RLI CORP - FORM 8-K - EX-99.1

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8-K - 8-K - RLI CORP	a15-21359_18k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

RLI REPORTS THIRD QUARTER 2015 RESULTS

PEORIA, ILLINOIS, October 19, 2015 — RLI Corp. (NYSE: RLI) — RLI Corp. reported third quarter 2015 operating earnings of $31.0 million ($0.70 per share), compared to $29.5 million ($0.68 per share) for the third quarter of 2014. For the nine months ended September 30, 2015, operating earnings were $87.0 million ($1.98 per share) compared to $83.2 million ($1.90 per share) for the same period in 2014.

	Third Quarter
Earnings Per Diluted Share	2015		2014
Operating earnings (1)	$	0.70	$	0.68
Net earnings	$	0.81	$	0.76

(1) See discussion below of non-GAAP financial measures.

Highlights for the quarter included:

· Combined ratio of 81.3, resulting in underwriting income of $33.6 million.

· 3% growth in gross premiums written and 5% growth in net premiums written.

· $15.8 million net increase in underwriting income resulting from favorable development in prior years’ loss reserves.

· Book value per share of $20.36, an increase of 4% from year end 2014 (7% inclusive of dividends).

“We are pleased to report another quarter of consistent, profitable results,” said RLI Corp. Chairman & CEO Jonathan E. Michael. “Although the overall market is still challenging, our underwriters have stuck to their trademark discipline and delivered an 81 combined ratio in the quarter and an 83 combined ratio through the first nine months of the year. Premium was up 3% for the quarter, with the casualty segment leading the way with 8% growth and the surety segment achieving 5% growth. The property segment’s premium was down 7% due to continued challenging market conditions in catastrophe lines. Heading into the conclusion of the year, I expect our team to keep executing on providing outstanding service to our customers and identifying new opportunities to sustain our growth.”

Underwriting Income

RLI achieved $33.6 million of underwriting income in the third quarter of 2015 on an 81.3 combined ratio, compared to $30.4 million of underwriting income on an 82.9 combined ratio in the same quarter for 2014. Results for 2015 include $15.8 million in favorable development in prior years’ loss reserves, compared to $15.3 million in favorable development in prior years’ loss reserves in 2014.

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

Underwriting Income (1)	Third Quarter
(in millions)	2015		2014
Casualty	$	13.7	$	13.8
Property	9.2		7.5
Surety	10.7		9.1
Total	$	33.6	$	30.4

	Third Quarter
Combined Ratio	2015	2014
Casualty	87.0	85.6
Property	79.4	86.1
Surety	63.8	66.7
Total	81.3	82.9

(1) See discussion below of non-GAAP financial measures.

RLI reported year-to-date underwriting income of $86.1 million representing an 83.4 combined ratio for the nine months ended September 30, 2015, versus $79.5 million of underwriting income representing an 84.3 combined ratio for the same period last year.

—more—

Other Income

RLI’s net investment income for the quarter fell 1.7% to $14.0 million, compared to the same period in 2014. For the nine-month period ended September 30, 2015, investment income was $40.9 million versus $41.8 million for the same period in 2014. The investment portfolio’s total return was 0.0% for the quarter. The bond portfolio’s return was 1.3% in the quarter, while the equity portfolio’s return was –5.3%. Through nine months, the investment portfolio’s total return was 0.1% with the bond portfolio returning 2.1% and equities declining 7.6%.

Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $19.8 million for the quarter ($0.45 per share) compared to $20.9 million ($0.48 per share) for the same quarter in 2014. Year-to-date comprehensive earnings were $55.0 million ($1.25 per share), compared to $123.3 million ($2.82 per share) for the same period last year.

Equity in earnings of unconsolidated investees was $0.7 million for the quarter compared to $2.9 million from the same period last year. These results are related to Maui Jim, Inc. ($0.5 million), a producer of premium sunglasses, and Prime Holdings Insurance Services, Inc. ($0.2 million), a specialty E&S insurance company. For the nine-month period ending September 30, 2015, equity in earnings of unconsolidated investees was $11.0 million versus $12.2 million in 2014. Equity in earnings of unconsolidated investees from Maui Jim and Prime was $10.1 million and $0.9 million, respectively.

Dividend Paid in the Third Quarter 2015

On September 18, 2015, the company paid an ordinary dividend of $0.19 per share, the same amount as the prior quarter. RLI’s cumulative dividends, including this recent payment, total more than $693 million paid over the last five years.

Non-GAAP Measures

Underwriting income, operating earnings, earnings per share (EPS) from operations and other per share items are non-GAAP financial measures, and we believe that investors’ understanding of RLI’s core operating performance is enhanced by our disclosure of these financial measures. Underwriting income or profit represents the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs and insurance operating expenses from net premium earned. Operating earnings and EPS from operations consist of our net earnings adjusted by net realized investment gains/(losses) and taxes related to net realized gains/(losses). Our definitions of these items may not be comparable to the definitions used by other companies. Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. All earnings per share data are calculated using fully diluted shares. Combined ratio refers to a GAAP combined ratio.

Other News

On July 14, 2015, RLI was named as one of the insurance industry’s top performing companies by Ward Group for the 25th consecutive year. RLI is one of only three property and casualty insurers to be recognized as a Ward’s 50® Top P&C Performer every year since the list’s inception in 1991.

At 10 a.m. central daylight time (CDT) tomorrow, October 20, 2015, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion through the Internet at http://edge.media-server.com/m/p/y9ynemhk.

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, 2014.

RLI Corp. (NYSE: RLI) is a specialty insurer serving diverse, 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 subsidiaries are rated A+ “Superior” by A.M. Best Company, a distinction held by fewer than 10 percent of property and casualty insurance companies in the U.S. RLI has paid and increased dividends for 40 consecutive years and delivered underwriting profits for 19 consecutive years. To learn more about RLI and its 50-year history of financial strength, visit www.rlicorp.com.

Media Contact

Aaron Jacoby, Vice President, Corporate Development
309-693-5880
Aaron.Jacoby@rlicorp.com

Supplemental disclosure regarding the earnings impact of specific items:

	Operating Earnings Per Share
	2015			2014		2015			2014
	3rd Qtr			3rd Qtr		9 Mos.			9 Mos.
Operating Earnings Per Share	$	0.70		$	0.68	$	1.98		$	1.90

Specific items included in operating earnings per share: (1) (2)
· Favorable development in casualty prior years’ reserves	$	0.16		$	0.17	$	0.58		$	0.58
· Favorable development in property prior years’ reserves	$	0.01		$	—	$	0.05		$	0.01
· Favorable development in surety prior years’ reserves	$	0.05		$	0.06	$	0.13		$	0.15
· Catastrophe impact
· 2015 storms	$	(0.04	)	$	—	$	(0.13	)	$	—
· 2014 and prior events	$	0.01		$	0.01	$	0.02		$	(0.09	)

(1) Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses.

(2) Reserve development reflects changes from previously estimated losses.

RLI CORP.

2015 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015			2014			% Change		2015			2014			% Change
SUMMARIZED INCOME STATEMENT DATA:
Net premiums earned	$	179,448		$	177,747		1.0	%	$	520,790		$	507,483		2.6	%
Net investment income	13,964			14,200			-1.7	%	40,890			41,764			-2.1	%
Net realized investment gains	7,534			5,708			32.0	%	25,622			22,640			13.2	%
Consolidated revenue	$	200,946		$	197,655		1.7	%	$	587,302		$	571,887		2.7	%

Loss and settlement expenses	$	73,051		$	76,019		-3.9	%	$	218,461		$	220,380		-0.9	%
Policy acquisition costs	60,505			58,180			4.0	%	178,965			168,387			6.3	%
Insurance operating expenses	12,299			13,120			-6.3	%	37,297			39,187			-4.8	%
Interest expense on debt	1,857			1,857			0.0	%	5,570			5,582			-0.2	%
General corporate expenses	1,958			2,800			-30.1	%	6,950			7,547			-7.9	%
Total expenses	$	149,670		$	151,976		-1.5	%	$	447,243		$	441,083		1.4	%

Equity in earnings of unconsolidated investees	661			2,915			-77.3	%	11,041			12,204			-9.5	%

Earnings before income taxes	$	51,937		$	48,594		6.9	%	$	151,100		$	143,008		5.7	%
Income tax expense	16,029			15,340			4.5	%	47,409			45,060			5.2	%
Net earnings	$	35,908		$	33,254		8.0	%	$	103,691		$	97,948		5.9	%

Other comprehensive earnings (loss), net of tax	(16,136		)	(12,353		)	-30.6	%	(48,663		)	25,318			—
Comprehensive earnings	$	19,772		$	20,901		-5.4	%	$	55,028		$	123,266		-55.4	%

Operating earnings: (1)
Net earnings	$	35,908		$	33,254		8.0	%	$	103,691		$	97,948		5.9	%
Less: Realized investment gains, net of tax	4,898			3,711			32.0	%	16,655			14,716			13.2	%
Operating earnings	$	31,010		$	29,543		5.0	%	$	87,036		$	83,232		4.6	%

Return on Equity:
Net earnings (trailing four quarters)									16.1		%	15.0		%
Comprehensive earnings (trailing four quarters)									11.7		%	19.0		%

Per Share Data
Diluted:
Weighted average shares outstanding (in 000’s)	44,153			43,712					44,031			43,692

EPS from operations (1)	$	0.70		$	0.68		2.9	%	$	1.98		$	1.90		4.2	%
Realized gains, net of tax	0.11			0.08			37.5	%	0.37			0.34			8.8	%
Net earnings per share	$	0.81		$	0.76		6.6	%	$	2.35		$	2.24		4.9	%

Comprehensive earnings per share	$	0.45		$	0.48		-6.2	%	$	1.25		$	2.82		-55.7	%

Cash dividends per share	$	0.19		$	0.18		5.6	%	$	0.56		$	0.53		5.7	%

Net Cash Flow provided by Operations	$	50,246		$	47,366		6.1	%	$	121,367		$	85,894		41.3	%

(1) See discussion above of non-GAAP financial measures.

RLI CORP.

2015 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

	September 30,		December 31,
	2015		2014		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income	$	1,532,304	$	1,495,087	2.5	%
(amortized cost - $1,504,333 at 9/30/15)
(amortized cost - $1,448,204 at 12/31/14)
Equity securities	369,047		410,642		-10.1	%
(cost - $206,546 at 9/30/15)
(cost - $193,535 at 12/31/14)
Other invested assets	10,873		11,597		-6.2	%
Cash and cash equivalents	87,171		46,959		85.6	%
Total investments and cash	$	1,999,395	$	1,964,285	1.8	%

Premiums and reinsurance balances receivable	170,942		154,573		10.6	%
Ceded unearned premiums	52,161		53,961		-3.3	%
Reinsurance balances recoverable on unpaid losses	317,737		335,106		-5.2	%
Deferred policy acquisition costs	72,300		65,123		11.0	%
Property and equipment	45,038		42,549		5.8	%
Investment in unconsolidated investees	71,451		60,046		19.0	%
Goodwill and intangibles	72,026		72,695		-0.9	%
Other assets	28,339		27,204		4.2	%
Total assets	$	2,829,389	$	2,775,542	1.9	%

Unpaid losses and settlement expenses	$	1,140,733	$	1,121,040	1.8	%
Unearned premiums	432,278		401,412		7.7	%
Reinsurance balances payable	38,829		38,013		2.1	%
Funds held	54,237		51,481		5.4	%
Income taxes - deferred	60,583		82,285		-26.4	%
Bonds payable, long-term debt	149,658		149,625		0.0	%
Accrued expenses	47,609		63,148		-24.6	%
Other liabilities	22,311		23,476		-5.0	%
Total liabilities	$	1,946,238	$	1,930,480	0.8	%
Shareholders’ equity	883,151		845,062		4.5	%
Total liabilities & shareholders’ equity	$	2,829,389	$	2,775,542	1.9	%

OTHER DATA

Common shares outstanding (in 000’s)	43,384		43,103

Book value per share	$	20.36	$	19.61	3.8	%
Closing stock price per share	$	53.53	$	49.40	8.4	%
Cash dividends per share - ordinary (annualized)	$	0.75	$	0.71	5.6	%
Cash dividends per share - special	$	—	$	3.00	—

Statutory Surplus	$	879,625	$	849,297	3.6	%

RLI CORP.

2015 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
2015

Gross premiums written	$	128,804			$	52,697			$	32,840			$	214,341
Net premiums written	107,580				42,492				31,464				181,536
Net premiums earned	105,160				44,685				29,603				179,448
Net loss & settlement expenses	54,274		51.6	%	17,861		40.0	%	916		3.1	%	73,051		40.7	%
Net operating expenses	37,235		35.4	%	17,608		39.4	%	17,961		60.7	%	72,804		40.6	%
Underwriting income	$	13,651	87.0	%	$	9,216	79.4	%	$	10,726	63.8	%	$	33,593	81.3	%

2014

Gross premiums written	$	119,789			$	56,611			$	31,422			$	207,822
Net premiums written	98,210				44,737				29,965				172,912
Net premiums earned	96,181				54,143				27,423				177,747
Net loss & settlement expenses	47,828		49.7	%	27,948		51.6	%	243		0.9	%	76,019		42.8	%
Net operating expenses	34,567		35.9	%	18,697		34.5	%	18,036		65.8	%	71,300		40.1	%
Underwriting income	$	13,786	85.6	%	$	7,498	86.1	%	$	9,144	66.7	%	$	30,428	82.9	%

Nine Months Ended September 30,

			GAAP				GAAP				GAAP				GAAP
	Casualty		Ratios		Property		Ratios		Surety		Ratios		Total		Ratios
2015

Gross premiums written	$	393,596			$	165,635			$	93,776			$	653,007
Net premiums written	330,532				133,375				89,550				553,457
Net premiums earned	305,842				128,084				86,864				520,790
Net loss & settlement expenses	159,220		52.1	%	52,314		40.8	%	6,927		8.0	%	218,461		41.9	%
Net operating expenses	108,498		35.5	%	53,550		41.8	%	54,214		62.4	%	216,262		41.5	%
Underwriting income	$	38,124	87.6	%	$	22,220	82.6	%	$	25,723	70.4	%	$	86,067	83.4	%

2014

Gross premiums written	$	364,027			$	216,499			$	88,864			$	669,390
Net premiums written	299,234				160,162				83,635				543,031
Net premiums earned	281,518				146,252				79,713				507,483
Net loss & settlement expenses	145,310		51.6	%	71,618		49.0	%	3,452		4.3	%	220,380		43.4	%
Net operating expenses	99,877		35.5	%	55,165		37.7	%	52,532		65.9	%	207,574		40.9	%
Underwriting income	$	36,331	87.1	%	$	19,469	86.7	%	$	23,729	70.2	%	$	79,529	84.3	%

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