RLI Corp.

Good morning, ladies and gentlemen. Welcome to the RLI Corp Second 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 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 the Form 10-Q for the quarterly period ended June 30, 2021, 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 second quarter results. RLI management may make reference during the call to operating earnings and earnings per share for 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 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 but may not be comparable to other companies' definition of operating earnings. The Form 8 contains a reconciliation between operating earnings and net earnings. The Form 8 and press release are available at the company's website at www.rlicorp.com. I will now turn the conference over to RLI's Vice President, Chief Investment Officer and Treasurer, Mr. Aaron Ifenthaler. Please go ahead, sir. Thank you, Travis.

Good morning, everyone, and welcome to RLI's second quarter earnings call for 2021. Joining us today are John Michael, Chairman and CEO, Craig Cleathermus, President and Chief Operating Officer, and Todd Bryant, Chief Financial Officer. Pretty standard structure for today's call with Todd running down the financial results for the quarter ended June 30th. Craig will add some commentary on current market conditions and our product portfolio. We will then open the call to questions, and John will close with some final thoughts. Todd?

Thanks, Aaron. Good morning, everyone. Yesterday, we reported second quarter operating earnings of $1.09 per share. Results reflect positive current year underwriting profit, supplemented by favorable benefits from prior year's loss reserves. All in, we experienced 25% top line growth and posted an 84.8 combined ratio. Additionally, our core business was complemented by a strong quarter from Maui Jim and Prime. While investment income was down modestly in the quarter, year-to-date operating cash flow of $165 million has supported growth in our invested asset base. Realized gains for the quarter were elevated as we rebalanced our equity position, leaving a modest $4 million change in unrealized gains on equity securities. As you know, large movements in equity prices and comparable periods can have a significant impact on net earnings, which you can see in both the quarterly and year-to-date comparisons to 2020. Aggregate underwriting and investment results push book value per share to $27.46, up 11% from year-end, inclusive of dividends. Greg will talk more about market conditions in a minute, but from a high level, all three segments experience growth. Property led the way, up 33%, as rates and market disruption continued to support growth. Casualty growth writings improved 24%, with all major product lines contributing. For surety, premium was up 11%, as our contract and transactional business grew nicely in the quarter. From an underwriting income perspective, the quarter's combined ratio was 84.8 compared to 88.4 a year ago. Our loss ratio declined 4.1 points to 44.4. Storm losses booked in the quarter totaled 8 million, with 7 million impacting the property segment and 1 million the casualty segment. On an overall basis, prior year's reserves continued to develop favorably, enhancing both the casualty and property loss ratios. Surety, however, experienced adverse loss development in the quarter. as we further strengthen incurred but not reported reserves on the 2020 accident year for the energy portion of our commercial surety business. Lastly, on the loss front, our current accident year loss ratio for casualty continued to improve. On an underlying basis, if you exclude prior year's reserve benefits and catastrophes, our casualty loss ratio was down seven points. COVID-related impacts in 2020 account for about four points of that decline. Excluding that, however, the loss ratio was still down three points. An improving mix in modest reductions in lost booking ratios, similar to what we discussed on the last few calls, have driven the positive results. With respect to COVID-specific reserves, amounts are largely unchanged from year end. Moving to expenses, our quarterly expense ratio increased a half a point to 40.4. Similar to last quarter, the increase and the increase in general corporate expenses are largely driven by amounts accrued for performance-related incentive plans. The combination of significantly higher operating earnings and improved combined ratio and growth in book value drove these metrics higher. Apart from elevated incentive amounts, and continued technology-related investments, other operating expenses were relatively flat. On the asset side of the balance sheet, our investment portfolio had the major components pulling the same direction, with positive results from equities and fixed income. Higher bond returns have come alongside lower reinvestment rates, as Treasury yields have declined from the highs we saw earlier in the year. Despite the return of lower yields, Strong operating cash flow is accruing to the benefit of total invested assets. A growing portfolio helped to flatten the curve of investment income, which was down just over 1% in the quarter. Total return was 2.8% for the quarter, and we continue to put money to work in nearly all environments to stay fully invested. Apart from the capital markets exposure, investee earnings were significant compared to 2020. Maui Gem and Prime contributed $10.6 million and $3.6 million, respectively, both benefiting from robust markets and an improving macroeconomic environment. All in all, a very good quarter and a strong first half of the year. And with that, I'll turn the call over to Craig.