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RLI(RLI) - 2024 Q4 - Annual Report
RLIRLI(RLI)2025-02-21 20:46
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Catastrophic Risks and Financial Exposure - The company faces unpredictable catastrophic losses, particularly from hurricanes and earthquakes, which could lead to material financial losses [120]. - The company relies on models to assess exposure to catastrophic events, but actual losses may exceed modeled expectations, impacting financial results [122]. - The company may struggle to maintain adequate reinsurance protection, which could increase net loss exposures and volatility in financial results [123]. - The company limits its net loss on any individual risk to a maximum of 12millionthroughreinsurancearrangements[437].EconomicandMarketConditions−Adverseeconomicchangescouldlowerdemandforinsuranceproducts,significantlyaffectingrevenue,especiallyintheconstructionsector,whichconstitutesapproximatelyone−thirdofthebusiness[125].−Accesstocapitalandmarketliquidityiscrucialforthecompany’sgrowth;inabilitytoraisecapitalcouldadverselyaffectbusinessopportunities[126].−Theinvestmentportfolio′svalueissubjecttofluctuationsduetochangesininterestratesandoverallmarketconditions,potentiallyimpactingfinancialcondition[129].FinancialPerformanceandEarnings−Consolidatedrevenueroseto12 million through reinsurance arrangements [437]. Economic and Market Conditions - Adverse economic changes could lower demand for insurance products, significantly affecting revenue, especially in the construction sector, which constitutes approximately one-third of the business [125]. - Access to capital and market liquidity is crucial for the company’s growth; inability to raise capital could adversely affect business opportunities [126]. - The investment portfolio's value is subject to fluctuations due to changes in interest rates and overall market conditions, potentially impacting financial condition [129]. Financial Performance and Earnings - Consolidated revenue rose to 1,770,384, up 17.1% from 1,511,994in2023[336].−Netpremiumsearnedincreasedto1,511,994 in 2023 [336]. - Net premiums earned increased to 1,526,406, representing a 17.9% growth from 1,294,306in2023[336].−Netearningsfor2024were1,294,306 in 2023 [336]. - Net earnings for 2024 were 345,779, a 13.5% increase compared to 304,611in2023[336].−Basicnetearningspershareincreasedto304,611 in 2023 [336]. - Basic net earnings per share increased to 3.78, up from 3.34in2023,reflectinga13.23.34 in 2023, reflecting a 13.2% growth [336]. - Total expenses grew to 1,337,964, a 16.9% increase from 1,144,339in2023[336].−Cashflowsfromoperatingactivitiesimprovedto1,144,339 in 2023 [336]. - Cash flows from operating activities improved to 560,219, compared to 464,257in2023,markinga20.7464,257 in 2023, marking a 20.7% increase [342]. Assets and Liabilities - Total assets increased to 5.63 billion in 2024 from 5.18billionin2023,reflectingagrowthininvestmentsandcash[331].−Unpaidlossesandsettlementexpensesroseto5.18 billion in 2023, reflecting a growth in investments and cash [331]. - Unpaid losses and settlement expenses rose to 2.69 billion in 2024, up from 2.45billionin2023,indicatinganincreaseinliabilities[331].−Thetotalliabilitiesincreasedto2.45 billion in 2023, indicating an increase in liabilities [331]. - The total liabilities increased to 4.11 billion in 2024 from 3.77billionin2023,highlightingariseinfinancialobligations[331].InvestmentPortfolioandRisks−Thecompany’sinvestmentportfolioissubjecttomarket,credit,andinterestraterisks,witheffortsmadetomitigatetheserisksthroughdiversification[401].−Thefairvalueoftotalfixedincomesecuritiesavailable−for−salewas3.77 billion in 2023, highlighting a rise in financial obligations [331]. Investment Portfolio and Risks - The company’s investment portfolio is subject to market, credit, and interest rate risks, with efforts made to mitigate these risks through diversification [401]. - The fair value of total fixed income securities available-for-sale was 3,175,796,000 as of December 31, 2024, compared to 2,855,849,000in2023,indicatingan11.22,855,849,000 in 2023, indicating an 11.2% increase [414]. - The company experienced a significant increase in interest on fixed income securities, which rose to 120,561,000 in 2024 from 103,446,000in2023,markinga16.5103,446,000 in 2023, marking a 16.5% increase [410]. Technology and Operational Risks - The company is committed to upgrading its technology systems to remain competitive, particularly in the face of advancements in artificial intelligence [139]. - Operational risks, including fraud and regulatory compliance failures, could adversely affect the company's financial performance [132]. - Any significant interruption in the company's systems could materially impact operations and profitability, highlighting the importance of system reliability [136]. Regulatory and Compliance Issues - The company’s ability to pay dividends is contingent on its subsidiaries' earnings and regulatory constraints, which may limit dividend distributions [128]. - The company is subject to Section 203 of the Delaware General Corporation Law, which may restrict its ability to engage in business combinations with significant shareholders [146]. Claims and Losses - Incurred losses and settlement expenses for 2024 totaled 739,253 thousand, reflecting a 22.3% increase from 604,413thousandin2023[441].−ThenetunpaidlossesandLAEattheendof2024stoodat604,413 thousand in 2023 [441]. - The net unpaid losses and LAE at the end of 2024 stood at 1,938,045 thousand, up from 1,688,676thousandin2023[441].−ThecumulativenumberofreportedclaimsasofDecember31,2024,was4,425,withtotalIBNRliabilitiesof1,688,676 thousand in 2023 [441]. - The cumulative number of reported claims as of December 31, 2024, was 4,425, with total IBNR liabilities of 123,161 thousand [443]. Tax and Compensation - Federal and state income taxes paid amounted to 68millionin2024,comparedto68 million in 2024, compared to 50 million in 2023 and 190millionin2022,withthespikein2022attributedtothesaleofaninvestment[476].−Totalcompensationexpenserelatedtoequityawardswas190 million in 2022, with the spike in 2022 attributed to the sale of an investment [476]. - Total compensation expense related to equity awards was 8 million for 2024, 9millionfor2023,and9 million for 2023, and 9 million for 2022 [486].