Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | Apr. 20, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2020 | |
Entity File Number | 001-09463 | |
Entity Registrant Name | RLI Corp | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 37-0889946 | |
Entity Address, Address Line One | 9025 North Lindbergh Drive | |
Entity Address, City or Town | Peoria | |
Entity Address, State or Province | IL | |
Entity Address, Postal Zip Code | 61615 | |
City Area Code | 309 | |
Local Phone Number | 692-1000 | |
Title of 12(b) Security | Common Stock $0.01 par value | |
Trading Symbol | RLI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 44,922,656 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000084246 | |
Amendment Flag | false |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings and Comprehensive Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Earnings and Comprehensive Earnings | ||
Net premiums earned | $ 215,582 | $ 204,689 |
Net investment income | 17,778 | 16,565 |
Net realized gains | 15,152 | 9,068 |
Net unrealized gains (losses) on equity securities | (130,395) | 33,498 |
Consolidated revenue | 118,117 | 263,820 |
Losses and settlement expenses | 111,021 | 94,297 |
Policy acquisition costs | 72,941 | 71,292 |
Insurance operating expenses | 14,381 | 16,667 |
Interest expense on debt | 1,897 | 1,861 |
General corporate expenses | 1,755 | 3,276 |
Total expenses | 201,995 | 187,393 |
Equity in earnings of unconsolidated investees | 4,514 | 5,314 |
Earnings (loss) before income taxes | (79,364) | 81,741 |
Income tax expense: | ||
Income tax expense (benefit) | (18,097) | 16,268 |
Net earnings (loss) | (61,267) | 65,473 |
Other comprehensive earnings (loss), net of tax | (13,031) | 29,301 |
Comprehensive earnings (loss) | $ (74,298) | $ 94,774 |
Basic: | ||
Net earnings (loss) per share (in dollars per share) | $ (1.36) | $ 1.47 |
Comprehensive earnings (loss) per share (in dollars per share) | (1.65) | 2.13 |
Diluted: | ||
Net earnings (loss) per share (in dollars per share) | (1.36) | 1.46 |
Comprehensive earnings (loss) per share (in dollars per share) | $ (1.65) | $ 2.11 |
Weighted average number of common shares outstanding | ||
Basic (in shares) | 44,920 | 44,536 |
Diluted (in shares) | 44,920 | 44,887 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Investments: | ||
Available-for-sale, at fair value (amortized cost of $1,912,851 and allowance for credit losses of $878 at 3/31/20) (amortized cost of $1,915,278 and allowance for credit losses of $0 at 12/31/19) | $ 1,963,585 | $ 1,983,086 |
Equity securities, at fair value (cost - $272,152 at 3/31/20 and $262,131 at 12/31/19) | 356,403 | 460,630 |
Other invested assets | 53,562 | 70,441 |
Cash | 42,701 | 46,203 |
Total investments and cash | 2,416,251 | 2,560,360 |
Accrued investment income | 14,944 | 14,587 |
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $16,948 at 3/31/20 and $16,682 at 12/31/19 | 154,084 | 160,369 |
Ceded unearned premium | 88,789 | 93,656 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $8,539 at 3/31/20 and $9,402 at 12/31/19 | 366,441 | 384,517 |
Deferred policy acquisition costs | 84,208 | 85,044 |
Property and equipment, at cost, net of accumulated depreciation of $64,322 at 3/31/20 and $62,703 at 12/31/19 | 52,741 | 53,121 |
Investment in unconsolidated investees | 108,081 | 103,836 |
Goodwill and intangibles | 54,025 | 54,127 |
Other assets | 39,047 | 36,104 |
TOTAL ASSETS | 3,378,611 | 3,545,721 |
Liabilities: | ||
Unpaid losses and settlement expenses | 1,574,760 | 1,574,352 |
Unearned premiums | 516,867 | 540,213 |
Reinsurance balances payable | 30,865 | 25,691 |
Funds held | 80,333 | 83,358 |
Income taxes - deferred | 26,546 | 56,727 |
Bonds payable, long-term debt | 149,349 | 149,302 |
Accrued expenses | 27,536 | 66,626 |
Other liabilities | 56,650 | 54,064 |
TOTAL LIABILITIES | 2,462,906 | 2,550,333 |
Shareholders' Equity | ||
Common stock ($0.01 par value, 100,000,000 shares authorized; 67,852,870 shares issued, 44,922,656 shares outstanding at 3/31/20; 67,799,229 shares issued, 44,869,015 shares outstanding at 12/31/19) | 679 | 678 |
Paid-in capital | 325,052 | 321,190 |
Accumulated other comprehensive earnings | 39,464 | 52,473 |
Retained earnings | 943,509 | 1,014,046 |
Deferred compensation | 6,970 | 7,980 |
Less: Treasury shares at cost (22,930,214 shares at 3/31/20 and 12/31/19) | (399,969) | (400,979) |
TOTAL SHAREHOLDERS' EQUITY | 915,705 | 995,388 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 3,378,611 | $ 3,545,721 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Available-for-sale, amortized cost | $ 1,912,851 | $ 1,915,278 |
Available-for-sale, allowance for credit losses | 878 | 0 |
Equity securities, cost | 272,152 | 262,131 |
Premiums and reinsurance balances receivable, allowances for uncollectible amounts | 16,948 | 16,682 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 8,539 | 9,402 |
Property and equipment, accumulated depreciation | $ 64,322 | $ 62,703 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 67,852,870 | 67,799,229 |
Common stock, shares outstanding (in shares) | 44,922,656 | 44,869,015 |
Treasury stock, shares (in shares) | 22,930,214 | 22,930,214 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Common stock | Paid-in Capital | Accumulated Other Comprehensive Earnings (Loss) | Retained Earnings | Deferred Compensation | Treasury Stock at Cost | Total |
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2018 | $ 674 | $ 305,660 | $ (14,572) | $ 908,079 | $ 8,354 | $ (401,353) | $ 806,842 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2018 | 44,504,043 | ||||||
Increase (Decrease) in Shareholders' Equity | |||||||
Net earnings (loss) | 65,473 | 65,473 | |||||
Other comprehensive earnings (loss), net of tax | 29,301 | 29,301 | |||||
Deferred compensation | (1,039) | 1,039 | |||||
Share-based compensation | $ 1 | 2,891 | 2,892 | ||||
Share-based compensation (in shares) | 50,213 | ||||||
Dividends and dividend equivalents | (9,803) | (9,803) | |||||
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2019 | $ 675 | 308,551 | 14,729 | 963,749 | 7,315 | (400,314) | 894,705 |
Shares, Outstanding, Ending Balance at Mar. 31, 2019 | 44,554,256 | ||||||
Increase (Decrease) in Shareholders' Equity | |||||||
Cumulative-effect adjustment from ASU 2016-13 | 22 | 1,073 | 1,095 | ||||
Stockholders' Equity Attributable to Parent, Beginning Balance at Dec. 31, 2019 | $ 678 | 321,190 | 52,473 | 1,014,046 | 7,980 | (400,979) | 995,388 |
Shares, Outstanding, Beginning Balance at Dec. 31, 2019 | 44,869,015 | ||||||
Increase (Decrease) in Shareholders' Equity | |||||||
Net earnings (loss) | (61,267) | (61,267) | |||||
Other comprehensive earnings (loss), net of tax | (13,031) | (13,031) | |||||
Deferred compensation | (1,010) | 1,010 | |||||
Share-based compensation | $ 1 | 3,862 | 3,863 | ||||
Share-based compensation (in shares) | 53,641 | ||||||
Dividends and dividend equivalents | (10,343) | (10,343) | |||||
Stockholders' Equity Attributable to Parent, Ending Balance at Mar. 31, 2020 | $ 679 | $ 325,052 | $ 39,464 | $ 943,509 | $ 6,970 | $ (399,969) | $ 915,705 |
Shares, Outstanding, Ending Balance at Mar. 31, 2020 | 44,922,656 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Shareholders' Equity | ||
Cash dividends paid per common share | $ 0.23 | $ 0.22 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Consolidated Statements of Cash Flows | ||
Net cash provided by (used in) operating activities | $ (5,767) | $ 30,787 |
Purchase of: | ||
Fixed income securities, available-for-sale | (69,233) | (95,984) |
Equity securities | (31,811) | (31,962) |
Property and equipment | (1,910) | (1,510) |
Other | (2,611) | (4,134) |
Proceeds from sale of: | ||
Fixed income securities, available-for-sale | 20,414 | 86,046 |
Equity securities | 38,042 | 26,347 |
Other | 2,267 | 154 |
Proceeds from call or maturity of: | ||
Fixed income securities, available-for-sale | 54,890 | 24,745 |
Net proceeds from sale (purchase) of short-term investments | (32,537) | |
Net cash provided by (used in) investing activities | 10,048 | (28,835) |
Cash Flows from Financing Activities | ||
Cash dividends paid | (10,332) | (9,797) |
Proceeds from stock option exercises | 2,549 | 2,886 |
Net cash used in financing activities | (7,783) | (6,911) |
Net decrease in cash | (3,502) | (4,959) |
Cash at the beginning of the period | 46,203 | 30,140 |
Cash at the end of the period | $ 42,701 | $ 25,181 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PRESENTATION The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2019 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at March 31, 2020 and the results of operations of RLI Corp. and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2019 to conform to the classifications used in the current year. The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates. B. ADOPTED ACCOUNTING STANDARDS ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Previous guidance delayed the recognition of credit losses until it was probable a loss had been incurred. This update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses, but is limited to the amount by which fair value is less than amortized cost. We adopted ASU 2016-13 on January 1, 2020 using the modified-retrospective approach. The standard applied to three of the Company’s balance sheet accounts: available-for-sale fixed income securities, premiums receivable and reinsurance balances recoverable. The impact of this standard was and is expected to continue to be immaterial, as our fixed income portfolio is weighted towards higher rated bonds (85 percent rated A or better at March 31, 2020 and December 31, 2019), we purchase reinsurance from financially strong reinsurers, we have a long history of collecting premium receivables through various economic cycles and we had previously maintained an allowance for uncollectible premium and reinsurance balances. In total, the cumulative-effect adjustment made to the balance sheet as of the beginning of the year resulted in a $1.1 million increase to retained earnings and an increase to accumulated other comprehensive earnings of less than $0.1 million. C. REINSURANCE Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of our legal liability to our policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continuously monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. Additionally, we perform an in depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. We subject our reinsurance recoverables to detailed recoverable tests, including a segment-based analysis using the average default rating percentage by S&P rating. Our policy is to charge to earnings, in the form of a credit allowance, an estimate of unrecoverable amounts from reinsurers. This credit allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $15.7 million and $8.5 million, respectively, at March 31, 2020. At December 31, 2019, the amounts were $15.7 million and $9.4 million, respectively. Adoption of ASU 2016-03 resulted in a $1.3 million decrease to the allowance for uncollectible amounts on reinsurance recoverables in 2020, while other changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs or recoveries were applied to the allowances in the first quarter of 2020. D. INTANGIBLE ASSETS Goodwill and intangible assets totaled $54.0 million and $54.1 million at March 31, 2020 and December 31, 2019, respectively, as detailed in the following table: Goodwill and Intangible Assets March 31, December 31, (in thousands) 2020 2019 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,572 at 3/31/20 and $3,470 at 12/31/19 463 565 Total intangibles $ 7,963 $ 8,065 Total goodwill and intangibles $ 54,025 $ 54,127 All definite-lived intangible assets are amortized based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the first quarter of 2020 and 2019. Annual impairment assessment was performed on our energy surety goodwill, miscellaneous and contract surety goodwill , small commercial goodwill and state insurance license indefinite-lived intangible asset during 2019. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of March 31, 2020 that would suggest our goodwill and intangible assets should be tested for impairment. E. EARNINGS PER SHARE Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements: For the Three-Month Period For the Three-Month Period Ended March 31, 2020 Ended March 31, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,536 $ 1.47 Effect of Dilutive Securities Stock options - - - 351 Diluted EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,887 $ 1.46 F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio. In reporting other comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 21 percent. Other comprehensive earnings (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $(3.5) million and $7.8 million for the first quarter of 2020 and 2019, respectively. Unrealized gains (losses), net of tax, on the fixed income portfolio were $(13.0) million for the first three months of 2020, compared to $29.3 million during the same period last year. Unrealized losses in the first three months of 2020 were attributable to widening credit spreads, which more than offset declines in interest rates and decreased the fair value of securities held in the fixed income portfolio. In contrast, declining interest rates increased the fair value of securities held in the fixed income portfolio in the first three months of 2019. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings (loss) for each period presented in the unaudited condensed consolidated interim financial statements: (in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 Beginning balance $ 52,473 $ (14,572) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) 22 - Adjusted beginning balance $ 52,495 $ (14,572) Other comprehensive earnings before reclassifications (11,880) 29,795 Amounts reclassified from accumulated other comprehensive earnings (1,151) (494) Net current-period other comprehensive earnings (loss) $ (13,031) $ 29,301 Ending balance $ 39,464 $ 14,729 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 5,727 $ - Credit losses on or the sale of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. During the first quarter of 2020, $0.8 million of credit loss expense was recognized on available-for sale securities, increasing the allowance for credit losses on fixed income securities to $0.9 million. No write-offs or recoveries were applied to the allowances in the first quarter of 2020. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table: Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 2,306 $ 625 Net realized gains (849) - Credit losses presented within net realized gains $ 1,457 $ 625 Earnings (loss) before income taxes (306) (131) Income tax benefit (expense) $ 1,151 $ 494 Net earnings (loss) G. FAIR VALUE MEASUREMENTS Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. Pricing Level 1 Pricing Level 2 Pricing Level 3 As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. Corporate, Agencies, Government and Municipal Bonds: Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): Regulation D Private Placement Securities: average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value measurement. For all of our fixed income securities classified as Level 2, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. In both comparisons, if discrepancies are found, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 securities provided by our pricing services are reasonable. Common Stock: Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy. H. RISKS AND UNCERTAINTIES Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The global COVID-19 pandemic has resulted in and is expected to continue to result in significant disruptions in economic activity and financial markets. The cumulative effects of COVID-19 on the Company, and the effect of any other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, reduce the market value of invested assets held by the Company or negatively impact the fair value of our goodwill. Catastrophe Exposures Our catastrophe reinsurance treaty renewed on January 1, 2020. We purchased limits of $400 million in excess of $25 million first-dollar retention for earthquakes in California, $425 million in excess of $25 million first-dollar retention for earthquakes outside of California and $275 million in excess of $25 million first-dollar retention for all other perils. These amounts are subject to certain co-participations by the Company on losses in excess of the $25 million retentions. On March 1, 2020, we purchased $100 million of additional catastrophe reinsurance protection on top of the previously described coverage. This increases the limits to $500 million for earthquakes in California, $525 million for earthquakes outside of California and $375 for all other perils, all of which are still subject to $25 million first-dollar retentions and certain co-participations in excess of the retentions. |
INVESTMENTS
INVESTMENTS | 3 Months Ended |
Mar. 31, 2020 | |
INVESTMENTS | |
INVESTMENTS | 2. INVESTMENTS Our investments are primarily composed of fixed income debt securities and common stock equity securities. We carry our equity securities at fair value and categorize all of our debt securities as available-for-sale, which are carried at fair value. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. The following is a summary of the disposition of fixed income and equity securities for the three-month periods ended March 31, 2020 and 2019: SALES Proceeds Gross Realized Net Realized (in thousands) From Sales Gains Losses Gain (Loss) 2020 Available-for-sale $ 19,858 $ 2,270 $ (102) $ 2,168 Equities 38,042 17,792 (2,633) 15,159 2019 Available-for-sale $ 92,277 $ 1,356 $ (723) $ 633 Equities 26,347 9,034 (592) 8,442 CALLS/MATURITIES Gross Realized Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2020 Available-for-sale $ 54,890 $ 145 $ (7) $ 138 2019 Available-for-sale $ 24,745 $ 1 $ (9) $ (8) FAIR VALUE MEASUREMENTS Assets measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 are summarized below: As of March 31, 2020 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 186,974 $ — $ 186,974 U.S. agency — 37,042 — 37,042 Non-U.S. govt. & agency — 7,316 — 7,316 Agency MBS — 414,262 — 414,262 ABS/CMBS* — 223,601 — 223,601 Corporate — 683,615 4,803 688,418 Municipal — 405,972 — 405,972 Total fixed income securities - available-for-sale $ — $ 1,958,782 $ 4,803 $ 1,963,585 Equity securities 356,403 — — 356,403 Other invested assets 12,056 — — 12,056 Total $ 368,459 $ 1,958,782 $ 4,803 $ 2,332,044 As of December 31, 2019 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 193,661 $ — $ 193,661 U.S. agency — 38,855 — 38,855 Non-U.S. govt. & agency — 7,628 — 7,628 Agency MBS — 420,165 — 420,165 ABS/CMBS* — 224,870 — 224,870 Corporate — 690,297 1,770 692,067 Municipal — 405,840 — 405,840 Total fixed income securities - available-for-sale $ — $ 1,981,316 $ 1,770 $ 1,983,086 Equity securities 460,630 — — 460,630 Total $ 460,630 $ 1,981,316 $ 1,770 $ 2,443,716 * Non-agency asset-backed and commercial mortgage-backed As of March 31, 2020, we had $4.8 million of Regulation D private placement fixed income securities whose fair value was measured using significant unobservable inputs (Level 3). The following table summarizes changes in the balance of these Level 3 securities. Level 3 (in thousands) Securities Balance as of January 1, 2020 $ 1,770 Net realized and unrealized gains (losses) Included in net earnings (loss) as a part of: Net investment income (5) Net realized gains (16) Included in other comprehensive earnings (loss) (1,048) Total net realized and unrealized gains (losses) $ (1,069) Purchases 4,102 Balance as of March 31, 2020 $ 4,803 Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - $ (16) Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - $ (1,048) The amortized cost and fair value of available-for-sale fixed income securities by contractual maturity as of March 31, 2020 were as follows: March 31, 2020 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 56,844 $ 56,702 Due after one year through five years 442,572 449,447 Due after five years through 10 years 549,193 569,898 Due after 10 years 236,938 249,675 Mtge/ABS/CMBS* 627,304 637,863 Total available-for-sale $ 1,912,851 $ 1,963,585 *Mortgage-backed, asset-backed and commercial mortgage-backed The amortized cost and fair value of available-for-sale securities at March 31, 2020 and December 31, 2019 are presented in the tables below. Amortized cost does not include the $13.9 million and $13.5 million of accrued interest receivable as of March 31, 2020 and December 31, 2019, respectively. Available-for-sale March 31, 2020 (in thousands) Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair Asset Class Cost Losses Gains Losses Value U.S. government $ 171,026 $ - $ 15,948 $ - $ 186,974 U.S. agency 32,236 - 4,806 - 37,042 Non-U.S. govt. & agency 7,324 - 105 (113) 7,316 Agency MBS 396,474 - 17,807 (19) 414,262 ABS/CMBS* 230,830 (21) 1,908 (9,116) 223,601 Corporate 685,116 (857) 23,364 (19,205) 688,418 Municipal 389,845 - 16,203 (76) 405,972 Total Fixed Income $ 1,912,851 $ (878) $ 80,141 $ (28,529) $ 1,963,585 *Non-agency asset-backed and commercial mortgage-backed Available-for-sale December 31, 2019 (in thousands) Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair Asset Class Cost Losses Gains Losses Value U.S. government $ 186,699 $ - $ 6,994 $ (32) $ 193,661 U.S. agency 36,535 - 2,362 (42) 38,855 Non-U.S. govt. & agency 7,333 - 295 - 7,628 Agency MBS 411,808 - 8,920 (563) 420,165 ABS/CMBS* 222,832 - 2,514 (476) 224,870 Corporate 659,640 - 33,245 (818) 692,067 Municipal 390,431 - 16,131 (722) 405,840 Total Fixed Income $ 1,915,278 $ - $ 70,461 $ (2,653) $ 1,983,086 *Non-agency asset-backed and commercial mortgage-backed Allowance for Credit Losses and Unrealized Losses on Fixed Income Securities We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required the recognition of a reversible allowance for credit losses on available-for-sale fixed income securities. See note 1. B. for more information on the adoption of the ASU. Available-for-sale securities in the fixed income portfolio are subjected to several criteria to determine if those securities should be included in the allowance for expected credit loss evaluation, including: ● Changes in technology that may impair the earnings potential of the investment, ● The discontinuance of a segment of business that may affect future earnings potential, ● Reduction of or non-payment of interest and/or principal, ● Specific concerns related to the issuer’s industry or geographic area of operation, ● Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and ● Downgrades in credit quality by a major rating agency. If changes in interest rates and credit spreads do not reasonably explain the unrealized loss for an available-for-sale security or if any of the criteria above indicate a potential credit loss, the security is subjected to a discounted cash flow analysis. Inputs into the discounted cash flow analysis include prepayment assumptions for structured securities, default rates and recoverability rates based on credit rating. The allowance for any security is limited to the amount that the securities fair value is below amortized cost. As of March 31, 2020, the discounted cash flow analysis resulted in an allowance for credit losses on 39 securities totaling $0.9 million. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Based on our analysis, we believe we will recover the amortized cost basis on the available-for-sale securities not included in the allowance for credit losses. We do not intend to sell the available-for-sale securities in an unrealized loss position and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost basis. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. Prior to the adoption of ASU 2016-13, we conducted reviews of fixed income securities with unrealized losses to evaluate whether an impairment was other-than-temporary. Any credit-related impairment on fixed income securities we did not plan to sell and for which we were not more likely than not to be required to sell were recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. We did not recognize any other-than-temporary impairment losses in earnings on the fixed income portfolio in the first three months of 2019. As of March 31, 2020, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 381 securities with an unrealized loss position for which an allowance for credit losses had not been recorded. The $28.5 million in associated unrealized losses represents 1.5 percent of the fixed income portfolio’s cost basis and 1.2 percent of total invested assets Unrealized losses increased through the first three months of 2020, as increased credit spreads more than offset declines in interest rates during the period. The following table illustrates the total value of fixed income securities that were in an unrealized loss position as of , after factoring in the allowance for credit losses, and December 31, 2019. March 31, 2020 December 31, 2019 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. government Fair value $ — $ — $ — $ 2,505 $ 8,463 $ 10,968 Amortized cost — — — 2,506 8,494 11,000 Unrealized Loss $ — $ — $ — $ (1) $ (31) $ (32) U.S. agency Fair value $ — $ — $ — $ 6,794 $ — $ 6,794 Amortized cost — — — 6,836 — 6,836 Unrealized Loss $ — $ — $ — $ (42) $ — $ (42) Non-U.S. government Fair value $ 3,011 $ — $ 3,011 $ — $ — $ — Amortized cost 3,124 — 3,124 — — — Unrealized Loss $ (113) $ — $ (113) $ — $ — $ — Agency MBS Fair value $ 249 $ 1,296 $ 1,545 $ 21,548 $ 41,718 $ 63,266 Amortized cost 249 1,315 1,564 21,664 42,165 63,829 Unrealized Loss $ — $ (19) $ (19) $ (116) $ (447) $ (563) ABS/CMBS* Fair value $ 126,540 $ 15,405 $ 141,945 $ 74,968 $ 18,036 $ 93,004 Amortized cost 134,660 16,401 151,061 75,332 18,148 93,480 Unrealized Loss $ (8,120) $ (996) $ (9,116) $ (364) $ (112) $ (476) Corporate Fair value $ 220,349 $ 4,182 $ 224,531 $ 16,478 $ 9,348 $ 25,826 Amortized cost 238,510 5,226 243,736 16,950 9,694 26,644 Unrealized Loss $ (18,161) $ (1,044) $ (19,205) $ (472) $ (346) $ (818) Municipal Fair value $ 7,301 $ — $ 7,301 $ 47,018 $ — $ 47,018 Amortized cost 7,377 — 7,377 47,740 — 47,740 Unrealized Loss $ (76) $ — $ (76) $ (722) $ — $ (722) Total fixed income Fair value $ 357,450 $ 20,883 $ 378,333 $ 169,311 $ 77,565 $ 246,876 Amortized cost 383,920 22,942 406,862 171,028 78,501 249,529 Unrealized Loss $ (26,470) $ (2,059) $ (28,529) $ (1,717) $ (936) $ (2,653) * Non-agency asset-backed and commercial mortgage-backed The following table shows the composition of the fixed income securities in unrealized loss positions, after factoring in the allowance for credit losses, at March 31, 2020 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s. Equivalent Equivalent (dollars in thousands) NAIC S&P Moody’s Amortized Unrealized Percent Rating Rating Rating Cost Fair Value Loss to Total 1 AAA/AA/A Aaa/Aa/A $ 202,517 $ 191,912 $ (10,605) 37.2 % 2 BBB Baa 85,785 80,759 (5,026) 17.6 % 3 BB Ba 65,256 59,398 (5,858) 20.5 % 4 B B 50,630 44,392 (6,238) 21.9 % 5 CCC Caa 2,674 1,872 (802) 2.8 % 6 CC or lower Ca or lower - - - - % Total $ 406,862 $ 378,333 $ (28,529) 100.0 % Unrealized Gains and Losses on Equity Securities Unrealized losses recognized on equity securities still held as of March 31, 2020 were $115.2 million during the first quarter of 2020. Comparatively, unrealized gains recognized on equity securities still held as of March 31, 2019 were $41.9 million during the first quarter of 2019. Other Invested Assets We had $53.6 million of other invested assets at March 31, 2020, compared to $70.4 million at the end of 2019. Other invested assets include investments in low income housing tax credit partnerships (LIHTC), membership in the Federal Home Loan Bank of Chicago (FHLBC), investments in private funds and investments in restricted stock. Our LIHTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investment’s net asset value. Restricted stock is carried at quoted market prices, as the restrictions expire within one year. Our LIHTC interests had a balance of $22.4 million at March 31, 2020, compared to $23.3 million at December 31, 2019 and recognized a total tax benefit of $0.9 million during the first quarter of 2020, compared to $0.6 million the prior year. Our unfunded commitment for our LIHTC investments totaled $8.0 million at March 31, 2020 and will be paid out in installments through 2035. As of March 31, 2020, $15.1 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides. As of and during the three-month period ended March 31, 2020, there were no outstanding borrowings with the FHLBC. Our investments in private funds totaled $17.5 million at March 31, 2020, compared to $46.0 million at December 31, 2019, and we had $13.5 million of associated unfunded commitments at March 31, 2020. Our interest in private funds is generally restricted from being transferred or otherwise redeemed without prior consent by the respective entities. During the first quarter of 2020, one of the private funds transitioned into a publically traded common stock, but short term restrictions were applied on our ability to sell without prior approval. Our investment in restricted stock was $12.1 million as of March 31, 2020. For our remaining investments in private funds, the timed dissolution of the partnerships would trigger redemption. Cash Cash consists of uninvested balances in bank accounts. We had a cash balance of $42.7 million at March 31, 2020, compared to $46.2 million at the end of 2019. |
HISTORICAL LOSS AND LAE DEVELOP
HISTORICAL LOSS AND LAE DEVELOPMENT | 3 Months Ended |
Mar. 31, 2020 | |
HISTORICAL LOSS AND LAE DEVELOPMENT | |
HISTORICAL LOSS AND LAE DEVELOPMENT | 3. HISTORICAL LOSS AND LAE DEVELOPMENT The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first three months of 2020 and 2019: For the Three-Month Periods Ended March 31, (in thousands) 2020 2019 Unpaid losses and LAE at beginning of year Gross $ 1,574,352 $ 1,461,348 Ceded (384,517) (364,999) Net $ 1,189,835 $ 1,096,349 Adoption impact of ASU 2016-13 on reinsurance balances recoverable $ (1,345) $ — Increase (decrease) in incurred losses and LAE Current accident year $ 126,194 $ 113,930 Prior accident years (15,173) (19,633) Total incurred $ 111,021 $ 94,297 Loss and LAE payments for claims incurred Current accident year $ (9,295) $ (5,531) Prior accident years (81,897) (70,145) Total paid $ (91,192) $ (75,676) Net unpaid losses and LAE at March 31 $ 1,208,319 $ 1,114,970 Unpaid losses and LAE at March 31 Gross $ 1,574,760 $ 1,479,344 Ceded (366,441) (364,374) Net $ 1,208,319 $ 1,114,970 We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required . We previously maintained an allowance for uncollectible reinsurance balances prior to the adoption of this update. However, in order to comply with the updated requirements, we released $1.3 million of the allowance on uncollectible reinsurance balances upon adoption. The implementation guidance required the cumulative-effect adjustment be made to the beginning balance of retained earnings, rather than through net earnings like historical changes have and ongoing modifications will continue to be recorded. See note 1. B. for more information on the adoption of the ASU. For the first three months of 2020, incurred losses and LAE included $15.2 million of favorable development on prior years’ loss reserves. The majority of products experienced modest amounts of favorable development on prior accident years, with notable contributions from transportation, marine, small commercial and surety. No products experienced significant adverse development. For the first three months of 2019, incurred losses and LAE included $19.6 million of favorable development on prior years’ loss reserves. General liability, commercial excess and personal umbrella, professional services and surety were drivers of the favorable development. Executive products experienced adverse development. The spread of COVID-19 and related economic shutdown has increased the uncertainty that is always present in our estimate of the ultimate cost of loss and settlement expense. Actuarial models base future emergence on historic experience, with adjustments for current trends, and the appropriateness of these assumptions involved more uncertainty as of March 31, 2020. We expect there will be impacts to the timing of loss emergence and ultimate loss ratios for certain coverages we underwrite. The industry is experiencing new issues, including the temporary suspension of civil court cases in most states, the extension of certain statutes of limitations and a significant reduction in economic activity and insured exposure in some classes. Our booked reserves include consideration of these factors, but legislative, regulatory or judicial actions could result in loss reserve deficiencies and reduce earnings in future periods. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2020 | |
INCOME TAXES | |
INCOME TAXES | 4. INCOME TAXES Our effective tax rate for the three-month period ended March 31, 2020 was 22.8 percent, compared to 19.9 percent for the same period in 2019. Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective rate was higher for the three-month period in 2020 as tax-favored adjustments increased the tax benefit realized on pretax losses. Income tax expense (benefit) attributable to income from operations for the three-month periods ended March 31, 2020 and 2019 differed from the amounts computed by applying the U.S. federal tax rate of 21 percent to pretax income by the items detailed in the below table. In interim periods, income taxes are adjusted to reflect the effective tax rate we anticipate for the year, with adjustments flowing through the other items, net line. For the Three-Month Periods Ended March 31, 2020 2019 (in thousands) Amount % Amount % Provision for income taxes at the statutory rate of 21% $ (16,666) 21.0 % $ 17,166 21.0 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (1,029) 1.3 % (741) (0.9) % Tax exempt interest income (313) 0.4 % (345) (0.4) % Dividends received deduction (271) 0.3 % (203) (0.2) % ESOP dividends paid deduction (132) 0.2 % (137) (0.2) % Nondeductible expenses 203 (0.3) % 509 0.6 % Other items, net 111 (0.1) % 19 0.0 % Total tax expense (benefit) $ (18,097) 22.8 % $ 16,268 19.9 % |
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2020 | |
STOCK BASED COMPENSATION | |
STOCK BASED COMPENSATION | 5. STOCK BASED COMPENSATION Our RLI Corp. Long-Term Incentive Plan (2010 LTIP) was in place from 2010 to 2015. The 2010 LTIP provided for equity-based compensation, including stock options, up to a maximum of 4,000,000 shares of common stock (subject to adjustment for changes in our capitalization and other events). Between 2010 and 2015, we granted 2,878,000 stock options under the 2010 LTIP. The 2010 LTIP was replaced in 2015. In 2015, our shareholders approved the 2015 RLI Corp. Long-Term Incentive Plan (2015 LTIP), which provides for equity-based compensation and replaced the 2010 LTIP. In conjunction with the adoption of the 2015 LTIP, effective May 7, 2015, options were no longer granted under the 2010 LTIP. Awards under the 2015 LTIP may be in the form of restricted stock, restricted stock units, stock options (non-qualified only), stock appreciation rights, performance units as well as other stock-based awards. Eligibility under the 2015 LTIP is limited to employees and directors of the Company or any affiliate. The granting of awards under the 2015 LTIP is solely at the discretion of the board of directors. The maximum number of shares of common stock available for distribution under the 2015 LTIP is 4,000,000 shares (subject to adjustment for changes in our capitalization and other events). Since the plan’s approval in 2015, we have awarded 2,312,835 stock options and restricted stock units under the 2015 LTIP, including 30,375 stock options thus far in 2020. Stock Options Under the 2015 LTIP, as under the 2010 LTIP, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant (subject to adjustments for changes in our capitalization, special dividends and other events as set forth in such plans). Options generally vest and become exercisable ratably over a five-year period and expire eight years after grant. For most participants, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75 , the requisite service period is deemed to be met and options are immediately expensed on the date of grant. For participants who will become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares. The following tables summarize option activity for the three-month periods ended March 31, 2020 and 2019: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2020 1,667,290 $ 62.52 Options granted 30,375 94.62 Options exercised (56,725) 49.23 $ 2,516 Options canceled/forfeited (300) 58.60 Outstanding options at March 31, 2020 1,640,640 $ 63.58 5.10 $ 40,778 Exercisable options at March 31, 2020 614,040 $ 54.68 3.75 $ 20,438 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2019 1,964,880 $ 54.24 Options granted 40,750 66.16 Options exercised (50,580) 33.71 $ 1,795 Options canceled/forfeited (19,100) 57.28 Outstanding options at March 31, 2019 1,935,950 $ 55.00 5.14 $ 32,589 Exercisable options at March 31, 2019 702,250 $ 47.84 3.73 $ 16,794 The majority of our stock options are granted annually at our regular board meeting in May. In addition, options are approved at the May meeting for quarterly grants to certain retirement eligible employees. Since stock option grants to retirement eligible employees are fully expensed when issued, the approach allows for a more even expense distribution throughout the year. In the first quarter of 2020, 30,375 stock options were granted with a weighted average exercise price of $94.62 and a weighted average fair value of $14.48 . We recognized $1.0 million of expense in the first quarter of 2020. Since options granted under our 2015 LTIP are non-qualified, we recorded a tax benefit of $0.2 million in the first quarter of 2020 related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $4.2 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $1.0 million of compensation expense and a tax benefit of $0.2 million in the first quarter of 2019. The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of March 31: 2020 2019 Weighted-average fair value of grants $ 14.48 $ 11.35 Risk-free interest rates 1.54 % 2.94 % Dividend yield 2.69 % 2.98 % Expected volatility 22.68 % 22.84 % Expected option life 4.99 years 5.11 years The risk-free rate was determined based on U.S. treasury yields that most closely approximated the option’s expected life. The dividend yield was determined based on the average annualized quarterly dividends paid during the most recent five-year period and incorporated a consideration for special dividends paid in recent history. The expected volatility was calculated based on the median of the rolling volatilities for the expected life of the options. The expected option life was determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant. Restricted Stock Units In addition to stock options, restricted stock units (RSUs) are granted with a value equal to the closing stock price of the Company’s stock on the dates the units are granted. These units generally have a three-year cliff vesting, but have an accelerated vesting feature for participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75 . In addition, the RSUs have dividend participation, which accrue as additional units and are settled with granted stock units at the end of the vesting period. As of March 31, 2020, 45,350 RSUs have been granted to employees under the 2015 LTIP and 43,708 remain outstanding. We recognized $0.2 million of expense on these units in the first quarter of 2020, compared to $0.1 million in the first quarter of 2019. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $0.8 million, which will be recognized over the remainder of the vesting period. In 2019 and 2018, each outside director received RSUs with a fair market value that approximated $50 thousand on the date of grant as part of annual director compensation. Director RSUs vest one year from the date of grant. As of March 31, 2020, 15,085 restricted stock units have been granted to directors under the 2015 LTIP and 6,182 remain outstanding. We recognized $0.1 million of compensation expense on these units in the first quarter of 2020, the same amount as in the first quarter of 2019. Total unrecognized compensation expense relating to outstanding and unvested director RSUs was less than $0.1 million, which will be recognized over the remainder of the vesting period. |
OPERATING SEGMENT INFORMATION
OPERATING SEGMENT INFORMATION | 3 Months Ended |
Mar. 31, 2020 | |
OPERATING SEGMENT INFORMATION | |
OPERATING SEGMENT INFORMATION | 6. OPERATING SEGMENT INFORMATION Selected information by operating segment is presented in the table below. Additionally, the table reconciles segment totals to total earnings and total revenues. For the Three-Month Periods REVENUES Ended March 31, (in thousands) 2020 2019 Casualty $ 143,420 $ 136,900 Property 44,348 38,746 Surety 27,814 29,043 Net premiums earned $ 215,582 $ 204,689 Net investment income 17,778 16,565 Net realized gains 15,152 9,068 Net unrealized gains (losses) on equity securities (130,395) 33,498 Total consolidated revenue $ 118,117 $ 263,820 NET EARNINGS (LOSS) (in thousands) 2020 2019 Casualty $ (1,323) $ 5,343 Property 9,908 8,246 Surety 8,654 8,844 Net underwriting income $ 17,239 $ 22,433 Net investment income 17,778 16,565 Net realized gains 15,152 9,068 Net unrealized gains (losses) on equity securities (130,395) 33,498 General corporate expense and interest on debt (3,652) (5,137) Equity in earnings of unconsolidated investees 4,514 5,314 Earnings (loss) before income taxes $ (79,364) $ 81,741 Income tax expense (benefit) (18,097) 16,268 Net earnings (loss) $ (61,267) $ 65,473 The following table further summarizes revenues by major product type within each operating segment: For the Three-Month Periods NET PREMIUMS EARNED Ended March 31, (in thousands) 2020 2019 Casualty Commercial excess and personal umbrella $ 40,088 $ 32,281 General liability 23,998 23,888 Commercial transportation 21,185 20,404 Professional services 20,695 20,299 Small commercial 15,633 13,188 Executive products 7,331 6,069 Other casualty 14,490 20,771 Total $ 143,420 $ 136,900 Property Marine $ 19,577 $ 17,021 Commercial property 19,155 16,875 Specialty personal 5,000 4,584 Other property 616 266 Total $ 44,348 $ 38,746 Surety Commercial $ 10,938 $ 10,812 Miscellaneous 10,516 11,602 Contract 6,360 6,629 Total $ 27,814 $ 29,043 Grand Total $ 215,582 $ 204,689 |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
LEASES | 7. LEASES Right-of-use assets are included in the other assets line item and lease liabilities are included in the other liabilities line item of the consolidated balance sheet. We determine if a contract contains a lease at inception and recognize operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Lease agreements may include options to extend or terminate. The options are exercised at our discretion and are included in operating lease liabilities if it is reasonably certain the option will be exercised. Lease agreements have lease and non-lease components, which are accounted for as a single lease component. Lease expense is recognized on a straight-line basis over the lease term. The Company’s operating lease obligations are for branch office facilities. Our leases have remaining lease terms of 1 to 15 years . The components of lease expense and other lease information as of and during the three-month periods ended March 31, 2020 and 2019 are as follows: For the Three-Month Period Ended (in thousands) March 31, 2020 March 31, 2019 Operating lease cost $ 1,406 $ 1,481 Cash paid for amounts included in measurement of lease liabilities Operating cash flows from operating leases $ 1,486 $ 1,395 Right-of-use assets obtained in exchange for new operating lease liabilities $ 15 $ 719 Other non-cash reductions to right-of-use assets $ 1,192 $ - (in thousands) March 31, 2020 December 31, 2019 Operating lease right-of-use assets $ 19,889 $ 22,335 Operating lease liabilities $ 23,141 $ 24,475 Weighted-average remaining lease term - operating leases 4.48 years 4.69 years Weighted-average discount rate - operating leases 2.34 % 2.33 % Future minimum lease payments under non-cancellable leases as of March 31, 2020 were as follows: (in thousands) March 31, 2020 2020 $ 4,505 2021 5,976 2022 5,904 2023 4,386 2024 2,334 Thereafter 1,365 Total future minimum lease payments $ 24,470 Less imputed interest (1,329) Total operating lease liability $ 23,141 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
BASIS OF PRESENTATION | A. BASIS OF PRESENTATION The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2019 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at March 31, 2020 and the results of operations of RLI Corp. and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2019 to conform to the classifications used in the current year. The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates. |
ADOPTED ACCOUNTING STANDARDS | B. ADOPTED ACCOUNTING STANDARDS ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Previous guidance delayed the recognition of credit losses until it was probable a loss had been incurred. This update requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that is included in net earnings. Credit losses relating to available-for-sale debt securities are also required to be recorded through a reversible allowance for credit losses, but is limited to the amount by which fair value is less than amortized cost. We adopted ASU 2016-13 on January 1, 2020 using the modified-retrospective approach. The standard applied to three of the Company’s balance sheet accounts: available-for-sale fixed income securities, premiums receivable and reinsurance balances recoverable. The impact of this standard was and is expected to continue to be immaterial, as our fixed income portfolio is weighted towards higher rated bonds (85 percent rated A or better at March 31, 2020 and December 31, 2019), we purchase reinsurance from financially strong reinsurers, we have a long history of collecting premium receivables through various economic cycles and we had previously maintained an allowance for uncollectible premium and reinsurance balances. In total, the cumulative-effect adjustment made to the balance sheet as of the beginning of the year resulted in a $1.1 million increase to retained earnings and an increase to accumulated other comprehensive earnings of less than $0.1 million. |
REINSURANCE | C. REINSURANCE Ceded unearned premiums and reinsurance balances recoverable on paid and unpaid losses and settlement expenses are reported separately as assets, instead of being netted with the related liabilities, since reinsurance does not relieve the Company of our legal liability to our policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continuously monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review their annual financial statements, quarterly disclosures and Securities and Exchange Commission (SEC) filings for those reinsurers that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. Additionally, we perform an in depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. We subject our reinsurance recoverables to detailed recoverable tests, including a segment-based analysis using the average default rating percentage by S&P rating. Our policy is to charge to earnings, in the form of a credit allowance, an estimate of unrecoverable amounts from reinsurers. This credit allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. The allowances for uncollectible amounts on paid and unpaid reinsurance recoverables were $15.7 million and $8.5 million, respectively, at March 31, 2020. At December 31, 2019, the amounts were $15.7 million and $9.4 million, respectively. Adoption of ASU 2016-03 resulted in a $1.3 million decrease to the allowance for uncollectible amounts on reinsurance recoverables in 2020, while other changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs or recoveries were applied to the allowances in the first quarter of 2020. |
INTANGIBLE ASSETS | D. INTANGIBLE ASSETS Goodwill and intangible assets totaled $54.0 million and $54.1 million at March 31, 2020 and December 31, 2019, respectively, as detailed in the following table: Goodwill and Intangible Assets March 31, December 31, (in thousands) 2020 2019 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,572 at 3/31/20 and $3,470 at 12/31/19 463 565 Total intangibles $ 7,963 $ 8,065 Total goodwill and intangibles $ 54,025 $ 54,127 All definite-lived intangible assets are amortized based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the first quarter of 2020 and 2019. Annual impairment assessment was performed on our energy surety goodwill, miscellaneous and contract surety goodwill , small commercial goodwill and state insurance license indefinite-lived intangible asset during 2019. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of March 31, 2020 that would suggest our goodwill and intangible assets should be tested for impairment. |
EARNINGS PER SHARE | E. EARNINGS PER SHARE Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements: For the Three-Month Period For the Three-Month Period Ended March 31, 2020 Ended March 31, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,536 $ 1.47 Effect of Dilutive Securities Stock options - - - 351 Diluted EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,887 $ 1.46 |
COMPREHENSIVE EARNINGS | F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio. In reporting other comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 21 percent. Other comprehensive earnings (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $(3.5) million and $7.8 million for the first quarter of 2020 and 2019, respectively. Unrealized gains (losses), net of tax, on the fixed income portfolio were $(13.0) million for the first three months of 2020, compared to $29.3 million during the same period last year. Unrealized losses in the first three months of 2020 were attributable to widening credit spreads, which more than offset declines in interest rates and decreased the fair value of securities held in the fixed income portfolio. In contrast, declining interest rates increased the fair value of securities held in the fixed income portfolio in the first three months of 2019. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings (loss) for each period presented in the unaudited condensed consolidated interim financial statements: (in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 Beginning balance $ 52,473 $ (14,572) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) 22 - Adjusted beginning balance $ 52,495 $ (14,572) Other comprehensive earnings before reclassifications (11,880) 29,795 Amounts reclassified from accumulated other comprehensive earnings (1,151) (494) Net current-period other comprehensive earnings (loss) $ (13,031) $ 29,301 Ending balance $ 39,464 $ 14,729 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 5,727 $ - Credit losses on or the sale of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. During the first quarter of 2020, $0.8 million of credit loss expense was recognized on available-for sale securities, increasing the allowance for credit losses on fixed income securities to $0.9 million. No write-offs or recoveries were applied to the allowances in the first quarter of 2020. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table: Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 2,306 $ 625 Net realized gains (849) - Credit losses presented within net realized gains $ 1,457 $ 625 Earnings (loss) before income taxes (306) (131) Income tax benefit (expense) $ 1,151 $ 494 Net earnings (loss) |
FAIR VALUE MEASUREMENTS | G. FAIR VALUE MEASUREMENTS Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. Pricing Level 1 Pricing Level 2 Pricing Level 3 As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. Corporate, Agencies, Government and Municipal Bonds: Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): Regulation D Private Placement Securities: average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. An increase to the credit spread assumptions would result in a lower fair value measurement. For all of our fixed income securities classified as Level 2, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. In both comparisons, if discrepancies are found, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 securities provided by our pricing services are reasonable. Common Stock: Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy. |
RISKS AND UNCERTAINTIES | H. RISKS AND UNCERTAINTIES Certain risks and uncertainties are inherent to our day-to-day operations. Adverse changes in the economy could lower demand for our insurance products or negatively impact our investment results, both of which could have an adverse effect on the revenue and profitability of our operations. The global COVID-19 pandemic has resulted in and is expected to continue to result in significant disruptions in economic activity and financial markets. The cumulative effects of COVID-19 on the Company, and the effect of any other public health outbreak, cannot be predicted at this time, but could reduce demand for our insurance policies, result in increased level of losses, settlement expenses or other operating costs, reduce the market value of invested assets held by the Company or negatively impact the fair value of our goodwill. Catastrophe Exposures Our catastrophe reinsurance treaty renewed on January 1, 2020. We purchased limits of $400 million in excess of $25 million first-dollar retention for earthquakes in California, $425 million in excess of $25 million first-dollar retention for earthquakes outside of California and $275 million in excess of $25 million first-dollar retention for all other perils. These amounts are subject to certain co-participations by the Company on losses in excess of the $25 million retentions. On March 1, 2020, we purchased $100 million of additional catastrophe reinsurance protection on top of the previously described coverage. This increases the limits to $500 million for earthquakes in California, $525 million for earthquakes outside of California and $375 for all other perils, all of which are still subject to $25 million first-dollar retentions and certain co-participations in excess of the retentions. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of goodwill and intangible assets | Goodwill and Intangible Assets March 31, December 31, (in thousands) 2020 2019 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Total goodwill $ 46,062 $ 46,062 Intangibles Indefinite-lived intangibles - state insurance licenses 7,500 7,500 Definite-lived intangibles, net of accumulated amortization of $3,572 at 3/31/20 and $3,470 at 12/31/19 463 565 Total intangibles $ 7,963 $ 8,065 Total goodwill and intangibles $ 54,025 $ 54,127 |
Schedule of reconciliation of numerator and denominator of the basic and diluted earnings per share computations | For the Three-Month Period For the Three-Month Period Ended March 31, 2020 Ended March 31, 2019 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,536 $ 1.47 Effect of Dilutive Securities Stock options - - - 351 Diluted EPS Earnings (loss) available to common shareholders $ (61,267) 44,920 $ (1.36) $ 65,473 44,887 $ 1.46 |
Schedule of changes in the balance of each component of accumulated other comprehensive earnings | (in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2020 2019 Beginning balance $ 52,473 $ (14,572) Cumulative-effect adjustment of ASU 2016-13 (see note 1.B.) 22 - Adjusted beginning balance $ 52,495 $ (14,572) Other comprehensive earnings before reclassifications (11,880) 29,795 Amounts reclassified from accumulated other comprehensive earnings (1,151) (494) Net current-period other comprehensive earnings (loss) $ (13,031) $ 29,301 Ending balance $ 39,464 $ 14,729 Balance of securities for which an allowance for credit losses has been recognized in net earnings $ 5,727 $ - |
Schedule of effects of reclassifications out of accumulated other comprehensive earnings | Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2020 2019 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 2,306 $ 625 Net realized gains (849) - Credit losses presented within net realized gains $ 1,457 $ 625 Earnings (loss) before income taxes (306) (131) Income tax benefit (expense) $ 1,151 $ 494 Net earnings (loss) |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Schedule of disposition of fixed maturities and equities | SALES Proceeds Gross Realized Net Realized (in thousands) From Sales Gains Losses Gain (Loss) 2020 Available-for-sale $ 19,858 $ 2,270 $ (102) $ 2,168 Equities 38,042 17,792 (2,633) 15,159 2019 Available-for-sale $ 92,277 $ 1,356 $ (723) $ 633 Equities 26,347 9,034 (592) 8,442 CALLS/MATURITIES Gross Realized Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2020 Available-for-sale $ 54,890 $ 145 $ (7) $ 138 2019 Available-for-sale $ 24,745 $ 1 $ (9) $ (8) |
Fair Value, Assets Measured on Recurring Basis | As of March 31, 2020 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 186,974 $ — $ 186,974 U.S. agency — 37,042 — 37,042 Non-U.S. govt. & agency — 7,316 — 7,316 Agency MBS — 414,262 — 414,262 ABS/CMBS* — 223,601 — 223,601 Corporate — 683,615 4,803 688,418 Municipal — 405,972 — 405,972 Total fixed income securities - available-for-sale $ — $ 1,958,782 $ 4,803 $ 1,963,585 Equity securities 356,403 — — 356,403 Other invested assets 12,056 — — 12,056 Total $ 368,459 $ 1,958,782 $ 4,803 $ 2,332,044 As of December 31, 2019 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale U.S. government $ — $ 193,661 $ — $ 193,661 U.S. agency — 38,855 — 38,855 Non-U.S. govt. & agency — 7,628 — 7,628 Agency MBS — 420,165 — 420,165 ABS/CMBS* — 224,870 — 224,870 Corporate — 690,297 1,770 692,067 Municipal — 405,840 — 405,840 Total fixed income securities - available-for-sale $ — $ 1,981,316 $ 1,770 $ 1,983,086 Equity securities 460,630 — — 460,630 Total $ 460,630 $ 1,981,316 $ 1,770 $ 2,443,716 * Non-agency asset-backed and commercial mortgage-backed |
Summary of changes in balance of Level 3 securities | Level 3 (in thousands) Securities Balance as of January 1, 2020 $ 1,770 Net realized and unrealized gains (losses) Included in net earnings (loss) as a part of: Net investment income (5) Net realized gains (16) Included in other comprehensive earnings (loss) (1,048) Total net realized and unrealized gains (losses) $ (1,069) Purchases 4,102 Balance as of March 31, 2020 $ 4,803 Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - $ (16) Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - $ (1,048) |
Schedule of amortized cost and fair value of available-for-sale securities | Available-for-sale March 31, 2020 (in thousands) Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair Asset Class Cost Losses Gains Losses Value U.S. government $ 171,026 $ - $ 15,948 $ - $ 186,974 U.S. agency 32,236 - 4,806 - 37,042 Non-U.S. govt. & agency 7,324 - 105 (113) 7,316 Agency MBS 396,474 - 17,807 (19) 414,262 ABS/CMBS* 230,830 (21) 1,908 (9,116) 223,601 Corporate 685,116 (857) 23,364 (19,205) 688,418 Municipal 389,845 - 16,203 (76) 405,972 Total Fixed Income $ 1,912,851 $ (878) $ 80,141 $ (28,529) $ 1,963,585 *Non-agency asset-backed and commercial mortgage-backed Available-for-sale December 31, 2019 (in thousands) Cost or Allowance Gross Gross Amortized for Credit Unrealized Unrealized Fair Asset Class Cost Losses Gains Losses Value U.S. government $ 186,699 $ - $ 6,994 $ (32) $ 193,661 U.S. agency 36,535 - 2,362 (42) 38,855 Non-U.S. govt. & agency 7,333 - 295 - 7,628 Agency MBS 411,808 - 8,920 (563) 420,165 ABS/CMBS* 222,832 - 2,514 (476) 224,870 Corporate 659,640 - 33,245 (818) 692,067 Municipal 390,431 - 16,131 (722) 405,840 Total Fixed Income $ 1,915,278 $ - $ 70,461 $ (2,653) $ 1,983,086 *Non-agency asset-backed and commercial mortgage-backed |
Schedule of securities in an unrealized loss position segregated by type and length of time in an unrealized loss position | March 31, 2020 December 31, 2019 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. government Fair value $ — $ — $ — $ 2,505 $ 8,463 $ 10,968 Amortized cost — — — 2,506 8,494 11,000 Unrealized Loss $ — $ — $ — $ (1) $ (31) $ (32) U.S. agency Fair value $ — $ — $ — $ 6,794 $ — $ 6,794 Amortized cost — — — 6,836 — 6,836 Unrealized Loss $ — $ — $ — $ (42) $ — $ (42) Non-U.S. government Fair value $ 3,011 $ — $ 3,011 $ — $ — $ — Amortized cost 3,124 — 3,124 — — — Unrealized Loss $ (113) $ — $ (113) $ — $ — $ — Agency MBS Fair value $ 249 $ 1,296 $ 1,545 $ 21,548 $ 41,718 $ 63,266 Amortized cost 249 1,315 1,564 21,664 42,165 63,829 Unrealized Loss $ — $ (19) $ (19) $ (116) $ (447) $ (563) ABS/CMBS* Fair value $ 126,540 $ 15,405 $ 141,945 $ 74,968 $ 18,036 $ 93,004 Amortized cost 134,660 16,401 151,061 75,332 18,148 93,480 Unrealized Loss $ (8,120) $ (996) $ (9,116) $ (364) $ (112) $ (476) Corporate Fair value $ 220,349 $ 4,182 $ 224,531 $ 16,478 $ 9,348 $ 25,826 Amortized cost 238,510 5,226 243,736 16,950 9,694 26,644 Unrealized Loss $ (18,161) $ (1,044) $ (19,205) $ (472) $ (346) $ (818) Municipal Fair value $ 7,301 $ — $ 7,301 $ 47,018 $ — $ 47,018 Amortized cost 7,377 — 7,377 47,740 — 47,740 Unrealized Loss $ (76) $ — $ (76) $ (722) $ — $ (722) Total fixed income Fair value $ 357,450 $ 20,883 $ 378,333 $ 169,311 $ 77,565 $ 246,876 Amortized cost 383,920 22,942 406,862 171,028 78,501 249,529 Unrealized Loss $ (26,470) $ (2,059) $ (28,529) $ (1,717) $ (936) $ (2,653) * Non-agency asset-backed and commercial mortgage-backed |
Schedule of credit quality indicators for investments in unrealized loss positions | Equivalent Equivalent (dollars in thousands) NAIC S&P Moody’s Amortized Unrealized Percent Rating Rating Rating Cost Fair Value Loss to Total 1 AAA/AA/A Aaa/Aa/A $ 202,517 $ 191,912 $ (10,605) 37.2 % 2 BBB Baa 85,785 80,759 (5,026) 17.6 % 3 BB Ba 65,256 59,398 (5,858) 20.5 % 4 B B 50,630 44,392 (6,238) 21.9 % 5 CCC Caa 2,674 1,872 (802) 2.8 % 6 CC or lower Ca or lower - - - - % Total $ 406,862 $ 378,333 $ (28,529) 100.0 % |
Available for sale securities | |
Schedule of contractual maturity of securities | March 31, 2020 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 56,844 $ 56,702 Due after one year through five years 442,572 449,447 Due after five years through 10 years 549,193 569,898 Due after 10 years 236,938 249,675 Mtge/ABS/CMBS* 627,304 637,863 Total available-for-sale $ 1,912,851 $ 1,963,585 *Mortgage-backed, asset-backed and commercial mortgage-backed |
HISTORICAL LOSS AND LAE DEVEL_2
HISTORICAL LOSS AND LAE DEVELOPMENT (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
HISTORICAL LOSS AND LAE DEVELOPMENT | |
Schedule of reconciliation of unpaid losses and settlement expenses (LAE) | For the Three-Month Periods Ended March 31, (in thousands) 2020 2019 Unpaid losses and LAE at beginning of year Gross $ 1,574,352 $ 1,461,348 Ceded (384,517) (364,999) Net $ 1,189,835 $ 1,096,349 Adoption impact of ASU 2016-13 on reinsurance balances recoverable $ (1,345) $ — Increase (decrease) in incurred losses and LAE Current accident year $ 126,194 $ 113,930 Prior accident years (15,173) (19,633) Total incurred $ 111,021 $ 94,297 Loss and LAE payments for claims incurred Current accident year $ (9,295) $ (5,531) Prior accident years (81,897) (70,145) Total paid $ (91,192) $ (75,676) Net unpaid losses and LAE at March 31 $ 1,208,319 $ 1,114,970 Unpaid losses and LAE at March 31 Gross $ 1,574,760 $ 1,479,344 Ceded (366,441) (364,374) Net $ 1,208,319 $ 1,114,970 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
INCOME TAXES | |
Schedule of reconciliation of income tax expense attributable to income from operations with amounts computed by applying the U.S. federal tax rate to pretax income from continuing operations | For the Three-Month Periods Ended March 31, 2020 2019 (in thousands) Amount % Amount % Provision for income taxes at the statutory rate of 21% $ (16,666) 21.0 % $ 17,166 21.0 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (1,029) 1.3 % (741) (0.9) % Tax exempt interest income (313) 0.4 % (345) (0.4) % Dividends received deduction (271) 0.3 % (203) (0.2) % ESOP dividends paid deduction (132) 0.2 % (137) (0.2) % Nondeductible expenses 203 (0.3) % 509 0.6 % Other items, net 111 (0.1) % 19 0.0 % Total tax expense (benefit) $ (18,097) 22.8 % $ 16,268 19.9 % |
STOCK BASED COMPENSATION (Table
STOCK BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
STOCK BASED COMPENSATION | |
Schedule of stock option activity | The following tables summarize option activity for the three-month periods ended March 31, 2020 and 2019: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2020 1,667,290 $ 62.52 Options granted 30,375 94.62 Options exercised (56,725) 49.23 $ 2,516 Options canceled/forfeited (300) 58.60 Outstanding options at March 31, 2020 1,640,640 $ 63.58 5.10 $ 40,778 Exercisable options at March 31, 2020 614,040 $ 54.68 3.75 $ 20,438 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2019 1,964,880 $ 54.24 Options granted 40,750 66.16 Options exercised (50,580) 33.71 $ 1,795 Options canceled/forfeited (19,100) 57.28 Outstanding options at March 31, 2019 1,935,950 $ 55.00 5.14 $ 32,589 Exercisable options at March 31, 2019 702,250 $ 47.84 3.73 $ 16,794 |
Schedule of stock option assumptions for fair value estimate | 2020 2019 Weighted-average fair value of grants $ 14.48 $ 11.35 Risk-free interest rates 1.54 % 2.94 % Dividend yield 2.69 % 2.98 % Expected volatility 22.68 % 22.84 % Expected option life 4.99 years 5.11 years |
OPERATING SEGMENT INFORMATION (
OPERATING SEGMENT INFORMATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
OPERATING SEGMENT INFORMATION | |
Schedule of revenues and net earnings by segment | For the Three-Month Periods REVENUES Ended March 31, (in thousands) 2020 2019 Casualty $ 143,420 $ 136,900 Property 44,348 38,746 Surety 27,814 29,043 Net premiums earned $ 215,582 $ 204,689 Net investment income 17,778 16,565 Net realized gains 15,152 9,068 Net unrealized gains (losses) on equity securities (130,395) 33,498 Total consolidated revenue $ 118,117 $ 263,820 NET EARNINGS (LOSS) (in thousands) 2020 2019 Casualty $ (1,323) $ 5,343 Property 9,908 8,246 Surety 8,654 8,844 Net underwriting income $ 17,239 $ 22,433 Net investment income 17,778 16,565 Net realized gains 15,152 9,068 Net unrealized gains (losses) on equity securities (130,395) 33,498 General corporate expense and interest on debt (3,652) (5,137) Equity in earnings of unconsolidated investees 4,514 5,314 Earnings (loss) before income taxes $ (79,364) $ 81,741 Income tax expense (benefit) (18,097) 16,268 Net earnings (loss) $ (61,267) $ 65,473 |
Schedule of net premiums earned by major product type | For the Three-Month Periods NET PREMIUMS EARNED Ended March 31, (in thousands) 2020 2019 Casualty Commercial excess and personal umbrella $ 40,088 $ 32,281 General liability 23,998 23,888 Commercial transportation 21,185 20,404 Professional services 20,695 20,299 Small commercial 15,633 13,188 Executive products 7,331 6,069 Other casualty 14,490 20,771 Total $ 143,420 $ 136,900 Property Marine $ 19,577 $ 17,021 Commercial property 19,155 16,875 Specialty personal 5,000 4,584 Other property 616 266 Total $ 44,348 $ 38,746 Surety Commercial $ 10,938 $ 10,812 Miscellaneous 10,516 11,602 Contract 6,360 6,629 Total $ 27,814 $ 29,043 Grand Total $ 215,582 $ 204,689 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases | |
Schedule of components of lease expense and other lease information | For the Three-Month Period Ended (in thousands) March 31, 2020 March 31, 2019 Operating lease cost $ 1,406 $ 1,481 Cash paid for amounts included in measurement of lease liabilities Operating cash flows from operating leases $ 1,486 $ 1,395 Right-of-use assets obtained in exchange for new operating lease liabilities $ 15 $ 719 Other non-cash reductions to right-of-use assets $ 1,192 $ - (in thousands) March 31, 2020 December 31, 2019 Operating lease right-of-use assets $ 19,889 $ 22,335 Operating lease liabilities $ 23,141 $ 24,475 Weighted-average remaining lease term - operating leases 4.48 years 4.69 years Weighted-average discount rate - operating leases 2.34 % 2.33 % |
Schedule of future minimum lease payments under non-cancellable leases | (in thousands) March 31, 2020 2020 $ 4,505 2021 5,976 2022 5,904 2023 4,386 2024 2,334 Thereafter 1,365 Total future minimum lease payments $ 24,470 Less imputed interest (1,329) Total operating lease liability $ 23,141 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounting Standards (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Retained earnings | $ 943,509 | $ 1,014,046 |
Accumulated other comprehensive earnings | $ 39,464 | $ 52,473 |
Percentage Of Fixed Income Portfolio Rated A Or Better | 85.00% | 85.00% |
Accounting Standards Update 2016-13 | Restatement Adjustment | ||
Retained earnings | $ 1,100 | |
Accounting Standards Update 2016-13 | Restatement Adjustment | Maximum | ||
Accumulated other comprehensive earnings | $ 100 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reinsurance (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Amount of allowance for uncollectible amounts on paid recoverables | $ 15,700,000 | $ 15,700,000 |
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts | 8,539,000 | 9,402,000 |
Financing Receivable, Allowance for Credit Loss, Writeoff | 0 | |
Financing Receivable, Allowance for Credit Loss, Recovery | $ 0 | |
Restatement Adjustment | Accounting Standards Update 2016-13 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Adoption impact of ASU 2016-13 on reinsurance balances recoverable | $ 1,345,000 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets and EPS (Details) - USD ($) $ / shares in Units, shares in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Business Acquisition | |||
Goodwill | $ 46,062,000 | $ 46,062,000 | |
Indefinite-lived intangibles - state insurance licenses | 7,500,000 | 7,500,000 | |
Definite-lived intangibles, net of accumulated amortization of $3,572 at 3/31/20 and $3,470 at 12/31/19 | 463,000 | 565,000 | |
Total intangibles | 7,963,000 | 8,065,000 | |
Goodwill and intangibles | 54,025,000 | 54,127,000 | |
Accumulated amortization of definite-lived intangibles | 3,572,000 | 3,470,000 | |
Amortization of intangible assets | 100,000 | $ 100,000 | |
Basic EPS, Income (Numerator) | |||
Income available to common shareholders | (61,267,000) | 65,473,000 | |
Diluted EPS, Income (Numerator) | |||
Income available to common shareholders | $ (61,267,000) | $ 65,473,000 | |
Basic EPS, Weighted Average Shares (Denominator) | |||
Number of shares outstanding | 44,920 | 44,536 | |
Effect of Dilutive Securities, Shares (Denominator) | |||
Stock options (in shares) | 351 | ||
Diluted EPS, Weighted Average Shares (Denominator) | |||
Number of shares outstanding | 44,920 | 44,887 | |
Basic EPS, Per Share Amount | |||
Basic net earnings per share (in dollars per share) | $ (1.36) | $ 1.47 | |
Diluted EPS, Per Share Amount | |||
Diluted earnings per share (in dollars per share) | $ (1.36) | $ 1.46 | |
Contractors Bonding and Insurance Company | |||
Business Acquisition | |||
Impairment of indefinite-lived intangible assets | 0 | ||
Energy Surety | |||
Business Acquisition | |||
Goodwill | $ 25,706,000 | 25,706,000 | |
Goodwill, Impairment Loss | 0 | ||
Miscellaneous and Contract Surety | |||
Business Acquisition | |||
Goodwill | 15,110,000 | 15,110,000 | |
Goodwill, Impairment Loss | 0 | ||
Small commercial | |||
Business Acquisition | |||
Goodwill | $ 5,246,000 | 5,246,000 | |
Goodwill, Impairment Loss | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in Accumulated Other Comprehensive Earnings (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
COMPREHENSIVE EARNINGS | |||
Tax rate used (as a percent) | 21.00% | 21.00% | |
Other comprehensive income (loss), tax | $ (3,500,000) | $ 7,800,000 | |
Changes in the balance of each component of accumulated other comprehensive earnings | |||
Beginning balance | 52,473,000 | ||
Net current-period other comprehensive earnings (loss) | (13,031,000) | 29,301,000 | |
Ending balance | 39,464,000 | ||
Balance of securities for which an allowance for credit losses has been recognized in net earnings | 5,727,000 | ||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income | |||
Net realized gains | 15,152,000 | 9,068,000 | |
Credit losses on available-for-sale securities | 800,000 | ||
Earnings (loss) before income taxes | (79,364,000) | 81,741,000 | |
Income tax expense (benefit) | 18,097,000 | (16,268,000) | |
Net earnings (loss) | (61,267,000) | 65,473,000 | |
Allowance for credit losses | 878,000 | $ 0 | |
Debt Securities, Available-for-sale, Allowance for Credit Loss, Writeoff | 0 | ||
Debt Securities, Available-for-sale, Allowance for Credit Loss, Recovery | 0 | ||
Unrealized Gains and Losses on Available-for-Sale Securities | |||
Changes in the balance of each component of accumulated other comprehensive earnings | |||
Beginning balance | 52,495,000 | (14,572,000) | |
Other comprehensive earnings before reclassifications | (11,880,000) | 29,795,000 | |
Amounts reclassified from accumulated other comprehensive earnings | (1,151,000) | (494,000) | |
Net current-period other comprehensive earnings (loss) | (13,031,000) | 29,301,000 | |
Ending balance | 39,464,000 | 14,729,000 | |
Unrealized Gains and Losses on Available-for-Sale Securities | Previously Reported | |||
Changes in the balance of each component of accumulated other comprehensive earnings | |||
Beginning balance | 52,473,000 | (14,572,000) | |
Unrealized Gains and Losses on Available-for-Sale Securities | Restatement Adjustment | Accounting Standards Update 2016-13 | |||
Changes in the balance of each component of accumulated other comprehensive earnings | |||
Beginning balance | 22,000 | ||
Reclassifications out of accumulated other comprehensive earnings | Unrealized Gains and Losses on Available-for-Sale Securities | |||
Reclassification Adjustment Out of Accumulated Other Comprehensive Income | |||
Net realized gains | 2,306,000 | 625,000 | |
Credit losses on available-for-sale securities | 849,000 | ||
Earnings (loss) before income taxes | 1,457,000 | 625,000 | |
Income tax expense (benefit) | (306,000) | (131,000) | |
Net earnings (loss) | $ 1,151,000 | $ 494,000 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Catastrophe Exposures (Details) - USD ($) $ in Millions | Mar. 01, 2020 | Feb. 29, 2020 | Dec. 31, 2020 |
Catastrophe Exposures | |||
First-dollar retention | $ 25 | $ 25 | |
Additional catastrophe reinsurance | $ 100 | ||
California earthquake | |||
Catastrophe Exposures | |||
Catastrophe reinsurance | 400 | ||
First-dollar retention | 25 | ||
Total catastrophe reinsurance | 500 | ||
Non-California earthquake | |||
Catastrophe Exposures | |||
Catastrophe reinsurance | 425 | ||
First-dollar retention | 25 | ||
Total catastrophe reinsurance | 525 | ||
Other perils | |||
Catastrophe Exposures | |||
Catastrophe reinsurance | 275 | ||
First-dollar retention | $ 25 | ||
Total catastrophe reinsurance | $ 375 |
INVESTMENTS - Disposition of Fi
INVESTMENTS - Disposition of Fixed Securities and Equities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Debt securities | Available for sale securities | SALES | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | $ 19,858 | $ 92,277 |
Gross Realized Gains | 2,270 | 1,356 |
Gross Realized Losses | (102) | (723) |
Net Realized Gain (Loss) | 2,168 | 633 |
Debt securities | Available for sale securities | CALLS/MATURITIES | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | 54,890 | 24,745 |
Gross Realized Gains | 145 | 1 |
Gross Realized Losses | (7) | (9) |
Net Realized Gain (Loss) | 138 | (8) |
Equity securities | SALES | ||
Summary of the disposition of fixed income and equity securities | ||
Proceeds From Sales | 38,042 | 26,347 |
Gross Realized Gains | 17,792 | 9,034 |
Gross Realized Losses | (2,633) | (592) |
Net Realized Gain (Loss) | $ 15,159 | $ 8,442 |
INVESTMENTS - Assets Measured A
INVESTMENTS - Assets Measured At Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets measured at Fair Value | ||
Available-for-sale fixed income | $ 1,963,585 | $ 1,983,086 |
Equity securities | 356,403 | 460,630 |
Fair value measured on recurring basis | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 1,963,585 | 1,983,086 |
Equity securities | 356,403 | 460,630 |
Other invested assets | 12,056 | |
Total assets at fair value | 2,332,044 | 2,443,716 |
Fair value measured on recurring basis | U.S. government | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 186,974 | 193,661 |
Fair value measured on recurring basis | U.S. Agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 37,042 | 38,855 |
Fair value measured on recurring basis | Non-U.S. govt. & agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 7,316 | 7,628 |
Fair value measured on recurring basis | Agency MBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 414,262 | 420,165 |
Fair value measured on recurring basis | ABS/CMBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 223,601 | 224,870 |
Fair value measured on recurring basis | Corporate Debt | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 688,418 | 692,067 |
Fair value measured on recurring basis | Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 405,972 | 405,840 |
Fair value measured on recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets measured at Fair Value | ||
Equity securities | 356,403 | 460,630 |
Other invested assets | 12,056 | |
Total assets at fair value | 368,459 | 460,630 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 1,958,782 | 1,981,316 |
Total assets at fair value | 1,958,782 | 1,981,316 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. government | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 186,974 | 193,661 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | U.S. Agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 37,042 | 38,855 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Non-U.S. govt. & agency | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 7,316 | 7,628 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Agency MBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 414,262 | 420,165 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | ABS/CMBS | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 223,601 | 224,870 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Debt | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 683,615 | 690,297 |
Fair value measured on recurring basis | Significant Other Observable Inputs (Level 2) | Municipal | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 405,972 | 405,840 |
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3) | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | 4,803 | 1,770 |
Total assets at fair value | 4,803 | 1,770 |
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3) | Corporate Debt | ||
Assets measured at Fair Value | ||
Available-for-sale fixed income | $ 4,803 | $ 1,770 |
INVESTMENTS - Level 3 (Details)
INVESTMENTS - Level 3 (Details) - Regulation D private placement fixed income securities $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Summary of changes in Level 3 securities | |
Beginning balance | $ 1,770 |
Net investment income | (5) |
Net realized gains | (16) |
Included in other comprehensive income (loss) | (1,048) |
Total net realized and unrealized gains (losses) | (1,069) |
Purchases | 4,102 |
Ending balance | 4,803 |
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Gain (Loss) Included in Other Comprehensive Income (Loss) | (1,048) |
Other comprehensive earnings (loss) | |
Summary of changes in Level 3 securities | |
Change in unrealized gains (losses) during the period for Level 3 assets held at period-end | (1,048) |
Net realized gains | |
Summary of changes in Level 3 securities | |
Change in unrealized gains (losses) during the period for Level 3 assets held at period-end | $ (16) |
INVESTMENTS - Amortized Cost an
INVESTMENTS - Amortized Cost and Fair Value (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
INVESTMENTS | ||
Accrued interest receivable | $ 14,944 | $ 14,587 |
Available-for-sale | ||
Total amortized cost | 1,912,851 | 1,915,278 |
Allowance for credit losses | (878) | 0 |
Available-for-sale Securities, Debt Securities | 1,963,585 | 1,983,086 |
Amortized Cost | ||
Due in one year or less | 56,844 | |
Due after one year through five years | 442,572 | |
Due after five years through 10 years | 549,193 | |
Due after 10 years | 236,938 | |
Mtge/ABS/CMBS | 627,304 | |
Total amortized cost | 1,912,851 | 1,915,278 |
Fair Value | ||
Due in one year or less | 56,702 | |
Due after one year through five years | 449,447 | |
Due after five years through 10 years | 569,898 | |
Due after 10 years | 249,675 | |
Mtge/ABS/CMBS | 637,863 | |
Total fair value | 1,963,585 | 1,983,086 |
Fair value measured on recurring basis | ||
INVESTMENTS | ||
Total assets at fair value | 2,332,044 | 2,443,716 |
Available-for-sale | ||
Available-for-sale Securities, Debt Securities | 1,963,585 | 1,983,086 |
Fair Value | ||
Total fair value | 1,963,585 | 1,983,086 |
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3) | ||
INVESTMENTS | ||
Total assets at fair value | 4,803 | 1,770 |
Available-for-sale | ||
Available-for-sale Securities, Debt Securities | 4,803 | 1,770 |
Fair Value | ||
Total fair value | 4,803 | 1,770 |
Debt securities | ||
INVESTMENTS | ||
Accrued interest receivable | 13,900 | 13,500 |
Available-for-sale | ||
Total amortized cost | 1,912,851 | 1,915,278 |
Allowance for credit losses | (878) | |
Gross unrealized gains | 80,141 | 70,461 |
Gross unrealized losses | (28,529) | (2,653) |
Available-for-sale Securities, Debt Securities | 1,963,585 | 1,983,086 |
Amortized Cost | ||
Total amortized cost | 1,912,851 | 1,915,278 |
Fair Value | ||
Total fair value | 1,963,585 | 1,983,086 |
U.S. government | ||
Available-for-sale | ||
Total amortized cost | 171,026 | 186,699 |
Gross unrealized gains | 15,948 | 6,994 |
Gross unrealized losses | (32) | |
Available-for-sale Securities, Debt Securities | 186,974 | 193,661 |
Amortized Cost | ||
Total amortized cost | 171,026 | 186,699 |
Fair Value | ||
Total fair value | 186,974 | 193,661 |
U.S. Agency | ||
Available-for-sale | ||
Total amortized cost | 32,236 | 36,535 |
Gross unrealized gains | 4,806 | 2,362 |
Gross unrealized losses | (42) | |
Available-for-sale Securities, Debt Securities | 37,042 | 38,855 |
Amortized Cost | ||
Total amortized cost | 32,236 | 36,535 |
Fair Value | ||
Total fair value | 37,042 | 38,855 |
Non-U.S. govt. & agency | ||
Available-for-sale | ||
Total amortized cost | 7,324 | 7,333 |
Gross unrealized gains | 105 | 295 |
Gross unrealized losses | (113) | |
Available-for-sale Securities, Debt Securities | 7,316 | 7,628 |
Amortized Cost | ||
Total amortized cost | 7,324 | 7,333 |
Fair Value | ||
Total fair value | 7,316 | 7,628 |
Agency MBS | ||
Available-for-sale | ||
Total amortized cost | 396,474 | 411,808 |
Gross unrealized gains | 17,807 | 8,920 |
Gross unrealized losses | (19) | (563) |
Available-for-sale Securities, Debt Securities | 414,262 | 420,165 |
Amortized Cost | ||
Total amortized cost | 396,474 | 411,808 |
Fair Value | ||
Total fair value | 414,262 | 420,165 |
ABS/CMBS | ||
Available-for-sale | ||
Total amortized cost | 230,830 | 222,832 |
Allowance for credit losses | (21) | |
Gross unrealized gains | 1,908 | 2,514 |
Gross unrealized losses | (9,116) | (476) |
Available-for-sale Securities, Debt Securities | 223,601 | 224,870 |
Amortized Cost | ||
Total amortized cost | 230,830 | 222,832 |
Fair Value | ||
Total fair value | 223,601 | 224,870 |
Corporate Debt | ||
Available-for-sale | ||
Total amortized cost | 685,116 | 659,640 |
Allowance for credit losses | (857) | |
Gross unrealized gains | 23,364 | 33,245 |
Gross unrealized losses | (19,205) | (818) |
Available-for-sale Securities, Debt Securities | 688,418 | 692,067 |
Amortized Cost | ||
Total amortized cost | 685,116 | 659,640 |
Fair Value | ||
Total fair value | 688,418 | 692,067 |
Municipal | ||
Available-for-sale | ||
Total amortized cost | 389,845 | 390,431 |
Gross unrealized gains | 16,203 | 16,131 |
Gross unrealized losses | (76) | (722) |
Available-for-sale Securities, Debt Securities | 405,972 | 405,840 |
Amortized Cost | ||
Total amortized cost | 389,845 | 390,431 |
Fair Value | ||
Total fair value | $ 405,972 | $ 405,840 |
INVESTMENTS - Allowance for Cre
INVESTMENTS - Allowance for Credit Losses, Unrealized Losses on Securities (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($)security | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Securities in unrealized loss positions | |||
Allowance for credit losses | $ 878 | $ 0 | |
Debt securities | |||
Securities in unrealized loss positions | |||
Number of debt securities for which there is an allowance for credit losses | security | 39 | ||
Allowance for credit losses | $ 900 | ||
Number of debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded | security | 381 | ||
Number of unrealized loss positions | security | 420 | ||
Number of securities in unrealized loss positions for 12 months or longer | security | 30 | ||
Unrealized loss | $ 28,500 | ||
Unrealized losses as percentage of fixed income portfolio cost basis | 1.50% | ||
Unrealized losses relative to total invested assets (as a percent) | 1.20% | ||
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Recognized in Earnings | $ 0 | ||
Equity securities | |||
Securities in unrealized loss positions | |||
Unrealized gains (losses) on equity securities still held | $ (115,200) | $ 41,900 |
INVESTMENTS - Unrealized Losses
INVESTMENTS - Unrealized Losses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Debt securities | ||
Fair value | ||
Less than 12 months | $ 357,450 | $ 169,311 |
12 months and greater | 20,883 | 77,565 |
Total Fair Value | 378,333 | 246,876 |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 383,920 | 171,028 |
12 months and greater | 22,942 | 78,501 |
Total Cost or Amortized Cost | 406,862 | 249,529 |
Unrealized Loss | ||
Less than 12 months | (26,470) | (1,717) |
12 months and greater | (2,059) | (936) |
Total Unrealized Loss | $ (28,529) | (2,653) |
Percent to Total | 100.00% | |
Debt securities | NAIC Rating 1 | AAA/AA/A | Aaa/Aa/A | ||
Fair value | ||
Total Fair Value | $ 191,912 | |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | 202,517 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (10,605) | |
Percent to Total | 37.20% | |
Debt securities | NAIC Rating 2 | BBB | Baa | ||
Fair value | ||
Total Fair Value | $ 80,759 | |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | 85,785 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (5,026) | |
Percent to Total | 17.60% | |
Debt securities | NAIC Rating 3 | BB | Ba | ||
Fair value | ||
Total Fair Value | $ 59,398 | |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | 65,256 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (5,858) | |
Percent to Total | 20.50% | |
Debt securities | NAIC Rating 4 | B | B | ||
Fair value | ||
Total Fair Value | $ 44,392 | |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | 50,630 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (6,238) | |
Percent to Total | 21.90% | |
Debt securities | NAIC Rating 5 | CCC | Caa | ||
Fair value | ||
Total Fair Value | $ 1,872 | |
Cost or amortized Cost | ||
Total Cost or Amortized Cost | 2,674 | |
Unrealized Loss | ||
Total Unrealized Loss | $ (802) | |
Percent to Total | 2.80% | |
U.S. government | ||
Fair value | ||
Less than 12 months | 2,505 | |
12 months and greater | 8,463 | |
Total Fair Value | 10,968 | |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 2,506 | |
12 months and greater | 8,494 | |
Total Cost or Amortized Cost | 11,000 | |
Unrealized Loss | ||
Less than 12 months | (1) | |
12 months and greater | (31) | |
Total Unrealized Loss | (32) | |
U.S. Agency | ||
Fair value | ||
Less than 12 months | 6,794 | |
Total Fair Value | 6,794 | |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 6,836 | |
Total Cost or Amortized Cost | 6,836 | |
Unrealized Loss | ||
Less than 12 months | (42) | |
Total Unrealized Loss | (42) | |
Non-U.S. govt. & agency | ||
Fair value | ||
Less than 12 months | $ 3,011 | |
Total Fair Value | 3,011 | |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 3,124 | |
Total Cost or Amortized Cost | 3,124 | |
Unrealized Loss | ||
Less than 12 months | (113) | |
Total Unrealized Loss | (113) | |
Agency MBS | ||
Fair value | ||
Less than 12 months | 249 | 21,548 |
12 months and greater | 1,296 | 41,718 |
Total Fair Value | 1,545 | 63,266 |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 249 | 21,664 |
12 months and greater | 1,315 | 42,165 |
Total Cost or Amortized Cost | 1,564 | 63,829 |
Unrealized Loss | ||
Less than 12 months | (116) | |
12 months and greater | (19) | (447) |
Total Unrealized Loss | (19) | (563) |
ABS/CMBS | ||
Fair value | ||
Less than 12 months | 126,540 | 74,968 |
12 months and greater | 15,405 | 18,036 |
Total Fair Value | 141,945 | 93,004 |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 134,660 | 75,332 |
12 months and greater | 16,401 | 18,148 |
Total Cost or Amortized Cost | 151,061 | 93,480 |
Unrealized Loss | ||
Less than 12 months | (8,120) | (364) |
12 months and greater | (996) | (112) |
Total Unrealized Loss | (9,116) | (476) |
Corporate Debt | ||
Fair value | ||
Less than 12 months | 220,349 | 16,478 |
12 months and greater | 4,182 | 9,348 |
Total Fair Value | 224,531 | 25,826 |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 238,510 | 16,950 |
12 months and greater | 5,226 | 9,694 |
Total Cost or Amortized Cost | 243,736 | 26,644 |
Unrealized Loss | ||
Less than 12 months | (18,161) | (472) |
12 months and greater | (1,044) | (346) |
Total Unrealized Loss | (19,205) | (818) |
Municipal | ||
Fair value | ||
Less than 12 months | 7,301 | 47,018 |
Total Fair Value | 7,301 | 47,018 |
Cost or amortized Cost | ||
Amortized cost, less than 12 months | 7,377 | 47,740 |
Total Cost or Amortized Cost | 7,377 | 47,740 |
Unrealized Loss | ||
Less than 12 months | (76) | (722) |
Total Unrealized Loss | $ (76) | $ (722) |
INVESTMENTS Debt and Short-term
INVESTMENTS Debt and Short-term Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Other invested assets | |||
Other investments | $ 53,562 | $ 70,441 | |
Investments pledged as collateral | $ 15,100 | ||
Investment in Federal Home Loan Bank Stock | us-gaap:AssetPledgedAsCollateralMember | ||
Federal Home Loan Bank Borrowings, Fair Value Disclosure | $ 0 | ||
Cash and Short-term Investments | |||
Cash | 42,701 | 46,203 | |
Investment In Low Income Housing Tax Credit Partnership Net Of Amortization | |||
Other invested assets | |||
Other investments | 22,400 | 23,300 | |
Total tax benefit on investments in housing tax credit partnership | 900 | $ 600 | |
Qualified Affordable Housing Project Investments, Commitment | 8,000 | ||
Investment in Private Funds | |||
Other invested assets | |||
Other investments | 17,500 | $ 46,000 | |
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments | 13,500 | ||
Investment in Restricted Stock | |||
Other invested assets | |||
Other investments | $ 12,100 |
HISTORICAL LOSS AND LAE DEVEL_3
HISTORICAL LOSS AND LAE DEVELOPMENT - Unpaid Losses and Settlement Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Unpaid losses and LAE at beginning of year: | |||
Gross | $ 1,574,352 | $ 1,461,348 | |
Ceded | (384,517) | (364,999) | |
Net | 1,189,835 | 1,096,349 | |
Increase (decrease) in incurred losses and LAE: | |||
Current accident year | 126,194 | 113,930 | |
Prior accident years | (15,173) | (19,633) | |
Total incurred | 111,021 | 94,297 | |
Loss and LAE payments for claims incurred: | |||
Current accident year | (9,295) | (5,531) | |
Prior accident year | (81,897) | (70,145) | |
Total paid | (91,192) | (75,676) | |
Net | 1,208,319 | 1,114,970 | |
Unpaid losses and LAE at year end | |||
Gross | 1,574,760 | 1,479,344 | |
Ceded | (366,441) | (364,374) | |
Net | $ 1,208,319 | $ 1,114,970 | |
Accounting Standards Update 2016-13 | Restatement Adjustment | |||
Adoption impact of ASU 2016-13 | |||
Adoption impact of ASU 2016-13 on reinsurance balances recoverable | $ (1,345) |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Reconciliation of income tax expense reported to amount computed by applying the U.S. federal tax rate | ||
Provision for income taxes at the statutory federal tax rate | $ (16,666) | $ 17,166 |
Excess tax benefit on share-based compensation | (1,029) | (741) |
Tax-exempt interest income | (313) | (345) |
Dividends received deduction | (271) | (203) |
ESOP dividends paid deduction | (132) | (137) |
Nondeductible expenses | 203 | 509 |
Other items, net | 111 | 19 |
Income tax expense (benefit) | $ (18,097) | $ 16,268 |
Reconciliation of income tax expense rate to the U.S. federal tax rate | ||
U.S. federal tax rate (as a percent) | 21.00% | 21.00% |
Excess tax benefit on share-based compensation (as a percent) | 1.30% | (0.90%) |
Effective rate reduction due to tax exempt interest income (as a percent) | 0.40% | (0.40%) |
Effective rate reduction due to dividend received (as a percent) | 0.30% | (0.20%) |
Effective rate reduction due to dividend paid to ESOP (as a percent) | 0.20% | (0.20%) |
Effective rate reduction due to nondeductible expenses (as a percent) | (0.30%) | 0.60% |
Effective rate reduction due to other items, net (as a percent) | (0.10%) | 0.00% |
Effective Income Tax Rate Reconciliation, Percent, Total | 22.80% | 19.90% |
STOCK BASED COMPENSATION (Detai
STOCK BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | 59 Months Ended | 60 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | May 06, 2015 | |
Weighted Number of Options Outstanding | |||||
Outstanding options at the beginning of the period (in shares) | 1,667,290 | 1,964,880 | 1,964,880 | ||
Options granted (in shares) | 30,375 | 40,750 | |||
Options exercised (in shares) | (56,725) | (50,580) | |||
Options canceled/forfeited (in shares) | (300) | (19,100) | |||
Outstanding options at the end of the period (in shares) | 1,640,640 | 1,935,950 | 1,667,290 | 1,640,640 | |
Exercisable options at the end of the period (in shares) | 614,040 | 702,250 | 614,040 | ||
Weighted Average Exercise Price | |||||
Outstanding options at the beginning of the period (in dollars per share) | $ 62.52 | $ 54.24 | $ 54.24 | ||
Options granted (in dollars per share) | 94.62 | 66.16 | |||
Options exercised (in dollars per share) | 49.23 | 33.71 | |||
Options canceled/forfeited (in dollars per share) | 58.60 | 57.28 | |||
Outstanding options at the end of the period (in dollars per share) | 63.58 | 55 | $ 62.52 | $ 63.58 | |
Exercisable options at the end of the period (in dollars per share) | $ 54.68 | $ 47.84 | $ 54.68 | ||
Weighted Average Remaining Contractual Life | |||||
Weighted-average remaining contractual term of options outstanding | 5 years 1 month 6 days | 5 years 1 month 20 days | |||
Weighted-average remaining contractual term of exercisable options | 3 years 9 months | 3 years 8 months 23 days | |||
Aggregate Intrinsic Value | |||||
Options exercised (in dollars) | $ 2,516 | $ 1,795 | |||
Outstanding options at the end of the period (in dollars) | 40,778 | 32,589 | $ 40,778 | ||
Exercisable options at the end of the period (in dollars) | $ 20,438 | $ 16,794 | 20,438 | ||
Weighted-average fair value of grants (in dollars per share) | $ 14.48 | $ 11.35 | |||
Stock-based compensation expenses (in dollars) | $ 1,000 | $ 1,000 | |||
Income tax benefit from stock-based compensation (in dollars) | 200 | $ 200 | |||
Unrecognized stock-based compensation expense (in dollars) | $ 4,200 | 4,200 | |||
Weighted average grant date assumptions and weighted average fair value | |||||
Weighted-average fair value of grants (in dollars per share) | $ 14.48 | $ 11.35 | |||
Risk-free interest rates (as a percent) | 1.54% | 2.94% | |||
Dividend yield (as a percent) | 2.69% | 2.98% | |||
Expected volatility (as a percent) | 22.68% | 22.84% | |||
Expected option life | 4 years 11 months 26 days | 5 years 1 month 9 days | |||
Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Award vesting period | 3 years | ||||
Age and period of service of the participant to be eligible for retirement | 75 years | ||||
Aggregate Intrinsic Value | |||||
Stock-based compensation expenses (in dollars) | $ 200 | $ 100 | |||
Unrecognized stock-based compensation expense (in dollars) | $ 800 | $ 800 | |||
Weighted average grant date assumptions and weighted average fair value | |||||
RSUs Granted | 45,350 | ||||
RSUs Outstanding | 43,708 | 43,708 | |||
Outside director | Maximum | |||||
Aggregate Intrinsic Value | |||||
Unrecognized stock-based compensation expense (in dollars) | $ 100 | $ 100 | |||
Outside director | Restricted Stock Units (RSUs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Award vesting period | 1 year | ||||
Aggregate Intrinsic Value | |||||
Stock-based compensation expenses (in dollars) | $ 100 | $ 100 | |||
Weighted average grant date assumptions and weighted average fair value | |||||
RSUs Granted | 15,085 | ||||
RSUs Outstanding | 6,182 | 6,182 | |||
Grant date fair value of RSUs | $ 50 | $ 50 | |||
RLI Corp. Long-Term Incentive Plan (LTIP) and Omnibus Stock Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Award vesting period | 5 years | ||||
Term of options | 8 years | ||||
Age and period of service of the participant to be eligible for retirement | 75 years | ||||
RLI Corp. Long-Term Incentive Plan (2010 LTIP) | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Shares authorized for grant | 4,000,000 | ||||
Weighted Number of Options Outstanding | |||||
Options granted (in shares) | 2,878,000 | ||||
RLI Corp. Long-Term Incentive Plan (2015 LTIP) | |||||
Share-based Compensation Arrangement by Share-based Payment Award | |||||
Shares authorized for grant | 4,000,000 | 4,000,000 | |||
Weighted Number of Options Outstanding | |||||
Options granted (in shares) | 30,375 | 2,312,835 |
OPERATING SEGMENT INFORMATION -
OPERATING SEGMENT INFORMATION - Reconciliation of Segment Totals to Total Earnings (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
REVENUES | ||
Net premiums earned | $ 215,582 | $ 204,689 |
Net investment income | 17,778 | 16,565 |
Net realized gains | 15,152 | 9,068 |
Net unrealized gains (losses) on equity securities | (130,395) | 33,498 |
Consolidated revenue | 118,117 | 263,820 |
NET EARNINGS | ||
Net underwriting income | 17,239 | 22,433 |
Net investment income | 17,778 | 16,565 |
Net realized gains | 15,152 | 9,068 |
Net unrealized gains (losses) on equity securities | (130,395) | 33,498 |
General corporate expense and interest on debt | (3,652) | (5,137) |
Equity in earnings of unconsolidated investees | 4,514 | 5,314 |
Earnings (loss) before income taxes | (79,364) | 81,741 |
Income tax expense (benefit) | (18,097) | 16,268 |
Net earnings (loss) | (61,267) | 65,473 |
Casualty segment | ||
REVENUES | ||
Net premiums earned | 143,420 | 136,900 |
NET EARNINGS | ||
Net underwriting income | (1,323) | 5,343 |
Property segment | ||
REVENUES | ||
Net premiums earned | 44,348 | 38,746 |
NET EARNINGS | ||
Net underwriting income | 9,908 | 8,246 |
Surety segment | ||
REVENUES | ||
Net premiums earned | 27,814 | 29,043 |
NET EARNINGS | ||
Net underwriting income | $ 8,654 | $ 8,844 |
OPERATING SEGMENT INFORMATION_2
OPERATING SEGMENT INFORMATION - Major Products (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue by major product | ||
Net premiums earned | $ 215,582 | $ 204,689 |
Casualty segment | ||
Revenue by major product | ||
Net premiums earned | 143,420 | 136,900 |
Casualty segment | Commercial excess and personal umbrella | ||
Revenue by major product | ||
Net premiums earned | 40,088 | 32,281 |
Casualty segment | General liability | ||
Revenue by major product | ||
Net premiums earned | 23,998 | 23,888 |
Casualty segment | Transportation | ||
Revenue by major product | ||
Net premiums earned | 21,185 | 20,404 |
Casualty segment | Professional services | ||
Revenue by major product | ||
Net premiums earned | 20,695 | 20,299 |
Casualty segment | Small commercial | ||
Revenue by major product | ||
Net premiums earned | 15,633 | 13,188 |
Casualty segment | Executive products | ||
Revenue by major product | ||
Net premiums earned | 7,331 | 6,069 |
Casualty segment | Other casualty | ||
Revenue by major product | ||
Net premiums earned | 14,490 | 20,771 |
Property segment | ||
Revenue by major product | ||
Net premiums earned | 44,348 | 38,746 |
Property segment | Marine | ||
Revenue by major product | ||
Net premiums earned | 19,577 | 17,021 |
Property segment | Commercial | ||
Revenue by major product | ||
Net premiums earned | 19,155 | 16,875 |
Property segment | Specialty Personal | ||
Revenue by major product | ||
Net premiums earned | 5,000 | 4,584 |
Property segment | Other property | ||
Revenue by major product | ||
Net premiums earned | 616 | 266 |
Surety segment | ||
Revenue by major product | ||
Net premiums earned | 27,814 | 29,043 |
Surety segment | Commercial surety product | ||
Revenue by major product | ||
Net premiums earned | 10,938 | 10,812 |
Surety segment | Miscellaneous | ||
Revenue by major product | ||
Net premiums earned | 10,516 | 11,602 |
Surety segment | Contract | ||
Revenue by major product | ||
Net premiums earned | $ 6,360 | $ 6,629 |
Leases - Components of Lease Ex
Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Leases | |||
Operating Lease Cost | $ 1,406 | $ 1,481 | |
Cash paid for amounts included in the measurement of lease liabilities | |||
Operating cash flows from operating leases | 1,486 | 1,395 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | 15 | $ 719 | |
Other non-cash reductions to right of use assets | 1,192 | ||
Operating lease right-of-use assets | $ 19,889 | $ 22,335 | |
Operating lease, right-of-use asset, Statement of Financial Position | us-gaap:OtherAssets | ||
Operating Lease Liabilities | $ 23,141 | $ 24,475 | |
Operating lease liability, Statement of Financial Position | us-gaap:OtherLiabilities | ||
Weighted-average remaining lease term - operating leases | 4 years 5 months 23 days | 4 years 8 months 8 days | |
Weighted-average discount rate - operating leases | 2.34% | 2.33% | |
Minimum | |||
Leases | |||
Remaining lease terms - operating leases | 1 year | ||
Maximum | |||
Leases | |||
Remaining lease terms - operating leases | 15 years |
Leases - Future Minimum Lease P
Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Future minimum lease payments under non-cancellable leases | ||
2020 | $ 4,505 | |
2021 | 5,976 | |
2022 | 5,904 | |
2023 | 4,386 | |
2024 | 2,334 | |
Thereafter | 1,365 | |
Total future minimum lease payments | 24,470 | |
Less imputed interest | (1,329) | |
Total operating lease liability | $ 23,141 | $ 24,475 |