RLI Corp.

Good day and welcome to the RLI Third Quarter Earnings Teleconference. This call is being recorded. It is now my pleasure to turn the conference over to Mr. Aaron Dieffenthaler. Sir, please begin.

Thank you, Chelsea. Good morning and welcome to RLI's Third 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. As usual, Todd, we'll kick things off by walking through the financials. Craig will follow with additional comments on current market conditions and our product portfolio. We'll then open the call to questions, and John will close with some final thoughts. Todd?

Thanks, Aaron, and good morning, everyone. Yesterday, we reported third quarter operating earnings of 65 cents per share. The quarter's results were negatively impacted by hurricanes, most notably Hurricane Ida, but solid underwriting results, excluding catastrophes, as well as favorable benefits from prior year's loss reserves, positively impacted earnings. All in, we experienced 18% top-line growth and posted a 94.6 combined ratio for the quarter. Year-to-date, our combined ratio stands at 88.9. From investments, income advanced 8% in the quarter as continued strong operating cash flow, $116 million in the quarter and $280 million for the year have been additive to our invested asset base. Earnings for Maui Gem and Prime were up 3% in the quarter, and while not core, continue to be a benefit to earnings. Realized gains were relatively flat in the quarter, while changes in unrealized gains and losses on equity securities were impacted by varying amounts of market volatility on a quarterly and year-to-date basis. As mentioned in prior calls, large movements in equity prices in comparable periods could 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 $27.63, up 13% from year-end, inclusive of dividends. Craig will talk more about premium in a minute, but at a high level, all three segments experience growth. as we continue to take advantage of favorable market conditions in most areas of our business. From an underwriting income perspective, this quarter's combined ratio was 94.6 compared to 99.5 a year ago. Both periods were impacted by elevated hurricane losses. Hurricane losses in the quarter are within our pre-announced range and total 34 million net of reinsurance. 33 million of that is from our property segment and 1 million impacted casualty where a number of our package policies are reported. Net of bonus-related impacts, the events totaled 28.9 million, or 50 cents per share net of tax, and added 11 points to the quarters combined ratio. From a prior year's reserves perspective, all three segments experienced favorable development. Casualty led the way with 26 million of favorable loss emergence spread across the majority of product lines. Moving to expenses, our quarterly expense ratio decreased by 2.7 points to 37.9 as did general corporate expenses. The declines are due in part to reductions in certain bonus measures but are also reflective of the increase in net earned premium and improved leverage on certain expenses. Turning to investments, it was a flat total return quarter with income offsetting modest price declines in the portfolio. Overall market yields remained subdued but we have seen a little uplift recently as 10-year yields inch back toward the highs we saw in late March. Operating cash flow remains the primary support for growth and investment income, which turned positive in the quarter. There have been a few shifts in the allocation over the course of the year, but our strategy continues to focus on putting money to work in nearly all environments. Apart from the capital markets exposure, investee earnings were up slightly from the comparable period in 2020, with Maui Jim and Prime contributing $5.4 million and $4.4 million, respectively. All in all, a very good quarter and strong first nine months of the year. And with that, I'll turn the call over to Craig.