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RLI Corp (NYSE:RLI), a specialty property and casualty insurer, presented its Q2 2024 investor presentation on July 23, 2024, highlighting significant growth across key financial metrics. The company reported a 69.9% increase in underwriting income and continued its streak of underwriting profitability, marking its 28th consecutive year with a combined ratio under 100.
Q2 2024 Performance Highlights
RLI delivered strong financial results in the second quarter of 2024, with net earnings per diluted share reaching $1.78, a 5.3% increase from Q2 2023. Operating earnings per diluted share grew even more impressively at $1.72, representing a 48.3% year-over-year increase. The company’s total net premiums earned rose to $379.1 million, up 17.6% compared to the same period last year.
Underwriting income saw a remarkable 69.9% increase to $70.0 million in Q2 2024, with the property segment leading the way with a 105.4% surge in underwriting income. The company’s combined ratio improved to 81.5 in Q2 2024 from 87.2 in Q2 2023, demonstrating enhanced underwriting efficiency.
As shown in the following financial update chart, RLI achieved growth across all business segments, with particularly strong performance in the property segment:
Other Q2 2024 highlights included an 11% increase in gross premiums written, an 18% increase in net investment income, and favorable development in prior years’ loss reserves resulting in a $19.8 million net increase in underwriting income. Book value per share reached $34.64, representing a 14% increase (inclusive of dividends) from year-end 2023.
Product Portfolio and Business Strategy
RLI maintains a diversified product portfolio across three main segments: Casualty (56%), Property (34%), and Surety (10%). The company operates in both the Excess and Surplus (E&S) market (39% of net written premium) and the Specialty Admitted market (61%).
The following chart illustrates the breakdown of RLI’s diversified product portfolio:
The company’s market cycle management approach has been key to its long-term success. RLI empowers its underwriters to capitalize during hard markets and exercise discipline during soft markets, while maintaining strict underwriting standards throughout market cycles.
This disciplined approach to underwriting has allowed RLI to consistently outperform the industry average in terms of combined ratio, as illustrated in the following chart:
Competitive Advantages and Financial Strength
RLI’s competitive advantages stem from what the company describes as its "ownership mentality," which permeates its culture and operations. The company has earned an A+ (Superior) rating from AM Best and an A (Strong) rating from S&P Global, reflecting its financial strength and stability.
The company has been recognized as a WARD’S 50 Top P&C Performer for 34 consecutive years—the only insurer to achieve this distinction every year since the award’s inception. Additionally, RLI boasts a Glassdoor rating of 4.9/5 stars and was named a "Best Place to Work" in 2024.
The following image highlights RLI’s financial strength and stability:
Investment Strategy and Capital Management
RLI maintains a conservative investment portfolio with a target asset allocation of 80% bonds and 20% equities. As of June 30, 2024, the actual allocation included 17.2% in equities, 32.2% in corporate bonds, 13.0% in municipal bonds, and various other fixed-income securities.
The company’s investment portfolio has delivered consistent income growth, as shown in the following chart:
RLI’s capital management strategy focuses on maintaining sufficient capital for operations while returning excess capital to shareholders. The company has increased its dividend for 49 consecutive years as of May 2024, demonstrating its commitment to shareholder returns.
Long-term Performance and Shareholder Value
RLI has established an impressive track record of creating shareholder value through consistent underwriting profitability, book value growth, and dividend increases. The company has achieved a 19.7% average annual growth in book value per share (including dividends) and a 12.5% average operating return on equity.
The following chart illustrates RLI’s total shareholder return compared to the S&P 500 over the past 20 years:
Over a 20-year period, RLI has delivered an average annual return of 15.6%, significantly outperforming the S&P 500’s 10.3%. This long-term outperformance underscores the effectiveness of RLI’s business model and strategy.
The company’s success can be measured through several key metrics, as shown in the following slide:
Forward-Looking Statements and Market Context
Looking ahead, RLI is focused on creating value through four key strategies: cycle management, platform enhancements, talent acquisition, and disciplined pursuit of opportunities in adjacent products. The company aims to maintain its underwriting discipline while capitalizing on growth opportunities in specialty insurance markets.
It’s worth noting that while the Q2 2024 results presented in this investor presentation were strong, the company’s recent Q4 2024 performance showed some challenges. According to recent earnings reports, RLI’s Q4 2024 operating earnings came in at $0.41 per share, significantly below analyst expectations of $1.02 per share. This resulted in a stock price decline of nearly 8% in after-hours trading following the Q4 earnings release.
Despite this recent setback, RLI’s long-term performance metrics remain strong, with the company achieving its 29th consecutive year of underwriting profit. The stock has rebounded somewhat, with premarket trading showing a 2.44% increase to $80.11 as of the most recent data.
RLI’s management remains committed to its core strategy of disciplined underwriting and profitable growth, positioning the company to navigate market cycles while continuing to deliver long-term value to shareholders.
Full presentation:
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