RLI Q2 Earnings & Revenues Top Estimates on Solid Underwriting – July 21, 2022


RLI Corp.. (RLI Free Report) reported second-quarter 2022 operating income of $1.49 per share, beating Zacks’ consensus estimate by 6.1%. Net income improved by 36.7% compared to the prior year quarter.

The quarterly results benefited from a solid performance in all its segments and from a favorable evolution of the reserves, which supported the technical results, and from an increase in the net investment income.

RLI Corp. Price, Consensus and EPS Surprise

Operational performance

Operating revenue for the reported quarter was $301.3 million, up 16.9% year-on-year, driven by net premiums earned up 17.3% and net investment income up 10.5%. The top line beat the Zacks consensus estimate of $276 million by 0.9%.

Gross premiums written increased 17% year-over-year to $418.8 million. This increase is explained by the good performance of the Property and Casualty (+5.1%), Surety (+12.6%) and Property and Casualty (+47.8%) branches.

Net investment income increased 10.5% year over year to $18.5 million.

Total expenses increased 10.1% year-over-year to $231.3 million, primarily due to higher policy acquisition costs, loss and adjustment expenses and interest charges on debt.

Underwriting revenue of $56 million increased 53%, primarily due to strong performance in the property and surety businesses.

The combined ratio improved 460 basis points (bps) year over year to 80.2.

Financial update

RLI ended the second quarter of 2022 with total investments and cash of $2.9 billion, down 7.3% from the end of 2021.

Book value was $23.02 per share as of June 30, 2022, down 13% from the figure as of December 31, 2021.

Long-term debt was $199.8 million, stable since the end of 2021.

Free cash flow from operations was $131.6 million, up 26.3% year-on-year.

The statutory surplus increased by 0.7% from the end of 2021 to reach $1.12 billion as of June 30, 2022.

Return on equity was 14.4%, reflecting a contraction of 1,030 basis points year-on-year.

Dividend Update

RLI paid a quarterly dividend of 26 cents in the second quarter, an increase of 4%. RLI’s cumulative dividends total over $510 million paid out over the past five years.

Company Update

RLI has agreed to sell its minority stake in Maui Jim, Inc. and estimates the net proceeds at approximately $500 million. Final proceeds should be determined at closing, based on purchase price adjustments for working capital and other items. The sale is expected to be finalized in the second half of 2022

Zacks Rank

RLI currently wears a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of another P&C insurer

The progressive societyit is (RPG Free Report) earnings per share of 95 cents were in line with the Zacks consensus estimate. Net income fell 37.1% year-over-year.

Net premiums earned from Progressive increased 13% to $12.1 billion. The combined ratio improved by 90 basis points compared to the level of the quarter of the previous year to 95.6.

Upcoming releases

Chubb Limited (BC Free Report) will release second quarter 2022 results on July 26. Zacks consensus estimate for the second quarter is pegged at $3.59, indicating a decline of 0.8% from the figure reported a year ago.

Chubb has beaten estimates for the past four quarters.

Axis Capital Holdings Limited (AXS Free Report) will release second quarter 2022 results on July 27. Zacks consensus estimate for the second quarter is pegged at $1.49, indicating a 25.5% decline from the figure reported a year ago.

Axis Capital has exceeded estimates over the past four quarters.


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