RLI Corp. (NYSE:RLI) Q1 2018 Earnings Conference Call - Preliminary Transcript

Apr 19, 2018 • 11:00 am ET


RLI Corp. (NYSE:RLI) Q1 2018 Earnings Conference Call - Preliminary Transcript


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Good morning and welcome, ladies and gentlemen, to the RLI Corporation First Quarter Earnings Teleconference. At this time, I would like to inform you that this conference is being recorded, and that all participants are in a listen-only mode. At the request of the Company, we will open the conference up for question 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 risk factors which could cause actual results to differ materially. These risk factors are listed in the Company's various SEC filings, including in the annual Form 10-K, which should be reviewed carefully. The Company has filed a Form 8-K with the Securities and Exchange Commission that contains the press release announcing first quarter results.

RLI management may make reference during the call to operating earnings and earnings per share from operations, which are non-GAAP measures of financial results. RLI's operating earnings and earnings per share from operations consist of net earnings after the elimination of after-tax realized investment gains or losses. RLI's management believes this measure is useful in gauging core operating performance across reporting periods, but may not be comparable to other companies definitions of operating earnings. The Form 8-K contains reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the Company's website at www.rlicorp.com.

I would now like to turn the conference over to RLI's Vice President, Corporate Development, Mr. Aaron Jacoby. Please go ahead, sir.

Aaron Jacoby

Thank you. Good morning to everyone. Welcome to the RLI Earnings Call for the first quarter of 2018. Joining me on today's call are Jon Michael, Chairman and CEO; Craig Kliethermes, President and Chief Operating Officer; and Tom Brown, Senior Vice President and CFO.

I'm going to turn the call over to Tom first to give some brief opening comments on the quarter's financial results. Then, Craig will talk about operations and market conditions. Next, we'll open the call to questions, and Jon will finish with some closing comments. Tom?

Tom Brown

Thanks, Aaron, and good morning. As reported last evening, first quarter 2018 operating earnings were $0.60 per share. Before I get into the results for the quarter, I do want to mention an accounting change effective in the first quarter, which exacerbates the difference between GAAP net earnings and non-GAAP operating earnings. This is detailed in press release, but let me provide a bit more color here.

FASB changed the accounting for unrealized gains and losses on equity securities requiring recognition in pretax earnings whereas historically unrealized gains and losses from this portfolio, net of tax were reflected in other comprehensive income. This accounting change can cause volatility in net earnings when comparing quarterly results. During the first quarter, we recognized a pretax decline of $26.8 million on our equity portfolio. We elected to eliminate this amount in reconciling