Q1 2013 Earnings Call
April 18, 2013 11:00 am ET
Aaron H. Jacoby - Vice President of Corporate Development
Thomas L. Brown - Chief Financial Officer, Principal Accounting Officer, Vice President and Treasurer
Michael J. Stone - Director, Member of Finance & Investment Committee, Member of Strategy Committee and President of Rli Insurance Company
Jonathan E. Michael - Chairman, Chief Executive Officer and President
Randy Binner - FBR Capital Markets & Co., Research Division
Raymond Iardella - Macquarie Research
Meyer Shields - Keefe, Bruyette, & Woods, Inc., Research Division
Scott G. Heleniak - RBC Capital Markets, LLC, Research Division
Previous Statements by RLI
» RLI Management Discusses Q4 2012 Results - Earnings Call Transcript
» RLI Corp. Q4 2009 Earnings Call Transcript
» RLI Q3 2009 Earnings Call Transcript
Aaron H. Jacoby
Thank you. Good morning to everyone. Welcome to RLI's Earnings Call for the First Quarter of 2013. Joining me on today's call are Jon Michael, Chairman and CEO; Mike Stone, President and Chief Operating Officer; and Tom Brown, Vice President and Chief Financial Officer. I'm going to turn the call over to Tom first to give some brief opening comments on the quarter's financial results. Then Mike will talk about our operations and market conditions. Next, we'll open the call to questions, and John will finish up with some closing comments. Tom?
Thomas L. Brown
Thanks, Aaron, and good morning. From our perspective, we saw this as another solid quarter. Gross premiums was up 10% over last year. Continuing the segment trends from last year, Casualty was the biggest driver, up 23%, as a result of new product initiatives, as well as certain products achieving both rate and exposure growth. The Property segment was flat, while Surety declined slightly as our underwriters remained diligent in light of tough economic conditions. Net written premium is up 12%. That's 2 points higher than the gross premium growth rate and is largely a result of a new Casualty reinsurance treaty put in place 1 month [ph] that allows us to retain more of the attractive business we write as pricing continues to advance.
Turning to profitability. The combined ratio was a very strong 86.2. Included in this result is $10.8 million of favorable development, mostly from the Casualty segment and from accident years 2008 to 2011. As a result of the higher premium and lower combined ratios, underwriting income advanced 33% versus last year. Regarding investments, it was a great quarter from a total return perspective, with the overall portfolio advancing 2.5% on the strength of our equity portfolio, which was up 11.5%. Investment income continued to trend down due to low reinvestment rates. At the end of the quarter, the fixed income portfolio stood at a consistent 4.9 duration and a 3.7% book yield. Not to be left out, Maui Jim did its part, contributing 19% earnings growth over the last year. The combination of underwriting and investment results drove operating earnings per share of $1.04 per share, up from $0.96 per share last year. The additional contribution from realized and unrealized investment gains drove excellent growth in book value per share of 4.6% since last year, year end. In summary, a positive start to 2013. And now I'd like to turn it over to Mike Stone for further discussion.
Michael J. Stone
Thanks, Tom. Good morning, everybody. Again, just to reiterate, a good underwriting quarter. Another sub-90 combined ratio quarter at 86. Good gross written premium growth, 10% gross and 12% net, as Tom indicated.
I'll try to give a little market color. Rates are moving up modestly, Casualty, some 5%-plus in certain products. Property, 2%. So just nominally, though growing much more rate in our Marine business, and Surety is essentially flat.
Casualty business. Our gross written premium is up 23%. Some products, gross written premium, up significantly more, and rates up nicely. For example, our Commercial umbrella business, premiums up 36%, rates up some 17%, as we're finding pockets of opportunity, allowing us to write business that other markets are walking away from.