RLI Corp.

Good morning and welcome to the RLI Corp third 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 make main comments, opinions, 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 maternally. Please refer to the risk factors described in the company's various SEC filings and in the annual report on Form 10-K, as supplemented are 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 third quarter results. During the call, RLI management may refer to operating earnings and earnings per share from operations, which are non-gap 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. Additionally, operating earnings and operating EPS exclude equity in earnings of margin and related taxes due to the sale of RLI's investments. RLI's management believes that measures are useful in Gorgian Core operating performance across reporting periods, but may not be comparable to other companies' definitions 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'll now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron Zetanfala. Please go ahead.

Thank you, Victoria. Good morning, everyone. Welcome to RLI's third quarter earnings call for 2022. Joining us today are Craig Cleatherman, President and CEO, Jen Klodnok, Chief Operating Officer, and Todd Bryant, Chief Financial Officer. Per our usual process, Todd will lead off and walk through financial results for the quarter. Craig and Jen will offer commentary on our product portfolio and current market conditions We will then take your questions, and Craig will close with some final thoughts.

Todd? Thanks, Aaron. Good morning, everyone. Yesterday, we reported third quarter operating earnings of 50 cents per share, which were negatively impacted by losses from Hurricane Ian. Apart from Ian, underwriting results on the current year remain strong, and benefits from prior year's reserve releases were accreted to earnings. we experienced 13% top-line growth and posted a combined ratio of 97 for the quarter. Combined with a very strong first half of the year, our year-to-date combined ratio was 85.3. Investment income advanced 19% in the quarter as reinvestment rates continued to move higher and operating cash flow remained strong and supportive of incremental investments in the portfolio. I'll talk more about Maui Gym in a minute. The net realized gains of $573 million for the quarter reflect the sale of its minority investment. From a net unrealized loss perspective, equity securities declined $26 million during the quarter as market volatility continued. Craig and Jim will give some color on the market landscape in a minute, but at a high level, all three segments experienced growth as we continue. most areas of our business. From an underwriting income perspective, the quarter's combined ratio was 97 compared to 94.6 a year ago. Both periods were impacted by elevated hurricane losses. Hurricane losses in the quarter are within our pre-announced range and total 40 million net of reinsurance. 33 million of that is from our property segment and 7 million impacted casualty for a number of our package policies or reports. Net of bonus-related impacts, the event totaled $34.8 million, or 60 cents per share net of tax, and added 12 points to the quarter's combined ratio. From a loss perspective, all three segments experienced favorable prior year's reserve development. Casualty experienced $28 million in favorable development, with notable contributions from general liability commercial excess, executive products, small commercial and miscellaneous professional liability. Property posted $3 million in favorable emergence with the largest benefit from our marine business. In surety, commercial and miscellaneous were responsible for the bulk of that segment's $2 million in positive development during the quarter. Moving to expenses, compared to last year, our quarterly expense ratio increased 2.5 points to 40.4. This result was impacted by increased bonus and incentive-related accruals. On a year-to-date basis, our expense ratio was 39.2. Turning to investments, total return performance was minus 3.4% during the quarter and minus 13.5% on a year-to-date basis. Balanced portfolios continue to be challenged by the current environment, as both stocks and bonds trade lower in price. As we discussed in our second quarter call, the majority of these declines remain unrealized without the need to sell significant portions of the portfolio. Strong operating cash flow and an increase in fixed income yields have offered a welcomed opportunity to purchase high-quality assets with underpinned investment income. Today, new money yields are achievable in the 4.5% range without having the need to reach down to the credit spectrum or for longer maturities. Moving to other investments, we recorded an $18 million loss in the quarter from our equity and earnings at Maui Gym. This result was driven largely by transaction-related expenses incurred by Maui Gym from the company's sale. As previously announced, we received $686.6 million in exchange for our shares in Maui Gym. Final proceeds remain subject to customary post-clothing working capital and other adjustments, which could modestly increase this amount. Prior to sale, our carrying value of Maui Gym was $108.4 million, inclusive of the quarter's loss. Our net earnings, with real-life gain, loss in the quarter, taxes, and other sale-related amounts, reflect $437.7 million or $9.56 per share from the sale of this minority investment. Lastly, book value per share was $30.72 to end the quarter, up 16% from year-end inclusive of dividends, and was heavily influenced by the realized gain on Mallee Gym. Obviously, this transaction generated a significant amount of capital. As always, our first preference is to deploy capital in support of our business, which we have been doing. We regularly evaluate our capital position relative to the opportunities we see as we look forward. This is the time of year we have historically evaluated any excess capital position, and we expect to follow the same approach in the fourth quarter of this year. 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.