Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RLI Corp (RLI, Financial) reported a strong third quarter with operating earnings of $1.31 per share, driven by positive underwriting performance and a 15% rise in investment income.
- The company achieved a combined ratio of 89.6% for the quarter, improving from 98.7% in the same period last year.
- Gross premiums grew by 13% in the quarter, with balanced growth across product segments, including a 16% increase in the Casualty segment.
- RLI Corp (RLI) saw a 26% increase in book value per share from year-end 2023, inclusive of dividends, reflecting strong comprehensive earnings.
- The company maintained strong operating cash flow of $219 million, supporting continued investment portfolio purchases with yields averaging 4.9%.
Negative Points
- RLI Corp (RLI) faced $37 million in losses from Hurricanes Helene and Beryl, impacting the Property and Casualty segments.
- The company anticipates pretax losses from Hurricane Milton to be between $45 million and $55 million, which could affect future financials.
- The Executive Products group within the Casualty segment is contracting, with rates down 4% in the quarter due to competitive pressures.
- The property market is softening, with hurricane rates down 8% and overall E&S property rate change flat, potentially impacting future growth.
- RLI Corp (RLI) is experiencing extended reporting patterns in the Casualty segment, which may indicate longer claim resolution times and increased risk.
Q & A Highlights
Q: Craig, could you discuss the most attractive opportunities for incremental profitability across your business lines that you see currently?
A: Craig Kliethermes, President and CEO, highlighted that RLI's business model, with its narrow and deep expertise in underwriting and claims, allows the company to lean into opportunities during market disruptions. He mentioned personal umbrella, transportation, marine, Hawaii homeowners, and E&S property as areas with potential for growth. The company's diverse portfolio enables it to capitalize on opportunities while pulling back in overly competitive markets.
Q: Could you provide observations on the trajectory of pricing versus loss cost inflation trends and any changes anticipated after the hurricanes?
A: Jennifer Klobnak, Chief Operating Officer, noted that property loss trends are up due to material costs and litigation. RLI has increased rates significantly over the past five years, which should stabilize the market. On the casualty side, rate changes are keeping up with loss trends, aided by strong collaboration between underwriters, claims, and analytical support.
Q: What drives RLI's consistent favorable reserve development, especially in a challenging environment with social inflation?
A: Craig Kliethermes explained that RLI takes a long-term, prudent view of loss cost trends and invests heavily in claims and actuarial communication. The company maintains a risk-based approach and focuses on small to middle-market insurers, avoiding excessive limits. This strategy, combined with diligent underwriting and claims processes, contributes to consistent favorable reserve development.
Q: Can you elaborate on the extended reporting patterns in the casualty segment and how they affect your approach?
A: Todd Bryant, Chief Financial Officer, mentioned that extended reporting patterns are observed in both older and recent accident years, particularly in excess liability and auto. The company is cautious in its approach, reflecting longer claim resolution times in its loss development patterns.
Q: Could you provide insights into RLI's investments in technology and how they contribute to growth opportunities?
A: Jennifer Klobnak highlighted that RLI invests in technology to improve processes and enhance user experience. Examples include streamlining application processes in personal umbrella and contractors' applications, and improving policy issuance in the marine division. These investments aim to optimize operations and support growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
