UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                 to

Commission File Number:       001-09463

RLI Corp.

(Exact name of registrant as specified in its charter)

Delaware	37-0889946
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
9025 North Lindbergh Drive, Peoria, IL	61615
(Address of principal executive offices)	(Zip Code)

(309) 692-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock $0.01 par value	RLI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐   No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of October 15, 2024, the number of shares outstanding of the registrant’s Common Stock was 45,821,466.

Table of Contents

		Page
Part I - Financial Information		3
Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Earnings and Comprehensive Earnings for the Three and Nine-Month Periods Ended September 30, 2024 and 2023 (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (unaudited)	4
	Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine-Month Periods Ended September 30, 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2024 and 2023 (unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
Part II - Other Information		35
Item 1.	Legal Proceedings	35
Item 1a.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		36

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Earnings and Comprehensive Earnings

(Unaudited)

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
(in thousands, except per share data)	2024		2023		2024		2023
Net premiums earned	$	389,489	$	318,409	$	1,129,230	$	948,412
Net investment income		36,694		31,963		103,502		87,835
Net realized gains		5,420		6,558		11,222		26,758
Net unrealized gains (losses) on equity securities		38,392		(25,236)		87,314		15,474
Consolidated revenue	$	469,995	$	331,694	$	1,331,268	$	1,078,479
Losses and settlement expenses		202,118		189,558		513,741		457,989
Policy acquisition costs		117,811		103,013		342,186		307,083
Insurance operating expenses		28,868		21,591		84,892		70,002
Interest expense on debt		1,617		1,873		4,839		5,928
General corporate expenses		3,994		2,372		13,144		10,805
Total expenses	$	354,408	$	318,407	$	958,802	$	851,807
Equity in earnings of unconsolidated investees		1,238		1,732		7,653		7,169
Earnings before income taxes	$	116,825	$	15,019	$	380,119	$	233,841
Income tax expense		21,798		1,483		75,200		43,842
Net earnings	$	95,027	$	13,536	$	304,919	$	189,999
Other comprehensive earnings (loss), net of tax		80,293		(56,834)		59,779		(38,848)
Comprehensive earnings (loss)	$	175,320	$	(43,298)	$	364,698	$	151,151
Basic net earnings per share	$	2.08	$	0.30	$	6.67	$	4.17
Diluted net earnings per share	$	2.06	$	0.29	$	6.60	$	4.12
Weighted average number of common shares outstanding:
Basic		45,780		45,622		45,734		45,581
Diluted		46,220		46,065		46,185		46,067

See accompanying notes to the unaudited condensed consolidated financial statements.

3

RLI Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30,		December 31,
(in thousands, except share and per share data)	2024		2023
ASSETS
Investments and cash:
Fixed income:
Available-for-sale, at fair value	$	3,176,073	$	2,855,849
(amortized cost of $3,302,684 and allowance for credit losses of $234 at 9/30/24)
(amortized cost of $3,054,391 and allowance for credit losses of $306 at 12/31/23)
Equity securities, at fair value (cost - $405,663 at 9/30/24 and $354,022 at 12/31/23)		729,738		590,041
Short-term investments, at cost which approximates fair value		203,296		134,923
Other invested assets		53,993		59,081
Cash		60,634		36,424
Total investments and cash	$	4,223,734	$	3,676,318
Accrued investment income		26,711		24,062
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $22,049 at 9/30/24 and $21,438 at 12/31/23		241,311		221,206
Ceded unearned premium		120,845		112,257
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $10,055 at 9/30/24 and $10,608 at 12/31/23		759,540		757,349
Deferred policy acquisition costs		172,069		146,566
Property and equipment, at cost, net of accumulated depreciation of $74,821 at 9/30/24 and $74,279 at 12/31/23		44,644		46,715
Investment in unconsolidated investees		65,271		56,966
Goodwill and intangibles		53,562		53,562
Income taxes-deferred		-		15,872
Other assets		84,068		69,348
TOTAL ASSETS	$	5,791,755	$	5,180,221
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Unpaid losses and settlement expenses	$	2,611,941	$	2,446,025
Unearned premiums		1,010,760		892,326
Reinsurance balances payable		43,423		71,507
Funds held		98,585		101,446
Income taxes-current		4,369		3,757
Income taxes-deferred		15,369		—
Debt		100,000		100,000
Accrued expenses		105,813		108,880
Other liabilities		53,145		42,766
TOTAL LIABILITIES	$	4,043,405	$	3,766,707
Shareholders’ Equity
Common stock ($0.01 par value)
(Shares authorized - 200,000,000)
(68,740,134 shares issued, 45,809,920 shares outstanding at 9/30/24)
(68,570,261 shares issued, 45,640,047 shares outstanding at 12/31/23)	$	687	$	686
Paid-in capital		371,398		362,345
Accumulated other comprehensive earnings (loss)		(106,524)		(166,303)
Retained earnings		1,875,788		1,609,785
Deferred compensation		11,917		13,539
Less: Treasury shares, at cost (22,930,214 shares at 9/30/24 and 12/31/23)		(404,916)		(406,538)
TOTAL SHAREHOLDERS’ EQUITY	$	1,748,350	$	1,413,514
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	5,791,755	$	5,180,221

See accompanying notes to the unaudited condensed consolidated financial statements.

4

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Unaudited)

									Accumulated
									Other
			Total						Comprehensive						Treasury
	Common		Shareholders’		Common		Paid-in		Earnings		Retained		Deferred		Shares
(in thousands, except share and per share data)	Shares		Equity		Stock		Capital		(Loss)		Earnings		Compensation		at Cost
Balance, January 1, 2023		45,469,752	$	1,177,341	$	684	$	352,391	$	(229,076)	$	1,446,341	$	12,015	$	(405,014)
Cumulative-effect adjustment from ASU 2023-02		—		(951)		—		—		—		(951)		—
Net earnings		—		98,811		—		—		—		98,811		—		—
Other comprehensive earnings (loss), net of tax		—		37,707		—		—		37,707		—		—		—
Deferred compensation		—		—		—		—		—		—		249		(249)
Share-based compensation		84,944		2,864		1		2,863		—		—		—		—
Dividends and dividend equivalents ($0.26 per share)		—		(11,851)		—		—		—		(11,851)		—		—
Balance, March 31, 2023		45,554,696	$	1,303,921	$	685	$	355,254	$	(191,369)	$	1,532,350	$	12,264	$	(405,263)
Net earnings		—		77,652		—		—		—		77,652		—		—
Other comprehensive earnings (loss), net of tax		—		(19,721)		—		—		(19,721)		—		—		—
Deferred compensation		—		—		—		—		—		—		243		(243)
Share-based compensation		41,500		2,402		—		2,402		—		—		—		—
Dividends and dividend equivalents ($0.27 per share)		—		(12,342)		—		—		—		(12,342)		—		—
Balance, June 30, 2023		45,596,196	$	1,351,912	$	685	$	357,656	$	(211,090)	$	1,597,660	$	12,507	$	(405,506)
Net earnings		—		13,536		—		—		—		13,536		—		—
Other comprehensive earnings (loss), net of tax		—		(56,834)		—		—		(56,834)		—		—		—
Deferred compensation		—		—		—		—		—		—		110		(110)
Share-based compensation		29,575		2,798		1		2,797		—		—		—		—
Dividends and dividend equivalents ($0.27 per share)		—		(12,321)		—		—		—		(12,321)		—		—
Balance, September 30, 2023		45,625,771	$	1,299,091	$	686	$	360,453	$	(267,924)	$	1,598,875	$	12,617	$	(405,616)
									Accumulated
									Other
			Total						Comprehensive						Treasury
	Common		Shareholders’		Common		Paid-in		Earnings		Retained		Deferred		Shares
(in thousands, except share and per share data)	Shares		Equity		Stock		Capital		(Loss)		Earnings		Compensation		at Cost
Balance, January 1, 2024		45,640,047	$	1,413,514	$	686	$	362,345	$	(166,303)	$	1,609,785	$	13,539	$	(406,538)
Net earnings		—		127,900		—		—		—		127,900		—		—
Other comprehensive earnings (loss), net of tax		—		(12,671)		—		—		(12,671)		—		—		—
Deferred compensation		—		—		—		—		—		—		(790)		790
Share-based compensation		69,834		4,357		1		4,356		—		—		—		—
Dividends and dividend equivalents ($0.27 per share)		—		(12,348)		—		—		—		(12,348)		—		—
Balance, March 31, 2024		45,709,881	$	1,520,752	$	687	$	366,701	$	(178,974)	$	1,725,337	$	12,749	$	(405,748)
Net earnings		—		81,992		—		—		—		81,992		—		—
Other comprehensive earnings (loss), net of tax		—		(7,843)		—		—		(7,843)		—		—		—
Deferred compensation		—		—		—		—		—		—		434		(434)
Share-based compensation		36,173		3,084		—		3,084		—		—		—		—
Dividends and dividend equivalents ($0.29 per share)		—		(13,278)		—		—		—		(13,278)		—		—
Balance, June 30, 2024		45,746,054	$	1,584,707	$	687	$	369,785	$	(186,817)	$	1,794,051	$	13,183	$	(406,182)
Net earnings		—		95,027		—		—		—		95,027		—		—
Other comprehensive earnings (loss), net of tax		—		80,293		—		—		80,293		—		—		—
Deferred compensation		—		—		—		—		—		—		(1,266)		1,266
Share-based compensation		63,866		1,613		—		1,613		—		—		—		—
Dividends and dividend equivalents ($0.29 per share)		—		(13,290)		—		—		—		(13,290)		—		—
Balance, September 30, 2024		45,809,920	$	1,748,350	$	687	$	371,398	$	(106,524)	$	1,875,788	$	11,917	$	(404,916)

See accompanying notes to the unaudited condensed consolidated financial statements.

5

RLI Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months
	Ended September 30,
(in thousands)	2024		2023
Net cash provided by operating activities	$	432,139	$	342,192
Cash Flows from Investing Activities
Purchase of:
Fixed income securities, available-for-sale	$	(591,291)	$	(560,192)
Equity securities		(76,568)		(40,571)
Property and equipment		(4,187)		(5,451)
Other		(4,356)		(8,535)
Proceeds from sale of:
Fixed income securities, available-for-sale		80,245		26,158
Equity securities		44,863		36,708
Equity method investments		—		14,134
Other		4,624		550
Proceeds from call or maturity of:
Fixed income securities, available-for-sale		242,955		414,529
Net proceeds from sale (purchase) of short-term investments		(68,373)		(88,803)
Net cash used in investing activities	$	(372,088)	$	(211,473)
Cash Flows from Financing Activities
Proceeds from issuance of debt	$	—	$	50,000
Payment of debt		—		(150,000)
Cash dividends paid		(38,882)		(36,490)
Proceeds from stock option exercises		3,041		1,398
Net cash used in financing activities	$	(35,841)	$	(135,092)
Net increase (decrease) in cash	$	24,210	$	(4,373)
Cash at the beginning of the period		36,424		22,818
Cash at September 30,	$	60,634	$	18,445

See accompanying notes to the unaudited condensed consolidated financial statements.

6

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of RLI Corp. (the Company) and subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). These condensed consolidated financial statements do not include all the disclosures required by GAAP for annual financial statements and should be read in conjunction with our 2023 Annual Report on Form 10-K. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, of a normal and recurring nature, that are necessary for fair financial statement presentation. The results of operations for any interim period are not necessarily indicative of the operating results for a full year.

The preparation of the unaudited condensed consolidated financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates.

B. ADOPTED ACCOUNTING STANDARDS

No new accounting standards applicable in 2024 materially impact our financial statements.

C. PROSPECTIVE ACCOUNTING STANDARDS

2023-07—Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

The guidance in ASU 2023-07 was designed to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on our financial statements.

2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures

The guidance in ASU 2023-09 was designed to increase transparency about income tax information through improvements to the rate reconciliation and disclosure of income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024. Although the Company continues to evaluate the impact of adopting this new accounting standard, the amendments are disclosure-related and should not have a material impact on our financial statements.

D. REINSURANCE

Ceded unearned premiums and reinsurance balances recoverable on unpaid losses and settlement expenses are reported separately as an asset, rather than being netted with the related liability, since reinsurance does not relieve the Company of our liability to policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continually monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review reinsurers’ annual financial statements and Securities and Exchange Commission filings for those that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and Standard & Poor’s (S&P) ratings of our reinsurers. We subject our reinsurance balances recoverable to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, which assists the Company in assessing the sufficiency of its allowance. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements.

Our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of

7

conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable balances for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. We then re-evaluate the overall allowance and determine whether the balance is sufficient and, if needed, an additional allowance is recognized.

The allowances for uncollectible amounts on paid and unpaid reinsurance balances recoverable were $16 million and $10 million, respectively, at September 30, 2024. At December 31, 2023, the amounts were $16 million and $11 million, respectively. Changes in the allowances were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs were applied to the allowances in the first nine months of 2024 and less than $1 million was recovered.

E. INTANGIBLE ASSETS

The composition of goodwill and intangible assets at September 30, 2024 and December 31, 2023 is detailed in the following table:

	September 30,		December 31,
(in thousands)	2024		2023
Goodwill
Surety	$	40,816	$	40,816
Casualty		5,246		5,246
Total goodwill	$	46,062	$	46,062
Indefinite-lived intangibles		7,500		7,500
Total goodwill and intangibles	$	53,562	$	53,562

Annual impairment assessments were performed on our goodwill and state insurance license indefinite-lived intangible assets during the second quarter of 2024. Based upon these reviews, none of the assets were impaired. In addition, there were no triggering events as of September 30, 2024 that would suggest an updated impairment test would be needed for our goodwill and intangible assets.

F. EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of these items increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding these items. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated financial statements:

8

	For the Three Months						For the Three Months
	Ended September 30, 2024						Ended September 30, 2023
	Income		Shares		Per Share		Income		Shares		Per Share
(in thousands, except per share data)	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic EPS
Earnings available to common shareholders	$	95,027		45,780	$	2.08	$	13,536		45,622	$	0.30
Effect of Dilutive Securities
Stock options and restricted stock units		—		440				—		443
Diluted EPS
Earnings available to common shareholders	$	95,027		46,220	$	2.06	$	13,536		46,065	$	0.29
Anti-dilutive securities excluded from diluted EPS				24						145
	For the Nine Months						For the Nine Months
	Ended September 30, 2024						Ended September 30, 2023
	Income		Shares		Per Share		Income		Shares		Per Share
(in thousands, except per share data)	(Numerator)		(Denominator)		Amount		(Numerator)		(Denominator)		Amount
Basic EPS
Earnings available to common shareholders	$	304,919		45,734	$	6.67	$	189,999