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RLI Q3 Earnings Top Estimates, Decline Y/Y on High Cat Loss

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RLI Corp. (RLI - Free Report) reported third-quarter 2022 operating earnings of 50 cents per share, beating the Zacks Consensus Estimate by 51.5%. The bottom line, however, declined 23.1% from the prior-year quarter.

The quarterly results benefited from solid performance across all its segments and favorable reserve development, and higher net investment income. However, third-quarter results were affected by losses stemming from Hurricane Ian.

RLI Corp. Price, Consensus and EPS Surprise

 

Operational Performance

Operating revenues for the reported quarter were $312.7 million, up 15.3% year over year, driven by 15% higher net premiums earned and 19.2% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 1.3%.

Gross premiums written increased 13.3% year over year to $403.8 million. This uptick can be attributed to the solid performance of Casualty (up 3.3%), Surety (up 12%) and Property segments (up 39.8%).

Net investment income increased 19.2% year over year to $21.3 million.

Total expenses increased 17.8% year over year to $287.4 million, primarily due to higher policy acquisition costs, insurance operating expenses, loss and settlement expenses, general corporate expenses and interest expenses on debt.

Underwriting income of $8.8 million decreased 35.8%, primarily due to the lower profitability at its Property and Surety segments. Underwriting income was impacted by losses stemming from Hurricane Ian that lowered underwriting income by $34.8 million.

The combined ratio deteriorated 240 basis points (bps) year over year to 97.

Financial Update

RLI exited the third quarter of 2022 with total investments and cash of $3.7billion, up 16.6% from 2021 end.

Book value was $30.72 per share as of Sep 30, 2022, up 16% from the figure as of Dec 31, 2021.

Long-term debt was $50 million, down 50% from 2021 end.

Net cash flow from operations was $112.2 million, down 3.2% year over year.

The statutory surplus decreased 3.6% from 2021 end to $1.2 billion as of Sep 30, 2022.

Return on equity was 22.2%, reflecting an expansion of 250 bps year over year.

Dividend Update

RLI paid out a quarterly dividend of 26 cents in the third quarter. RLI’s cumulative dividends total more than $513 million paid over the last five years.

Zacks Rank

RLI currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Performance of Other P&C Insurers

Of the insurance industry players that have reported third-quarter results so far, The Travelers Companies (TRV - Free Report) beat the Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) missed the same.

Travelers’s third-quarter 2022 core income of $2.20 per share beat the Zacks Consensus Estimate by 24.3% but decreased 15.4% year over year.  Total revenues increased 6.8% from the year-ago quarter to $9.4 billion and beat the Zacks Consensus Estimate by 2.5%.

Net written premiums increased 110% year over year to $9.2 billion. Underwriting gain of $115 million increased 53.3% year over year in the reported quarter.  The combined ratio improved 40 bps year over year to 98.2.

Progressive’s earnings per share of 49 cents missed the Zacks Consensus Estimate of $1.24 as well as our estimate of $1.38. The bottom line however improved more than threefold from 14 cents earned in the year-ago quarter.

Net premiums written were $13 billion in the quarter, up 5% from $11.7 billion a year ago but missed our estimate of $14.2 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 120 bps from the prior-year quarter’s level to 99.2

Upcoming Release

Chubb Limited (CB - Free Report) is set to report third-quarter 2022 results on Oct 24. The Zacks Consensus Estimate for third-quarter earnings is pegged at $3.19, indicating an increase of 20.8% from the year-ago quarter’s reported figure.

Chubb delivered an earnings surprise in each of the last four reported quarters.

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