Good morning, and welcome to the RLI Corp. first quarter earnings teleconference. After management's prepared remarks, we will open the conference up for questions and answers. Before we get started, let me remind everyone that through the course of the 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 factors and uncertainties, which could cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including in the annual report on Form 10-K, as supplemented in Forms 10-Q, all of 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 the first quarter results.
During the call, RLI management may refer 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 gains or losses and the after-tax unrealized gains or losses on equity securities. RLI's management believes these measures are useful in gauging core operating performance across reporting periods that may not be comparable to other companies' definitions of operating earnings. The Form 8-K contains a 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 Chief Investment Officer and Treasurer, Mr. Aaron Diefenthaler. Please go ahead when you're ready.
Thanks, Adam. Good morning, and welcome to RLI's first quarter earnings call for 2022. Joining us today are Craig Kliethermes, President and CEO, Jen Klobnak, Chief Operating Officer, Todd Bryant, Chief Financial Officer, and Jonathan Michael, Chairman. As usual, Todd will lead off with a summary of our financial performance for the quarter. Craig and Jen will offer additional comments on current market conditions related to our product portfolio. We will then take your questions, and Craig will close with some final thoughts. Todd?
Thanks, Aaron, and good morning, everyone. Yesterday, we reported first quarter operating earnings of $1.43 per share. The quarter's results reflect strong underwriting performance and growth in investment income. Underwriting income benefited from benign weather-related losses in our property segment, a modestly improved underlying loss ratio in our casualty segment, and continued favorable benefits from prior years' loss reserve in all three segments. All in, we posted a combined ratio of 77.9% for the quarter and experienced continued top-line growth, which was up 22% in the quarter. Investment income advanced 9% as we realized elevated income on improved reinvestment rates and a larger asset base. Realized gains were $6 million in the quarter, while unrealized losses on equity securities were $28 million.
As mentioned on prior calls, large movements in equity prices between periods can have a significant impact on net earnings, which you can see in the comparative quarterly results. Craig and Jen will talk more about premium in a minute, but at a high level, all three segments experienced growth as we continue to benefit from favorable market conditions in most areas of our business. From an underwriting income perspective, the quarter's combined ratio was 77.9%, compared to 86.9% a year ago. Our loss ratio declined 6.7 points, largely due to low catastrophe activity during the first quarter of 2022. Storm losses added less than 1 point to this quarter's loss ratio, compared to 7 points of loss from winter storms last year. From the prior year's reserves perspective, both quarters benefited from favorable development.
Similar to the comparable period last year, Casualty posted $28 million of favorable loss emergence across a majority of product lines and over multiple accident years. Property experienced $13 million in favorable development, a notable increase over last year. The largest benefit came from our marine business, which is shorter tailed, and losses are known and develop more quickly. Likewise, Contract and Commercial Surety were responsible for that segment's $5 million in positive development during the quarter. Our approach to reserving remains the same, and the quarter's results are reflective of consistent process of evaluating reserve studies and actual versus expected losses for the current period. Moving to expenses, compared to last year, our quarterly expense ratio decreased 2.3 points to 38.7%. The decline reflects improved leverage on our expense base as net premiums earned continue to grow.
Certain incentive-related amounts that are influenced by growth in book value were also down. The investment environment was a challenge in the quarter as interest rate increases weighed on bond prices and equity declined with heightened volatility. Total return performance came in at -4.7% through March and is reflected in our other comprehensive loss of $67.7 million or $1.48 per share. I'll emphasize that the majority of this decline is being reflected in the change in unrealized gains and losses on our balance sheet. We have a history of strong operating cash flow and an investment approach that holds most positions to maturity. There seems to be little reason to make these losses permanent by selling securities.
As we have discussed in the past, we're happy to trade fixed income price declines for an opportunity to put money to work at higher yields. Incorporating the aforementioned comprehensive loss and adjusting for dividends, book value per share declined 5% in the quarter to $25.45. Away from the traditional investment portfolio, total investee earnings increased $2.3 million compared to last year, with Maui Jim contributing $6.4 million and Prime $2.8 million. We also announced in the quarter that we have agreed to sell our minority stake in Maui Jim and anticipate after-tax proceeds will approximate $500 million. Final proceeds will be subject to certain adjustments at closing, which we expect to occur in the second half of the year. All in all, a very good operating quarter and strong start to the year. With that, I'll turn the call over to Craig. Craig?
Thank you, Todd, and good morning, everyone. Very nice beginning to 2022. Over 20% top-line growth on a sub 80 combined ratio. We're realizing growth in premium and underwriting profits across almost every product in our portfolio. Just one quarter played so far. Still way too early to cut down the nets. Instead, we will keep our head down and stay focused on the underwriting fundamentals that we practice every day. In aggregate, rate levels continue to be up, enough to cover our loss cost inflation expectations. We remain cautious in regards to inflation, both core and social, and we continue to manage our volatility with quality reinsurance partners who believe in our ownership culture and business model. I'll turn it over to Jen for some more color by segment.
Thank you, Craig. As Todd mentioned, both premium and underwriting profit increased in all three segments as momentum continued into the first quarter, supported by a focus on Service and Investments in People and Technology. Specifically in casualty, premium was up 14% on an 84 combined ratio. Rates increased 5%, which is down slightly from last quarter. Growth was driven by Personal Umbrella, E&S Primary and Excess Liability, and our professional services and small commercial groups. While we are monitoring growth, all of these groups are experiencing positive rate change on stable loss ratios, and each one contributed significantly to this quarter's profitability. One of the few products with a decrease in premium this quarter was the Executive Products Group, which is our D&O portfolio. We have exited some minor products in this group over the last year and competition has returned to the space.
Rates still increased 8% in the quarter, which was a lower increase than prior quarters, but still a positive result after three consecutive years of over 20% rate increases. Another area where competition has rebounded is within the transportation market. Despite this, premium grew 36%, driven by a return of exposure in our public auto group, with bus activity now back to pre-pandemic levels. New business has been difficult to win, as MGA markets with new backing have returned aggressively to the market. We were able to achieve a 9% rate increase for our transportation renewals. Even in an increasingly competitive environment, our EPG and transportation products remain profitable. We continue to see a lot of opportunities in the broader casualty segment. Moving on to the property segment, premium increased 47% on a 67 combined ratio. All products had double-digit premium growth.
The obvious difference in quarterly results is the significantly reduced catastrophe activity compared to last year's historic cold weather and winter storm event. Property rates are up 7% overall, driven by hurricane rates, which were up 17%. Much of the premium growth was driven by our E&S property portfolio, where new business submissions are up 22%. Pricing in the hurricane space is accelerating and Florida specifically is in a very hard market. We are tightening up our underwriting guidelines each month as we continue to be more selective, increasing deductibles, lowering the limits we offer, raising rates, and increasing minimum premiums. We are actively managing our aggregates and finding opportunities to support growth while market conditions remain attractive. It is worth mentioning Marine also had a solid quarter, with premium up 19% along with a significant contribution to the bottom line.
Last but not least, Surety premium grew 7% on a sub 70 combined ratio. This was led by Contract Surety, where rising and volatile material costs have led to both increased premium and increased risk. The ability to estimate and complete projects on time and at cost is becoming more difficult. We continue to demonstrate our cautious risk-based approach to underwriting with close monitoring and receiving collateral where needed. Small miscellaneous business also grew with our continuing focus on marketing and ease of doing business.
Large commercial business was down slightly due to some non-recurring opportunities last year. There's still plenty of competition in this space with new markets entering due to underwriter turnover, but we are holding our own. Overall, we believe our product portfolio is very healthy, which gives us the confidence to execute on opportunities. We have a lot of positive momentum driven by the efforts of all of our employee owners to take care of our customers. This quarter's results reflect their outstanding efforts. I'll turn the call back over to Craig.
Thanks, Jen. As Jen commented, we feel our portfolio is in good order. We believe the quality of our risk management is differentiating, selecting the best risks, retrenching where pricing is irrational, quickly addressing problems, and managing downside risk. This approach mitigates the need for wild swings in our rate levels. RLI is known as a stable, consistent, and committed carrier in our chosen markets. We remain focused on providing our customers with exceptional service and proven expertise in exchange for a fair premium that permits us to make an underwriting profit. Our portfolio is broad and diversified, and our underwriters are narrow and deep. This gives us the benefit of finding opportunities in all market cycles while allowing our experts to slow down the game, be very selective as needed, but also run the fast break when we sense an advantage.
We have realized good momentum in our portfolio of products, and we will continue to work to realize our full potential. I want to thank the entire RLI family for delivering and putting in all the hard work needed to achieve success. I ask all of our associate owners, keep being different because being different works. I'll now turn it back to the moderator to open it up for questions.
Thank you. The question and answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star one on your telephone. If you wish to withdraw your question, please press star followed by two. Your question will be taken in the order that it is received. Please stand by for your first question. Our first question today comes from Matt Carletti from JMP. Matt, your line is open. Please go ahead.
Hey, thanks. Good morning.
Morning.
Morning.
Hoping to ask you a question not so much about the quarter, but the recent news on the sale of Maui Jim, obviously your guys' ownership there. The question is about kind of what you might do with the proceeds. Is it logical to think that absent, you know, some really strong growth opportunities that a special dividend might make sense, or what are you guys thinking on that?
Matt, this is Craig. I'm surprised by the question, actually. No, I'm just joking. I was expecting this was gonna be a question for the call, not just from you, but from probably most. I mean, I just, you know, obviously-
[audio distortion]
Yeah, I knew you would. That's all right. You know, we always take a very thoughtful approach to our capital position, as you guys know. I mean, it's not really any different. You know, there's still a lot of time between now and the expected close of this transaction. You know, our preference has always been to invest in our own products, you know, ones that we know, you know, with disciplined underwriters, and they'll share our values and our culture. You can see, you know, I think we're doing a pretty good job of that right now, putting that capital to work. Any announcement we make on use of proceeds will obviously come after the close of the transaction, and after full evaluation of usage of our own portfolio and considering all other opportunities that make sense.
I would remind you that, you know, we do treat this as shareholder money. This is not our money, as management, so we're going to take good care of it. We assure you that we're gonna be consistent, take a consistent and disciplined approach, just as we always have in regards to our capital position. That's pretty much all I can say about the transaction, but, I don't know if that answered your question completely.
Perfect. No, very, very helpful. One other, if I can actually back to kind of the quarterly results. I think you commented on it a little bit, but I was hoping that you could peel back the onion a little bit on the growth in property in the quarter and just if you'd be, you know, a little bit more of what you're seeing there, whether specific lines or geographies or so forth. It was obviously a pretty strong result.
Sure, Matt, this is Jen. I'll weigh in on that. The market really is focused on the E&S property space and particularly in Florida. You know, after the one-month renewals, we expected more capacity to enter that market, given it's been somewhat attractive after some of the events, particularly in Louisiana in the last couple of years. We expected some competition, and really that competition hasn't arrived. In fact, the MGAs that we compete against and other carriers have seemed to pull back their limits quite a bit. It's almost like, where's Waldo? We're looking to see where did these people go. I mean, some of it probably is Lloyd's, but it's a little bit of speculation as to who all is pulled out. Generally speaking, people are putting up less capacity than they used to.
Where you have a building that might be worth $30 million, now that's layered with multiple insurance policies adding up to $30 million versus one policy previously. That creates a lot of opportunity, one reason our submissions are up so much. Essentially, there's just not enough capacity to cover it all. Our brokers continue to call us back. Can we get more limits? You know, what else can you do for us? It's a very active and busy market, that's difficult to answer all those phone calls. We don't see anything in sight that's going to end this opportunity at the moment. We expect, though, for new capacity to be entering given where the rates are at.
For the time being, we're gonna take advantage of it while we can and see where it goes. In the meantime, for our book, you know, as I mentioned, we are being more selective and raising rates, deductibles, things of that nature to make sure that we're taking advantage of the market with the best terms and conditions we can.
Great. That's super helpful. Thank you, and congrats on a nice start to the year.
Thanks, Matt.
Thank you.
The next question comes from Cullen Johnson of B. Riley Securities. Cullen, please go ahead.
Hey, good morning. Thanks for taking my questions. I was wondering, you know, kind of given just the change in the interest rate environment, I'm curious if you're seeing maybe the risk/reward change in your investment portfolio in favor of either higher fixed income allocation or maybe there's some individual pockets within that allocation that seem more attractive. Basically, just wondering, you know, how do you adjust your portfolio, if at all, as you start to see these changes in rates?
Hey, Cullen. It's Aaron Diefenthaler. Good question. You know, if you look back over the last couple of years with equity prices being pretty robust on the upside, we have focused most of our operating cash flow towards fixed income, even in lower rate environments than today. We're certainly pleased to have a better opportunity to put money to work today at higher rates than we've had over the last couple of years. Really, I would say the opportunity is broad-based in fixed income. You have spreads that are modestly wider across a number of sectors, including high-quality municipals.
Corporate securities, the yield curve is pretty flat, so you don't necessarily have to cast that next marginal dollar of operating cash flow out the yield curve. You can pick your spots along the curve as well. I would just characterize it as a broad-based opportunity to put operating cash flow to work in fixed income.
Got it. Thank you. That's helpful. Next question, I think y'all mentioned the premium rate was up 8% across the board in the quarter, so lower than last quarter but still in excess of loss cost. Apologies if I missed it, but do you have an estimate of what loss cost was in the quarter?
This is Todd. We're from a reserving perspective, right? I mean, I think the actuaries are gonna take a longer-term approach, and I think they'll react where necessary to loss cost trend, if it's up in a particular product. So, you know, I think, you know, probably in the 5%-7% range, probably if we total it all in. So just a bit below. It varies by-
Okay.
The thing is it's product, right?
Yeah.
Right.
5%-7%, I think, is gross trend. I just want to verify or reiterate that there is some benefit to exposure, underlying exposure trends going on too. It kind of nets out. Net of that exposure trend, I'd say it's probably closer to 4%-6%.
Okay. That makes sense. Thank you.
The next question comes from Casey Alexander of Compass Point. Casey, please go ahead.
Hi. Good morning. One question. Given the extraordinarily low loss ratio for the quarter, oftentimes the company has a little bump up in expenses for bonus accruals for profitable underwriting, but it didn't seem to be the case this quarter. Is that just because it's a little early in the year, and you wait to see how the year develops or am I just off on that?
Yeah, this is Todd. Yeah, I think you have components there. You're right from a combined ratio, an ROE, and a book value growth. Those all play in. You're right from the standpoint of it, if it's based on salary, right? A lot of that is, the later in the year it can be a little bit higher, certainly. The book value component, I mean, just look at what equities did, right? -$30 million versus +$30 million a year ago, so a $60 million swing there. So that'll impact things. I think our retirement is probably up about $1 million. If you go all the way through all of that, it's probably about a point less in the first quarter on a combined ratio relative to last year. That book value growth component weighs in there.
Okay. All right. Great. Thank you. Secondly, there was a sound that blocked it out. Did you say that you expect the Maui Jim to close in the second quarter or the second half?
Second half.
Second half. It seemed to me that when the original announcement was made, it was kind of lined up for the second quarter. Is it delayed a little bit?
No. The original announcement already said second half as well.
Okay. All right. Thank you. Okay. That's all my questions. Thank you.
The next question comes from Mark Dwelle from RBC Capital Markets. Mark, your line is open.
Yeah, good morning. I'm afraid I won't be very original. I'm gonna go back to some of the questions that have already been asked. Let me start with a numbers kind of question. You had gone through on the 13 points or the $13 million rather, favorable development on property. Could you just talk through that again? I couldn't write fast enough.
Yeah, sure. Yeah, on the property side, the $13 million that we talked about certainly is higher than what it was. The larger portion of that is our marine book, right? Really everything in that is a shorter tail, right, from the property standpoint. If you look at marine, that's probably the most noticeable. It was around $8 million favorable of that $13 million. You're really gonna get 19-21 those accident years with a higher amount of that in the most recent accident year. Marine's gonna develop pretty quickly, as the actuaries review the studies, look at case reserves, paid losses, and that type of thing.
Okay. Thank you. That's helpful on that. Going back to the Maui Jim topic, I know most investors are focused on capital return, but would identifying an alternative, you know, non-insurance asset as a replacement be something that's on the table? Is it something you're examining at all? I mean, there is a meaningful income stream associated with Maui Jim that, you know, will obviously go away when the transaction closes.
Mark, I mean, obviously we consider all options. I mean, we look at all the things. I mean, I don't think we're always looking for opportunities, new revenue streams, whether they be insurance-related or non-insurance related. If they're good business decisions and they fit within what we think adds value to our shareholders and it is in line with you know, disciplined approach, you know, it's just they're hard to find. Businesses are hard to find, whether they're insurance or non-insurance businesses, so that they're a good fit. We're always looking, though.
Okay. Thank you. Understood. I didn't figure you're gonna go for a big reveal here just off of my question, but I guess I just wanna. I'll get my guy to-
We did have an opportunity to buy the hotel that sits across the street from us, and I think we ruled that out.
I don't know. It's been years since I stayed there. It's probably still pretty nice. Anyway.
It's not too bad.
Anyway, I just wanna ask you to reiterate you had mentioned that when the sale closes, you'll make some comment at that point as to what you're thinking, or just I just wanna make sure I heard that correctly.
I mean, that's our expectation after the close. Yes. Still a little daylight between here and there.
Understood. Got it. All right. Thanks for that. I wanna also go back, related to a couple of the questions on, you know, the property book. The growth there was obviously, you know, kind of found another gear after running, you know, 20-ish% last year to get up to 40%. Most of that apparently was not rate driven. I guess I wanna ask just to kinda, was the growth primarily, you know, new business? Was it organic growth by people just having higher limits because property values have accelerated? Can you just maybe break down a little bit more of, you know, how you get from, you know, 7% pricing to 46% over your overall growth in the quarter?
Yeah. The overall Property segment rate change was 7%. Within that, you know, part of the growth was from our hurricane exposure, which was a 17% rate increase, and that's accelerating each month. That's a blended amount for the quarter. There is some new exposure there, but a lot of that too is an increase in the value of the locations that we're insuring. We don't count that as rate change. That's pure exposure growth. That is the location we had last year. We have it again this year, but this year it's worth maybe $1 million more than it was last year. That's driving some of that premium growth as well. That's true across the board with our various Property products.
Whether it be our E&S property division or marine or Hawaii book, each of those products is trying to value their locations with care and considering what inflation is doing to the underlying exposure. That's a chunk of the growth is exposure driven from a you know same building as last year perspective. Then a portion is the rate. Like within marine, we've also got positive rate change, which we've been getting for about five or six years now in a row, which is great to see.
Also some exposure growth in Hawaii as well, which I didn't mention because it's not moving the needle a ton, but they continue to be so focused on service that they're able to to win more business each year. Really a combination of three products, some exposure growth in terms of similar buildings and some new business. A lot of that is rate as well.
Are there any components of the property market that aren't seeing rate?
Oh, I would say from the parts that we participate in, I would say no. We were getting rate pretty much everywhere. There could be property markets we don't participate in that aren't seeing it.
Okay. Thanks for the additional color and good luck for the upcoming quarter.
Thank you.
Thank you.
The next question comes from Jamie Inglis from Philo Smith & Co. Jamie, please go ahead.
Thank you. Hey, guys, great quarter. Excellent job. You have touched a couple of times on the results in the marine book, good growth, you know, good profitability, positive reserve development sort of, et cetera. What's going on within that book of business particularly that we're talking about it so much right now? I mean, what's happening and where are you writing and what are you writing that's making it such a super line right now?
Well, the marine market is complicated. It's had several years of some disruption. A lot of that was driven by Lloyd's pulling back with their prior results that were a bit challenging. Initially, a couple of years ago, that created some opportunity. You know, the marine industry overall struggles with obtaining profitability. At RLI, you know, we require that our product groups focus on making underwriting profits so that we're around to pay claims later and be there for our brokers. We really do the business a little bit different than the overall marketplace in terms of discipline and making sure that we, you know, keep our rates moving in the right direction. We have a couple of products within that portfolio.
We have a large inland marine operation and then also some ocean marine business as well. Within inland, we've really grown through some addition of some underwriters that focus on, you know, subcomponents of the inland marketplace. Each of them have a quality book of business, tight relationships with some producers, and you know, are very transparent. As renewals come up, for example, they'll talk in advance with their producer to make sure that, you know, expectations are set with regard to how that renewal is gonna go. You know, if there's been loss activity, if there seems to be more rate or valuation questions, we'll go ahead and address that in advance of the renewal. On the ocean side, similar story.
We've had a little bit of loss activity on that side, more so than the inland, but we've addressed that through changes in underwriting, and that book is looking more attractive now as well. I don't know that you'll hear the same rate change at other marine operations. I mean, our operation is a little different. It's all about, you know, what mix, what type of product we're focusing on, what our mix is versus others. For example, we don't participate in offshore energy. That's a very challenging part of that marketplace. For us, you know, it's just business as usual, doing what we do, which is selecting risk and making sure we're charging enough to cover the exposure.
Okay, great. Thanks. I've got a question. If you think about the last few years, rates have been up materially in many lines of business, and I'm trying to get a sense, or if you could speak to what extent does that provide opportunities to you guys to write in either new markets, new lines of business, whatever, versus the obvious corollary, which is that competitors are seeing the same thing, and they're seeing and are growing quickly. How do you navigate your way through that to the opportunity versus the competitive environment?
Well, we struggle regardless because, you know, we tend to have maybe a higher bar for results than our competitors. I would say we navigate it through really individual risk selection. We're focused on, you know, really underwriting, which is different than some other places where our underwriters are looking at the individual risk and understanding the exposure and asking more questions sometimes than our peers, and then knowing what rate we need to charge. Our rate change doesn't always reflect what other people get because we're looking at it from what we need to have to be adequate for that particular exposure, and that tends to add up to something.
when, you know, rates are going up, then a lot of times people are fixing their book, and, you know, the brokers start to shop business, then we get the opportunity to look at some new business. We'll look at that just like we do our renewals, where we need to make sure we understand the exposure, and we charge the right amount. I think in an increasing rate environment, when that indicates issues with other carriers that maybe we can take advantage of, and you've probably seen some of that in our growth in the last year or two.
Are you looking at more opportunities in terms of new areas that you want to be in now than you were a year ago, two years ago, three years ago?
This is Craig. I mean, we're always looking for talented people, individuals, teams that have underwriting expertise. As I mentioned, narrow and deep. Also share our values and would thrive in our culture. That's the type of people we look for. You know, we're not for everyone, but we do constantly look for new teams of people that bring new expertise in those markets. You know, and we also try to push our own teams to look at adjacencies. I think to your point about you know, are there other opportunities in other spaces.
We push our folks to look at adjacencies. I think to Jen's point is you have to be very careful. Don't get caught up in rate change. I mean, obviously, you could be in habitational business right now, and if that's all we did, habitational and cyber liability, we'd be reporting to you 100% rate increases right now. Of course, if I was you, I would always step back and say, if they needed a 100%, how good were they before? Now, sometimes that answer is because they don't have the capacity to do it, and there's no capacity in the market. A lot of times they're doing it because they need the rate.
You don't see typically large swings like that for us because we try to be more disciplined and walk away from places where the, you know, there's no longer an opportunity. I would be remiss not to mention that. I mean, I think where our underwriters bring something to bear probably better than average, certainly in our industry, is selection, right? It's about selection. It's always. I mean, we can't drive a market rate. We're not big enough. I don't think any company in the insurance space is really big enough, even though they might say they can. Ultimately, it's about selection. It's having good underwriters that know the business really well and know the risks really well, and they can look at it and say, "You know what?
Rates are down here, but this risk is still priced adequately for me to be able to make money on this account and offer the quality service and you know, our professional experience in risk management to the equation for the cost that, you know, the price that they're gonna pay." At the end of the day, you know, it's about selection in all markets. Our folks do stay pretty close to home. It's hard to push them into adjacencies, but we're always looking for new teams. We think we're a great home for people that are focused on underwriting profit. If there's any of them out there listening, we're taking applications. That's what we're gonna continue to do, is try to focus on that.
Are there more of those guys? Sorry. Are there more of those people available now than there were, you know, three years ago? I mean, you can make an argument that underwriting results today are as good as they've been in quite a long time for lots of companies, not just you guys. If you were an underwriter at wherever and you had a good book of business, now wouldn't be a bad time to move, 'cause you could maintain the book of business. I mean, you could make an argument it's even better opportunities now than you've had in the past. Is that true, or is that not necessarily true?
I mean, I think it's very individualized where the opportunities are. I mean, a lot of it comes with disruption in the space. It could be disruption in regards to who their new boss is as opposed to, you know, how the market is performing. I mean, we're constantly looking, and we're constantly interviewing and talking to people. You know, we have a high bar for folks, and sometimes they wanna participate in that, and sometimes they don't, 'cause they're gonna live or die based on their own results. That's how we compensate them. Sometimes that's attractive to people, and sometimes it's not. Sometimes they'd rather go for the more money up front.
I'm not gonna pretend it's easy. It's not easy to find people that are good fits, but we do find them. They don't happen every day, but they do happen. We constantly have a list of people that we're talking to. Got a couple we're talking to right now.
Good. All right. Good deal. Thanks a lot. Good luck.
Thank you.
Thank you.
As a reminder, that's star one to ask a question. Our next question comes from Meyer Shields with KBW. Meyer, please go ahead.
Great. Thanks. A couple of very quick questions, mostly on property. If we allocate the catastrophe losses appropriately, it seems like there's a little bit of underlying loss ratio increase on a year-over-year basis. Is that mixed? Is that just the inflation we're seeing in home repair? Or sorry, building repair.
I think a little bit we had some later reported losses in the quarter. I think it's timing on some of that stuff, Meyer. I mean, I don't think there's any sort of trend there. We have, you're right, from a materials perspective, I think even if we go back to last year, that we talked about that, either extended BI or increased inflation on the material front. That is affecting losses, certainly, but Jen talked about right to the increased values that are factored in and helps on the revenue side. I don't think there's anything really underlying that, you know, may have pushed that up, you know, just a few points.
Okay. Perfect. Is there any way of, I guess, ballparking a PML given the growth in Florida that you've talked about today?
Well, I can tell you that we did on January first buy more reinsurance. We bought $100 million more limits in our catastrophe tower, which covers both hurricane and earthquake exposure. When it comes to PML on a net basis, we haven't moved the needle too much. In fact, you know, we're continuing to look for additional support as we continue to grow in that space. While the gross number is up a bit, the net number is fairly constant.
I mean, I think we always
Okay.
We always try to make sure contained.
Yeah.
Go ahead.
No, no. I interrupted Craig, I think, when he was talking about the containment strategy for reinsurance.
Well, we just always buy to make sure we're covered the 250 PML or more. I mean, just so you know that. I mean, I think that we disclosed that before, but that's welcome. You know, we try to make sure we're always contained. Obviously, that's rating, you know, the rating agency implications if you don't. Anyway, so.
Right. Okay, perfect. Just final question. The equity and earnings from Prime was down on a year-over-year basis, and I was hoping you could talk through that on a...
No, this is Todd. I think there was a little decline on the underwriting income front this quarter. I mean, I think we're monitoring that. There still is revenue growth occurring. You can get a little change by any given quarter-to-quarter comparison. We're keeping an eye on that.
Okay, perfect. Thanks so much.
If there are no further questions, I will now turn the conference over to Mr. Craig Kliethermes for some closing remarks.
Well, thanks everyone for your questions and interest in RLI. This quarter's results reflect a customer focus hallmark underwriting discipline and exceptional risk management. We'll continue to invest in product strategies where we can add value to our customers and our shareholders. This is what owners do. Talk to you all next quarter. Thank you.
This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.