RLI Corp. (NYSE:RLI) – RLI Corp. reported third quarter 2021 net earnings of $29.2 million ($0.64 per share), compared to $42.4 million ($0.93 per share) for the third quarter of 2020. Operating earnings⁽¹⁾ for the third quarter of 2021 were $29.8 million ($0.65 per share), compared to $19.0 million ($0.42 per share) for the same period in 2020.

	Third Quarter				Year to Date
Earnings Per Diluted Share	2021		2020		2021		2020
Net earnings	$	0.64	$	0.93	$	4.03	$	1.62
Operating earnings ⁽¹⁾	$	0.65	$	0.42	$	2.61	$	1.84
(1) See discussion below: Non-GAAP and Performance Measures.

Highlights for the quarter included:

Underwriting income⁽¹⁾ of $13.7 million on a combined ratio⁽¹⁾ of 94.6.
18% increase in gross premiums written.
Favorable development in prior years' loss reserves, resulting in a $25.1 million net increase in underwriting income.
Losses from third quarter hurricanes, resulting in a $28.9 million net decrease in underwriting income.
Book value per share of $27.63, an increase of 13% (inclusive of dividends) from year-end 2020.

"Despite the impact of Hurricane Ida and other catastrophes that occurred during the quarter, we delivered strong underwriting results and a 95 combined ratio," said RLI Corp. Chairman & CEO Jonathan E. Michael. "We experienced growth in gross written premium across all three segments, reflecting favorable market conditions for most product lines. Although catastrophe activity impacted our bottom line results, these events reinforce our purpose and promise to be there for our customers in times of need. I'm proud of our team's ongoing efforts to deliver outstanding service and value to all stakeholders we serve."

Underwriting Income

RLI achieved $13.7 million of underwriting income in the third quarter of 2021 on a 94.6 combined ratio, compared to $1.2 million on a 99.5 combined ratio in 2020.

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

Underwriting Income (Loss)⁽¹⁾							Combined Ratio⁽¹⁾
(in millions)	2021			2020				2021		2020
Casualty	$	22.9		$	14.0		Casualty		85.9		90.2
Property		(16.5	)		(19.9	)	Property		127.2		144.0
Surety		7.3			7.1		Surety		75.3		74.8
Total	$	13.7		$	1.2		Total		94.6		99.5
(1) See discussion below: Non-GAAP and Performance Measures.

Other Income

Net investment income for the quarter increased 7.9% to $17.8 million, compared to the same period in 2020. The investment portfolio's total return was 0.1% for the quarter and 3.1% for the nine months ended September 30, 2021.

RLI's comprehensive earnings were $17.0 million for the quarter ($0.37 per share), compared to $51.9 million ($1.14 per share) for the same quarter in 2020. 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., a producer of premium sunglasses, was $5.4 million for the quarter. Equity in earnings of Prime Holdings Insurance Services, Inc., a specialty insurance company, was $4.4 million. Comparatively, for the third quarter of 2020, equity in earnings of unconsolidated investees from Maui Jim and Prime was $6.2 million and $3.3 million, respectively.

Dividends Paid in the Third Quarter of 2021

On September 20, 2021, the company paid a regular quarterly dividend of $0.25 per share, the same amount as the prior quarter. RLI's cumulative dividends total more than $500 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 2021 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 20, 2021, RLI was named as one of the insurance industry's top performing companies by Ward benchmarking, a business unit of Aon, for the 31^st 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.

At 10 a.m. central daylight time (CDT) tomorrow, October 21, 2021, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion at https://edge.media-server.com/mmc/p/fyykgewf.

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 25 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 September 30,						Nine Months Ended September 30,
(Dollars in millions, except per share amounts)			2021			2020			2021			2020
Favorable development in casualty prior years' reserves			$	26.4		$	22.0		$	83.8		$	49.5
Favorable development in property prior years' reserves			$	0.5		$	4.0		$	8.4		$	9.5
Favorable development in surety prior years' reserves			$	2.5		$	3.2		$	2.6		$	11.1

Net incurred losses related to:
	2021 storms		$	(1.0	)	$	-		$	(25.0	)	$	-
	3Q 2021 hurricanes		$	(34.0	)	$	-		$	(34.0	)	$	-
	2020 and prior events⁽⁴⁾		$	0.1		$	(38.1	)	$	2.1		$	(55.1	)

			Operating Earnings Per Share
			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021			2020
Operating Earnings Per Share⁽¹⁾			$	0.65		$	0.42		$	2.61		$	1.84

Specific items included in operating earnings per share:^{(2) (3)}
	Net favorable development in casualty prior years' reserves		$	0.40		$	0.34		$	1.30		$	0.78
	Net favorable development in property prior years' reserves		$	-		$	0.01		$	0.09		$	0.05
	Net favorable development in surety prior years' reserves		$	0.03		$	0.05		$	0.01		$	0.16

	Net incurred losses related to:
		2021 storms	$	(0.01	)	$	-		$	(0.37	)	$	-
		3Q 2021 hurricanes	$	(0.50	)	$	-		$	(0.50	)	$	-
		2020 and prior events⁽⁴⁾	$	-		$	(0.60	)	$	0.03		$	(0.85	)

(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.

RLI CORP
2021 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	Three Months Ended September 30,										Nine Months Ended September 30,
SUMMARIZED INCOME STATEMENT DATA:		2021			2020		% Change					2021				2020			% Change
Net premiums earned	$	253,389		$	216,630			17.0		%	$	722,984			$	640,946				12.8		%
Net investment income		17,844			16,543			7.9		%		50,929				51,238				(0.6	)	%
Net realized gains		1,829			1,512			21.0		%		52,442				14,555			NM
Net unrealized gains (losses) on equity securities		(2,592	)		28,126		NM					29,526				(27,564	)		NM
Consolidated revenue	$	270,470		$	262,811			2.9		%	$	855,881			$	679,175				26.0		%
Loss and settlement expenses		143,656			127,596			12.6		%		355,574				339,819				4.6		%
Policy acquisition costs		80,449			71,032			13.3		%		232,674				213,436				9.0		%
Insurance operating expenses		15,560			16,850			(7.7	)	%		54,504				45,137				20.8		%
Interest expense on debt		1,906			1,901			0.3		%		5,711				5,701				0.2		%
General corporate expenses		2,505			2,668			(6.1	)	%		9,533				6,417				48.6		%
Total expenses	$	244,076		$	220,047			10.9		%	$	657,996			$	610,510				7.8		%
Equity in earnings of unconsolidated investees		9,043			8,745			3.4		%		29,407				18,359				60.2		%
Earnings before income taxes	$	35,437		$	51,509			(31.2	)	%	$	227,292			$	87,024				161.2		%
Income tax expense		6,194			9,122			(32.1	)	%		43,222				13,738			NM
Net earnings	$	29,243		$	42,387			(31.0	)	%	$	184,070			$	73,286				151.2		%

Other comprehensive earnings (loss), net of tax		(12,240	)		9,550		NM					(41,810	)			50,090			NM
Comprehensive earnings	$	17,003		$	51,937			(67.3	)	%	$	142,260			$	123,376				15.3		%

Operating earnings⁽¹⁾:
Net earnings	$	29,243		$	42,387			(31.0	)	%	$	184,070			$	73,286				151.2		%
Less:
Realized gains		(1,829	)		(1,512	)		21.0		%		(52,442	)			(14,555	)		NM
Income tax on realized gains		385			318			21.1		%		11,013				3,057			NM
Unrealized (gains) losses on equity securities		2,592			(28,126	)	NM					(29,526	)			27,564			NM
Income tax on unrealized gains (losses) on equity securities		(544	)		5,905		NM					6,200				(5,789	)		NM
Operating earnings	$	29,847		$	18,972			57.3		%	$	119,315			$	83,563				42.8		%

Return on Equity:
Net earnings (trailing four quarters)											22.8			%		12.5		%
Comprehensive earnings (trailing four quarters)											19.7			%		16.9		%

Per Share Data:
Diluted:
Weighted average shares outstanding (in 000's)		45,689			45,426							45,714				45,339

Net earnings per share	$	0.64		$	0.93			(31.2	)	%	$	4.03			$	1.62				148.8		%
Less:
Realized gains		(0.04	)		(0.03	)		33.3		%		(1.15	)			(0.32	)		NM
Income tax on realized gains		0.01			0.01			0.0		%		0.24				0.07			NM
Unrealized (gains) losses on equity securities		0.05			(0.62	)		(108.1	)	%		(0.65	)			0.60			NM
Income tax on unrealized gains (losses) on equity securities		(0.01	)		0.13			(107.7	)	%		0.14				(0.13	)		NM
EPS from operations⁽¹⁾	$	0.65		$	0.42			54.8		%	$	2.61			$	1.84				41.8		%

Comprehensive earnings per share	$	0.37		$	1.14			(67.5	)	%	$	3.11			$	2.72				14.3		%

Cash dividends per share - ordinary	$	0.25		$	0.24			4.2		%	$	0.74			$	0.71				4.2		%

Net Cash Flow provided by Operations	$	115,932		$	79,471			45.9		%	$	280,441			$	163,244				71.8		%

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

NM = Not Meaningful

RLI CORP
2021 FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)

	September 30,		December 31,
		2021		2020	% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income, at fair value	$	2,394,669	$	2,196,626		9.0		%
(amortized cost - $2,310,314 at 9/30/21)
(amortized cost - $2,061,467 at 12/31/20)
Equity securities, at fair value		565,238		524,006		7.9		%
(cost - $311,392 at 9/30/21)
(cost - $293,190 at 12/31/20)
Other invested assets		52,480		54,232		(3.2	)	%
Cash and cash equivalents		89,618		62,217		44.0		%
Total investments and cash	$	3,102,005	$	2,837,081		9.3		%

Premiums and reinsurance balances receivable		177,162		174,628		1.5		%
Ceded unearned premiums		127,765		113,488		12.6		%
Reinsurance balances recoverable on unpaid losses		602,154		443,729		35.7		%
Deferred policy acquisition costs		104,309		88,425		18.0		%
Property and equipment		50,860		51,406		(1.1	)	%
Investment in unconsolidated investees		158,721		128,382		23.6		%
Goodwill and intangibles		53,562		53,719		(0.3	)	%
Other assets		56,128		47,627		17.8		%
Total assets	$	4,432,666	$	3,938,485		12.5		%

Unpaid losses and settlement expenses	$	2,033,517	$	1,750,049		16.2		%
Unearned premiums		673,809		586,386		14.9		%
Reinsurance balances payable		38,093		42,265		(9.9	)	%
Funds held		89,288		81,747		9.2		%
Income taxes - deferred		78,308		80,235		(2.4	)	%
Bonds payable, long-term debt		149,629		149,489		0.1		%
Accrued expenses		74,155		75,925		(2.3	)	%
Other liabilities		45,611		36,411		25.3		%
Total liabilities	$	3,182,410	$	2,802,507		13.6		%
Shareholders' equity		1,250,256		1,135,978		10.1		%
Total liabilities & shareholders' equity	$	4,432,666	$	3,938,485		12.5		%

OTHER DATA:
Common shares outstanding (in 000's)		45,245		45,143

Book value per share	$	27.63	$	25.16		9.8		%
Closing stock price per share	$	100.27	$	104.15		(3.7	)	%

Statutory surplus	$	1,220,341	$	1,121,592		8.8		%

RLI CORP
2021 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
	2021

Gross premiums written		$	232,796				$	90,148					$	33,302				$	356,246
Net premiums written			178,586					68,444						31,623					278,653
Net premiums earned			162,852					60,886						29,651					253,389
Net loss & settlement expenses			84,139		51.7	%		55,695			91.5	%		3,822		12.9	%		143,656		56.7	%
Net operating expenses			55,764		34.2	%		21,749			35.7	%		18,496		62.4	%		96,009		37.9	%
Underwriting income (loss)⁽¹⁾		$	22,949		85.9	%	$	(16,558	)		127.2	%	$	7,333		75.3	%	$	13,724		94.6	%

2020

Gross premiums written		$	204,008				$	68,535					$	30,320				$	302,863
Net premiums written			157,330					48,895						28,823					235,048
Net premiums earned			143,002					45,380						28,248					216,630
Net loss & settlement expenses			78,076		54.6	%		46,874			103.3	%		2,646		9.4	%		127,596		58.9	%
Net operating expenses			50,933		35.6	%		18,457			40.7	%		18,492		65.4	%		87,882		40.6	%
Underwriting income (loss)⁽¹⁾		$	13,993		90.2	%	$	(19,951	)		144.0	%	$	7,110		74.8	%	$	1,152		99.5	%

Nine Months Ended September 30,
				GAAP						GAAP					GAAP					GAAP
		Casualty		Ratios			Property			Ratios			Surety		Ratios			Total		Ratios
2021

Gross premiums written		$	658,021				$	256,596					$	95,508				$	1,010,125
Net premiums written			510,913					194,373						90,842					796,128
Net premiums earned			467,817					168,393						86,774					722,984
Net loss & settlement expenses			228,807		48.9	%		111,643			66.3	%		15,124		17.4	%		355,574		49.2	%
Net operating expenses			164,756		35.2	%		65,434			38.9	%		56,988		65.7	%		287,178		39.7	%
Underwriting income (loss)⁽¹⁾		$	74,254		84.1	%	$	(8,684	)		105.2	%	$	14,662		83.1	%	$	80,232		88.9	%

2020

Gross premiums written		$	553,291				$	194,542					$	88,015				$	835,848
Net premiums written			436,621					141,885						83,735					662,241
Net premiums earned			421,637					135,115						84,194					640,946
Net loss & settlement expenses			249,992		59.3	%		84,395			62.5	%		5,432		6.5	%		339,819		53.0	%
Net operating expenses			149,242		35.4	%		54,596			40.4	%		54,735		65.0	%		258,573		40.4	%
Underwriting income (loss)⁽¹⁾		$	22,403		94.7	%	$	(3,876	)		102.9	%	$	24,027		71.5	%	$	42,554		93.4	%

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

Category: Earnings Release

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RLI Reports Third Quarter 2021 Results