RLI Corp.

Good morning and welcome to the RLI Corp Horse Culture Earnings Teleconference. After management's prepared remarks, we'll 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 fourth 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 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' definitions of operating earnings. The Form 8K contains a reconciliation between operating earnings and net earnings. The form 8K and press release are available at the company's website. I will now turn the conference over to RLI's vice president, chief investment officer and treasurer, Mr. Aaron DeFasala. Please go ahead. Thank you, Lydia. Good morning.

And welcome to RLI's final earnings call for 2021. Joining us today are Craig Kleethermes, President and CEO, Jen Klobnoch, Chief Operating Officer, Todd Bryant, Chief Financial Officer, and John Michael, Chairman. Todd will lead us off with relevant financial highlights. Craig and Jen will follow with additional comments on our product portfolio and the current market environment. 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 fourth quarter operating earnings of $1.26 per share. The quarter's results reflect very low weather-related losses in our property segment, modestly improved underlying loss ratios in our casualty and surety segments, and continued favorable benefits from prior year's loss reserves. All in, we posted a combined ratio of 80.7 for the quarter and experienced continued growth in top line, which was up 12% in the quarter. On a full year basis, we posted an 86.8 combined ratio and grew premium 19%. Investment income advanced 7.7% in the quarter and close of the year up 1.4%. Continued strong operating cash flow, 104 million in the quarter, and 385 million for the year have been additive to our invested asset base. Realized gains were 12 million in the quarter, while changes in unrealized gains and losses on equity securities totaled 36 million as the market rallied further to close the year. 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 and year-to-date results. The combination of solid underwriting investment results pushed book value per share to $27.14, up 20% from year-end 2020, inclusive of dividends. Craig and Jim 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 the underwriting income perspective, the quarter's combined ratio, as I mentioned, was 80.7, compared to 88 a year ago. Our loss ratio declined 6.6 points due largely to benign catastrophe activity during the fourth quarter of 2021. From a prior year's reserves perspective, both fourth quarters benefited from a similar amount of favorable development. Casualty posted 26 million of favorable loss emergence across the majority of product lines and over multiple accident years, while surety posted 3 million in favorable emergence. Given the short tail nature of surety, the majority of favorable emergence was on the 2020 accident year. Moving to expenses, compared to last year, our quarterly expense ratio decreased 0.7 points to 41.5. This was, however, elevated from our trend through the first three quarters of 2021. The upward movement is largely reflective of increased performance and incentive-related amounts, which as discussed before, are driven by combined ratio, operating return on equity and growth in book value. On a full year basis, our expense ratio declined 0.5 points to 40.3, reflective of improved leverage on our expense base as net premiums earned rose. Turning to investments, we realized 1.5% total return for the quarter and 4.7% on the year. Robust equity returns more than offset price declines in fixed income, which fell on a move higher in market yields throughout the year. We remain content to keep putting significant levels of operating cash flow to work, a strategy that helped turn the investment income tide in the quarter. Apart from capital markets exposure, investee earnings were up considerably from the comparable period in 2020, with Maui Jim and Prime contributing $3.1 and $5.3 million, respectively. On a combined basis, Investee earnings totaled $37 million for the full year. As we talked about before, while not core to operations, continue to be a benefit to earnings. All in all, a very good quarter and strong finish to the year. And with that, I'll turn the call over to Craig.