On Feb. 16, specialty insurance company RLI Corporation (NYSE:RLI) released fourth-quarter earnings for the period ended Dec. 31.

  • Net income more than tripled to $56 million from $18 million, thanks to an absurdly low loss ratio of 32.6% (compared to 64.3% in the prior-year period).
  • Operating earnings (which excludes a $14 million gain on the sale) grew to $41 million from $17 million.
  • Book value per share grew 15% for the year to $31.17 per share, up from $27.12.
  • Favorable loss reserve development for the fourth quarter was $25.1 million. If I exclude that, on a current accident year basis, the loss ratio increases to 50.7% from 32.6%.
  • RLI carries a two-star rating in Motley Fool CAPS.

(Figures in thousands, except per-share data)

Income Statement Highlights

Q4 2006

Q4 2005

% Change

Premiums Earned

$138,839

$117,464

18.2%

Investment Income

$18,745

$16,508

13.6%

Net Income

$55,683

$18,105

207.6%

EPS

$2.23

$0.68

227.9%



Get back to basics with a look at an insurer's income statement.

Ratio Checkup

Q4 2006

Q4 2005

Change

Loss Ratio

32.6%

64.3%

(31.70%)

Expense Ratio

38.7%

36.1%

2.60%

Combined Ratio

71.3%

100.4%

(29.10%)

Return on Equity

19.1%

16.2%

2.90%

*Expressed in percentage points.

What do these ratios mean?

Balance Sheet Highlights

Assets

Q4 2006

Q4 2005

% Change

Investments

$1,828,241

$1,697,791

7.7%

Total Assets

$2,771,296

$2,735,870

1.3%



Liabilities

Loss and Loss Adjustment Expense Reserve

$1,318,777

$1,331,866

(1.0%)

Unearned Premiums

$387,811

$383,683

1.1%

Long Term Debt

$100,000

$100,000

0.0%



Learn your way around an insurer's balance sheet.

Related Companies:

  • XL Capital (NYSE: XL)
  • AXIS Capital (NYSE: AXS)
  • Arch Capital Group (Nasdaq: ACGL)
  • St. Paul Travelers (NYSE: STA)

Related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

Fool contributor Emil Lee is an analyst and a disciple of value investing. So is the team at Motley Fool Inside Value. See what bargains our team has uncovered by taking the service for a free, 30-day spin.

Emil doesn't own shares in any of the companies mentioned above and appreciates hearing your comments, concerns, and complaints. The Motley Fool has a disclosure policy.