RLI Corporation, a property/casualty underwriter based in Illinois, released its first quarter earnings of $7.1 million, compared with $6.5 million from the same quarter in 2000. Included in the result are net operating earnings of 6.2 million verses the $6.6 million result from the same period last year.
The small decline in the first quarter operating earnings was due to the company’s loss experience from the Seattle earthquake, which totaled just under $1.0 million.
For the quarter, RLI reported pretax underwriting profits of $2.1 million on a 96.7 net GAAP combined ratio, compared to $3.7 million on a 93.0 combined ratio last year. Although the quarter’s combined ratio was up slightly from one year ago, the company continues to generate profitable business. The surety segment reported a five percent improvement in profitability, due to a volume related expense savings. The casualty segment’s performance remained essentially unchanged from last year.
Despite earthquake losses, property segment results were profitable. RLI Corp’s President Jonathan E. Michael said that customers have reported minimal losses as a result of the Seattle earthquake. Michael stated that RLI’s estimated liability for the event was just under $1.0 million. He also said that RLI surety and casualty segments continue to perform well, consistent with expectations and underwriters reported more opportunities for new business and select those with the greatest potential for profitability.
Gross written premiums for the 2001 quarter increased 17 percent over the same period in 2000, reaching the $120.1 million level. The casualty segment posted a 34 percent increase in gross writings, reflecting the improved pricing environment in this segment. The surety and property segments showed a 9 percent increase and a 4 percent decrease, respectively, for the period. Overall, net written premiums increased by 15 percent.
Investment income continued to grow, due to an increase in invested assets relating to RLI’s continuing premium growth and profitability. Strong operating cash flows over the past year helped quarterly pretax investment income rise seven percent, to $7.5 million. Invested assest were down four percent from year-end, due to swings in the investment markets and a reduction in short-term debt of almost $13 million during the quarter.
Comprehensive earnings, which include after-tax unrealized gains from the investment portfolio, were subject to the quarter’s volatility in the equity markets. Although RLI’s equity portfolio return was -6.8 percent for the quarter, it significantly outperformed the S&P 500 index, which was down almost 12 percent for the same period. The portfolio’s net unrealized loss of $14.3 million, combined with net earnings, produced a comprehensive loss for the quarter of $7.1 million or .71 cents per share.
Over time, the portfolio’s results continue to be positive, with an average annual total return of 16 percent since its inception in 1982 and 12 percent over the past five-plus years. As a result, cumulative comprehensive earnings have outpaced net earnings by 39 percent over the same five-year period, resulting in added growth in RLI shareholder value.
Topics Profit Loss
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