RLI Corp.

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 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 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 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 at www.RLICorp.com. I will now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron Deifenthaler, so 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 Cleatherman's President and CEO, Jen Klobnoch, Chief Operating Officer, Todd Bryant, Chief Financial Officer, and John 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 year's 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 Jim will talk more about premium in a minute, but at a high level, all three segments experience 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 one point to this quarter's loss ratio, compared to seven 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 the 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. 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 equities declined with heightened volatility. Total return performance came in at a minus 4.7% through March and is reflected in our comprehensive losses 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 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 Gym contributing $6.4 million and Prime $2.8 million. We also announced in the Corps that we have agreed to sell our minority stake in Maui Gym and anticipate after-tax proceeds will approximate $500 million. Final proceeds will be subject to certain adjustments to 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. And with that, I'll turn the call over to Craig.