RLI Corp.

Good morning and welcome to the RLI Corp fourth quarter earnings teleconference. After management's prepared remarks, we'll be opening the conference up for a question and answer session. 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. These 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 third 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. Additionally, operating earnings and operating EPS exclude equity in earnings of Maui Gym and related taxes due to the sales of RLI's investments. RLI's management believes these measures are useful in gauging core operating performance across reporting periods that 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.rliporp.com. I will now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron DeFensola, please go ahead.

Thank you, Drew. Good morning, everyone. Thanks for joining us to close out 2022 with RLI's fourth quarter earnings call. Participating with me are Craig Klee-Thurman, President and CEO, Jane Klobnoch, Chief Operating Officer, Todd Bryant, Chief Financial Officer. Todd will kick things off with the financial results for the quarter. Craig and Jen will offer some commentary on current market conditions, our product portfolio, and possibly reinsurance. Just a guess there. After our prepared remarks, we'll take your questions, and Craig will close with some final thoughts. Todd? Thanks, Aaron. Good morning, everyone. Yesterday, we reported fourth quarter operating earnings of $1.53 per share, with both underwriting and investments contributing. Overall, we posted a combined ratio of 82.1 for the quarter and experienced continued top-line growth, which was up 14% in the quarter. On a full-year basis, gross premiums written increased 16%, and we posted an 84.4 combined ratio, marking our 27th consecutive year of underwriting profitability. Investment income advanced nearly 60% in the quarter and closed the year up 25%. Reinvestment rates moved higher as did our invested asset base, driven largely by funds received from the sale of Maui Gym. Operating cash flow was negative for the quarter, as we paid $116 million in taxes on the gain from the sale of Maui Gym. This amount is included as a reduction to operating cash flow, while the cash proceeds received from the sale were reflected as cash flow from investing. Apart from this nuance, operating cash flow was very similar to last year on both a quarter and year-to-date basis. Realized losses of $3 million in the quarter were the result of adjustments to Maui Gems' pre-closed financials, which increased our equity in Maui earnings and correspondingly decreased our realized gains recorded on the sale. This adjustment had no impact on net earnings. For equity securities, changes on realized gains and losses reflects a $34 million gain as the market rallied 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. Greg and Jim will talk more about the market and 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 an underwriting income perspective, the quarter's combined ratio was 82.1 compared to 80.7 a year ago. Our loss ratio increased 2.6 points due to higher weather-related losses. In the quarter, we incurred 8 million in storm losses, 7 million in property, and 1 million in casualty from a number of main storms. At the same time, we reduced our estimate of net losses from Hurricane Ian $2 million, which is now at the bottom of our initial range estimate. Claim volume and severity have come in below initial expectations for this storm, which occurred very late in the third quarter. From a prior year's perspective, we continue to benefit from favorable reserve development. Casualty posted $14 million of favorable loss emergence with contributions from a number of product lines. Property posted $4 million in favorable emergence due largely to reductions in reserves for prior year storms. In addition, we experienced improvements in the current year's underlying loss ratios for both property and casualty. Year-to-date, property's underlying loss ratio declined four points compared to last year due to lower attritional losses in both inland marine and commercial fires. a shift in business mix and overall rate increases. Moving to expenses, compared to last year, our quarterly expense ratio decreased 1.2 points to 40.3. On a full year basis, our expense ratio declined 0.8 points to 39.5. Both results are reflective of improved leverage on our expense base as net premiums earned continue to grow. Turning to investments, Total return performance improved and came in at 2.3% during the fourth quarter and minus 11.5% for the year. Without question, it was a difficult year for the markets. But as a long-term investor, we are encouraged by stabilizing equities and higher bond yields, which are accruing to investment income. In the quarter, we continue to invest in high-quality bonds with incremental cash flow and have yet to pivot toward riskier assets. Apart from a short-lived, short-term portfolio associated with the Maui GEM proceeds, new money yields continue to exceed 4%. Moving to other investments, we recorded $7 million in investee earnings in the quarter, with Maui GEM contributing $3 million and Prime posting $4 million. The result for Maui was due to the true-up of pre-closed financials, as mentioned previously. This adjustment had no impact on net earnings for the quarter, as realized gains were reduced by an equal amount. As noted in the press release, we have excluded earnings from Maui Jim from operating earnings. As such, this adjustment did not affect those earnings either. On a year-to-date basis, investee earnings are down significantly, largely to transaction-related expenses incurred by Maui Jim from the company's sale. As a reminder, We received $687 million in exchange for our shares in Maui Gym in the third quarter. Final proceeds remain subject to customary post-closing working capital and other adjustments. We expect most of that adjustment process to conclude during the first half of 2023 and could modestly increase this amount. For 2022, our net earnings with realized gain, investee earnings, Taxes and other sale-related amounts reflect $434 million, or $9.49 per share, from the sale of our minority investment. The combination of solid underwriting investment results took book value per share to $25.89, up 25% from year-end 2021, inclusive of dividends. This growth benefited from the gain associated with the sale of MauiGEM, a portion of which was returned to shareholders via a $7 per share special dividend in December. All in all, a very good quarter and strong finish to the year. And with that, I'll turn the call over to Craig. Craig? Well, thank you, Aaron and Todd.

Good morning, everyone. As Todd mentioned, we finished the year with continued momentum, reporting excellent underwriting results and double-digit growth for the quarter. 2022 marks our 27th consecutive year of underlying profit on both a net and gross basis. We've now benefited from back-to-back years of top-line growth in excess of 15%, and another year of rate increases in excess of underlying loss trends across the property and cashless segments. This has resulted in very good returns that we are pleased to report to our shareholders. Our underwriters have been able to grow almost all the products within our portfolio, but there are a few pockets where we still face stiff competition. A hard reboot in the reinsurance market, continued multifaceted inflation, and weakened balance sheets should provide a stronger backbone to the industry's underwriting discipline and be supportive of more firming. Assuming the competitive environment responds rationally, We anticipate rate increases and disruption that should create new opportunities for profitable growth. We've already seen additional improvement in price, terms, and conditions in the property market at the end of 2022. Over the last decade, we've been able to access low attaching earnings protection from high quality reinsurers at favorable prices. At each reinsurance renewal, we evaluate the risk reward equation carefully. using our actual team and reinsurance brokers to inform decision-making. Given our conservative balance sheet, diversified portfolio of specialty products, and underlying profitability, we have always retained the optionality to take more net where the expected reinsurance-seeded margins exceed a fair return. We believe the cost of property reinsurance increased beyond that point at 1-1. As a result, we adjusted our retention and co-participations accordingly, and are comfortable with our new reinsurance structure. We remain optimistic about the expected underlying profitability of our portfolio. We believe we are in strong position to capitalize on the disruption that we expect to ensue. I will turn it over to Jen, who will provide more detail on the quarter results and the reinsurance placements made on 1-1.