RLI Posts Lower Q3 Underwriting Income, but Net Income Rises over 6%

RLI Corp. posted a 6.2 percent increase in net earnings for 2012's third quarter compared to the same period a year ago despite reporting lower underwriting income and a reduced benefit from favorable prior-year reserves.

The Peoria, Ill. based specialty insurer says net earnings in the quarter were $25.5 million, up from $24 million in 2011's third quarter. While net investment income declined by 10.9 percent, the company saw $5.5 million in net realized investment gains for the period, compared to net realized losses of $177,000 a year ago. That, combined with a 2.3 increase in net-premiums earned, helped to push RLI's consolidated revenue up by 4.5 percent relative to 2011's third quarter.

While the company saw underwriting income for its casualty segment decline to $10.8 million in the quarter, compared to $22.2 million last year, RLI reduced underwriting losses in its property segment for the period to $300,000 from $1.8 million a year ago. Underwriting income for its surety segment was up to $8 million for the quarter compared to $1.1 million last year. The three segments together produced underwriting income of $18.5 million in 2012's third quarter, down from $21.5 million for the same period last year.

The combined ratio for the property segment improved to 100.6 in the quarter, compared to 103 a year ago. For surety, the combined ratio dropped to 70.3 compared to 96. But for casualty, the combined ratio jumped to 84.2 compared to 63.2 in 2011's third quarter. In total, RLI posted a 2012 third-quarter combined ratio of 87.7, compared to 85.3 in 2011's third quarter.

RLI says its results include $18.1 million in favorable loss-reserve development for prior years, down from $28 million a year ago.

The company says  it suffered $4.4 million in third-quarter losses from Hurricane Isaac, compared to $5.9 million in 2011 third-quarter losses from Hurricane Irene. 

RLI Chairman and CEO Jonathan E. Michael says in a statement, “We commend our talented underwriters, whose contributions once again created an excellent result. We remain focused on delivering superior products and service to our customers and continuing our outstanding financial track record.”

He adds, “I'm proud of our performance thus far this year. Book value has grown more than $100 million and book value per share is up 12.5 percent. This growth can be attributed to a combination of strong underwriting and investment results. RLI is well positioned to capitalize on improving market conditions.”

For the first nine months of the year, RLI reports net earnings of $78.2 million, down 19.1 percent from $96.7 million in the first nine months of 2011. While the company has seen a 7.5 percent increase in consolidated revenues for the year through September, it has also endured a 20.4 percent increase in total expenses compared to the same period last year.