Specialty Insurer’s Earnings Climbed on Equity Gains
Net premiums earned increased 3.8% to $417.1 million in the second quarter.
Specialty insurer RLI Corp. (RLI) posted second-quarter net earnings of $168.0 million, or $1.82 a share, up 35.2% from $124.3 million, or $1.34 a share, a year earlier.
The headline gain reflected stronger investment results while the core insurance business lost some ground. Operating earnings remained nearly flat at $76.9 million, or $0.83 a share, and underwriting income declined 3.7% to $59.9 million as the combined ratio worsened to 85.6 from 84.5.
Revenue rose 15.2% to $575.6 million, aided by a 136.8% increase in unrealized equity-security gains to $103.0 million. Net investment income growth accelerated to 17% from 15% in the first quarter and 9% in the fourth quarter, reaching $46.0 million after totaling $42.3 million in each of the preceding two periods.
Underwriting results recovered modestly from the first quarter, when income was $57.8 million and the combined ratio was 86.0. Profitability remained below the fourth quarter’s $70.9 million of underwriting income and 82.6 combined ratio, while gross-premium-written growth held at 3% for a second consecutive quarter.
Property drove the underwriting result, with income rising 8.1% to $53.5 million and its combined ratio improving to 56.8 from 62.1. Casualty underwriting income fell to $1.7 million from $8.3 million as its ratio deteriorated to 99.3, while surety income edged up to $4.7 million.
Favorable prior-year reserve development contributed $35.1 million to underwriting income, up from $24.4 million a year earlier and $31.3 million in the first quarter. The quarter also included $10.0 million of losses from 2024 catastrophe events, partly offset by $13.7 million of favorable movement tied to earlier events.
Expense growth exceeded premium growth, with policy-acquisition costs up 7.3% and insurance operating expenses rising 10.2%. Operating cash flow fell 16.9% to $145.2 million and declined 32.4% to $188.0 million for the first half.
RLI returned capital through a new $250.0 million repurchase authorization, $12.0 million of second-quarter buybacks and a $2.00-a-share special dividend totaling $184.0 million. Book value fell to $19.09 a share from $19.54 at the end of March following those distributions, though it had increased 11% from year-end on a dividend-and-repurchase-inclusive basis.