RLI Corp.

Good morning and welcome, ladies and gentlemen, to the RLI Corp Third Quarter Earnings Teleconference. As a reminder, we will open the conference up for questions and answers after the presentation. 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 may cause actual results to differ materially. Please refer to the risk factors described in the company's various SEC filings, including the annual report on Form 10-K as supplemented in the Form 10-Q for the quarterly period ended September 30, 2020, 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 third 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. RLIs operating earnings and earnings per share from operations consist of net earnings after the elimination of after-tax realized gains or losses and after-tax unrealized gains or losses on equity securities. RLI's management believes that measures are useful in gauging core operations performance across reporting periods but may not be comparable to other companies' definitions of operating earnings. The Form 8 contains reconciliation between operating earnings and net earnings. The form 8K and press release are available on the company's website at rlicorp.com. I will now turn the conference over to RLI Vice President, Chief Investment Officer, and Treasurer, Mr. Aaron Dieffenthaler. Please go ahead, sir.

Thank you, Ryan. Good morning, everyone, and welcome to RLI's third quarter earnings call. Joining us today are John Michael, Chairman and CEO, Craig Cleathermus, President and Chief Operating Officer, and Todd Bryant, Chief Financial Officer. As in prior quarters, Todd will kick things off with financial details on the three- and nine-month periods ending September 30th. Hopefully that information will answer some of your common questions. Craig will follow with some detail on the product portfolio. We can then open the call to questions, and John will close with some final thoughts. Todd?

Thanks, Aaron. Good morning, everyone. Last night, we reported third quarter operating earnings of 42 cents per share. In a quarter that was impacted by a number of severe hurricanes, we achieved 9% top line growth and posted a 99.5 combined ratio. Investment income declined modestly, while investee earnings and unrealized returns on the investment portfolio reversed adverse trends experienced earlier in the year. Positive net earnings drove book value per share up 13% for the year, inclusive of dividends, to end the quarter at $24.40. Pricing momentum continued in a number of our products, and the pandemic's influence was modest this quarter, with cashly posting 11% top-line growth, while property and surety were up 8% and 1%, respectively. Craig will talk more about individual products and market conditions in a minute, but overall growth in gross premiums written was driven largely by rate increases and expanded distribution. From an underwriting perspective, the quarter's numerous hurricanes resulted in one of our larger CAT-impacted periods. Recorded losses from Hurricanes Hannah, Isaias, Laura, and Sally are within our preannounced range and stand at $39 million net of reinsurance. $35 million of that is from our property segment and $4 million impacted casualty, where a number of our package policies are reported. Net of bonus-related impacts, these losses totaled $33.2 million, or 58 cents per share net of tax, and added 15 points to the quarter's combined ratio. Overall, the quarter's loss ratio was 58.9. In addition to catastrophe losses, we maintained the elevated current year loss booking ratios mentioned last quarter on certain financial-related products where heightened exposure to pandemic-related losses exists. This resulted in recording 4 million in COVID-19-related losses, 3 million in casualty, and 1 million in surety. Year-to-date, reserves established for COVID-19 total 15 million. By segment, amounts recorded totaled 2 million for property, 3 million for surety, and 10 million for casualty. To date, we have not paid any COVID-related indemnity amounts. A majority of claims received have been closed, but we continue to investigate and review all claims submitted. Offsetting reserve additions in the quarter were approximately $25 million in net benefits from prior year's reserve releases. By segment, casualty totaled 19, with a majority of products posting favorable experience. Surety posted $3 million in benefits and property was $3 million, inclusive of some reductions in prior year storm losses. Moving to expenses, our quarterly expense ratio remained below last year, down 1.3 points to 40.6. Book value growth improved during the quarter, but continues to lag prior year, as does our combined ratio, resulting in lower amounts earned under incentive compensation. The decline in amounts under incentive plans accounts for the majority of the decrease in our expense ratio, as well as the bulk of the decrease in general corporate expense. Having said that, while revenue has exceeded our early estimates at the onset of the pandemic, targeted actions set in motion to eliminate or defer expenses have persisted. We are continuing to evaluate areas of opportunity for efficiency gains and expense savings while increasing our investment in technology, particularly those related to customer experience and ease of doing business. Turning to investments, we are pleased to see a continued recovery in most sectors during the quarter. Despite some September volatility for equities, the portfolio again produced positive results and a 2.2% total return. Although invested assets contributed to sustained growth in book value, the current interest rate environment weighed on investment income during the quarter. Operating cash flow was strong this quarter and drove a continued preference for purchase activity in high-quality investment-grade securities. While capital markets volatility may resurface in the near term, 2020 has confirmed that our sound balance sheet can weather most storms. Outside of the core portfolio, our share of investee earnings increased nicely in the quarter. For Maui Gym, net sales improved from the second quarter's trend as the retail sector opened up further. While sales remained down significantly on a year-to-date comparative basis, efforts to right-size related operating expenses have proven effective. For prime, investee earnings continue to advance, reflective of growth in revenue and earnings they are experiencing. As mentioned previously, results for both investees may be influenced by any economic headwinds, particularly in the retail sector as it relates to Maui Gym. And with that, I'll turn the call over to Craig.