RLI CORP [RLI] Filings

10-Q 1 rli-10q_20210930.htm 10-Q rli-10q_20210930.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-09463

RLI Corp.

(Exact name of registrant as specified in its charter)


Delaware		37-0889946
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

9025 North Lindbergh Drive, Peoria, IL		61615
(Address of principal executive offices)		(Zip Code)

(309) 692-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock $0.01 par value	RLI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 14, 2021, the number of shares outstanding of the registrant’s Common Stock was 45,244,505.

Table of Contents

			Page

Part I - Financial Information			3

	Item 1.	Financial Statements	3

		Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three and Nine-Month Periods Ended September 30, 2021 and 2020 (unaudited)	3

		Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine-Month Periods Ended September 30, 2021 and 2020 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2021 and 2020 (unaudited)	6

		Notes to Unaudited Condensed Consolidated Interim Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36

	Item 4.	Controls and Procedures	36

Part II - Other Information			37

	Item 1.	Legal Proceedings	37

	Item 1a.	Risk Factors	37

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 3.	Defaults upon Senior Securities	37

	Item 4.	Mine Safety Disclosures	37

	Item 5.	Other Information	37

	Item 6.	Exhibits	37

Signatures			38

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(Unaudited)

	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
(in thousands, except per share data)	2021			2020		2021			2020
Net premiums earned	$	253,389		$	216,630	$	722,984		$	640,946
Net investment income		17,844			16,543		50,929			51,238
Net realized gains		1,829			1,512		52,442			14,555
Net unrealized gains (losses) on equity securities		(2,592	)		28,126		29,526			(27,564	)
Consolidated revenue	$	270,470		$	262,811	$	855,881		$	679,175
Losses and settlement expenses		143,656			127,596		355,574			339,819
Policy acquisition costs		80,449			71,032		232,674			213,436
Insurance operating expenses		15,560			16,850		54,504			45,137
Interest expense on debt		1,906			1,901		5,711			5,701
General corporate expenses		2,505			2,668		9,533			6,417
Total expenses	$	244,076		$	220,047	$	657,996		$	610,510
Equity in earnings of unconsolidated investees		9,043			8,745		29,407			18,359
Earnings before income taxes	$	35,437		$	51,509	$	227,292		$	87,024
Income tax expense		6,194			9,122		43,222			13,738
Net earnings	$	29,243		$	42,387	$	184,070		$	73,286

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

Basic net earnings per share	$	0.65		$	0.94	$	4.07		$	1.63
Diluted net earnings per share	$	0.64		$	0.93	$	4.03		$	1.62

Weighted average number of common shares outstanding:
Basic		45,243			45,014		45,216			44,962
Diluted		45,689			45,426		45,714			45,339

See accompanying notes to the unaudited condensed consolidated interim financial statements.

Table of Contents

RLI Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30,			December 31,
(in thousands, except share and per share data)	2021			2020
ASSETS
Investments and cash:
Fixed income:
Available-for-sale, at fair value	$	2,394,669		$	2,196,626
(amortized cost of $2,310,314 and allowance for credit losses of $226 at 9/30/21)
(amortized cost of $2,061,467 and allowance for credit losses of $397 at 12/31/20)
Equity securities, at fair value (cost - $311,392 at 9/30/21 and $293,190 at 12/31/20)		565,238			524,006
Other invested assets		52,480			54,232
Cash		89,618			62,217
Total investments and cash	$	3,102,005		$	2,837,081
Accrued investment income		17,143			16,126
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $18,860 at 9/30/21 and $17,658 at 12/31/20		177,162			174,628
Ceded unearned premium		127,765			113,488
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $10,067 at 9/30/21 and $8,634 at 12/31/20		602,154			443,729
Deferred policy acquisition costs		104,309			88,425
Property and equipment, at cost, net of accumulated depreciation of $73,746 at 9/30/21 and $68,682 at 12/31/20		50,860			51,406
Investment in unconsolidated investees		158,721			128,382
Goodwill and intangibles		53,562			53,719
Other assets		38,985			31,501
TOTAL ASSETS	$	4,432,666		$	3,938,485

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Unpaid losses and settlement expenses	$	2,033,517		$	1,750,049
Unearned premiums		673,809			586,386
Reinsurance balances payable		38,093			42,265
Funds held		89,288			81,747
Income taxes-deferred		78,308			80,235
Bonds payable, long-term debt		149,629			149,489
Accrued expenses		74,155			75,925
Other liabilities		45,611			36,411
TOTAL LIABILITIES	$	3,182,410		$	2,802,507

Shareholders’ Equity
Common stock ($0.01 par value)
(Shares authorized - 200,000,000 at 9/30/21 and 12/31/20)
(68,174,719 shares issued, 45,244,505 shares outstanding at 9/30/21)
(68,072,794 shares issued, 45,142,580 shares outstanding at 12/31/20)	$	682		$	681
Paid-in capital		340,868			335,365
Accumulated other comprehensive earnings		66,904			108,714
Retained earnings		1,234,801			1,084,217
Deferred compensation		8,330			8,292
Less: Treasury shares, at cost (22,930,214 shares at 9/30/21 and 12/31/20)		(401,329	)		(401,291	)
TOTAL SHAREHOLDERS’ EQUITY	$	1,250,256		$	1,135,978
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,432,666		$	3,938,485

See accompanying notes to the unaudited condensed consolidated interim financial statements.

Table of Contents

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

										Accumulated
										Other
			Total							Comprehensive									Treasury
	Common		Shareholders’			Common		Paid-in		Earnings			Retained			Deferred			Shares
(in thousands, except share and per share data)	Shares		Equity			Stock		Capital		(Loss)			Earnings			Compensation			at Cost
Balance, January 1, 2020		44,869,015	$	995,388		$	678	$	321,190	$	52,473		$	1,014,046		$	7,980		$	(400,979	)
Cumulative-effect adjustment from ASU 2016-13		—		1,095			—		—		22			1,073			—			—
Net earnings		—		(61,267	)		—		—		—			(61,267	)		—			—
Other comprehensive earnings (loss), net of tax		—		(13,031	)		—		—		(13,031	)		—			—			—
Deferred compensation		—		—			—		—		—			—			(1,010	)		1,010
Share-based compensation		53,641		3,863			1		3,862		—			—			—			—
Dividends and dividend equivalents ($0.23 per share)		—		(10,343	)		—		—		—			(10,343	)		—			—
Balance, March 31, 2020		44,922,656	$	915,705		$	679	$	325,052	$	39,464		$	943,509		$	6,970		$	(399,969	)
Net earnings		—		92,166			—		—		—			92,166			—			—
Other comprehensive earnings (loss), net of tax		—		53,571			—		—		53,571			—			—			—
Deferred compensation		—		—			—		—		—			—			630			(630	)
Share-based compensation		29,946		810			—		810		—			—			—			—
Dividends and dividend equivalents ($0.24 per share)		—		(10,794	)		—		—		—			(10,794	)		—			—
Balance, June 30, 2020		44,952,602	$	1,051,458		$	679	$	325,862	$	93,035		$	1,024,881		$	7,600		$	(400,599	)
Net earnings		—		42,387			—		—		—			42,387			—			—
Other comprehensive earnings (loss), net of tax		—		9,550			—		—		9,550			—			—			—
Deferred compensation		—		—			—		—		—			—			103			(103	)
Share-based compensation		102,562		6,768			1		6,767		—			—			—			—
Dividends and dividend equivalents ($0.24 per share)		—		(10,823	)		—		—		—			(10,823	)		—			—
Balance, September 30, 2020		45,055,164	$	1,099,340		$	680	$	332,629	$	102,585		$	1,056,445		$	7,703		$	(400,702	)

										Accumulated
										Other

RLI CORP [RLI] Filings
10-Q	[2021-10-22]
10-Q	[2021-07-23]
10-Q	[2021-04-23]
10-K	[2021-02-19]
10-Q	[2020-10-23]
10-Q	[2020-07-24]
10-Q	[2020-04-28]
10-K	[2020-02-21]
10-Q	[2019-10-24]
10-Q	[2019-07-25]
10-Q	[2019-04-24]
10-K	[2019-02-22]
10-Q	[2018-10-24]
10-Q	[2018-07-20]
10-Q	[2018-04-25]
10-K	[2018-02-23]
10-Q	[2017-10-25]
10-Q	[2017-07-26]
10-Q	[2017-04-27]
10-K	[2017-02-24]
10-Q	[2016-10-24]
10-Q	[2016-07-25]
10-Q	[2016-04-25]
10-K	[2016-02-26]
10-Q	[2015-10-23]
10-Q	[2015-07-24]
10-Q	[2015-04-24]
10-K	[2015-02-26]
10-Q	[2014-10-27]
10-Q	[2014-07-28]
10-Q	[2014-04-28]
10-K	[2014-02-27]
10-Q	[2013-10-28]
10-Q	[2013-07-29]
10-Q	[2013-04-29]
10-K	[2013-02-27]
10-Q	[2012-10-29]
10-Q	[2012-07-30]
10-Q	[2012-04-30]
10-K	[2012-02-28]