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RLI's (RLI) CEO Jonathan Michael on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 21, 2016 11:00 AM ET

Executives

Aaron Jacoby - VP and Corporate Development

Thomas Brown - VP, CFO and Treasurer

Craig Kliethermes - President and COO

Jonathan Michael - Chairman, President and CEO

Analysts

Arash Soleimani - KBW

Randy Binner - FBR Capital Markets

Mark Dwelle - RBC Capital Markets

Jeff Schmidt - William Blair

Operator

Good morning and welcome ladies and gentlemen to the RLI Corp’s First Quarter Earnings Teleconference. At this time, I would like to inform you that his 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-answer session after the presentation.

Before we get started, let me remind everyone that through the course of this 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 factor, which could cause actual results to differ materially. These risk factors are listed in the company’s various SEC filings, including 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 will now 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 2016. Joining me on today’s call are Jon Michael, Chairman and CEO; Craig Kliethermes, President and Chief Operating Officer and Tom Brown, Vice President and Chief Financial Officer.

I am 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 up with some closing comments. Tom?

Thomas Brown

Thanks, Aaron and good morning, everyone. It feels a bit like broken record with these opening comments which speaks to our consistency. But nonetheless we are pleased to report a good start to year with these first quarter results.

Starting with the combing ratio, we achieved an 88 in the quarter modestly better than the last year. Underwriting income was positively impacted from favorable loss reserve development. In this case $11 million coming out of the Casualty segment. As a reminder, during the first quarter we do not perform a full actuarial loss reserve study.

Total gross written premiums was up 3% in the quarter. Casualty our largest segment turned in an impressive 9% growth rate on the strength of a number of different products, including some recent product launches. Surety was up 7% continue a very nice run of growth over the last several years.

Property however was down 13%. Excluding the discontinued crop and facultative reinsurance business that we previously reported the segment was down 7%, which is attributable mostly to continued soft market conditions in catastrophe expose areas. Each segment turned in attractive combined ratios, Casualty at a 92, property at an 84 and Surety at an 80 combining ratio. Again a pretty good result leading to the aforementioned 88 overall combined ratio.