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 attentions, 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 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 8K 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, equity and earnings of Maui GEM and the related taxes are excluded from the operating earnings and operating EPS for 2022 due to the sale of RLI's investment in the third quarter of 2022. RLI's management believes these measures are useful in gauging core operating performances across reporting periods, but may not be comparable to other companies' definitions of operating earnings. The Form 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rli.gov. I will now turn the conference over to RLI's Chief Investment Officer and Treasurer, Mr. Aaron Dieffenthaler. Please go ahead.

Thank you, Megan. Good morning, and welcome to RLI's first quarter earnings call for 2023. Joining us today are Craig Klythermus, President and CEO, Jen Klobnoch, Chief Operating Officer, and Todd Bryant, Chief Financial Officer. As usual, Todd will lead off with a summary of our financial performance in the quarter. Craig and Jen will offer detail 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. Good morning, everyone.

Yesterday we reported first quarter operating earnings of $1.63 per share. The quarter's results reflect strong underwriting performance and continued growth in investment income. All in, we posted a combined ratio of 77.9 for the quarter and experienced continued top line growth, which was up 16% as property and surety led the way. Investment income advanced 51% as we realized elevated income on improved reinvestment rates and a larger invested asset base. Operating cash flow was 69 million up nicely for the quarter and is supportive of asset growth. Realized gains were $15 million in the quarter. A majority of these gains were from the payout of the working capital escrow from the Maui Gym Sale and represent substantially all of the escrowed amounts from this transaction. Also in the quarter, the equity portfolio posted $15 million of unrealized gains. As mentioned on numerous occasions, large movements in equity prices between periods can have a significant impact on net earnings, which you can again see in the comparative results this quarter. From an underwriting income perspective, the quarter's combined ratio was 77.9 and was in line with last year's result. Our loss ratio declined two points as underlying results improved for both property and casualty. While storm losses added four points to the property segments loss ratio versus three points last year, The traditional losses remained low and were spread across a much higher revenue base. For casualty, the underlying loss ratio improved by half a point, due largely to mixed shifts as initial current accident year loss ratios are not materially different from a year ago. From a prior year's reserves perspective, all three segments benefited from favorable development. Casualty posted $36 million of favorable loss emergence across the majority of product lines and over multiple accident years. Property experienced $13 million in favorable development as marine, ENFs, and admitted property lines posted loss reductions. For surety, favorable reserve development was $3 million, modestly below last year's level, which explains the majority of the increase in the segment's loss ratio between periods. Our approach to reserving remains the same, and the quarter's results are reflective of a consistent process. Moving to expenses, compared to last year, our quarterly expense ratio increased two points to 40.7. Elevated incentive-related amounts account for nearly 1.5 points of this increase. Most notably, amounts influenced by operating return on equity and growth in book value were up significantly compared to the first quarter of last year. In addition, we have increased investments in both our people and technology to support growth, improve customer experience, and to drive efficiencies. Despite some market volatility, quarterly investment returns were positive at 2.8%, with both stocks and bonds contributing to comprehensive earnings of $137 million. Although the retreat in bond yields was significant in March, we still found a creep of opportunities in fixed income and purchase yields averaged more than 4.5% for the quarter. There has been little change to our investment strategy over the last year, with a focus on putting meaningful amounts of cash flow to work in high-quality bonds. Incorporating comprehensive earnings and adjusting for dividends, book value per share increased 12% in the quarter to $28.62 per share. Away from the traditional investment portfolio, investor earnings were down, but that comparison is largely influenced by our sale of Maui Gym, which contributed over $6 million to last year's result. As noted last year and highlighted in the press release, for comparative purposes, we have excluded earnings from Maui Gym in our calculation of operating earnings for 2022. 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.