RLI Corp. (NYSE:RLI) Q1 2019 Earnings Conference Call - Final Transcript

Apr 18, 2019 • 11:00 am ET

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RLI Corp. (NYSE:RLI) Q1 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Bruce E. Kiddoo

quarter, about $1 million, and loss estimates for both 2017 and 2018 hurricanes remained unchanged.

We were pleased with each of our segments combined ratios; 96 in casualty, 79 in property, and a 70 in surety. Our casualty segment was favorably impacted by $11 million of net positive reserve development. Most casualty volumes developed favorably, including transportation, which posted a modest amount of favorable development for a second consecutive quarter. Our property segment posted favorable development of $2 million, exclusively from our marine line.

Finally, our surety segment had favorable development of $4 million. From a higher level, it is worth pointing out that our expense ratio is up about a point in the quarter, as our bonus and profit-sharing accruals correlate with the strong growth in earnings and book value. Overall, very solid underwriting results across our diverse product portfolio.

Turning to our top-line, gross written premiums advanced 6% in the quarter. Craig will provide more detailed discussion shortly, but growth was fairly broad-based and was achieved despite reductions from product exits in the prime quota share reduction that we announced during our fourth quarter call.

From a segment perspective, casualty grew top-line 8%. Growth was achieved in a number of established products as well as newer initiatives, including energy, casualty and general binding authority. We're pleased with this growth, but the segment is also the one most impacted by the recent product exits and the comparison to prior year may get more challenging as the year progresses.

Moving on to property, top-line grew by 7%. This growth was driven largely by marine, but also due to growth in our Hawaii homeowners group. Finally, surety posted a 2% decline in top-line as we remain disciplined in a very competitive environment. Complementing this underwriting performance, investment income continued to advance, up 16% compared to the first quarter of 2018. We have grown our invested asset base over the past year and continued to benefit from rotations in the portfolio and higher average yields. On a total return basis, our investment portfolio generated 4.5% return in the quarter. This return, coupled with solid operating performance, resulted in $95 million in comprehensive earnings for the quarter, driving book value up $1.95 per share after paying a $0.22 per share in ordinary dividend during the first quarter. Our overall business fundamentals, underwriting and investments results were very strong for the quarter, in conclusion, a very good start to the year.

And with that, I'll turn the call over to Craig.

Analyst
Ross Seymore

Thanks, Tom. Good morning, everyone. A very good start to the year with 6% top-line growth and an 89 combined ratio. Premium growth was a bit slower than previous quarters, but still a good result given the previously announced product exits. We've had some recent success focusing on growing our more established and most profitable products. We have nicknamed this initiative Grow What We Know, and this has helped us create more balance between newer products that take time to season, and those