News Column

RLI Posts 2013 Fourth Quarter and Year-End Results

January 27, 2014

RLI Corp. reported fourth quarter 2013 operating earnings of $31.5 million ( $0.72 per share), compared to $19.2 million ( $0.44 per share) for the fourth quarter of 2012. For the year ended December 31, 2013 , operating earnings were $111.9 million ( $2.57 per share) compared to $86.9 million ( $2.01 per share) for the 2012 fiscal year. On January 15 , RLI executed a two-for-one stock split of common stock. All share and per share data in this release reflect the stock split. In a release on January 22 , the Company noted that highlights for the quarter included: -5 percent growth in gross premiums written and 15 percent growth in net premiums written. -Underwriting income of $29.6 million , resulting in a combined ratio of 82.4. - $15.2 million net increase in underwriting income resulting from favorable development in prior years' loss reserves. -Special dividend of $1.50 per share, representing $64.5 million returned to shareholders. - $13.2 million dividend from Maui Jim, Inc. Highlights for the year included: -7 percent growth in gross premiums written and 12 percent growth in net premiums written. -Underwriting income of $106.8 million , resulting in a combined ratio of 83.1. - $70.0 million net increase in underwriting income resulting from favorable development in prior years' loss reserves. -18th consecutive year of a combined ratio below 100. -Net operating cash flow of $135.0 million . -Book value per share of $19.29 at year end, an increase of 15 percent over 2012, inclusive of dividends. "I'm pleased with the strong results we delivered this quarter," said RLI Corp. Chairman & CEO Jonathan E. Michael . "Our top line growth continued and we achieved an impressive 82.4 combined ratio, demonstrating the success of our disciplined underwriting approach and prudent management of our business." "RLI also posted solid results for the year due to the efforts of our talented underwriters and associates," said Michael. "2013 marked our 9th consecutive year of achieving a combined ratio below 90 and 38th year of increasing regular dividends. While we are encouraged by our success over the past year, we will remain focused on underwriting for a profit and making strategic investments in our business so we can continue delivering value to our customers and shareholders." RLI achieved $29.6 million of underwriting income in the fourth quarter of 2013 on an 82.4 combined ratio, compared to $8.5 million of underwriting income on a 94.3 combined ratio in the same quarter for 2012. For the year, RLI achieved $106.8 million of underwriting income on an 83.1 combined ratio, compared to $63.6 million of underwriting income on an 89.0 combined ratio in 2012. Results for 2013 were driven by a benign catastrophe season, improved current year results in our casualty segment, as well as increased favorable development in prior years' loss reserves. RLI's net investment income for the quarter declined 7.3 percent to $13.4 million , compared to the same period in 2012. For the year ended December 31, 2013 , investment income was $52.8 million versus $58.8 million for the 2012 fiscal year. Despite an increase in market yields during the year, reinvestment rates remained below the portfolio's average yield, contributing to a year-over-year decline in investment income. The investment portfolio's total return was 1.9 percent for the quarter. The bond portfolio returned 0.3 percent in the quarter, and the equity portfolio's return was 8.2 percent. For the year ended December 31, 2013 , the investment portfolio's total return was 4.0 percent with the bond portfolio returning -1.6 percent and equities returning 27.4 percent. The decline in the bond portfolio was due to an increase in interest rates. Earnings which include after-tax unrealized gains/losses from the investment portfolio, were $44.6 million for the quarter ( $1.02 per share) compared to $13.2 million ( $0.31 per share) for the same quarter in 2012. Full-year earnings were $119.1 million ( $2.74 per share), compared to $129.2 million ( $2.99 per share) in 2012. During the quarter, equity in earnings of unconsolidated investee was $0.2 million compared to a loss of $0.1 million from the same period last year, both of which reflect seasonal results. These results are related to our 40 percent ownership in Maui Jim, Inc. , a producer of premium sunglasses. For the year ended December 31, 2013 , equity in earnings of unconsolidated investee was $10.9 million , a 23 percent increase compared to 2012. During the quarter, RLI received a $13.2 million dividend from Maui Jim, Inc. , which resulted in a tax benefit on dividends received from affiliates of $3.7 million ( $0.08 per share). On December 20, 2013 , RLI paid a special cash dividend of $1.50 per share and a regular quarterly dividend of $0.17 per share, totaling $71.8 million and resulting in a tax benefit of $1.9 million ( $0.04 per share) as dividends to the ESOP are fully deductible. RLI has paid dividends for 150 consecutive quarters and increased regular dividends in each of the last 38 years. Over the last 10 years, the company's regular quarterly dividend has grown an average of 11.9 percent per year. On October 2, 2013 , RLI issued $150,000,000 of senior unsecured notes, bearing a coupon rate of 4.875 percent and maturity date of September 15, 2023 . On December 12, 2013 , RLI used a portion of the proceeds received from this offering to repay its $100,000,000 of senior notes outstanding. RLI, a specialty insurance company, offers a diversified portfolio of property and casualty coverages and surety bonds serving niche or underserved markets. More information: rlicorp.com ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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