RLI CORP [RLI] Filings

10-Q 1 rli-10q_20220630.htm 10-Q rli-10q_20220630.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 June 30, 2022

☐	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 July 14, 2022, the number of shares outstanding of the registrant’s Common Stock was 45,368,804.

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 Six-Month Periods Ended June 30, 2022 and 2021 (unaudited)	3

		Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)	4

		Condensed Consolidated Statements of Shareholders’ Equity for the Three and Six-Month Periods Ended June 30, 2022 and 2021 (unaudited)	5

		Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended June 30, 2022 and 2021 (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	22

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34

	Item 4.	Controls and Procedures	34

Part II - Other Information			35

	Item 1.	Legal Proceedings	35

	Item 1a.	Risk Factors	35

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

	Item 3.	Defaults upon Senior Securities	35

	Item 4.	Mine Safety Disclosures	35

	Item 5.	Other Information	35

	Item 6.	Exhibits	35

Signatures			36

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 Six Months
	Ended June 30,					Ended June 30,
(in thousands, except per share data)	2022			2021		2022			2021
Net premiums earned	$	282,810		$	241,000	$	551,962		$	469,595
Net investment income		18,472			16,661		36,355			33,085
Net realized gains		12,804			36,463		18,392			50,613
Net unrealized gains (losses) on equity securities		(100,994	)		3,956		(128,804	)		32,118
Consolidated revenue	$	213,092		$	298,080	$	477,905		$	585,411
Losses and settlement expenses		117,914			107,026		223,438			211,918
Policy acquisition costs		89,615			77,235		174,902			152,225
Insurance operating expenses		19,325			20,148		38,188			38,944
Interest expense on debt		2,011			1,904		4,021			3,805
General corporate expenses		2,435			3,686		5,798			7,028
Total expenses	$	231,300		$	209,999	$	446,347		$	413,920
Equity in earnings of unconsolidated investees		11,654			13,940		20,413			20,364
Earnings (loss) before income taxes	$	(6,554	)	$	102,021	$	51,971		$	191,855
Income tax expense (benefit)		(4,315	)		20,206		6,287			37,028
Net earnings (loss)	$	(2,239	)	$	81,815	$	45,684		$	154,827

Other comprehensive earnings (loss), net of tax		(97,563	)		15,177		(213,144	)		(29,570	)
Comprehensive earnings (loss)	$	(99,802	)	$	96,992	$	(167,460	)	$	125,257

Basic net earnings (loss) per share	$	(0.05	)	$	1.81	$	1.01		$	3.43
Diluted net earnings (loss) per share	$	(0.05	)	$	1.79	$	1.00		$	3.39

Weighted average number of common shares outstanding:
Basic		45,354			45,226		45,330			45,202
Diluted		45,354			45,715		45,748			45,703

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

Table of Contents

RLI Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30,			December 31,
(in thousands, except share and per share data)	2022			2021
ASSETS
Investments and cash:
Fixed income:
Available-for-sale, at fair value	$	2,280,909		$	2,409,887
(amortized cost of $2,480,480 and allowance for credit losses of $292 at 6/30/22)
(amortized cost of $2,346,267 and allowance for credit losses of $441 at 12/31/21)
Equity securities, at fair value (cost - $327,246 at 6/30/22 and $324,501 at 12/31/21)		487,995			613,776
Other invested assets		51,018			50,501
Cash		113,044			88,804
Total investments and cash	$	2,932,966		$	3,162,968
Accrued investment income		18,465			17,505
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $18,193 at 6/30/22 and $18,067 at 12/31/21		191,391			167,279
Ceded unearned premium		132,417			130,916
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $10,949 at 6/30/22 and $11,188 at 12/31/21		666,730			608,086
Deferred policy acquisition costs		123,055			103,553
Property and equipment, at cost, net of accumulated depreciation of $71,680 at 6/30/22 and $75,236 at 12/31/21		50,955			52,161
Investment in unconsolidated investees		187,310			171,311
Goodwill and intangibles		53,562			53,562
Other assets		44,912			40,961
TOTAL ASSETS	$	4,401,763		$	4,508,302

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Unpaid losses and settlement expenses	$	2,150,519		$	2,043,555
Unearned premiums		754,192			680,444
Reinsurance balances payable		39,291			42,851
Funds held		101,983			89,773
Income taxes-deferred		2,389			83,509
Bonds payable, long-term debt		199,769			199,676
Accrued expenses		68,052			98,274
Other liabilities		41,380			40,859
TOTAL LIABILITIES	$	3,357,575		$	3,278,941

Shareholders’ Equity
Common stock ($0.01 par value)
(Shares authorized - 200,000,000)
(68,299,018 shares issued, 45,368,804 shares outstanding at 6/30/22)
(68,219,551 shares issued, 45,289,337 shares outstanding at 12/31/21)	$	683		$	682
Paid-in capital		349,161			343,742
Accumulated other comprehensive earnings (loss)		(163,318	)		49,826
Retained earnings		1,250,661			1,228,110
Deferred compensation		8,945			9,642
Less: Treasury shares, at cost (22,930,214 shares at 6/30/22 and 12/31/21)		(401,944	)		(402,641	)
TOTAL SHAREHOLDERS’ EQUITY	$	1,044,188		$	1,229,361
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	4,401,763		$	4,508,302

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, 2021		45,142,580	$	1,135,978		$	681	$	335,365	$	108,714		$	1,084,217		$	8,292		$	(401,291	)
Net earnings (loss)		—		73,012			—		—		—			73,012			—			—
Other comprehensive earnings (loss), net of tax		—		(44,747	)		—		—		(44,747	)		—			—			—
Deferred compensation		—		—			—		—		—			—			(366	)		366
Share-based compensation		60,858		1,392			—		1,392		—			—			—			—
Dividends and dividend equivalents ($0.24 per share)		—		(10,849	)		—		—		—			(10,849	)		—			—
Balance, March 31, 2021		45,203,438	$	1,154,786		$	681	$	336,757	$	63,967		$	1,146,380		$	7,926		$	(400,925	)
Net earnings (loss)		—		81,815			—		—		—			81,815			—			—
Other comprehensive earnings (loss), net of tax		—		15,177			—		—		15,177			—			—			—
Deferred compensation		—		—			—		—		—			—			325			(325	)
Share-based compensation		19,905		1,343			1		1,342		—			—			—			—
Dividends and dividend equivalents ($0.25 per share)		—		(11,318	)		—		—		—			(11,318	)		—			—
Balance, June 30, 2021		45,223,343	$	1,241,803		$	682	$	338,099	$	79,144		$	1,216,877		$	8,251		$	(401,250	)

										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, 2022		45,289,337	$	1,229,361		$	682	$	343,742	$	49,826		$	1,228,110		$	9,642		$	(402,641	)
Net earnings (loss)		—		47,923			—		—		—			47,923			—			—
Other comprehensive earnings (loss), net of tax		—		(115,581	)		—		—		(115,581	)		—			—			—
Deferred compensation		—		—			—		—		—			—			(973	)		973
Share-based compensation		26,605		3,049			—		3,049		—			—			—			—
Dividends and dividend equivalents ($0.25 per share)		—		(11,330	)		—		—		—			(11,330	)		—			—
Balance, March 31, 2022		45,315,942	$	1,153,422		$	682	$	346,791	$	(65,755	)

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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]
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10-K	[2012-02-28]