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RLI RLI

Participants
Aaron Diefenthaler VP, Chief Investment Officer and Treasurer
Todd Bryant VP and CFO
Craig Kliethermes President and COO
Jon Michael Chairman and CEO
Randy Binner B. Riley Securities, Inc., FBR
Mark Dwelle RBC Capital Markets
Matt Carletti JMP
Call transcript
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Operator

Good day, and welcome ladies and gentlemen to the RLI Corp's First Quarter Earnings Teleconference.

As a reminder, we will open up the conference for questions and answers after the presentation.

Before we get started, let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs and expectations for the future.

As always, these forward-looking statements are subject to certain factors and uncertainties, which may cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including the annual report on Form 10-K as supplemented in the Form 10-Q for the quarterly period ending March 31, 2021, which should be reflected carefully. a that [ph] announcing contains results. filed and the first has Commission, Exchange the company Form with X-K Securities quarter The press release management non-GAAP measures to financial results. the per RLI from of reference and share are earnings earnings call which operations make may operating during RLI's and losses and losses after-tax share gains or earnings from net consist of or operating after realized the gains equity earnings on securities. earnings elimination per operations of after-tax unrealized core operating operations, measures may these management gauging periods to useful RLI across are and performance in not other believes reporting companies' earnings. comparable be definitions of The Form earnings. between earnings and X-K net contains reconciliation operations Form The press on available the are company's X-K at and website www.rlicorp.com. release turn I Vice over Chief the RLI's Mr. to conference will Investment now President, Treasurer, Officer and Diefenthaler. Aaron sir. ahead, go Please

Aaron Diefenthaler

welcome earnings morning, first RLI's Good call XXXX. Casey. quarterly Thanks, and for to

us Michael, are Chief Officer; and and Kliethermes, Officer. Craig Bryant, Jon Operating CEO; President Chief Financial and Todd today Joining Chairman

with will and color on will questions As details Todd? the close financial and Todd We Jon conditions. market the Craig quarter. the on final then will can start call usual, thoughts. some open to some with product off with follow portfolio

Todd Bryant

year growth loss returned as premium top-line elevated per Thanks, first when quarter $X.XX results. XX% or well we Aaron, Yesterday, quarter quarters' for were share. than XX% losses, storm reserves, reported The favorable good result insurance. of year's earnings achieved and growth last prior benefits the as on casualty which operating morning, improved reflects year more winter by everyone. to We current adjusting transportation offset comparable

accurate period the $XX decrease Investment comparing premium of rates on adding adjusting equity the earnings XXXX. insurance Unrealized combined premium down in We business. decline posted resulted helped the on total, in the income our XX.X losses more a gains which our growth view during the served provides stark bolster pandemic, the to auto million experienced the year, transportation in ratio. a In premium, contrast quarter. reinvestment the returning and at we and we a net year unrealized was last same when reminder, portfolio As in quarter. the or the were X.X% last reflective this during back by onset of believe public

we Additionally, But the XX% nicely the year auto Craig high $XX was quarter was modest, growth support a all a net adjustment result plus market as want for XX% continued to will public to in compared advanced segments invest comparative led XX.X, the first year from the benefit combined year. accrued But as conditions three underwriting From earnings was market last surety. this and in perspective, mentioned, as the more previously casualty a an casualty year. Adjusting of which premium Property disruption rates start quarter's way last experienced out talk fairly year's up last to minute. to this to ratio Reported amount, of earnings. the compared million growth growth. in about call from ago. growth. level, XX.X

XX.X, compared in the largest most to loss, storm in impact widespread reserve Favorable storm of the related exposure million seven and was and was spring one points Yuri, across winter $XX last coverages. was despite from million development declined property Our our $X million in net loss experienced. a property to in package events was products. X.X segment, ratio notably $XX the certain casualty to year, segment up storm point Of or winter

On casualty. a an XXXX, to first segment of improving property aforementioned reserves, its reserves specific in million in if an reserves, reserve improvement. COVID the mix ratio casualty perspective, down is loss established quarter in underlying $X and in the as this and influenced reserves $X have loss year. of basis, million ratio last ratios, influenced booking reserves approach reductions An year, in from specific modest our exclude prior COVID reminder first well down million we accident the we about loss same prior recorded and result, were last uncertainty the established our COVID quarter as current total in and call driven underlying we from seeing for fourth catastrophes our around year-end. is unchanged The largely are the benefits, is a the similar XXXX. on year the and discussed In what on we quarter you year's X COVID As indications $X COVID, points From year. overall period

our to point expense to ratio expenses, half a XX. Moving quarterly increased

up expense accrued driven general equity was operating addition, plus metrics portfolio corporate plans. by million. of $X.X are these higher. significantly earnings These combination incentive for combined ratio higher net The increases performance drove improved In performance, related given relative and the an amounts

flat. were expenses operating other amounts, incentive Excluding

X.X% from to quarter. price flow we first in the for in investments, with were good solid profitable the bonds a yields, price All quarter from Jim that, over I'll with public growth. the higher more returns And Craig. operating risk yield has for with our other turn million Prime $X.X the bonds results. a return a of in, offset benefit grade are earnings at higher assets. to high the to investment and to more portfolio, declines continue positive and than nicely put And the also from decline happy from each year. core trade the opportunity and And Jim modest investee call the Traditional difficult Maui to rates. adding portfolio return lead mid-XXXX. overcome continues credit. assets positive posted Turning to work the equities quarter's and in rebounded Maui couldn't a to the both to in start period very Prime contributor in a Outside cash quarter, All quarter,

Craig Kliethermes

Aaron good Todd. morning, And Thanks, and everyone.

disciplined gross to start and products, a the written and consistency portfolio the combined impact the very running testament segments, in despite of The to XX products. winter a of premium, year Top-line results sub-XX our off solid underwriting specialty achieved in was we're reporting ratio our underlying our underwriting we growth mentioned, all combined to is across storm of Yuri. realized ratio growth most and an approach. Todd As of well-diversified XX%

read increases or rates our low. we this early the a quarter loss whether above majority beta, too Our it portfolio. were the most not is quite achievement carried would a costs were fervent plateauing long-term but of lower as markets, high, say say at in achieve rate continue the little the to the are across to as not but highest lows I

our catastrophe competition the moving in commercial spaces our broadly products, well-balanced property, acceptable casualty, diet executive and palette and The us remains remain underwriting chosen market. toward Our auto as liability, for excess exposed disruptive refined is most is levels rate marine.

an ratio on Now for and XX%, premiums grew XX report specific transportation. combined to we gross X% some casualty, outstanding comments. In segment adjusted

recall, personal have both segment line. package increase X% and profitability which products may The top-line this to by led personal was able by segment on our small liability, nicely. account businesses, still and are excess our businesses. the holding while overall, in primary liability, transportation, was led retentions transportation services inactive segment of industry. due you a down, to the never industry supply related for to transportation Also last shut some construction note, observed completely vehicles the premium our this our slowdown exposure As year quarter and And comparable to casualty product resulting required rate achieve in professional significant the pandemic rebounded we although a We're adjustment has executive issues. uncertainty casualty chain well. liability, Underwriting access significant liability

still XX% loss our quarter. segments increases public increases products achieve increases moderating able with widespread double This mentioned overall. digit we're a As see business within as liability, rate achieved directors widespread and the were the of for for underwriting dozen rate the earlier, so winter XX% rate portfolio. along product, on or storm excess transportation result we did We but across products grew a officers segment and of some the to commercial top-line more executive Yuri. Property for rate the small

in this segment. opportunities We continue to all observe across products

Since and but above grew a Earthquake above of prices levels rate of to businesses a seems peak a than still rate the of risk. versus The the at supply. or result assume excess catastrophe financing pace. was infrequently, demand threshold increases double-digit mainly occur earthquakes still off premium its and for and little acceptable significant the quarters, wind, to Our more certain couple property competitive self-insure. required seldom elect a decline is coverage little owners the size last

catastrophe We exposures to continues our grow have cooperate. if to market room the

underwriting digit produces time results. mahalo profitable of combined Larger on results we XX% reinsurance the that grow of to grow, Hawaii in business be to pace competitors X% we to is don't underwriting a elsewhere. at retrenchment, starting without In another to experienced for continue great our to than want continues to Marine disruption for come Surety, opportunities XX our some a industry grew capacity seems ratio, signs many which continues growth homeowners missions also big very a Lloyd's to the to a on at good Our giving more and increase significantly and see The top-line move double I because business, company. achieved and and losses back causing first to and market result top-line years. the hopefully and great the finally have us. tightening hit

this we capitalize came All this starting are as observe. to as our were quarter driven of products which in commercial disruption segment We growth from well business, profitable. new existing will saw continue to on with account our expansion the opportunities business both accounts. Most

and makes take well-positioned investing the to do and our customers our future, in with building create with true on well, we adapt opportunities, occurs. us. remain partners new of opportunities make focus work retrench, to what when start for in XXXX, disruption to solid market consistent for our continue to competitors service, will our easier and underwriting, technology. And Overall, execute. investment technology advantage customers the to we'll we we own and and different, us on distribution servicing We to our stay relationships, focus and will our environment, We what it people,

ways our solutions constantly and customers needs It distribution what do. provide owners profitable do. of to we are We to the is partners. meet is looking This for what

success the Our they they provide service owners and the quality we attributed be customers. the and associate build our with hire to can of relationships directly

it turn up Thank open differentiated I'll back quarter. questions. And to Our you. delivered again the to moderator the approach this

Operator

Thank ahead, take Binner. question you, we'll first And our from Please Randy sir. [Operator Instructions] sir. go

Randy Binner

the a it, I on Thanks. have of in couple premiums. I quantification apologize missed so casualty? we back guess the first get more was normalized I quantification I growth but morning. questions. there a is commentary can around that a if adding in Good book rate transportation

Todd Bryant

It's There million. $XX Todd. was. is this Randy,

year for to we back was produced If you the negative quarter $XX that last million. look transportation premium, adding where the of in first to

Randy Binner

to Compared Okay. XQ 'XX?

Todd Bryant

Yeah. casualty where Correct. that in to ended amount really we either back transportation Add total. in in

If XX%. year, overall that to XX% versus back that'll last to then you add get that growth

Randy Binner

Got And increase number increase Craig's of that you blended your lower rate what was that absolute on rate or beta. overall then a I an kind the of actually comment guess, provide number it. did was?

Craig Kliethermes

quarter segment sure we I'm was Well, quarter. I this last what and by the suppose increase disclosed

overall, say I happy had to I last casualty the we I think in mean, XX% I'm guess that, So quarter quarter. for

I had quarter. I or X% we're small up, player. said get think caught we we obviously, too wouldn't mean, medium a because sized I relatively there's this

volatility bellwether for of caution as and against, around. why want then so not industry, we to necessarily whole I a that's bounce numbers have little we're a So bit the

sure not trend the I'm not. So that or

On the last property quarter. XX% we reported I increase XX% believe reported this and rate quarter, we side,

I within if be could next. you could know say the down, it's but I So point. don't one that mean, it's

Randy Binner

Yeah.

peak, good this past just think, be that a of made little I guess, earnings season earlier to bit what was would some But rate I you maybe versus casualty that on too trend. could but beta, still if the very tell. helpful? it lower last early of think it's data I And expand kind

Craig Kliethermes

I I did Sure. the talk mean, in casualty segment. a bit little

too its rate they public strong almost word. digit just were quite of third I increases, we digit like the I before. it's that straight mean, soften rate the got they double mean, increases that's still year weren't they For size double that business, on DNO example,

that the group, executive in So the that's within then overall in private increase. down but in offset when they it rate funded price DNO DNO, decrease, less those of more didn't that widespread rates average did business. But increases weigh there increased, we the for cyber, like the that the quite takes some EPOI get public of an actually average,

So there's was relatively an area. flat. Transportation

I the And in getting are probably it. was, some think, This so mean, the roughly that property, I And of then increases. that on digit casualty I was off that. part double was business, third we straight think, again, biggest of the driver cat getting year was about the the

double quake. aren't So large, increases quite digit increases both the they're still in as but wind and

that So down. on brought that

Randy Binner

it. Got

I'll Okay. it Thank you. there. leave

Craig Kliethermes

Thanks, Randy.

Operator

we Thank take from you. will [ph] question Kane. our Derek And next

Unidentified Analyst

Good growth Couple short-term the from morning. ones. How had is that on of or economic determine recovery? some Thanks the the trends to to, look are actuarial unprecedented note, loss you quick of points what for claims, of during aside are that you've my metrics thinking question. about taking whether related you top-line impressive the a data And kind sustainable? monitoring

Todd Bryant

I short-term part I just as Todd, trends, as guess is, mean, start this in we we on just considered, Derek, say the the your first far don't. would I'll there out. I I would of question how

Craig view and further, view, about this we reserving can comment and the side, actuarial the the of certainly but often. actuarial on talked On

a about was longer-term trend down whatever because approach, talked too, year may that. it loss we taking it we or I are discount frequency whether last costs think We it be,

I that you rate the trends. would think cost above in that prudent expect discount is we're really a trend shorter-term But loss long-term those ratio. long-term it's cost take some we the to loss approach, to benefit see to loss trend, the and modest extent getting we think

Craig Kliethermes

that a long-term mean, things we think casualty approach said, I always comment way certainly we business. in continue Todd top an we both I our I I things that, on approached that guess, that see way trends, and was to the the positive the trends of pie made mean, rate or the intermediate excess opportunities I reboots, growth economy. with those mean, property And of signs coming end think believe Those we as we've growth, and those. longer-term the is stuff. book and we term over fighting and bigger. it's the of as you so sign. I good to a lot each far long-term mean, up a And insure back, I as there's I economy if other more insure don't gets the there's that's

You've seen, our regards as several We've start increase. in more some opportunity think infer revenue, caution that for kind those of existing comments and exposure are and the become with there's of the their around part. had to seeing of basis the clients industry. to just of clients, cautious I estimates, much pandemic. more about from most their estimates construction of mean, policies one the my We're because definitely I reserved auditable

across of end end they a the realize But very if give not getting portfolio, in an may premium think if a that's bridges economy third next construction. bill, the public year. will a do Obviously, help them I and till So audit roads up, construction so it our We industry. of infrastructure comes will other businesses in a lot of do we the don't but whole some there's lot we come we'll positive. premiums, up better, and audit that

disruption could of tightening gives and our we I'll capacity, the the continue capacity, amongst our be constantly acceptable to disruption in that the disciplined as to or the rates that So less underwriters, the tightening opportunities. levels come especially an more market, us reinsurance see helpful. to monitor of say And opportunity competitors, any

good very I submission which best, obviously value positive do typically base, good, there's existing we growth their up look already flow, accounts because like if not to results who opportunity we at we the going And clients accounts, lowered is with those economy see good comes exposure and continues us, but watching. our us. back, for retain But retention produce flow, which and the know, be So, it's we're for are submission everywhere. then clients, have something be mean, to we we of

Unidentified Analyst

years second That's very question in helpful. you that? And reserve large the my releases accident casualty is, have some what segment, drove

Todd Bryant

Derek, XX. that bit several, widespread. earlier a it's to so I little you're you fairly some some know, than But, It's to I on you'll look [ph] Todd. going XX have think fairly spots. larger. XX XX, It XX to XX, in mean, a widespread. was widespread. Puf was pretty commercial was more larger quarter. It a was [ph] was Transportation was XX, relative GL Small that fairly it's probably basis. the large on product was in larger.

Unidentified Analyst

for all Okay. the you Thank answers.

Craig Kliethermes

Thanks, Derek.

Operator

[Operator Please Mark ahead, We'll for question you. next Dwelle. go Thank Instructions] our sir. take

Mark Dwelle

to glad morning. standard. good high I'm see Yeah, to a RLI set continues

insurance first to one the the company You're ever word use mahalo on calls. earnings

So kudos to my that. On questions. for

But that of at on First press release, were the if of $XX all, the those? the $XX numbers million. in all it's between just, a your just asked this you your - sum million. I've totals before. buy up top catastrophe say were down difference even I below, table the the lines, release, press question. maybe releases And then to What's you XX losses reserve

Todd Bryant

Todd. it's Mark,

If was you have showing addition, similar bullet, would although in look to a been in right. net increase underwriting would the net those new our We're the income. the you increase, it table at in total It's queue, that the thing. have type

those types So of there release. expense will will the impact, things that total be offset

to trying will a is if we're impact, then and pictures, pure breaks both So underwriting you pure, one give impact. EPS up the the net loss table you

Mark Dwelle

makes That it. sense. Got

been the you that because aspects to in it. Okay, that there's reconciled past expense

kind this effectively. ratio the EPS clear the from total so of intact loss impact, isolates And

Todd Bryant

to have but have We've in those we there's been broken out the broken done. release. this in the something some Yeah, queue, out requests

And so we added that table.

Mark Dwelle

it. Got

you. Thank Okay.

the question relates I that comments, of operating had comments. some I it to second just, on maybe really guess The the

in pricing peaked I would change guess peak ask it's growth competitive to competitive you. are say seeing growth, unclear in maybe changes have to correct, you and going is conditions maybe a or what to question near more terms that Are a quotes, think like more second I'm is, in from, first moving any whether I interest approach more be there and to I is broader the fewer seemed it's whether whatever. people price behavior? or

dynamics. some to kind Just down of competitive maybe to of drill the trying on

Craig Kliethermes

it's I knowledge for Yeah, Craig. difficult to our than see is I Mark, very our mean, business own much through mean, this of deeper us obviously, we to have competitors.

us are every five it almost businesses, our because their one in but businesses So, well one I harder our is for competitors our every top list, of speak of different. diversification,

pen we MGAs. obviously, mean, mean, on time-to-time I But still business, really the in capacity rather own I can a people still that marketplace. talent. for we own bit the in MGAs, don't see we mean, a giving which some, felt we but do like I would side the not casualty we've I mean, in some from casualty from there's terms say confounders really all So, I and the is We this that in but standpoint, still are our like people I had I'll experienced the We're property seeing terms say anyway. some the conditions we've seeing in the think bet side. market tightest always side, hardening

So, deductibles to on in that you from take I talking resistance. I the costs, premium better that. up, to that insisting we people bit closer mean, minimum properties the on of brokers sign. the acceptance going least going up. requirements. to into valuations more brokers you something where to good get actually were from our mean, path they I bleeds stuff, which mean, a People going replacement about certainly are that normally, versus maybe a That's coinsurance get we're a on coming seeing information. property, standards regards we're is get some write, ACV little But acceptance general

resort, elsewhere. asking unless know, puts last the you for only you going you if as can't there, on So placements I almost find list over to I'm that

line. product with whatever, know, that mean, it's we get that's mean, mean, always people your not but good I our competing So, I folks, have competition. super every say by or in little I movement But like we that They invite tighten, responsible say we have of I'm most good. see mean, answered aggressive I are effectively. I don't if going certainly different burned a results. I'll to I competition. don't I've question responsible people always anymore from spaces,

deliver us someone They understand cap, claims we of probably know a a the in likes that rather live class and relationship. on so how focus better. We enough certain will we'd better it, mutual it than we understand, think we price handle we be a better things can beneficiary know. it So to business better,

hopefully So, your again, answered I question.

Mark Dwelle

my That quite questions. Mahalo. covers it all thoroughly. That's

Craig Kliethermes

Mahalo.

Operator

Carletti. we Matt our And will from you. take question next Thank

Matt Carletti

Hoping the just empty a out like lot Texas? but winter back And little Texas, the loss. you I within a even assume longer it the big if of onion but kind of, could on just is, event, I'm that's takes obviously, I that even there's froze industry just a storm mean, peel modest from a there learned Or if have little of a Yuri COVID-related know, lessons kind of that? you was might geography for curious to kind bit losses. number anything, that, thinking pipes exacerbated find properties things very

Craig Kliethermes

we You valves, know, don't do, is, of off out the buildings we shut most interesting you thing have in where I they Texas, in them as know, as were. found many

get So going. was out or I was. we COVID-related and exceptional think We customers them I we've Hurricane We've willing I playing with. been I an think service had to done mean, here. and same thing there don't and with back people COVID. that our job dealt did that since have get challenges anything mean, the

in cover think valves believe even a multiple this varied I other it But shutoff states. they not class did the business. was prevalent Texas in challenging. the are somewhat states, hurricane, as we of challenge And more places. contained, little by in as were more area or it was a in lot widespread, a find tornado. a something broad, a biggest is it than is then hurricane, I but seven six which is The

Matt Carletti

we granted. take Things for Interesting.

Craig Kliethermes

Yeah.

one point, me winter Yuri mean, what have we other any is really was outside interesting a Matt, I that to just to losses. other So didn't widespread. storm is Craig's very

ex-Yuri from So property that really of standpoint. kind had quarter great a

Matt Carletti

forward. and nice luck No, good going you point. color the of thank quarter. Best Great. for Well,

Craig Kliethermes

Thanks, Matt.

Operator

currently no questions. have we And further

to conference turning be over I'll So back Michael. Jonathan the

Jon Michael

for use the combined rates over started And quarter. beat operating were satisfying year. produced just to the Very We XX we'll and you That's Premiums significant up. next thank getting I'll We're earnings. talk ratio. words sub $X.XX per you. share a Thank you, estimates. consensus

Craig Kliethermes

Mahalo.

Operator

may of today's to XXXXXXX. replay for this concludes call, Ladies Thank a and may wish the X-XXX-XXX-XXXX, do All access by gentlemen, now teleconference. This so for you dialing participating. you ID if wonderful with day. parties disconnect. you Have