SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

12 Months Ended

Dec. 31, 2019

SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

SCHEDULE II-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)

RLI CORP. AND SUBSIDIARIES

SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(PARENT COMPANY)

CONDENSED BALANCE SHEETS

December 31,

(in thousands, except share data)	2019		2018
Assets
Cash	$	350	$	3,214
Investments in subsidiaries		1,034,679		828,806
Investments in unconsolidated investee		79,597		79,521
Fixed income:
Available-for-sale, at fair value (amortized cost - $42,747 in 2019 and $58,812 in 2018)		45,538		59,878
Property and equipment, at cost, net of accumulated depreciation of $1,562 in 2019 and $1,494 in 2018		1,846		1,914
Income taxes receivable - current		842		—
Other assets		400		547
Total assets	$	1,163,252	$	973,880
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable, affiliates	$	1,310	$	130
Income taxes payable - current		—		32
Income taxes - deferred		14,578		15,081
Bonds payable, long-term debt		149,302		149,115
Interest payable, long-term debt		2,153		2,153
Other liabilities		521		527
Total liabilities	$	167,864	$	167,038
Shareholders’ equity:
Common stock ($0.01 par value 100,000,000 share authorized)
(67,799,229 shares issued and 44,869,015 shares outstanding in 2019)
(67,434,257 shares issued and 44,504,043 shares outstanding in 2018)	$	678	$	674
Paid-in capital		321,190		305,660
Accumulated other comprehensive earnings, net of tax		52,473		(14,572)
Retained earnings		1,014,046		908,079
Deferred compensation		7,980		8,354
Treasury stock, at cost (22,930,214 shares in 2019 and 2018)		(400,979)		(401,353)
Total shareholders’ equity	$	995,388	$	806,842
Total liabilities and shareholders’ equity	$	1,163,252	$	973,880

See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 101 of this report.

RLI CORP. AND SUBSIDIARIES

SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(PARENT COMPANY)—(continued)

CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS

Years ended December 31,

(in thousands)	2019		2018		2017
Net investment income	$	1,656	$	648	$	647
Net realized gains (losses)		463		(142)		(36)
Equity in earnings of unconsolidated investee		13,592		12,471		14,436
Selling, general and administrative expenses		(12,686)		(9,427)		(11,340)
Interest expense on debt		(7,588)		(7,437)		(7,426)
Loss before income taxes	$	(4,563)	$	(3,887)	$	(3,719)
Income tax benefit		(4,989)		(2,359)		(16,601)
Net earnings (loss) before equity in net earnings of subsidiaries	$	426	$	(1,528)	$	12,882
Equity in net earnings of subsidiaries		191,216		65,707		92,146
Net earnings	$	191,642	$	64,179	$	105,028
Other comprehensive earnings (loss), net of tax
Unrealized gains (losses) on securities:
Unrealized holding gains arising during the period	$	1,727	$	710	$	21
Less: reclassification adjustment for (gains) losses included in net earnings		(365)		112		6
Other comprehensive earnings - parent only	$	1,362	$	822	$	27
Equity in other comprehensive earnings (loss) of subsidiaries/investees		65,683		(34,819)		35,282
Other comprehensive earnings (loss)	$	67,045	$	(33,997)	$	35,309
Comprehensive earnings	$	258,687	$	30,182	$	140,337

See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 101 of this report.

RLI CORP. AND SUBSIDIARIES

SCHEDULE II—CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(PARENT COMPANY)—(continued)

CONDENSED STATEMENTS OF CASH FLOWS

Years ended December 31,

(in thousands)	2019		2018		2017
Cash flows from operating activities
Earnings (loss) before equity in net earnings of subsidiaries	$	426	$	(1,528)	$	12,882
Adjustments to reconcile net losses to net cash provided by (used in) operating activities:
Net realized (gains) losses		(463)		142		36
Depreciation		68		68		77
Other items, net		2,487		(471)		595
Change in:
Affiliate balances receivable/payable		1,180		1,187		(930)
Federal income taxes		(1,673)		3,430		(6,874)
Changes in investment in unconsolidated investee:
Undistributed earnings		(13,592)		(12,471)		(14,436)
Dividends received		13,200		9,900		—
Net cash provided by (used in) operating activities	$	1,633	$	257	$	(8,650)
Cash flows from investing activities
Purchase of:
Fixed income, available-for-sale	$	(2,507)	$	(73,812)	$	(5,773)
Sale of:
Fixed income, available-for-sale		14,273		12,056		24,771
Property and equipment		—		—		128
Call or maturity of:
Fixed income, available-for-sale		29,501		75,662		3,499
Net proceeds from sale (purchase) of short-term investments		—		70		(47)
Cash dividends received-subsidiaries		34,003		73,363		107,000
Net cash provided by investing activities	$	75,270	$	87,339	$	129,578
Cash flows from financing activities
Proceeds from stock option exercises	$	9,490	$	6,076	$	3,502
Cash dividends paid		(93,315)		(90,662)		(124,247)
Other		4,058		—		—
Net cash used in financing activities	$	(79,767)	$	(84,586)	$	(120,745)
Net increase (decrease) in cash	$	(2,864)	$	3,010	$	183
Cash at beginning of year		3,214		204		21
Cash at end of year	$	350	$	3,214	$	204

Interest paid on outstanding debt amounted to $7.3 million for 2019, 2018 and 2017, respectively. See Notes to Consolidated Financial Statements. See also the accompanying report of independent registered public accounting firm on page 101 of this report.