	(79.8	)	%		17,986				(213,144	)		NM
Comprehensive earnings (loss)	$	57,931		$	(99,802	)	NM			$	194,449			$	(167,460	)		NM

Operating earnings⁽¹⁾:
Net earnings (loss)	$	77,652		$	(2,239	)	NM			$	176,463			$	45,684			NM
Less:
Net realized gains		(5,580	)		(12,804	)	(56.4	)	%		(20,200	)			(18,392	)		9.8		%
Income tax on realized gains		1,171			2,689		(56.5	)	%		4,242				3,862			9.8		%
Net unrealized (gains) losses on equity securities		(25,214	)		100,994		NM				(40,710	)			128,804			NM
Income tax on unrealized gains (losses) on equity securities		5,295			(21,209	)	NM				8,549				(27,049	)		NM
Equity in earnings of Maui Jim		—			(8,505	)	(100.0	)	%		—				(14,872	)		(100.0	)	%
Income tax on equity in earnings of Maui Jim		—			1,786		(100.0	)	%		—				3,123			(100.0	)	%
Operating earnings⁽²⁾	$	53,324		$	60,712		(12.2	)	%	$	128,344			$	121,160			5.9		%

Return on Equity:
Net earnings (trailing four quarters)											56.9		%		14.4		%
Comprehensive earnings (trailing four quarters)											53.1		%		(6.1	)	%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		46,044			45,354						46,045				45,748

Net earnings (loss) per share⁽²⁾	$	1.69		$	(0.05	)	NM			$	3.83			$	1.00			NM
Less:
Net realized gains		(0.12	)		(0.28	)	(57.1	)	%		(0.44	)			(0.40	)		10.0		%
Income tax on realized gains		0.03			0.06		(50.0	)	%		0.09				0.08			12.5		%
Net unrealized (gains) losses on equity securities		(0.55	)		2.23		NM				(0.88	)			2.82			NM
Income tax on unrealized gains (losses) on equity securities		0.11			(0.47	)	NM				0.19				(0.59	)		NM
Equity in earnings of Maui Jim		—			(0.19	)	(100.0	)	%		—				(0.33	)		(100.0	)	%
Income tax on equity in earnings of Maui Jim		—			0.04		(100.0	)	%		—				0.07			(100.0	)	%
Operating earnings per share⁽¹⁾⁽²⁾	$	1.16		$	1.34		(13.4	)	%	$	2.79			$	2.65			5.3		%

Comprehensive earnings (loss) per share	$	1.26		$	(2.20	)	NM			$	4.22			$	(3.66	)		NM

Cash dividends per share - ordinary	$	0.27		$	0.26		3.8		%	$	0.53			$	0.51			3.9		%

Net Cash Flow provided by Operations	$	174,376		$	131,631		32.5		%	$	243,595			$	170,645			42.7		%

(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)

	June 30,		December 31,
	2023		2022		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	2,689,100	$	2,666,950	0.8		%
(amortized cost - $2,946,920 at 6/30/23)
(amortized cost - $2,945,273 at 12/31/22)
Equity securities, at fair value		552,566		498,382	10.9		%
(cost - $340,184 at 6/30/23)
(cost - $328,019 at 12/31/22)
Short-term investments		271,296		36,229	648.8		%
Other invested assets		60,907		47,922	27.1		%
Cash and cash equivalents		16,707		22,818	(26.8	)	%
Total investments and cash	$	3,590,576	$	3,272,301	9.7		%

Accrued investment income		22,525		21,259	6.0		%
Premiums and reinsurance balances receivable		229,471		189,501	21.1		%
Ceded unearned premiums		112,353		138,457	(18.9	)	%
Reinsurance balances recoverable on unpaid losses		720,858		740,089	(2.6	)	%
Deferred policy acquisition costs		148,336		127,859	16.0		%
Property and equipment		48,358		49,573	(2.5	)	%
Investment in unconsolidated investees		55,250		58,275	(5.2	)	%
Goodwill and intangibles		53,562		53,562	0.0		%
Income taxes - deferred		29,864		40,269	(25.8	)	%
Other assets		54,693		75,923	(28.0	)	%
Total assets	$	5,065,846	$	4,767,068	6.3		%

Unpaid losses and settlement expenses	$	2,361,577	$	2,315,637	2.0		%
Unearned premiums		891,103		785,085	13.5		%
Reinsurance balances payable		35,931		61,100	(41.2	)	%
Funds held		102,429		101,144	1.3		%
Income taxes - current		5,326		—	NM
Current portion of long-term debt		199,956		199,863	0.0		%
Accrued expenses		70,220		94,869	(26.0	)	%
Other liabilities		47,392		32,029	48.0		%
Total liabilities	$	3,713,934	$	3,589,727	3.5		%
Shareholders' equity		1,351,912		1,177,341	14.8		%
Total liabilities & shareholders' equity	$	5,065,846	$	4,767,068	6.3		%

OTHER DATA:
Common shares outstanding (in 000's)		45,596		45,470

Book value per share	$	29.65	$	25.89	14.5		%
Closing stock price per share	$	136.47	$	131.27	4.0		%

Statutory surplus	$	1,539,490	$	1,437,324	7.1		%

RLI CORP 2023 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
2023

Gross premiums written	$	251,057			$	221,889			$	35,018			$	507,964
Net premiums written		208,978				177,830				32,733				419,541
Net premiums earned		187,048				101,841				33,391				322,280
Net loss & settlement expenses		110,195	58.9	%		41,139	40.4	%		2,609	7.8	%		153,943	47.8	%
Net operating expenses		69,876	37.4	%		34,825	34.2	%		22,435	67.2	%		127,136	39.4	%
Underwriting income⁽¹⁾	$	6,977	96.3	%	$	25,877	74.6	%	$	8,347	75.0	%	$	41,201	87.2	%

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	%


Six Months Ended June 30,
			GAAP				GAAP				GAAP				GAAP
	Casualty		Ratios		Property		Ratios		Surety		Ratios		Total		Ratios
2023

Gross premiums written	$	468,891			$	380,735			$	73,350			$	922,976
Net premiums written		390,179				302,696				69,251				762,126
Net premiums earned		373,079				190,608				66,316				630,003
Net loss & settlement expenses		194,883	52.2	%		67,576	35.5	%		5,972	9.0	%		268,431	42.6	%
Net operating expenses		139,388	37.4	%		68,772	36.0	%		44,321	66.8	%		252,481	40.1	%
Underwriting income⁽¹⁾	$	38,808	89.6	%	$	54,260	71.5	%	$	16,023	75.8	%	$	109,091	82.7	%

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	%

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

Category: Earnings Release

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RLI Reports Second Quarter 2023 Results