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What changed in RLI CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RLI CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+265 added−258 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-23)

Top changes in RLI CORP's 2024 10-K

265 paragraphs added · 258 removed · 225 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

61 edited+6 added−8 removed101 unchanged
Biggest changeWithin the United States alone, approximately 2,600 companies actively market property and casualty coverages. Our primary competitors in the casualty segment include AIG, Arch, Aspen, Beazley, Berkley, Chubb, CNA, Great American, Great West, Hartford, Hudson, James River, Kinsale, Lancer, Liberty, Markel, Protective, RSUI, Sompo, Travelers, USLI and Zurich.
Biggest changeWithin the United States alone, approximately 2,600 companies actively market property and casualty coverages. 6 Table of Contents ​ Our primary competitors in the casualty segment include AIG, Allianz, Arch, Aspen, AXA/IL, Beazley, Berkley, Berkshire/National Indemnity, Chubb, CNA, Great American, Great West, Hartford, Hudson, James River, Kinsale, Lancer, Liberty, Markel, Nationwide, Progressive, RSUI, Sompo, Tokio Marine/HCC, Travelers, USLI, Westchester and Zurich. ​ Our primary competitors in the property segment include AmRisc, Arch, Arrowhead, CNA, Golden Bear, Lexington, Liberty Mutual, Markel, Palomar, RSUI, Special Risk Underwriters, Travelers, Velocity and Westchester. ​ Our primary competitors in the surety segment are AIG, Arch, Beazley, Berkley, Chubb, CNA, Great American, Hartford, Intact, Liberty Mutual, Markel, Merchants, Philadelphia, Sompo, Swiss Re, Travelers and Zurich. ​ Capacity from managing general agents also increases competition in the property and casualty markets.
We also offer coverages for security guards and environmental liability for underground storage tanks, contractors and asbestos and environmental remediation specialists. ​ Professional Services ​ We offer professional liability coverages focused on providing errors and omission coverage for small to medium-sized design, technical, computer and other miscellaneous professionals.
We also offer coverages for security guards and environmental liability coverages for underground storage tanks, contractors and asbestos and environmental remediation specialists. ​ Professional Services ​ We offer professional liability coverages focused on providing errors and omission coverage for small to medium-sized design, technical, computer and other miscellaneous professionals.
We provide insurance for a wide range of commercial and industrial risks, such as office buildings, apartments, condominiums, builders’ risks and certain industrial and mercantile structures. ​ Marine ​ Our marine coverages include cargo, hull, protection and indemnity, marine liability, as well as inland marine coverages including builders’ risks and contractors’ equipment.
We provide insurance for a wide range of commercial and industrial risks, such as office buildings, apartments, condominiums and certain industrial and mercantile structures. ​ Marine ​ Our marine coverages include cargo, hull, protection and indemnity, marine liability, as well as inland marine coverages including builders’ risks and contractors’ equipment.
We may purchase facultative coverage in addition to the treaty coverages shown below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Risk ​ ​ (in millions) ​ ​ ​ Renewal ​ Attachment ​ Limit ​ Maximum Product Line(s) Covered ​ Contract Type ​ Date ​ Point ​ Purchased ​ Retention * ​ General liability Excess of Loss 1/1 ​ $ 1.0 ​ $ 9.0 ​ $ 2.8 ​ Commercial excess Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Personal umbrella Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Commercial transportation Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Package - liability and workers' compensation Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 10.0 ​ ​ 4.2 ​ Workers' compensation catastrophe ​ Excess of Loss ​ 1/1 ​ ​ 11.0 ​ ​ 14.0 ​ ​ — ** Professional services - professional liability Excess of Loss 4/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 3.3 ​ Executive products Quota Share 7/1 ​ ​ N/A ​ ​ 25.0 ​ ​ 6.3 ​ Property - risk cover Excess of Loss 1/1 ​ ​ 2.0 ​ ​ 23.0 ​ ​ 5.4 ​ Marine Excess of Loss 6/1 ​ ​ 2.5 ​ ​ 27.5 ​ ​ 2.5 ​ Surety Excess of Loss 4/1 ​ ​ 2.0 ​ ​ 73.0 ​ ​ 9.7 *** * Maximum retention includes first-dollar retention plus any co-participation we retain through the reinsurance tower. ** The workers’ compensation catastrophe treaty responds after our package liability and workers’ compensation excess of loss treaty with no additional retention. *** A limited number of commercial surety accounts are permitted to exceed the $75 million limit.
We may purchase facultative coverage in addition to the treaty coverages shown below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Risk ​ ​ (in millions) ​ ​ ​ Renewal ​ Attachment ​ Limit ​ Maximum Product Line(s) Covered ​ Contract Type ​ Date ​ Point ​ Purchased ​ Retention * ​ General liability Excess of Loss 1/1 ​ $ 1.0 ​ $ 9.0 ​ $ 2.8 ​ Commercial excess Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Personal umbrella Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Commercial transportation Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 2.8 ​ Package - liability and workers' compensation Excess of Loss 1/1 ​ ​ 1.0 ​ ​ 10.0 ​ ​ 4.2 ​ Workers' compensation catastrophe ​ Excess of Loss ​ 1/1 ​ ​ 11.0 ​ ​ 14.0 ​ ​ — ** Professional services - professional liability Excess of Loss 4/1 ​ ​ 1.0 ​ ​ 9.0 ​ ​ 3.3 ​ Executive products Quota Share 7/1 ​ ​ N/A ​ ​ 25.0 ​ ​ 6.3 ​ Property - risk cover Excess of Loss 1/1 ​ ​ 2.0 ​ ​ 23.0 ​ ​ 4.9 ​ Marine Excess of Loss 6/1 ​ ​ 3.0 ​ ​ 27.0 ​ ​ 3.0 ​ Surety Excess of Loss 4/1 ​ ​ 5.0 ​ ​ 70.0 ​ ​ 12.0 *** * Maximum retention includes first-dollar retention plus any co-participation we retain through the reinsurance tower. ** The workers’ compensation catastrophe treaty responds after our package liability and workers’ compensation excess of loss treaty with no additional retention. *** A limited number of commercial surety accounts are permitted to exceed the $75 million limit.
Publications of AM Best, Standard & Poor’s and Moody’s indicate that A and A+ ratings are assigned to those companies that, in their opinion, have a superior ability to meet ongoing insurance obligations, a strong capacity to meet financial commitments or a low credit risk, respectively. ​ At December 31, 2023, the following ratings were assigned to our insurance companies and represent affirmations of previously assigned ratings: ​ ​ ​ ​ AM Best ​ RLI Ins., Mt.
Publications of AM Best, Standard & Poor’s and Moody’s indicate that A and A+ ratings are assigned to those companies that, in their opinion, have a superior ability to meet ongoing insurance obligations, a strong capacity to meet financial commitments or a low credit risk, respectively. ​ At December 31, 2024, the following ratings were assigned to our insurance companies and represent affirmations of previously assigned ratings: ​ ​ ​ ​ AM Best ​ RLI Ins., Mt.
Other invested assets represented 1 percent of the total portfolio and include investments in low-income housing tax credit and historic tax credit partnerships, membership stock in the Federal Home Loan Bank of Chicago and investments in private funds. The remaining 5 percent was made up of cash and short-term investments.
Other invested assets represented 1 percent of the total portfolio and include investments in low-income housing tax credit and historic tax credit partnerships, membership stock in the Federal Home Loan Bank of Chicago and investments in private funds. The remaining 3 percent was made up of cash and short-term investments.
We also offer general liability and package coverages through a general binding authority (GBA) group, a program in which select surplus lines producers are granted limited underwriting authority through our on-line system to bind business on behalf of the Company. ​ PROPERTY SEGMENT ​ Commercial Property ​ Our commercial property coverage consists primarily of excess and surplus lines and specialty insurance such as fire, earthquake, wind and difference in conditions (DIC), which can include earthquake, flood and collapse coverages.
We also offer general liability and package coverages through a binding authority group, a program in which select surplus lines producers are granted limited underwriting authority through our online system to bind business on behalf of the Company. ​ PROPERTY SEGMENT ​ Commercial Property ​ Our commercial property coverage consists primarily of excess and surplus lines and specialty insurance such as fire, earthquake, wind and difference in conditions (DIC), which can include earthquake, flood and collapse coverages.
The Company’s 2023 survey response, for calendar year 2022, can be accessed on the California Department of Insurance website. ​ The rates, policy terms and conditions of reinsurance agreements generally are not subject to regulation by any regulatory authority.
The Company’s 2024 survey response, for calendar year 2023, can be accessed on the California Department of Insurance website. ​ The rates, policy terms and conditions of reinsurance agreements generally are not subject to regulation by any regulatory authority.
As of December 31, 2023, each of our insurance company subsidiaries had RBC levels significantly in excess of the company action level RBC, defined as being 200 percent of the authorized control level RBC, which would prompt corrective action under Illinois law.
As of December 31, 2024, each of our insurance company subsidiaries had RBC levels significantly in excess of the company action level RBC, defined as being 200 percent of the authorized control level RBC, which would prompt corrective action under Illinois law.
We have a track record of withdrawing from markets when conditions become overly adverse and offering new coverages and programs where the opportunity exists to provide needed risk transfer with exceptional service on a profitable basis. ​ FINANCIAL STRENGTH RATINGS ​ Financial strength ratings are an important factor in establishing the relative competitive position of insurance companies.
We have a history of withdrawing from markets when conditions become overly adverse and offering new coverages and programs where the opportunity exists to provide needed risk transfer with exceptional service on a profitable basis. ​ FINANCIAL STRENGTH RATINGS ​ Financial strength ratings are an important factor in establishing the relative competitive position of insurance companies.
Many of these risks are unique and harder to place than in the standard admitted market, but for marketing and regulatory reasons, they must remain with an admitted insurance company.
Many of these risks are unique and harder to place than in the standard admitted market, but for marketing, regulatory or contractual reasons, they must remain with an admitted insurance company.
However, the ability of a ceding insurer to take credit for the reinsurance purchased from reinsurance companies is a significant component of reinsurance regulation. Typically, a ceding insurer will only enter into a reinsurance agreement if it can 13 Table of Contents obtain credit against its reserves on its statutory basis financial statements for the reinsurance ceded to the reinsurer.
However, the ability of a ceding insurer to take credit for the reinsurance purchased from reinsurance companies is a significant component of reinsurance regulation. Typically, a ceding insurer will only enter into a reinsurance agreement if it can obtain credit against its reserves on its statutory basis financial statements for the reinsurance ceded to the reinsurer.
Losses were modeled based on our exposure as of December 31, 2023, utilizing the reinsurance treaty structure in place as of January 1, 2024.
Losses were modeled based on our exposure as of December 31, 2024, utilizing the reinsurance treaty structure in place as of January 1, 2025.
Property-Casualty Forecast & Analysis: By Line of Business, Fourth Quarter 2023. Estimated for the year ended December 31, 2023. ** Source: AM Best (2023). Aggregate & Averages – Property/Casualty, United States & Canada . 2019 – 2022. ​ INVESTMENTS ​ Our investment portfolio serves as a resource for loss payments and secondarily as a source of income to support operations.
Property-Casualty Forecast & Analysis: By Line of Business, Fourth Quarter 2024. Estimated for the year ended December 31, 2024. ** Source: AM Best (2024). Aggregate & Averages – Property/Casualty, United States & Canada . 2020 – 2023. ​ INVESTMENTS ​ Our investment portfolio serves as a resource for loss payments and secondarily as a source of income to support operations.
The independent agent cannot bind the risk unless they receive approval from our underwriters or through our automated systems. ​ CARRIER PARTNERS ​ We partner with other insurance carriers for home business and personal umbrella.
The independent agent cannot bind the risk unless they receive approval from either our underwriters or automated systems. ​ CARRIER PARTNERS ​ We partner with other insurance carriers for home business and personal umbrella coverage.
The difference between the combined ratio and 100 reflects the per dollar rate of underwriting income or loss, with ratios below 100 indicating underwriting profit and ratios above 100 indicating underwriting loss. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 2021 2020 2019 Loss ratio 46.7 44.9 46.5 51.2 49.3 Expense ratio 39.9 39.5 40.3 40.8 42.6 Combined ratio 86.6 84.4 86.8 92.0 91.9 ​ We also calculate the statutory combined ratio, which is not indicative of underwriting income due to accounting for policy acquisition costs differently for statutory accounting purposes, but is a standardized industry measure.
The difference between the combined ratio and 100 reflects the per dollar rate of underwriting income or loss, with ratios below 100 indicating underwriting profit and ratios above 100 indicating underwriting loss. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2024 2023 2022 2021 2020 Loss ratio 48.4 46.7 44.9 46.5 51.2 Expense ratio 37.8 39.9 39.5 40.3 40.8 Combined ratio 86.2 86.6 84.4 86.8 92.0 ​ We also calculate the statutory combined ratio, which is not indicative of underwriting income due to accounting for policy acquisition costs differently for statutory accounting purposes, but is a standardized industry measure.
Amounts for 2023 and 2022 reflect additional catastrophe reinsurance protection that was purchased mid-year to support growth in our catastrophe-exposed business. ​ Catastrophe Coverages (in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ 2022 ​ ​ First-Dollar ​ ​ ​ ​ First-Dollar ​ ​ ​ ​ First-Dollar ​ ​ ​ ​ Retention Limit Retention Limit Retention Limit California earthquake ​ $ 25 $ 850 ​ $ 25 $ 850 ​ $ 25 $ 750 Non-California earthquake ​ ​ 50 ​ 850 ​ ​ 50 ​ 850 ​ ​ 25 ​ 775 Other perils, including hurricane ​ ​ 50 ​ 750 ​ ​ 50 ​ 750 ​ ​ 25 ​ 625 ​ Our property catastrophe program continues to be applied on an excess of loss basis.
Amounts for 2023 reflect additional catastrophe reinsurance protection that was purchased mid-year to support growth in our catastrophe-exposed business. ​ Catastrophe Coverages (in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2025 ​ 2024 ​ 2023 ​ ​ First-Dollar ​ ​ ​ ​ First-Dollar ​ ​ ​ ​ First-Dollar ​ ​ ​ ​ Retention Limit Retention Limit Retention Limit California earthquake ​ $ 25 $ 850 ​ $ 25 $ 850 ​ $ 25 $ 850 Non-California earthquake ​ ​ 50 ​ 850 ​ ​ 50 ​ 850 ​ ​ 50 ​ 850 Other perils, including hurricane ​ ​ 50 ​ 750 ​ ​ 50 ​ 750 ​ ​ 50 ​ 750 ​ Our property catastrophe program continues to be applied on an excess of loss basis.
The statutory combined ratio is the sum of (a) the ratio of statutory loss and loss adjustment expenses incurred to statutory net premiums earned (loss ratio), (b) the ratio of statutory other underwriting expenses incurred to statutory net premiums written (expense ratio) and (c) the ratio of policyholder dividends to statutory net premiums earned (policyholder dividend ratio). ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Statutory 2023 2022 2021 2020 2019 Statutory loss ratio 46.7 ​ 44.9 ​ 46.5 ​ 51.0 ​ 49.3 ​ Statutory expense ratio 37.7 ​ 38.3 ​ 38.8 ​ 40.8 ​ 41.8 ​ Statutory combined ratio 84.4 ​ 83.2 ​ 85.3 ​ 91.8 ​ 91.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ P&C industry combined ratio 102.2 * 102.7 ** 99.7 ** 98.8 ** 98.9 ** * Source: Conning (2023).
The statutory combined ratio is the sum of (a) the ratio of statutory loss and loss adjustment expenses incurred to statutory net premiums earned (loss ratio), (b) the ratio of statutory other underwriting expenses incurred to statutory net premiums written (expense ratio) and (c) the ratio of policyholder dividends to statutory net premiums earned (policyholder dividend ratio). ​ 10 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Statutory 2024 2023 2022 2021 2020 Statutory loss ratio 48.4 ​ 46.7 ​ 44.9 ​ 46.5 ​ 51.0 ​ Statutory expense ratio 37.5 ​ 37.7 ​ 38.3 ​ 38.8 ​ 40.8 ​ Statutory combined ratio 85.9 ​ 84.4 ​ 83.2 ​ 85.3 ​ 91.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ P&C industry combined ratio 98.3 * 101.5 ** 102.7 ** 99.7 ** 98.8 ** * Source: Conning (2024).
As of December 31, 2023, 9 percent of RLI Corp. shares were owned by insiders. ​ Diversity and Inclusion ​ We strive to cultivate an exceptional workforce to perpetuate our ownership culture, deliver excellent customer service and continue to achieve superior business results.
As of December 31, 2024, 7 percent of RLI Corp. shares were owned by insiders. ​ Diversity and Inclusion ​ We strive to cultivate an exceptional workforce to perpetuate our ownership culture, deliver excellent customer service and continue to achieve superior business results.
Comparatively, based on the catastrophe reinsurance treaty purchased on January 1, 2023, there was a 99.6 percent likelihood that the net loss would have been less than 10.8 percent of policyholders’ statutory surplus as of December 31, 2022.
Comparatively, based on the catastrophe reinsurance treaty purchased on January 1, 2024, there was a 99.6 percent likelihood that the net loss would have been less than 8.0 percent of policyholders’ statutory surplus as of December 31, 2023.
The excess and surplus lines environment and production model effectively filter submission flow and match market opportunities to our expertise and appetite. The excess and surplus market represented less than 10 percent of the entire domestic property and casualty industry as of December 31, 2022, according to AM Best and as measured by direct premiums written.
The excess and surplus lines environment and 3 Table of Contents production model effectively filter submission flow and match market opportunities to our expertise and appetite. The excess and surplus market represented less than 10 percent of the entire domestic property and casualty industry as of December 31, 2024, according to AM Best and as measured by direct premiums written.
Although covered in one program, limits and attachment points differ for California earthquakes and all other perils. These catastrophe limits are in addition to the per-occurrence coverage provided by facultative and other treaty coverages. We have participated in the catastrophe layers purchased by retaining a percentage of certain layers throughout this period.
Although covered in one program, limits and attachment points differ for California earthquakes and all other perils. These catastrophe limits are in addition to the per-occurrence coverage provided by facultative and other treaty coverages. We have participated in the catastrophe layers purchased by retaining a percentage of various layers in certain years.
We solicit employee feedback to help ensure employees are engaged, feel valued and are contributing to our success. ​ The Company employed 1,099 associates throughout the United States as of December 31, 2023, compared to 1,001 as of December 31, 2022, and the average employee tenure was 8.8 years.
We solicit employee feedback to help ensure employees are engaged, feel valued and are contributing to our success. ​ The Company employed 1,147 associates throughout the United States as of December 31, 2024, compared to 1,099 as of December 31, 2023, and the average employee tenure was 8.6 years.
The carriers place the business with us through their associated agencies when the underlying risk does not meet their underwriting appetite. ​ UNDERWRITING AGENTS ​ We contract with certain underwriting agencies, which have limited authority to bind or underwrite business on our behalf.
The carriers place this business with us through their associated agencies when the underlying risk does not meet their underwriting appetite. ​ UNDERWRITING AGENTS ​ We contract with select underwriting agencies that have limited authority to bind or underwrite business on our behalf.
Executive oversight for human capital is provided by the Company’s Vice President of Human Resources, who reports to the 14 Table of Contents President & CEO.
Executive oversight for human capital is provided by the Company’s Vice President of Human Resources, who reports to the President & CEO.
At high rates of return, we grow the book of business and may purchase additional reinsurance to increase our capacity. As the rate of return decreases, we may reduce exposure and may purchase less reinsurance as this capacity becomes unnecessary. Our reinsurance coverage for 2022 through 2024 are shown in the table below.
At high rates of return, we grow the book of business and may purchase additional reinsurance to increase our capacity. As the rate of return decreases, we may reduce exposure and may purchase less reinsurance as this capacity becomes unnecessary. Our reinsurance coverages for 2023 through 2025 are shown in the table below.
The combination of coverages, service, pricing and other methods of competition vary from line to line. Our principal methods of meeting this competition are innovative coverages, quality and consistent service to the agents and policyholders, and fair pricing.
The combination of coverages, service, pricing and other methods of competition vary from line to line. Our principal methods of winning business are innovative coverages, quality and consistent service to the agents and policyholders, and fair pricing.
We also offer incidental related insurance coverages including general liability, excess liability and motor truck cargo. We produce business through independent agents and brokers nationwide. ​ 4 Table of Contents General Liability ​ Our general liability business consists primarily of coverage for third-party liability of commercial insureds including manufacturers, contractors, apartments and mercantile.
We also offer incidental related insurance coverages including general liability, excess liability and motor truck cargo. ​ 4 Table of Contents General Liability ​ Our general liability business consists primarily of third-party liability coverage for commercial insureds including manufacturers, contractors, apartments and mercantile.
As of December 31, 2023, 81 percent of the fixed income portfolio was rated A or better and 58 percent was rated AA or better. ​ We classify all of the securities in our fixed income portfolio as available-for-sale, which are carried at fair value.
As of December 31, 2024, 79 percent of the fixed income portfolio was rated A or better and 57 percent was rated AA or better. ​ We classify all the securities in our fixed income portfolio as available-for-sale, which are carried at fair value.
You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings. ​
You should review the various risks, uncertainties and other factors listed from time to time in our Securities and Exchange Commission filings. ​ 15 Table of Contents
While the NAIC provides this general guideline, rating agencies often require a more conservative ratio to maintain strong or superior ratings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) 2023 2022 2021 2020 2019 Statutory net premiums written ​ $ 1,427,747 ​ $ 1,241,536 ​ $ 1,057,533 ​ $ 892,088 ​ $ 860,337 Policyholders’ surplus ​ ​ 1,520,135 ​ 1,407,925 ​ 1,240,649 ​ 1,121,592 ​ 1,029,671 Ratio ​ ​ 0.9 to 1 ​ 0.9 to 1 ​ 0.9 to 1 ​ 0.8 to 1 ​ 0.8 to 1 ​ COMBINED RATIO AND STATUTORY COMBINED RATIO ​ Our underwriting experience is best indicated by our combined ratio, which is the sum of (a) the ratio of incurred loss and settlement expenses to net premiums earned (loss ratio) and (b) the ratio of policy acquisition costs and insurance operating expenses to net premiums earned (expense ratio).
While the NAIC provides this general guideline, rating agencies often require a more conservative ratio to maintain strong or superior ratings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (dollars in thousands) 2024 2023 2022 2021 2020 Statutory net premiums written ​ $ 1,605,521 ​ $ 1,427,747 ​ $ 1,241,536 ​ $ 1,057,533 ​ $ 892,088 Policyholders’ surplus ​ ​ 1,787,312 ​ 1,520,135 ​ 1,407,925 ​ 1,240,649 ​ 1,121,592 Ratio ​ ​ 0.90 to 1 ​ 0.94 to 1 ​ 0.88 to 1 ​ 0.85 to 1 ​ 0.80 to 1 ​ COMBINED RATIO AND STATUTORY COMBINED RATIO ​ Our underwriting experience is best indicated by our combined ratio, which is the sum of (a) the ratio of incurred loss and settlement expenses to net premiums earned (loss ratio) and (b) the ratio of policy acquisition costs and insurance operating expenses to net premiums earned (expense ratio).
For 2023, our specialty reinsurance operations wrote gross premiums of $21 million, representing approximately 1 percent of our total gross premiums written for the year. ​ BUSINESS SEGMENT OVERVIEW ​ The segments of our insurance operations are casualty, property and surety. For additional information, see note 12 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data.
For 2024, our specialty reinsurance operations wrote gross premiums of $27 million, representing approximately 1 percent of our total gross premiums written for the year. ​ BUSINESS SEGMENT OVERVIEW ​ Our insurance operations consist of three segments: property, casualty and surety. For additional information, see note 11 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data.
RLI Ins., our principal insurance company subsidiary, had an authorized control level RBC of $273 million compared to actual statutory capital and surplus of $1.5 billion as of December 31, 2023, resulting in statutory capital that is more than five times the authorized control level.
RLI Ins., our principal insurance company subsidiary, had an authorized control level RBC of $296 million compared to actual statutory capital and surplus of $1.8 billion as of December 31, 2024, resulting in statutory capital that is more than six times the authorized control level.
Our product suite for these customers also includes a full array of multi-peril package products including general liability, property, automobile, excess liability and workers’ compensation coverages. This business primarily markets its products through specialty retail agents nationwide. ​ Small Commercial ​ Our small commercial business offers property and casualty insurance coverages for small to mid-sized contractors.
Our product suite for these customers also includes a full array of multi-peril package products including general liability, property, automobile, excess liability and workers’ compensation coverages. ​ Small Commercial ​ Our small commercial business offers property and casualty insurance coverages for small to mid-sized contractors.
Our excess and surplus operations wrote gross premiums of $794 million, or 44 percent, of our total gross premiums written in 2023. ​ 3 Table of Contents SPECIALTY REINSURANCE MARKET ​ The business we write in the specialty reinsurance market is generally written on a portfolio basis. We write contracts on an excess of loss and a proportional basis.
Our excess and surplus operations wrote gross premiums of $848 million, or 42 percent, of our total gross premiums written in 2024. ​ SPECIALTY REINSURANCE MARKET ​ The business we write in the specialty reinsurance market is generally written on a portfolio basis. We write contracts on an excess of loss and a proportional basis.
This total represented 9 percent of cash and investments, compared to 12 percent at year-end 2022. ​ REGULATION ​ STATE REGULATION ​ As an insurance holding company, we and our insurance company subsidiaries, are subject to regulation by the states and territories in which the insurance subsidiaries are domiciled or transact business.
This total represented 9 percent of cash and investments, which was the same as 2023. ​ REGULATION ​ STATE REGULATION ​ As an insurance holding company, we and our insurance company subsidiaries, are subject to regulation by the states and territories in which the insurance subsidiaries are domiciled or transact business.
For 2023, our specialty admitted operations produced gross premiums written of $992 million, representing approximately 55 percent of our total gross premiums for the year. ​ EXCESS AND SURPLUS INSURANCE MARKET ​ The excess and surplus market focuses on hard-to-place risks.
For 2024, our specialty admitted operations produced gross premiums written of $1.1 billion, representing approximately 57 percent of our total gross premiums for the year. ​ EXCESS AND SURPLUS INSURANCE MARKET ​ The excess and surplus market focuses on hard-to-place risks.
Depending upon state law, licensed insurers can be assessed a small percentage of the annual premiums written for the relevant lines of insurance in that state to contribute to paying the claims of insolvent insurers. These assessments may increase or decrease in the future, depending upon the rate of insurance company insolvencies.
Depending upon state law, licensed insurers can be assessed a small percentage of the annual premiums written for the relevant lines of insurance in that state to fund its guaranty association or insurer of last resort plan. These assessments may increase or decrease in the future, depending upon the rate of insurance company insolvencies.
More than 93 percent of our reinsurance recoverables are due from companies with financial strength ratings of A or better by AM Best and Standard & Poor’s rating services. ​ We utilize both treaty and facultative reinsurance coverage for our risks.
A reinsurance committee, comprised of senior management, reviews and approves our security guidelines and reinsurer usage. More than 93 percent of our reinsurance balances recoverable are due from companies with financial strength ratings of A or better by AM Best and Standard & Poor’s rating services. ​ We utilize both treaty and facultative reinsurance coverage for our risks.
Several of these products involve detailed eligibility criteria, which are incorporated into strict underwriting guidelines and prequalification of each risk using a system accessible by the independent agent.
Several of these products require detailed eligibility criteria, which are incorporated into strict underwriting guidelines, and each risk is prequalified through a system that is accessible to the independent agent.
The fixed income portfolio was 78 percent of the total portfolio, down 4 percent from the prior year, while the equity allocation was 16 percent of the overall portfolio, up 1 percent from the previous year.
The fixed income portfolio was 78 percent of the total portfolio, the same as the prior year, while the equity allocation was 18 percent of the overall portfolio, up 2 percent from the previous year.
We prefer to utilize our own underwriting, claims and support staff, given the complex nature of our products. The niche markets we operate within require unique experience and deep knowledge to select appropriate risks and serve our customers. Ensuring a seamless transfer of knowledge as employees retire and developing newer talent continues to be a focus of the Company.
We prefer to utilize our own underwriting, claims and support staff, given the complex nature of our products. The niche markets we operate within require unique experience and deep knowledge to select appropriate risks and serve our customers.
The table below summarizes the composition of net premiums earned by major product. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) 2023 2022 2021 CASUALTY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial excess and personal umbrella ​ $ 286,178 ​ 22 % ​ $ 253,921 ​ 22 % ​ $ 219,437 ​ 22 % Commercial transportation ​ ​ 103,719 ​ 8 % ​ ​ 96,992 ​ 8 % ​ ​ 83,352 ​ 8 % General liability ​ ​ 103,066 ​ 8 % ​ ​ 100,374 ​ 9 % ​ ​ 90,853 ​ 9 % Professional services ​ ​ 99,596 ​ 8 % ​ ​ 95,187 ​ 9 % ​ ​ 88,855 ​ 9 % Small commercial ​ ​ 72,920 ​ 6 % ​ ​ 67,673 ​ 6 % ​ ​ 64,660 ​ 7 % Executive products ​ ​ 24,687 ​ 2 % ​ ​ 26,606 ​ 2 % ​ ​ 21,873 ​ 2 % Other casualty ​ ​ 68,180 ​ 5 % ​ ​ 71,079 ​ 6 % ​ ​ 64,609 ​ 8 % Total ​ $ 758,346 ​ 59 % ​ $ 711,832 ​ 62 % ​ $ 633,639 ​ 65 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PROPERTY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial property ​ $ 244,798 ​ 19 % ​ $ 163,078 ​ 14 % ​ $ 107,941 ​ 11 % Marine ​ ​ 129,428 ​ 10 % ​ ​ 113,208 ​ 10 % ​ ​ 97,745 ​ 10 % Other property ​ ​ 27,304 ​ 2 % ​ ​ 31,600 ​ 3 % ​ ​ 26,151 ​ 2 % Total ​ $ 401,530 ​ 31 % ​ $ 307,886 ​ 27 % ​ $ 231,837 ​ 23 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SURETY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 49,707 ​ 4 % ​ $ 47,652 ​ 4 % ​ $ 43,738 ​ 4 % Transactional ​ ​ 47,983 ​ 3 % ​ ​ 45,826 ​ 4 % ​ ​ 43,982 ​ 5 % Contract ​ ​ 36,740 ​ 3 % ​ ​ 31,240 ​ 3 % ​ ​ 27,707 ​ 3 % Total ​ $ 134,430 ​ 10 % ​ $ 124,718 ​ 11 % ​ $ 115,427 ​ 12 % Grand total ​ $ 1,294,306 ​ 100 % ​ $ 1,144,436 ​ 100 % ​ $ 980,903 ​ 100 % ​ CASUALTY SEGMENT ​ Commercial Excess and Personal Umbrella ​ Our commercial excess coverage is written in excess of primary liability insurance provided by other carriers and, in some cases, in excess of primary liability written by the Company.
The table below summarizes the composition of net premiums earned by major product. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) 2024 2023 2022 CASUALTY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial excess and personal umbrella ​ $ 354,847 ​ 23 % ​ $ 286,178 ​ 22 % ​ $ 253,921 ​ 22 % Commercial transportation ​ ​ 120,650 ​ 8 % ​ ​ 103,719 ​ 8 % ​ ​ 96,992 ​ 8 % General liability ​ ​ 104,423 ​ 7 % ​ ​ 103,066 ​ 8 % ​ ​ 100,374 ​ 9 % Professional services ​ ​ 103,794 ​ 7 % ​ ​ 99,596 ​ 8 % ​ ​ 95,187 ​ 9 % Small commercial ​ ​ 78,308 ​ 5 % ​ ​ 72,920 ​ 6 % ​ ​ 67,673 ​ 6 % Executive products ​ ​ 23,555 ​ 2 % ​ ​ 24,687 ​ 2 % ​ ​ 26,606 ​ 2 % Other casualty ​ ​ 67,260 ​ 4 % ​ ​ 68,180 ​ 5 % ​ ​ 71,079 ​ 6 % Total ​ $ 852,837 ​ 56 % ​ $ 758,346 ​ 59 % ​ $ 711,832 ​ 62 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PROPERTY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial property ​ $ 345,554 ​ 23 % ​ $ 244,798 ​ 19 % ​ $ 163,078 ​ 14 % Marine ​ ​ 145,706 ​ 10 % ​ ​ 129,428 ​ 10 % ​ ​ 113,208 ​ 10 % Other property ​ ​ 40,124 ​ 2 % ​ ​ 27,304 ​ 2 % ​ ​ 31,600 ​ 3 % Total ​ $ 531,384 ​ 35 % ​ $ 401,530 ​ 31 % ​ $ 307,886 ​ 27 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SURETY ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transactional ​ $ 49,460 ​ 3 % ​ $ 47,983 ​ 3 % ​ $ 45,826 ​ 4 % Commercial ​ ​ 48,533 ​ 3 % ​ ​ 49,707 ​ 4 % ​ ​ 47,652 ​ 4 % Contract ​ ​ 44,192 ​ 3 % ​ ​ 36,740 ​ 3 % ​ ​ 31,240 ​ 3 % Total ​ $ 142,185 ​ 9 % ​ $ 134,430 ​ 10 % ​ $ 124,718 ​ 11 % Grand total ​ $ 1,526,406 ​ 100 % ​ $ 1,294,306 ​ 100 % ​ $ 1,144,436 ​ 100 % ​ CASUALTY SEGMENT ​ Commercial Excess and Personal Umbrella ​ Our commercial excess coverage is written in excess of primary liability insurance provided by other carriers and, in some cases, in excess of primary liability written by the Company.
Based on the catastrophe reinsurance treaty purchased on January 1, 2024, there is a 99.6 percent likelihood that the net loss will be less than 8.0 percent of policyholders’ statutory surplus as of December 31, 2023.
Based on the catastrophe reinsurance treaty purchased on January 1, 2025, there is a 99.6 percent likelihood that the net loss will be less than 2.6 percent of policyholders’ statutory surplus as of December 31, 2024. The exposure levels continue to be within our tolerances for this risk.
We also offer bonds for small and emerging contractors that are reinsured through the Federal Small Business Administration. ​ MARKETING AND DISTRIBUTION ​ We distribute our coverages across the country, primarily through wholesale and retail brokers, independent agents and carrier partners. ​ BROKERS ​ The largest volume of broker-generated premium is in our commercial property, general liability, commercial surety, executive products, commercial excess and commercial transportation coverages.
We also offer bonds for small and emerging contractors that are reinsured through the Federal Small Business Administration. ​ MARKETING AND DISTRIBUTION ​ We distribute our coverages across the country, primarily through wholesale and retail brokers, independent agents and carrier partners. ​ BROKERS ​ Our commercial property, general liability, commercial surety, executive products, commercial excess, marine and commercial transportation coverages are sold through independent wholesale and retail brokers. ​ INDEPENDENT AGENTS ​ We distribute products such as homeowners’ and dwelling fire, home business, surety, commercial transportation, professional services, small commercial and personal umbrella through independent agents.
Typically, these are performance and payment bonds that guarantee commercial contractors’ contractual obligations for a specific construction project. These bonds are marketed through a select number of insurance agencies that have surety and construction expertise.
Typically, these are performance and payment bonds that guarantee commercial contractors’ contractual obligations for a specific construction project.
These accounts are subject to additional levels of review and are monitored on a monthly basis. ​ 8 Table of Contents At each renewal, we consider any plans to change the underlying insurance coverage we offer, as well as updated loss activity, the level of RLI Insurance Group’s surplus, changes in our risk appetite and the cost and availability of reinsurance.
These accounts are subject to additional levels of review and are monitored regularly. ​ At each renewal, we consider any plans to change the underlying insurance coverage we offer, as well as updated loss activity, the level of RLI Insurance Group’s surplus, changes in our risk appetite and the cost and availability of reinsurance. ​ 8 Table of Contents PROPERTY REINSURANCE — CATASTROPHE COVERAGE ​ Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders, including earthquakes, hurricanes, floods, wildfires, convective storms and certain other aggregating events.
For an expanded discussion of the impact of reinsurance on our operations, see note 5 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. 7 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2023 2022 2021 PREMIUMS WRITTEN ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct and Assumed ​ $ 1,806,660 ​ $ 1,565,486 ​ $ 1,347,354 Reinsurance ceded ​ ​ (378,913) ​ ​ (323,950) ​ ​ (289,821) Net ​ $ 1,427,747 ​ $ 1,241,536 ​ $ 1,057,533 PREMIUMS EARNED ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct and Assumed ​ $ 1,699,419 ​ $ 1,460,845 ​ $ 1,253,296 Reinsurance ceded ​ ​ (405,113) ​ ​ (316,409) ​ ​ (272,393) Net ​ $ 1,294,306 ​ $ 1,144,436 ​ $ 980,903 ​ Reinsurance is subject to certain risks, specifically market risk, which affects the cost and ability to secure reinsurance contracts, and credit risk, which is the risk that our reinsurers may not pay on losses in a timely fashion or at all.
For an expanded discussion of the impact of reinsurance on our operations, see note 4 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. 7 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, (in thousands) 2024 2023 2022 PREMIUMS WRITTEN ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct and Assumed ​ $ 2,013,048 ​ $ 1,806,660 ​ $ 1,565,486 Reinsurance ceded ​ ​ (407,527) ​ ​ (378,913) ​ ​ (323,950) Net ​ $ 1,605,521 ​ $ 1,427,747 ​ $ 1,241,536 PREMIUMS EARNED ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct and Assumed ​ $ 1,921,235 ​ $ 1,699,419 ​ $ 1,460,845 Reinsurance ceded ​ ​ (394,829) ​ ​ (405,113) ​ ​ (316,409) Net ​ $ 1,526,406 ​ $ 1,294,306 ​ $ 1,144,436 ​ Reinsurance is subject to certain risks, including market risk, which affects the cost and ability to secure reinsurance contracts.
Although the predominant exposures are located within the United States, there is some incidental international exposure written within these coverages. ​ Other Property ​ We offer specialized homeowners’ and dwelling fire insurance through retail agents in Hawaii, as well as property coverages through our general binding authority group. ​ 5 Table of Contents SURETY SEGMENT ​ Commercial ​ We offer a variety of commercial surety bonds for medium to large-sized businesses across a broad spectrum of industries, including the financial, healthcare, as well as onshore and offshore energy, petrochemical and refining industries.
Although the predominant exposures are located within the United States, there is some incidental international exposure written within these coverages. ​ Other Property ​ We offer specialized homeowners’ and dwelling fire insurance in Hawaii, as well as property coverages packaged through our binding authority group. ​ 5 Table of Contents SURETY SEGMENT ​ Transactional ​ Our transactional surety coverage includes small bonds for businesses and individuals.
These products are primarily marketed through retail agents. ​ Executive Products ​ We provide a suite of management liability coverages, such as directors and officers (D&O) liability insurance, fiduciary liability, employment practice liability and fidelity coverages, for a variety of risk classes, including both public and private businesses.
The coverages included in these packages are predominantly general liability, but also include some inland marine coverages, as well as commercial automobile, property and excess liability coverage. ​ Executive Products ​ We provide a suite of management liability coverages, such as directors and officers (D&O) liability insurance, fiduciary liability, employment practice liability and fidelity coverages, for a variety of risk classes, including both public and private businesses.
We compete favorably, in part, because of our sound financial condition and reputation, as well as our broad, geographic footprint in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. In all segments, we have experienced underwriting and claim specialists.
We compete favorably, in part, because of the value we add in relationships, the level of service we provide, the quality of our associate-owners, our sound financial condition and reputation, as well as our geographic footprint. In all segments, we have experienced underwriting and claim specialists.
The loss amounts are pre-tax and include the impact of reinsurance reinstatement premium. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Losses in millions) ​ ​ ​ ​ Hurricane ​ ​ California Earthquake ​ ​ Non-California Earthquake Probability ​ Return Period ​ Gross Loss ​ Net Loss ​ Gross Loss ​ Net Loss ​ Gross Loss ​ Net Loss 90.0% ​ 10 Year ​ $ 93 ​ $ 50 ​ $ 15 ​ $ 11 ​ $ 1 ​ $ 1 96.0% ​ 25 Year ​ ​ 208 ​ ​ 69 ​ ​ 88 ​ ​ 28 ​ ​ 13 ​ ​ 8 98.0% ​ 50 Year ​ ​ 322 ​ ​ 86 ​ ​ 209 ​ ​ 46 ​ ​ 50 ​ ​ 30 99.0% ​ 100 Year ​ ​ 457 ​ ​ 99 ​ ​ 375 ​ ​ 72 ​ ​ 128 ​ ​ 44 99.6% ​ 250 Year ​ ​ 688 ​ ​ 112 ​ ​ 647 ​ ​ 97 ​ ​ 265 ​ ​ 63 ​ Actual results could vary significantly from these modeled losses as the actual nature or severity of a particular event cannot be accurately predicted.
The loss amounts are pre-tax and include the impact of additional reinsurance reinstatement premium, if any. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Losses in millions) ​ ​ ​ ​ Hurricane ​ ​ California Earthquake ​ ​ Non-California Earthquake Probability ​ Return Period ​ Gross Loss ​ Net Loss ​ Gross Loss ​ Net Loss ​ Gross Loss ​ Net Loss 90.0% ​ 10 Year ​ $ 94 ​ $ 42 ​ $ 14 ​ $ 10 ​ $ 2 ​ $ 2 96.0% ​ 25 Year ​ ​ 209 ​ ​ 47 ​ ​ 78 ​ ​ 26 ​ ​ 15 ​ ​ 9 98.0% ​ 50 Year ​ ​ 331 ​ ​ 49 ​ ​ 186 ​ ​ 26 ​ ​ 53 ​ ​ 26 99.0% ​ 100 Year ​ ​ 484 ​ ​ 50 ​ ​ 332 ​ ​ 33 ​ ​ 128 ​ ​ 32 99.6% ​ 250 Year ​ ​ 740 ​ ​ 50 ​ ​ 581 ​ ​ 42 ​ ​ 243 ​ ​ 39 ​ Actual results could vary significantly from these modeled losses as the actual nature or severity of a particular event cannot be accurately predicted.
We enable employees to maintain and expand their industry knowledge and technical expertise through education and training, as well as through memberships in industry and trade associations.
Ensuring a seamless transfer of knowledge as employees retire and developing 14 Table of Contents newer talent continues to be a focus of the Company. We enable employees to maintain and expand their industry knowledge and technical expertise through education and training, as well as through memberships in industry and trade associations.
Examples of these types of bonds are license and permit, notary and court bonds. The underwriting and delivery of these bonds is highly automated. ​ Contract ​ We offer bonds for small to medium-sized contractors throughout the United States, underwritten on an account basis.
The underwriting and delivery of these bonds is highly automated. ​ Commercial ​ We offer a variety of commercial surety bonds for medium to large-sized businesses across a broad spectrum of industries, including the financial, healthcare, energy and renewable energy industries. ​ Contract ​ We offer bonds for small to medium-sized contractors throughout the United States, underwritten on an account basis.
We strive to purchase reinsurance from financially strong reinsurers. We evaluate reinsurers’ ability to pay based on their financial results, level of surplus, financial strength ratings and other risk characteristics. A reinsurance committee, comprised of senior management, reviews and approves our security guidelines and reinsurer usage.
Reinsurance is also subject to credit risk, which is the risk that our reinsurers may not pay on losses in a timely fashion or at all. We strive to purchase reinsurance from financially strong reinsurers. We evaluate reinsurers’ ability to pay based on their financial results, level of surplus, financial strength ratings and other risk characteristics.
Aggregate maturities for the fixed income portfolio as of December 31, 2023, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Fair Value Due in one year or less ​ $ 157,831 ​ $ 156,463 Due after one year through five years ​ ​ 904,769 ​ ​ 874,375 Due after five years through 10 years ​ ​ 674,761 ​ ​ 654,068 Due after 10 years ​ ​ 548,021 ​ ​ 464,476 ABS/CMBS/MBS* ​ ​ 769,009 ​ ​ 706,467 Total available-for-sale ​ $ 3,054,391 ​ $ 2,855,849 * Asset-backed, commercial mortgage-backed and mortgage-backed securities ​ We had cash and fixed income securities maturing within one year of $328 million at year-end 2023.
Aggregate maturities for the fixed income portfolio as of December 31, 2024, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Fair Value Due in one year or less ​ $ 256,711 ​ $ 255,017 Due after one year through five years ​ ​ 742,187 ​ ​ 723,476 Due after five years through 10 years ​ ​ 948,340 ​ ​ 914,770 Due after 10 years ​ ​ 574,403 ​ ​ 476,062 ABS/CMBS/MBS* ​ ​ 869,518 ​ ​ 806,471 Total available-for-sale ​ $ 3,391,159 ​ $ 3,175,796 * Asset-backed, commercial mortgage-backed and mortgage-backed securities ​ We had cash and fixed income securities maturing within one year of $372 million at year-end 2024.
It is used for a variety of reasons, including supplementing the limits provided by the treaty coverage or covering risks or perils excluded from treaty reinsurance. ​ Much of our reinsurance is purchased on an excess of loss basis.
Facultative coverage is applied to individual risks at the company’s discretion to supplement the limits provided by our treaty coverage or cover risks excluded from treaty reinsurance. Much of our reinsurance is purchased on an excess of loss basis.
We are in compliance with the requirements of these regulations. ​ The NAIC adopted the Insurer Climate Risk Disclosure Data Survey to provide regulators with information about the assessment of risks posed by climate change to insurers and the actions insurers are taking in response to their understanding of climate change risks.
Such state guidance on the use of AI sets forth expectations that companies have governance and risk management practices in place to ensure the use of AI complies with various state laws governing the business of insurance. ​ 13 Table of Contents The NAIC adopted the Insurer Climate Risk Disclosure Data Survey to provide regulators with information about the assessment of risks posed by climate change to insurers and the actions insurers are taking in response to their understanding of climate change risks.
The comparable metric over the past five years, as measured at the beginning of each of those treaty years, has ranged from 4.6 percent of surplus to 15.1 percent of surplus.
The comparable metric over the past five years, as measured at the beginning of each of those treaty years, has ranged from 2.6 percent of surplus to 10.8 percent of surplus. ​ OPERATING RATIOS ​ PREMIUMS TO SURPLUS RATIO ​ The following table shows, for the periods indicated, our insurance subsidiaries’ statutory ratios of net premiums written to policyholders’ surplus.
On a direct basis, we also assume premium on various reinsurance treaties. ​ 6 Table of Contents COMPETITION ​ Our specialty property and casualty insurance subsidiaries are part of a very competitive industry that is cyclical and historically characterized by periods of high premium rates and shortages of underwriting capacity followed by periods of severe competition and excess underwriting capacity.
The underwriting agreements include strict guidelines, and the agents are subject to regular audits. ​ DIRECT ​ We utilize digital platforms to efficiently produce, process and service select business, including home business, binding authority, small commercial, personal umbrella and surety. ​ COMPETITION ​ Our specialty property and casualty insurance subsidiaries are part of a very competitive industry that is cyclical and historically characterized by periods of high premium rates and shortages of underwriting capacity followed by periods of severe competition and excess underwriting capacity.
Our participation has varied over time based on price and the amount of risk transferred by each layer. All layers of the treaty include one reinstatement, which for certain layers requires the payment of additional premium. ​ The following table shows the likelihood that a loss from a single event would be less than the amount shown.
Our participation has varied over time based on price and the amount of risk transferred by each layer. For 2025, the program was 100 percent placed, with a portion of the first layer expiring on May 31, 2025. All layers of the treaty include one reinstatement, some being prepaid reinstatements, while others require the payment of additional reinstatement premium.
Removed
The coverages included in these packages are predominantly general liability, but also have some inland marine coverages, as well as commercial automobile, property and excess coverage.
Added
Examples of these bond types are license and permit, notary and court bonds.
Removed
These risks are underwritten on an account basis and coverage is marketed through a select number of regional and national brokers with surety expertise. ​ Transactional ​ Our transactional surety coverage includes small bonds for businesses and individuals written through independent insurance agencies throughout the United States.
Added
With the renewal effective January 1, 2025, the number of layers with prepaid reinstatement premium increased, which reduces the net loss impact on catastrophe events.
Removed
This business is produced through independent wholesale and retail brokers. ​ INDEPENDENT AGENTS ​ We target classes of insurance, such as homeowners’ and dwelling fire, home business, surety and personal umbrella through independent agents.
Added
Additionally, we have coverages that may reduce first-dollar retentions for multiple events within an established period of time. ​ The following table shows the likelihood that a loss from a single event would be less than the amount shown.
Removed
The underwriting agreements involve strict underwriting guidelines and the agents are subject to regular audits. ​ DIGITAL AND DIRECT ​ We utilize digital efforts to produce and efficiently process and service business including home business, general binding authority, small commercial and personal umbrella risks and surety bonding.
Added
Many states also operate an insurance plan, often referred to as the “insurer of last resort” to provide property insurance to state residents who are unable to obtain that insurance in the private market.
Removed
Primary competitors in the property segment include AmRisc, Arch, Arrowhead, CNA, Golden Bear, Lexington, Liberty Mutual, Markel, Palomar, RSUI, Special Risk Underwriters, Travelers, Velocity and Westchester. Primary competitors in the surety segment are AIG, Arch, Beazley, Berkley, Chubb, CNA, Great American, Hartford, Intact, Liberty Mutual, Markel, Merchants, Philadelphia, Sompo, Swiss Re, Travelers and Zurich.
Added
These regulations are revised from time-to-time, such as New York’s second amendment to its cybersecurity act, requiring us to periodically revise our cybersecurity governance, processes and controls to comply with the revised regulations. ​ A number of states have issued regulatory guidance to insurance companies authorized to do business in those respective states on the use of artificial intelligence (AI).
Removed
Treaty coverage refers to a reinsurance contract under which the company agrees to cede all risks within a defined class of business to the reinsurer, who agrees to provide coverage on all risks ceded without individual underwriting. Facultative coverage is applied to individual risks at the company’s discretion and is subject to underwriting by the reinsurer.
Added
A number of states have adopted the NAIC Model Bulletin on the Use of Artificial Intelligence, while the New York Department of Financial Services issued its circular letter.
Removed
In the last renewal cycle, we increased co-participations within the ceded layers of the property reinsurance structure. ​ PROPERTY REINSURANCE — CATASTROPHE COVERAGE ​ Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders, including earthquakes, hurricanes, floods, wildfires, convective storms and certain other aggregating events.
Removed
The exposure levels are within our tolerances for this risk. ​ OPERATING RATIOS ​ PREMIUMS TO SURPLUS RATIO ​ The following table shows, for the periods indicated, our insurance subsidiaries’ statutory ratios of net premiums written to policyholders’ surplus.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

26 edited+5 added−1 removed70 unchanged
Biggest changeThe effects on the Company could include: ​ ● Changes in the frequency, severity and location of weather-related catastrophes, which may result in higher levels of losses, ​ ● Additional uncertainty in third party catastrophe models, which could impair our ability to assess exposure and adequately price the catastrophe risks we insure, ​ ● Flooding of coastal property, resulting from rising sea levels, making certain geographic areas uninhabitable, reducing demand for insurance products we offer in those areas, ​ ● Increased losses from weather-related catastrophes may make it more difficult to obtain reinsurance at desired levels, or more expensive to acquire reinsurance coverage, which may reduce the amount of business we write and the revenues we generate, ​ ● A transition from carbon-based energy to other sources of energy may decrease demand for insurance coverage we provide to the industries that produce or use carbon-based energy, decrease the availability of reinsurance available for 19 Table of Contents coverages we provide for those industries, or increase claims and losses related to those industries, any of which could affect our profitability, ​ ● Changes in legislation, regulation and court decisions could increase our compliance costs, impose liability on policyholders that we did not contemplate when we underwrote policies, or limit our ability to sell insurance coverage to certain policyholders and ​ ● Losses on our invested assets that could have a material adverse impact on our results of operations and financial condition. ​ Our reinsurers may not pay on losses in a timely fashion, or at all, which may increase our costs and have an adverse effect on our business. ​ We purchase reinsurance to transfer part of the risk we have assumed (known as ceding) to a reinsurance company in exchange for part of the premium we receive in connection with the risk.
Biggest changeThe effects on the Company could include: ​ ● Changes in the frequency, severity and location of weather-related catastrophes, which may result in higher levels of losses and could increase the volatility of our financial results, ​ ● Additional uncertainty in third party catastrophe models, which could impair our ability to assess exposure and adequately price the catastrophe risks we insure, ​ ● Flooding of coastal property, resulting from rising sea levels, making certain geographic areas uninhabitable, reducing demand for insurance products we offer in those areas, ​ ● Increased losses from weather-related catastrophes may make it more difficult to obtain reinsurance at desired levels, or more expensive to acquire reinsurance coverage, which may reduce the amount of business we write and the revenues we generate, ​ ● A transition from carbon-based energy to other sources of energy may decrease demand for insurance coverage we provide to the industries that produce or use carbon-based energy, decrease the availability of reinsurance available for coverages we provide for those industries, or increase claims and losses related to those industries, any of which could affect our profitability, ​ ● Changes in legislation, regulation and court decisions could increase our compliance costs, impose liability on policyholders that we did not contemplate when we underwrote policies, or limit our ability to sell insurance coverage to certain policyholders and ​ ● Losses on our invested assets that could have a material adverse impact on our results of operations and financial condition. ​ If we cannot obtain adequate reinsurance protection for the risks we have underwritten or at prices we deem acceptable, we may be exposed to greater losses from these risks or we may reduce the amount of business we underwrite, which would reduce our revenues . ​ Market conditions beyond our control determine the availability and cost of the reinsurance protection that we purchase.
The effects of these and other coverage issues are difficult to predict and could have a materially adverse effect on our financial performance. ​ As part of the reserving process, we review historical data and consider the impact of various factors such as: ​ ● Loss emergence and claim reporting patterns, ​ ● Underlying policy terms and conditions, ​ ● Business and exposure mix, ​ ● Emerging coverage issues, ​ ● Trends in claim frequency and severity, ​ ● Changes in operations, ​ ● Emerging economic and social trends, ​ 18 Table of Contents ● State reviver statutes that permit claims after a statute of limitation has expired, ​ ● Court closures or increased time-to-trial, ​ ● Inflation in amounts awarded by courts and juries and ​ ● Changes in the regulatory and litigation environments. ​ This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events.
The effects of these and other coverage issues are difficult to predict and could have a materially adverse effect on our financial performance. ​ 18 Table of Contents As part of the reserving process, we review historical data and consider the impact of various factors such as: ​ ● Loss emergence and claim reporting patterns, ​ ● Underlying policy terms and conditions, ​ ● Business and exposure mix, ​ ● Emerging coverage issues, ​ ● Trends in claim frequency and severity, ​ ● Changes in operations, ​ ● Economic trends such as inflation, ​ ● State reviver statutes that permit claims after a statute of limitation has expired, ​ ● Court closures or increased time-to-trial, ​ ● Social trends such as increased amounts awarded by courts and juries and ​ ● Changes in the regulatory and litigation environments. ​ This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events.
If the actual amount of insured losses is greater than the amount we have reserved for these losses, our profitability could suffer. ​ Catastrophic losses are unpredictable and could cause the Company to suffer material financial losses. ​ Our insurance coverages include exposure to catastrophic events, particularly earthquakes on the West Coast and hurricanes and tropical storms affecting coastal regions of the United States.
If the actual amount of insured losses is greater than the amount we have reserved for these losses, our profitability could suffer. ​ Catastrophic losses are unpredictable and could cause the Company to suffer material financial losses. ​ Our insurance coverages include exposure to catastrophic events, particularly hurricanes and tropical storms affecting coastal regions of the United States and earthquakes, primarily on the West Coast.
The cumulative effects on the Company could include, without limitation: ​ ● Reduced demand for our insurance policies due to reduced economic activity, which could negatively impact our revenues, ​ ● Reduced cash flows from our policyholders, delaying premium payments, ​ ● Increased costs and disruption of operations due to employees working remotely or unavailability of our employees, ​ ● Increased claims, losses, litigation and related expenses, ​ ● Legislative, regulatory and judicial actions in response to the public health outbreak, including, but not limited to, actions prohibiting us from cancelling insurance policies in accordance with our policy terms, requiring us to cover losses when our underwriting intent in those policies was not to provide coverage or was to exclude coverage, ordering us to provide premium refunds, granting extended grace periods for payment of premiums and providing for extended periods of time to pay premiums that are past due, ​ ● Policyholder losses from pandemic-related claims could be greater than our reserves for those losses, ​ ● Volatility and declines in financial markets could reduce the fair market value, or result in the impairment, of invested assets held by the Company and ​ ● Changes in interest rates, which could reduce future investment results. ​ Although we have investigated and closed a substantial number of COVID-19-related claims without payment, state and federal courts could rule that such claims are covered under our policies.
The cumulative effects on the Company could include, without limitation: ​ ● Reduced demand for our insurance policies due to reduced economic activity, which could negatively impact our revenues, ​ 23 Table of Contents ● Reduced cash flows from our policyholders, delaying premium payments, ​ ● Increased costs and disruption of operations due to employees working remotely or unavailability of our employees, ​ ● Increased claims, losses, litigation and related expenses, ​ ● Legislative, regulatory and judicial actions in response to the public health outbreak, including, but not limited to, actions prohibiting us from cancelling insurance policies in accordance with our policy terms, requiring us to cover losses when our underwriting intent in those policies was not to provide coverage or was to exclude coverage, ordering us to provide premium refunds, granting extended grace periods for payment of premiums and providing for extended periods of time to pay premiums that are past due, ​ ● Policyholder losses from pandemic-related claims could be greater than our reserves for those losses, ​ ● Volatility and declines in financial markets could reduce the fair market value, or result in the impairment, of invested assets held by the Company and ​ ● Changes in interest rates, which could reduce future investment results. ​ Although we have investigated and closed a substantial number of COVID-19-related claims without payment, state and federal courts could rule that such claims are covered under our policies.
These estimates are based on historical information and on estimates of future trends that may affect the frequency and severity of claims that may be reported in the future. ​ Estimating loss reserves is a difficult, complex and inherently uncertain process involving many variables and subjective judgments.
These estimates are based on historical information and on estimates of future trends that may affect the frequency and severity of claims that may be reported in the future. ​ Estimating loss reserves is a difficult, complex and an inherently uncertain process involving many variables and subjective judgments.
Our ratings are subject to periodic review by such firms, and the criteria used in the rating methodologies is subject to change. As such, we cannot assure we will continue to maintain of our current ratings. ​ All of our ratings were reviewed during 2023. AM Best reaffirmed its A+, Superior rating for the combined entity of RLI Ins., Mt.
Our ratings are subject to periodic review by such firms, and the criteria used in the rating methodologies is subject to change. As such, we cannot assure we will continue to maintain our current ratings. ​ All our ratings were reviewed during 2024. AM Best reaffirmed its A+, Superior rating for the combined entity of RLI Ins., Mt.
Such appellate court decisions may take several years to become final and their ultimate outcome remains uncertain at this time. ​ 23 Table of Contents We may suffer losses from litigation, which could materially and adversely affect our financial condition and business operations. ​ We continually face risks associated with litigation of various types, including general commercial and corporate litigation, and disputes relating to bad faith allegations that could result in the Company incurring losses in excess of policy limits.
Such appellate court decisions may take several years to become final and their ultimate outcome remains uncertain at this time. ​ We may suffer losses from litigation, which could materially and adversely affect our financial condition and business operations. ​ We continually face risks associated with litigation of various types, including general commercial and corporate litigation, and disputes relating to bad faith allegations that could result in the Company incurring losses in excess of policy limits.
We maintain a vendor management program to establish procurement policies and to monitor vendor risk, including the security and stability of our critical vendors. ​ Any significant interruption in the operation of our facilities, systems and business functions could adversely affect our financial condition and results of operations. ​ We rely on multiple computer systems to interact with producers and customers, issue policies, pay claims, run modeling functions, assess insurance risks and complete various important internal processes including accounting and bookkeeping.
We maintain a vendor management program to establish procurement policies and to monitor vendor risk, including the security and stability of our critical vendors. ​ 22 Table of Contents Any significant interruption in the operation of our facilities, systems and business functions could adversely affect our financial condition and results of operations. ​ We rely on multiple computer systems to interact with producers and customers, issue policies, pay claims, run modeling functions, assess insurance risks and complete various important internal processes including accounting and bookkeeping.
Weather-related catastrophes may include meteorological events such as hurricanes, severe convective storms and winter weather; and climatological events such as drought, wildfires and heatwaves. In addition, catastrophe losses can occur from events such as lava flows in Hawaii and terrorist events in the United States. ​ The incidence and severity of catastrophes are inherently unpredictable.
Weather-related catastrophes may include events such as hurricanes, severe convective storms, winter weather, drought and heatwaves. In addition, catastrophe losses can occur from events such as wildfires, lava flows in Hawaii and terrorist events in the United States. ​ The incidence and severity of catastrophes are inherently unpredictable.
To address uncertainty related to catastrophe models, we also monitor against thresholds using non-modeled scenarios. ​ Changing climate and weather conditions may adversely affect our financial condition or profitability. ​ Climate change is a complex and evolving issue and we cannot predict the cumulative impact it may have on our results of operations or financial condition at this time.
To address uncertainty related to catastrophe models, we also monitor against thresholds using non-modeled scenarios. ​ 19 Table of Contents Changing climate and weather conditions may adversely affect our financial condition or profitability. ​ Climate change is a complex and evolving issue and we cannot predict the cumulative impact it may have on our results of operations or financial condition at this time.
Furthermore, if we are unable to effectively update or replace our key legacy technology systems as they become obsolete, or as emerging technology renders them competitively inefficient, our competitive position, security and our cost structure could be adversely affected. ​ Epidemics, pandemics and public health outbreaks could adversely affect our business, including revenues, profitability, results of operations and/or cash flows, in a manner and to a degree that could be material. ​ Epidemics, pandemics and other public health outbreaks, such as the COVID-19 pandemic, generally result in significant disruptions in economic activity and financial markets.
Furthermore, if we are unable to effectively update or replace our key legacy technology systems as they become obsolete, or as emerging technology renders them competitively inefficient, our competitive position, security and our cost structure could be adversely affected. ​ Epidemics, pandemics and public health outbreaks could adversely affect our business, including revenues, profitability, results of operations and/or cash flows, in a manner and to a degree that could be material. ​ Epidemics, pandemics and other public health outbreaks generally result in significant disruptions in economic activity and financial markets.
Our profitability can be significantly affected, and has been affected to varying degrees, by: ​ ● Competitive pressures impacting our ability to write new business or retain existing business at an adequate rate, ​ ● Rising levels of loss costs that we cannot anticipate at the time we price our coverages, including inflation in the cost of materials, delays that cause increased business interruption losses and social inflation, as influenced by higher jury verdicts, ​ 15 Table of Contents ● Volatile and unpredictable developments, including man-made, weather-related and other natural catastrophes, terrorist attacks or geopolitical events, ​ ● Significant price changes of the commodities we insure, ​ ● Changes in the availability and level of reinsurance capacity, ​ ● Changes in the amount of losses resulting from new types of claims and new or changing judicial interpretations relating to the scope of insurers’ liabilities and ​ ● The ability of our underwriters to accurately select and price risk and our claim personnel to appropriately deliver fair outcomes. ​ In addition, the demand for property and casualty insurance, both admitted and excess and surplus lines, can vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases, causing our revenues to fluctuate.
Our profitability can be significantly affected, and has been affected to varying degrees, by: ​ ● Competitive pressures impacting our ability to write new business or retain existing business at an adequate rate, ​ ● Rising levels of loss costs that we cannot anticipate at the time we price our coverages, including those caused by inflation in the cost of materials, delays that cause increased business interruption losses and legal system abuse resulting in higher jury verdicts, ​ ● Volatile and unpredictable developments, including man-made, weather-related and other natural catastrophes, terrorist attacks or geopolitical events, ​ ● Significant price changes of the commodities we insure, ​ ● Changes in the availability and level of reinsurance capacity, ​ ● Changes in the amount of losses resulting from new types of claims, correlations of losses and new or changing judicial interpretations relating to the scope of insurers’ liabilities and ​ ● The ability of our underwriters to accurately select and price risk and our claim personnel to appropriately deliver fair outcomes. ​ In addition, the demand for property and casualty insurance, both admitted and excess and surplus lines, can vary significantly, rising as the overall level of economic activity increases and falling as that activity decreases, causing our revenues to fluctuate.
During these times, it is very difficult to grow or maintain premium volume without sacrificing underwriting income. ​ We face competition from specialty insurance companies, underwriting agencies and intermediaries, as well as diversified financial services companies that are significantly larger than we are, and that have significantly greater financial, marketing, management and other resources.
During these times, it is very difficult to grow or maintain premium volume without sacrificing underwriting income. 16 Table of Contents ​ We face competition from specialty insurance companies, underwriting agencies and intermediaries, as well as diversified financial services companies that are significantly larger than we are, and that have significantly greater financial, marketing, management and other resources.
If our company needs capital but cannot raise it, our business and future growth could be adversely affected. ​ 20 Table of Contents We are an insurance holding company and therefore may not be able to receive adequate or timely dividends from our insurance subsidiaries. ​ RLI Corp. is the holding company for our three insurance operating companies.
If our company needs capital but cannot raise it, our business and future growth could be adversely affected. ​ We are an insurance holding company and therefore may not be able to receive adequate or timely dividends from our insurance subsidiaries. ​ RLI Corp. is the holding company for our three insurance operating companies.
Loss of all or a substantial portion of the business written through these parties could have a material adverse effect on our business. ​ Our business is concentrated in several key states and a change in our business in one of those states could disproportionately affect our financial condition or results of operations. ​ Although we operate in all 50 states, 57 percent of our direct premiums earned were generated in four states in 2023: Florida – 20 percent; California – 17 percent; Texas – 11 percent; and New York – 9 percent.
Loss of all or a substantial portion of the business written through these parties could have a material adverse effect on our business. ​ Our business is concentrated in several key states and a change in our business in one of those states could disproportionately affect our financial condition or results of operations. ​ Although we operate in all 50 states, 57 percent of our direct premiums earned were generated in four states in 2024: Florida – 20 percent; California – 18 percent; Texas – 11 percent; and New York – 8 percent.
We operate within an enterprise risk management (ERM) framework designed to assess and monitor our risks. However, assurance that we can effectively review and monitor all risks or that all of our employees will operate within the ERM framework cannot be 21 Table of Contents guaranteed.
We operate within an enterprise risk management (ERM) framework designed to assess and monitor our risks. However, assurance that we can effectively review and monitor all risks or that all our employees will operate within the ERM framework cannot be guaranteed.
If we are unable to compete effectively in the markets we operate in or are not successful in expanding our operations into new markets, the amount of premium we write may decline, pressuring overall business results. ​ A number of new, proposed or potential legislative or industry developments could further increase competition in our industry, including: ​ ● An increase in capital-raising by companies in our lines of business, which could result in new entrants to our markets and an excess of capital in the industry, ​ 16 Table of Contents ● The deregulation of commercial insurance lines in certain states and the possibility of federal regulatory reform of the insurance industry, which could increase competition from standard carriers for our excess and surplus lines of insurance business, ​ ● Programs in which state-sponsored entities provide property insurance in catastrophe-prone areas or other alternative market types of coverage, ​ ● Changing practices, which may lead to greater competition in the insurance business and ​ ● The emergence of Insurtech companies and the development of new technologies, which may lead to disruption of current business models and the insurance value chain. ​ New competition from these developments could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our coverages at attractive rates and thereby adversely affect our underwriting results. ​ A downgrade in our ratings from AM Best, Standard & Poor’s or Moody’s could negatively affect our business. ​ Financial strength ratings are an important factor in establishing the competitive position of insurance companies.
If we are unable to compete effectively in the markets we operate in or are not successful in expanding our operations into new markets, the amount of premium we write may decline, pressuring overall business results. ​ New, proposed or potential legislative or industry developments could further increase competition in our industry, including: ​ ● An increasing level of industry capital, new carrier formation or elevated competition in our line of business, ​ ● The deregulation of commercial insurance lines in certain states and the possibility of federal regulatory reform of the insurance industry, which could increase competition from standard carriers for our excess and surplus lines of insurance business, ​ ● Programs in which state-sponsored entities provide property insurance in catastrophe-prone areas or other alternative market types of coverage, ​ ● Changing practices, which may lead to greater competition in the insurance business and ​ ● The development of new technologies, which may lead to disruption of current business models and the insurance value chain. ​ New competition from these developments could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our coverages at attractive rates and thereby adversely affect our underwriting results. ​ A downgrade in our ratings from AM Best, Standard & Poor’s or Moody’s could negatively affect our business. ​ Financial strength ratings are an important factor in establishing the competitive position of insurance companies.
These regulations, generally administered by a department of insurance in each state and territory in which we do business, relate to, among other things: ​ ● Approval of policy forms and premium rates, ​ ● Standards of solvency, including risk-based capital measurements, ​ ● Licensing of insurers and their producers, ​ ● Restrictions on agreements with our large revenue-producing agents, ​ ● Cancellation and non-renewal of policies, ​ ● Restrictions on the nature, quality and concentration of investments, ​ ● Restrictions on the ability of our insurance company subsidiaries to pay dividends to the Company, ​ ● Restrictions on transactions between insurance company subsidiaries and their affiliates, 17 Table of Contents ​ ● Restrictions on the size of risks insurable under a single policy, ​ ● Requiring deposits for the benefit of policyholders, ​ ● Requiring certain methods of accounting, ​ ● Periodic examinations of our operations and finances, ​ ● Prescribing the form and content of records of financial condition required to be filed and ​ ● Requiring reserves for unearned premium, losses and other purposes. ​ These regulatory requirements may adversely affect or inhibit our ability to achieve some or all of our business objectives. ​ In addition, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations.
These regulations, generally administered by a department of insurance in each state and territory in which we do business, relate to, among other things: ​ ● Approval of policy forms, premium rates and the basis on which rates can be determined, ​ 17 Table of Contents ● The use of artificial intelligence systems to make or supplement decisions related to underwriting, rating and pricing, claim administration and payment, and fraud detection, ​ ● Standards of solvency, including risk-based capital measurements, ​ ● Licensing of insurers and their producers, ​ ● Restrictions on agreements with our large revenue-producing agents, ​ ● Cancellation and non-renewal of policies, ​ ● Restrictions on the nature, quality and concentration of investments, ​ ● Restrictions on the ability of our insurance company subsidiaries to pay dividends to the Company, ​ ● Restrictions on transactions between insurance company subsidiaries and their affiliates, ​ ● Restrictions on the size of risks insurable under a single policy, ​ ● Requiring deposits for the benefit of policyholders, ​ ● Requiring certain methods of accounting, ​ ● Periodic examinations of our operations and finances, ​ ● Prescribing the form and content of records of financial condition required to be filed and ​ ● Requiring reserves for unearned premium, losses and other purposes. ​ These regulatory requirements may adversely affect or inhibit our ability to achieve some or all of our business objectives. ​ In addition, regulatory authorities have relatively broad discretion to deny or revoke licenses for various reasons, including the violation of regulations.
In addition, models are revised periodically, which could change modeled losses. The losses we might incur from an actual catastrophe could be higher than our expectation of losses generated from modeled catastrophe scenarios, which could have a materially adverse effect on our results of operations and financial condition.
The losses we might incur from an actual catastrophe could be higher than our expectation of losses generated from modeled catastrophe scenarios, which could have a materially adverse effect on our results of operations and financial condition.
If we are unable to keep pace with the advancements being made in technology, our ability to compete with other insurance companies who have advanced technological capabilities will be negatively affected.
If we are unable to keep pace with the advancements being made in technology, such as the use of artificial intelligence systems, our ability to compete with other insurance companies who have advanced technological capabilities will be negatively affected.
In 2023, 42 percent of our gross premiums written were produced through six producer entities, while no other entity’s production exceeded 2 percent of our gross premiums written.
In 2024, 46 percent of our gross premiums written were produced through eight producer entities, while no other entity’s production exceeded 2 percent of our gross premiums written.
In addition, catastrophe claim costs may be higher than we originally estimate and could cause substantial volatility in our financial results for any fiscal quarter or year. ​ We use models to help assess exposure to catastrophic events against established thresholds. Models include underlying assumptions based on a limited set of actual events and cannot contemplate all possible catastrophe scenarios.
In addition, catastrophe claim costs may be higher than we originally estimate and could cause substantial volatility in our financial results for any fiscal quarter or year. ​ We use models to help assess exposure to certain catastrophic events against established thresholds.
The bond portfolio is affected by interest rate changes and movement in credit spreads. We attempt to mitigate our interest rate and credit risks by constructing a well-diversified portfolio of high-quality securities with varied maturities.
While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is positively correlated with movements in domestic stocks. The bond portfolio is affected by interest rate changes and movement in credit spreads. We attempt to mitigate our interest rate and credit risks by constructing a well-diversified portfolio of high-quality securities with varied maturities.
In addition, fluctuations can result from changes in interest rates, credit risk, government monetary policies, liquidity of holdings and general economic conditions. The equity portfolio will fluctuate with movements in the overall stock market. While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is positively correlated with movements in domestic stocks.
In addition, fluctuations can result from changes in interest rates, credit risk, government monetary policies, liquidity of holdings and 21 Table of Contents general economic conditions. The equity portfolio will fluctuate with movements in the overall stock market.
We, as well as our business partners and service providers, employ measures to prevent, detect, address, mitigate and recover from these threats (including employee training, access controls, data encryption, vulnerability assessments, continuous monitoring of information technology networks and systems and maintenance of backup and protective systems). 22 Table of Contents However, cyber security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations.
We, as well as our business partners and service providers, employ measures to prevent, detect, address, mitigate and recover from these threats (including employee training, access controls, data encryption, vulnerability assessments, continuous monitoring of information technology networks and systems and maintenance of backup and protective systems).
Many of the bonds we issue, particularly in the energy sector, are non-cancelable and may expose the Company to greater losses, should the surety reinsurance coverage we are able to secure be reduced or become unavailable. ​ Financial and Investment ​ Adverse changes in the economy could lower the demand for our insurance products and could have an adverse effect on the revenue and profitability of our operations. ​ Factors such as business revenue, construction spending, government spending, the volatility and strength of the capital markets and inflation can all affect the business and economic environment.
Either of these events would increase our costs and could have a material adverse effect on our business. ​ 20 Table of Contents Financial and Investment ​ Adverse changes in the economy could lower the demand for our insurance products and could have an adverse effect on the revenue and profitability of our operations. ​ Factors such as business revenue, construction spending, government spending, the volatility and strength of the capital markets and inflation can all affect the business and economic environment.
Removed
Either of these events would increase our costs and could have a material adverse effect on our business. ​ If we cannot obtain adequate reinsurance protection for the risks we have underwritten or at prices we deem acceptable, we may be exposed to greater losses from these risks or we may reduce the amount of business we underwrite, which would reduce our revenues . ​ Market conditions beyond our control determine the availability and cost of the reinsurance protection that we purchase.
Added
Models include underlying assumptions based on a limited set of actual events and cannot contemplate all possible catastrophe scenarios. In addition, models are revised periodically, which could change modeled losses.
Added
Some of the bonds we issue, particularly in the energy sector, are non-cancelable and may expose the Company to greater losses, should the surety reinsurance coverage we are able to secure be reduced or become unavailable.
Added
Additionally, the potential exists for losses to exceed our reinsurance limits when we believe we have adequate reinsurance coverage in place, which would adversely impact our net earnings. ​ Our reinsurers may not pay on losses in a timely fashion, or at all, which may increase our costs and have an adverse effect on our business. ​ We purchase reinsurance to transfer part of the risk we have assumed (known as ceding) to a reinsurance company in exchange for part of the premium we receive in connection with the risk.
Added
However, cyber security incidents, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties) and the disruption of business operations.
Added
Unresolved Staff Comments ​ None . 24 Table of Contents ​

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAdditionally, the board receives periodic updates on emerging cybersecurity issues and developments through director education provided by the Company and third-party experts, detailed reviews provided by the CIO/CISO and the Company’s head of IT security on select cyber security topics, and “table top” simulations of a cybersecurity event. ​ Management oversight of cybersecurity risks is provided through the Company’s risk committee, which is chaired by the chief executive officer and comprised of members of senior management.
Biggest changeAdditionally, the board receives periodic updates on emerging cybersecurity issues and developments through director education provided by the Company and third-party experts, detailed reviews provided by the CIO and the Company’s head of IT security on select cybersecurity topics, and periodic “table top” simulations of a cybersecurity event. ​ The Company maintains a Cybersecurity Incident Response Plan (CIRP) providing a framework for identifying, evaluating and escalating potential or actual cybersecurity events.
The Company’s approach to cybersecurity risk management is generally based on the five core functions contained within the NIST Framework organizing structure: identify, protect, detect, respond and recover. ​ As of the date of this report, risks from cybersecurity threats or incidents have not materially affected, nor are they reasonably likely to materially affect, the Company’s business strategy, results of operations or financial condition.
The Company’s approach to cybersecurity risk management is generally based on the six core functions contained within the NIST Framework organizing structure: identify, protect, detect, respond, recover and govern. ​ As of the date of this report, risks from cybersecurity threats or incidents have not materially affected, nor are they reasonably likely to materially affect, the Company’s business strategy, results of operations or financial condition.
The CIRP assigns responsibilities and provides a workflow between the Company’s IT security department; members of an Executive Cybersecurity Committee comprised of the chief executive officer and senior management; and the board of directors regarding the detection, assessment and response to a cybersecurity event. ​ The Company’s internal audit department routinely engages third-party cybersecurity consultants to conduct network security audits.
The CIRP assigns responsibilities and provides a workflow between the Company’s IT security department; the Company’s Technology Committee; and the board of directors regarding the detection, assessment and response to a cybersecurity event. ​ The Company’s internal audit department routinely engages third-party cybersecurity consultants to conduct network security audits.
Among its responsibilities, the risk committee identifies the Company’s material risks and reviews the strategies, processes and controls in place to facilitate the understanding, identification, prevention, measurement, reporting and mitigation of those risks.
The Company’s Risk Committee, chaired by the CEO and comprised of members of executive management, identifies the Company’s material risks and reviews the strategies, processes and controls in place to facilitate the understanding, identification, prevention, measurement, reporting and mitigation of those risks.
However, in light of emerging and changing cybersecurity threats and vulnerabilities, the Company cannot guarantee that it will not be a victim of a cybersecurity attack in the future that could materially affect the Company. See Item 1A, Risk Factors for more information. ​ The RLI Corp. Board of Directors provides oversight for cybersecurity risks primarily through its audit committee.
However, in light of emerging and changing cybersecurity threats and vulnerabilities, the Company cannot guarantee that it will not be a victim of a cybersecurity attack in the future that could materially affect the Company.
The risk committee also periodically conducts a detailed review of cybersecurity risks. ​ The Company’s IT security department, which operates under general oversight of the Company’s CIO/CISO, is responsible for day-to-day assessment and management of cybersecurity risks, including efforts to prevent and, if necessary, mitigate the effects of a cybersecurity incident.
See Item 1A, Risk Factors for more information. ​ The IT security department is responsible for the day-to-day assessment and management of cybersecurity risks, including efforts to prevent and, if necessary, mitigate the effects of a cybersecurity incident.
The Company’s chief information officer (CIO), who also serves as the Company’s chief information security officer (CISO), along with the head of the Company’s IT security department, present quarterly to the audit committee on cybersecurity risks and the Company’s strategies and actions to assess and manage those risks.
The committee was renamed the Finance & Risk Committee (FRC). The Company’s CIO, along with the head of the Company’s IT security department, presents quarterly to the designated committee on cybersecurity risks and the Company’s strategies to assess and manage those risks.
Removed
The risk committee meets quarterly and reviews the Company’s 24 Table of Contents current assessment of cybersecurity risks conducted by the Company’s CIO/CISO and IT security department based on leading cybersecurity frameworks.
Added
The Company’s IT security department operates under general oversight of the Company’s chief information officer (CIO), who also serves as the Company’s chief information security officer (CISO). The Company’s CIO has 27 years of technology and technology leadership experience, including 14 years serving as a CISO, in the insurance industry.
Removed
The Company’s CIO/CISO has 25 years of technology and technology leadership experience, including 13 years serving as a CISO in the insurance industry. ​ The Company maintains a Cybersecurity Incident Response Plan (CIRP) providing a framework for identifying, evaluating and escalating potential or actual cybersecurity events.
Added
The head of the Company’s IT security department, who reports to the CIO, holds a Certified Information Systems Security Professional designation from the Information Security Certification Consortium, has 20 years of experience in the insurance industry and has served in IT security-related roles for 24 years. ​ Management oversight of cybersecurity risks is provided primarily through the Company’s Technology Committee, which is chaired by the Company’s CIO and comprised of members of senior management.
Added
The Technology Committee’s responsibilities include general oversight of cybersecurity-related matters, maintenance of the cybersecurity and data privacy programs and oversight of the Company’s cybersecurity incident response plan. Technology risk, including cybersecurity risk, is also integrated into the Company’s enterprise risk management process.
Added
The Risk Committee meets quarterly and reviews the Technology Committee’s current assessment of cybersecurity risks. ​ Through 2024, the RLI Corp. Board of Directors provided oversight for cybersecurity risks primarily through its Audit Committee. In February 2025, the charter of the Finance & Investments Committee was revised to include overall enterprise risk management oversight, including oversight of cybersecurity risk.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeManagement considers our office facilities suitable and adequate for our current levels of operations. ​ RLI’s Peoria, Illinois campus includes a 1.8-megawatt solar field that is capable of producing annual electrical power equal to or exceeding the yearly electrical needs for all of our office buildings in Peoria. ​
Biggest changeManagement considers our office facilities suitable and adequate for our current levels of operations. ​ 25 Table of Contents RLI’s Peoria, Illinois campus includes a 1.8-megawatt solar field that is capable of producing annual electrical power equal to or exceeding the yearly electrical needs for all our office buildings in Peoria. ​
Item 2. Properties ​ We own five commercial buildings totaling 173,000 square feet on our 23-acre campus that serves as our corporate headquarters in Peoria, Illinois. All of our branch offices and other company operations lease office space throughout the country.
Item 2. Properties ​ We own five commercial buildings totaling 173,000 square feet on our 23-acre campus that serves as our corporate headquarters in Peoria, Illinois. All our branch offices and other company operations lease office space throughout the country.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings ​ Information on our legal proceedings is set forth in note 10 to the Consolidated Financial Statements included under Item 8, Financial Statements and Supplementary Data. ​ Item 4. Mine Safety Disclosures ​ Not applicable . ​ PART II ​
Biggest changeItem 3. Legal Proceedings ​ Information on our legal proceedings is set forth in note 9 to the Consolidated Financial Statements included under Item 8, Financial Statements and Supplementary Data. ​ Item 4. Mine Safety Disclosures ​ Not applicable . ​ PART II ​

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 25 ​ ​ ​ Part II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. Reserved 26 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 26 ​ ​ ​ Part II ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Reserved 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 50 Item 8.
Financial Statements and Supplementary Data 52 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 92 Item 9A. Controls and Procedures 92 Item 9B. Other Information 92
Financial Statements and Supplementary Data 53 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 92 Item 9A. Controls and Procedures 92 Item 9B. Other Information 92

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAlthough the Company currently intends to continue paying quarterly cash dividends to our shareholders, there can be no assurance as to the amount of such dividends or whether the Company will continue to pay such dividends. ​ 25 Table of Contents Performance ​ The following graph provides a five-year comparison of RLI Corp.’s total return to shareholders compared to that of the S&P 500 and S&P 500 P&C Index: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2018 2019 2020 2021 2022 2023 RLI ​ -------------- ​ $ 100 $ 133 ​ $ 157 ​ $ 174 ​ $ 217 ​ $ 225 S&P 500 ​ •••••••••••••••• ​ ​ 100 ​ 131 ​ ​ 156 ​ ​ 200 ​ ​ 164 ​ ​ 207 S&P 500 P&C Index ​ — — — ​ ​ 100 ​ 126 ​ ​ 134 ​ ​ 157 ​ ​ 187 ​ ​ 207 ​ Assumes $100 invested on December 31, 2018, in RLI, S&P 500 and S&P 500 P&C Index, with reinvestment of dividends.
Biggest changeAlthough the Company currently intends to continue paying quarterly cash dividends to our shareholders, there can be no assurance as to the amount of such dividends or whether the Company will continue to pay such dividends. ​ Performance ​ The following graph provides a five-year comparison of RLI Corp.’s total return to shareholders compared to that of the S&P 500 and S&P 500 P&C Index: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2019 2020 2021 2022 2023 2024 RLI ​ -------------- ​ $ 100 $ 118 ​ $ 131 ​ $ 163 ​ $ 169 ​ $ 216 S&P 500 ​ •••••••••••••••• ​ ​ 100 ​ 118 ​ ​ 152 ​ ​ 125 ​ ​ 157 ​ ​ 197 S&P 500 P&C Index ​ — — — ​ ​ 100 ​ 106 ​ ​ 125 ​ ​ 149 ​ ​ 164 ​ ​ 222 ​ Assumes $100 invested on December 31, 2019, in RLI, S&P 500 and S&P 500 P&C Index, with reinvestment of dividends.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ RLI Corp. common stock trades on the New York Stock Exchange under the symbol “RLI”. RLI Corp. has paid dividends for 190 consecutive quarters and increased quarterly dividends in each of the last 48 years.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ RLI Corp. common stock trades on the New York Stock Exchange under the symbol “RLI”. RLI Corp. has paid dividends for 194 consecutive quarters and increased quarterly dividends in each of the last 49 years.
As of February 14, 2024, there were 1,071 registered holders of the Company’s common stock. ​ The payment of dividends to our shareholders is at the discretion of our board of directors and will depend on our results of operations, our financial condition, regulatory restrictions of our insurance subsidiaries and other factors deemed relevant by our board of directors.
As of February 13, 2025, there were 1,103 registered holders of the Company’s common stock. ​ The payment of dividends to our shareholders is at the discretion of our board of directors and will depend on our results of operations, our financial condition, regulatory restrictions of our insurance subsidiaries and other factors deemed relevant by our board of directors.
In December 2023 and 2022, RLI Corp. paid special cash dividends of $2.00 and $7.00 per share to shareholders, respectively.
In December 2024 and 2023, RLI Corp. paid special cash dividends of $2.00 and $1.00 per share to shareholders, respectively.
Comparison of five-year annualized total return — RLI: 17.7%, S&P 500: 15.7% and S&P 500 P&C Index: 15.7%. ​ Securities Authorized for Issuance under Equity Compensation Plans ​ Information on securities authorized for issuance under our equity compensation plan is incorporated by reference to the “Share Ownership of Certain Beneficial Owners and Management” section of the Proxy Statement. ​ Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities - Not applicable. ​ Issuer Purchases of Equity Securities ​ In 2010, our board of directors implemented a $100 million share repurchase program.
Comparison of five-year annualized total return — RLI: 16.6%, S&P 500: 14.5% and S&P 500 P&C Index: 17.3%. ​ 26 Table of Contents Securities Authorized for Issuance under Equity Compensation Plans ​ Information on securities authorized for issuance under our equity compensation plan is incorporated by reference to the “Share Ownership of Certain Beneficial Owners and Management” section of the Proxy Statement. ​ Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities - Not applicable. ​ Issuer Purchases of Equity Securities - Not applicable. ​
Removed
In 2023, our board of directors terminated the share repurchase program. We did not repurchase any shares during 2023. ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet investment income increased by 40 percent in 2023, primarily due to higher reinvestment rates and a larger average asset base relative to the prior year. ​ ​ ​ ​ ​ ​ ​ ​ CONSOLIDATED REVENUE ​ Year ended December 31, (in thousands) 2023 2022 Net premiums earned ​ $ 1,294,306 ​ $ 1,144,436 Net investment income ​ ​ 120,383 ​ ​ 86,078 Net realized gains ​ ​ 32,518 ​ ​ 588,515 Net unrealized gains (losses) on equity securities ​ ​ 64,787 ​ ​ (121,037) Total consolidated revenue ​ $ 1,511,994 ​ $ 1,697,992 ​ Net earnings for 2023 totaled $305 million, down from $583 million in 2022, as the comparable period was elevated by the gain recognized on the sale of our interest in Maui Jim in 2022. ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ NET EARNINGS ​ Year ended December 31, (in thousands) 2023 2022 Underwriting income ​ $ 173,185 ​ $ 178,216 Net investment income ​ ​ 120,383 ​ ​ 86,078 Net realized gains ​ ​ 32,518 ​ ​ 588,515 Net unrealized gains (losses) on equity securities ​ ​ 64,787 ​ ​ (121,037) Interest expense on debt ​ ​ (7,301) ​ ​ (8,047) General corporate expenses ​ ​ (15,917) ​ ​ (12,900) Equity in earnings of unconsolidated investees ​ ​ 9,610 ​ ​ 9,853 Earnings before income taxes ​ $ 377,265 ​ $ 720,678 Income tax expense ​ ​ (72,654) ​ ​ (137,267) Net earnings ​ $ 304,611 ​ $ 583,411 ​ UNDERWRITING RESULTS ​ We achieved our 28th consecutive year of underwriting profitability in 2023.
Biggest changeImproved underwriting income was bolstered by an increase in investment income and larger unrealized gains on equity securities. ​ 37 Table of Contents ​ ​ ​ ​ ​ ​ ​ NET EARNINGS ​ Year ended December 31, (in thousands) 2024 2023 Underwriting income ​ $ 210,653 ​ $ 173,185 Net investment income ​ ​ 142,278 ​ ​ 120,383 Net realized gains ​ ​ 19,966 ​ ​ 32,518 Net unrealized gains on equity securities ​ ​ 81,734 ​ ​ 64,787 Interest expense on debt ​ ​ (6,331) ​ ​ (7,301) General corporate expenses ​ ​ (15,880) ​ ​ (15,917) Equity in earnings of unconsolidated investees ​ ​ (4,869) ​ ​ 9,610 Earnings before income taxes ​ $ 427,551 ​ $ 377,265 Income tax expense ​ ​ (81,772) ​ ​ (72,654) Net earnings ​ $ 345,779 ​ $ 304,611 ​ UNDERWRITING RESULTS ​ We surpassed $2 billion in gross premiums written for the first time and achieved our 29th consecutive year of underwriting profitability in 2024.
As an example, our property catastrophe business (included below in other property) has significant variance in year over year results; however, its reserving estimation risk is relatively moderate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected loss Reserve ​ ​ Length of ​ Emergence ​ ​ ​ ratio ​ estimation Product line reserve tail patterns relied upon Other risk factors variability variability Commercial excess Long Internal Low frequency High High ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personal umbrella Medium Internal Low frequency Medium Medium ​ ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General liability Long Internal Exposure changes/mix Medium High ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Professional services Medium Internal Highly varied exposures Medium Medium ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial transportation Medium Internal High severity Medium Medium ​ ​ ​ ​ ​ Exposure change/mix ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Small commercial Medium Internal Exposure change/mix Medium Medium ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Small volume ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Executive products Long Internal & external Low frequency High High ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth/mix ​ ​ ​ ​ ​ ​ ​ ​ ​ Heavily reinsured ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other casualty Medium Internal & external Small volume Medium Medium ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Marine Medium Internal & external Exposure growth/mix High Medium ​ ​ ​ ​ ​ ​ Aggregation exposure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other property Short Internal Aggregation exposure High Medium ​ ​ ​ ​ ​ Low frequency ​ ​ ​ ​ ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Surety Medium Internal Economic volatility Medium Medium ​ ​ ​ ​ ​ Unique exposures ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Runoff including asbestos & environmental Long Internal & external Loss trend volatility High High ​ ​ ​ ​ ​ ​ Mass tort/latent exposure ​ ​ ​ ​ ​ Due to inherent uncertainty underlying loss reserve estimates, including, but not limited to, the future settlement environment, final resolution of the estimated liability may be different from that anticipated at the reporting date.
As an example, our property catastrophe business (included below in commercial and other property) has significant variance in year over year results; however, its reserving estimation risk is relatively moderate. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expected loss Reserve ​ ​ Length of ​ Emergence ​ ​ ​ ratio ​ estimation Product line reserve tail patterns relied upon Other risk factors variability variability Commercial excess Long Internal Low frequency High High ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Personal umbrella Medium Internal Low frequency Medium Medium ​ ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General liability Long Internal Exposure changes/mix Medium High ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Professional services Medium Internal Highly varied exposures Medium Medium ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial transportation Medium Internal High severity Medium Medium ​ ​ ​ ​ ​ Exposure change/mix ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Small commercial Medium Internal Exposure change/mix Medium Medium ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Small volume ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Executive products Long Internal & external Low frequency High High ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss trend volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic volatility ​ ​ ​ ​ ​ ​ ​ ​ ​ Unforeseen tort potential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exposure growth/mix ​ ​ ​ ​ ​ ​ ​ ​ ​ Heavily reinsured ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other casualty Medium Internal & external Small volume Medium Medium ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Marine Medium Internal & external Exposure growth/mix High Medium ​ ​ ​ ​ ​ ​ Aggregation exposure ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial and other property Short Internal Aggregation exposure High Medium ​ ​ ​ ​ ​ Low frequency ​ ​ ​ ​ ​ ​ ​ ​ ​ High severity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Surety Medium Internal Economic volatility Medium Medium ​ ​ ​ ​ ​ Unique exposures ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Runoff including asbestos & environmental Long Internal & external Loss trend volatility High High ​ ​ ​ ​ ​ ​ Mass tort/latent exposure ​ ​ ​ ​ ​ Due to inherent uncertainty underlying loss reserve estimates, including, but not limited to, the future settlement environment, final resolution of the estimated liability may be different from that anticipated at the reporting date.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ OVERVIEW ​ RLI Corp. is a U.S. based, specialty insurance company that underwrites select property, casualty and surety products through major subsidiaries collectively known as RLI Insurance Group (Group). Our focus is on niche markets and developing unique products that are tailored to customers’ needs.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ OVERVIEW ​ RLI Corp. is a U.S. based, specialty insurance company that underwrites select property, casualty and surety products through three major subsidiaries collectively known as RLI Insurance Group (Group). Our focus is on niche markets and developing unique products that are tailored to customers’ needs.
The LRC is made up of various members of the management team including the lead reserving actuary, chief executive officer, chief operating officer, chief financial officer, chief legal officer and other selected executives. As part of the discussion with the LRC, the analysis supporting the actuarial central estimate of the IBNR reserve by product is reviewed.
The LRC is made up of various members of the management team including the lead reserving actuary, chief executive officer, chief operating officer, chief financial officer, chief claim officer, chief legal officer and other selected executives. As part of the discussion with the LRC, the analysis supporting the actuarial central estimate of the IBNR reserve by product is reviewed.
We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed. ​ 29 Table of Contents Our IBNR reserving process involves three steps: (1) an initial IBNR generation process that is prospective in nature, (2) a loss and LAE reserve estimation process that occurs retrospectively and (3) a subsequent discussion and reconciliation between our prospective and retrospective IBNR estimates, which includes changes in our provisions for IBNR where deemed appropriate. ​ Initial IBNR Generation Process ​ Initial carried IBNR reserves are determined through a reserve generation process.
We reflect favorable or unfavorable development of loss reserves in the results of operations in the period the estimates are changed. ​ 30 Table of Contents Our IBNR reserving process involves three steps: (1) an initial IBNR generation process that is prospective in nature, (2) a loss and LAE reserve estimation process that occurs retrospectively and (3) a subsequent discussion and reconciliation between our prospective and retrospective IBNR estimates, which includes changes in our provisions for IBNR where deemed appropriate. ​ Initial IBNR Generation Process ​ Initial carried IBNR reserves are determined through a reserve generation process.
Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred. ​ Additional discussion of other significant accounting policies may be found in note 1 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​ RESULTS OF OPERATIONS ​ This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred. ​ Additional discussion of other significant accounting policies may be found in note 1 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​ RESULTS OF OPERATIONS ​ This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
The difference between the combined ratio and 100 reflects the per-dollar rate of underwriting income or loss. ​ CRITICAL ACCOUNTING POLICIES ​ In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial 27 Table of Contents statements and the reported amounts of revenues and expenses for the reporting period.
The difference between the combined ratio and 100 reflects the per-dollar rate of underwriting income or loss. ​ 28 Table of Contents CRITICAL ACCOUNTING POLICIES ​ In preparing the consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period.
Extreme projections are critically analyzed and may be adjusted, given less credence or discarded altogether. Internal documentation is maintained that records any substantial changes in methods or assumptions from one loss reserve study to another. ​ 32 Table of Contents Our estimates of ultimate loss and LAE reserves are subject to change as additional data emerges.
Extreme projections are critically analyzed and may be adjusted, given less credence or discarded altogether. Internal documentation is maintained that records any substantial changes in methods or assumptions from one loss reserve study to another. ​ 33 Table of Contents Our estimates of ultimate loss and LAE reserves are subject to change as additional data emerges.
Adjustments in the initial loss ratio by product and segment are made where necessary and reflect updated assumptions regarding loss experience, loss trends, price changes and prevailing risk factors. ​ 30 Table of Contents Loss and LAE Reserve Estimation Process ​ Estimates of the expected value of the unpaid loss and LAE are derived using standard actuarial methodologies on a quarterly basis.
Adjustments in the initial loss ratio by product and segment are made where necessary and reflect updated assumptions regarding loss experience, loss trends, price changes and prevailing risk factors. ​ 31 Table of Contents Loss and LAE Reserve Estimation Process ​ Estimates of the expected value of the unpaid loss and LAE are derived using standard actuarial methodologies on a quarterly basis.
For more information on the changes in loss and LAE reserves by segment, see note 6 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​ Gross reserves (liability) and the reinsurance balances recoverable (asset) are generally subject to the same influences that affect net reserves, though changes to our reinsurance agreements can cause reinsurance balances recoverable to behave differently.
For more information on the changes in loss and LAE reserves by segment, see note 5 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​ Gross reserves (liability) and the reinsurance balances recoverable (asset) are generally subject to the same influences that affect net reserves, though changes to our reinsurance agreements can cause reinsurance balances recoverable to behave differently.
Our revolving line of credit with PNC permits us to borrow up to an aggregate principal amount of $100 million, but may be increased up to an aggregate principal amount of $130 million under certain conditions. The facility has a three-year term that expires on May 29, 2026. As of December 31, 2023, $50 million was outstanding on this facility.
Our revolving line of credit with PNC permits us to borrow up to an aggregate principal amount of $100 million, but may be increased up to an aggregate principal amount of $130 million under certain conditions. The facility has a three-year term that expires on May 29, 2026. As of December 31, 2024, $50 million was outstanding on this facility.
This constant change can cause estimates based on prior experience to be less reliable than estimates for more stable, admitted books of business. Also, as a niche market insurer, there is little industry-level information for 33 Table of Contents direct comparisons of current and prior experience and other reserving parameters.
This constant change can cause estimates based on prior experience to be less reliable than estimates for more stable, admitted books of business. Also, as a niche market insurer, there is little industry-level information for 34 Table of Contents direct comparisons of current and prior experience and other reserving parameters.
We rigorously attempt to consider all significant facts and circumstances known at the time loss reserves are established. ​ 28 Table of Contents Following is a table of significant risk factors involved in estimating losses grouped by major product line. We distinguish between loss ratio risk and reserve estimation risk.
We rigorously attempt to consider all significant facts and circumstances known at the time loss reserves are established. ​ 29 Table of Contents Following is a table of significant risk factors involved in estimating losses grouped by major product line. We distinguish between loss ratio risk and reserve estimation risk.
Thus, in almost all cases, it is impossible to discretely measure the effect of a single assumption or construct a 34 Table of Contents meaningful sensitivity expectation that holds true in all cases. The scenario above is representative of general liability, one of our largest and longest-tailed products.
Thus, in almost all cases, it is impossible to discretely measure the effect of a single assumption or construct a meaningful sensitivity expectation that holds true in all cases. The scenario above is representative of general liability, one of our 35 Table of Contents largest and longest-tailed products.
These tax benefits reduced the effective tax rate for 2023 and 2022 by 0.4 percent and 0.6 percent, respectively. ​ NET UNPAID LOSSES AND SETTLEMENT EXPENSES ​ The primary liability on our balance sheet relates to unpaid losses and settlement expenses, which represents our estimated liability for losses and related settlement expenses before considering offsetting reinsurance balances recoverable.
These tax benefits reduced the effective tax rate for 2024 and 2023 by 0.6 percent and 0.4 percent, respectively. ​ NET UNPAID LOSSES AND SETTLEMENT EXPENSES ​ The primary liability on our balance sheet relates to unpaid losses and settlement expenses, which represents our estimated liability for losses and related settlement expenses before considering offsetting reinsurance balances recoverable.
Our loss reserving processes reflect accepted actuarial practices and our methodologies result in a reasonable provision for reserves as of December 31, 2023. ​ Reserve Sensitivities ​ There are three major parameters that have significant influence on our actuarial estimates of ultimate liabilities by product.
Our loss reserving processes reflect accepted actuarial practices and our methodologies result in a reasonable provision for reserves as of December 31, 2024. ​ Reserve Sensitivities ​ There are three major parameters that have significant influence on our actuarial estimates of ultimate liabilities by product.
The method reflects more information in the analysis than the paid loss development method. ​ Weaknesses : Method involves additional estimation risk if significant changes to case reserving practices have occurred. ​ 31 Table of Contents Case Reserve Development — Patterns of historical development in reported losses relative to historical case reserves are determined.
The method reflects more information in the analysis than the paid loss development method. ​ Weaknesses : Method involves additional estimation risk if significant changes to case reserving practices have occurred. ​ 32 Table of Contents Case Reserve Development — Patterns of historical development in reported losses relative to historical case reserves are determined.
Additionally, based on qualifying assets and the $50 million borrowing outstanding with the FHLBC as of year-end, additional aggregate borrowing capacity from the FHBLC is approximately $15 million. However, under certain circumstances, that capacity may be increased based on additional FHLBC stock purchased and available collateral.
Additionally, based on qualifying assets and the $50 million borrowing outstanding with the FHLBC as of year-end, additional immediate borrowing capacity from the FHBLC is approximately $15 million. However, under certain circumstances, that capacity may be increased based on additional FHLBC stock purchased and available collateral.
Each of these components are presented in the statements of earnings but is not subtotaled. However, this information is available in total and by segment in note 12 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data.
Each of these components are presented in the statements of earnings but are not subtotaled. However, this information is available in total and by segment in note 11 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data.
Our deferred tax assets relate to expected future tax deductions arising from claim reserves and future taxable income related to changes in our unearned premium and unrealized losses on our fixed income 35 Table of Contents portfolio.
Our deferred tax assets relate to expected future tax deductions arising from claim reserves and future taxable income related to changes in our unearned premium and unrealized losses on our fixed income 36 Table of Contents portfolio.
The primary factor in our ability to generate positive operating cash flow is underwriting profitability, which we have achieved for 28 consecutive years. ​ OPERATING ACTIVITIES ​ The following list highlights some of the major sources and uses of cash flow from operating activities: ​ ​ ​ ​ Sources Uses Premiums received Claims Loss payments from reinsurers Ceded premium to reinsurers Investment income (interest and dividends) Commissions paid Funds held Operating expenses ​ Interest expense ​ ​ Income taxes ​ Funds held ​ Our largest source of cash is from premiums received from our customers, which we receive at the beginning of the coverage period for most policies.
The primary factor in our ability to generate positive operating cash flow is underwriting profitability, which we have achieved for 29 consecutive years. ​ 48 Table of Contents OPERATING ACTIVITIES ​ The following list highlights some of the major sources and uses of cash flow from operating activities: ​ ​ ​ ​ Sources Uses Premiums received Claims Loss payments from reinsurers Ceded premium to reinsurers Investment income (interest and dividends) Commissions paid Funds held Operating expenses ​ Interest expense ​ ​ Income taxes ​ Funds held ​ Our largest source of cash is from premiums received from our customers, which we receive at the beginning of the coverage period for most policies.
Total gross loss and LAE reserves increased to $2.4 billion at December 31, 2023, from $2.3 billion at December 31, 2022, while ceded loss and LAE reserves increased to $757 million from $740 million over the same period. ​ LIQUIDITY AND CAPITAL RESOURCES ​ OVERVIEW ​ We have three primary types of cash flows: (1) operating cash flows, which consist mainly of cash generated by our underwriting operations and income earned on our investment portfolio, (2) investing cash flows related to the purchase, sale and maturity of investments and (3) financing cash flows that impact our capital structure, such as changes in debt, issuance of common stock and dividend payments.
Total gross loss and LAE reserves increased to $2.7 billion at December 31, 2024, from $2.4 billion at December 31, 2023, while ceded loss and LAE reserves decreased to $755 million from $757 million over the same period. ​ LIQUIDITY AND CAPITAL RESOURCES ​ OVERVIEW ​ We have three primary types of cash flows: (1) operating cash flows, which consist mainly of cash generated by our underwriting operations and income earned on our investment portfolio, (2) investing cash flows related to the purchase, sale and maturity of investments and (3) financing cash flows that impact our capital structure, such as changes in debt, issuance of common stock and dividend payments.
First, the loss ratio is loss and settlement expenses divided by net premiums earned. The second component, the expense ratio, reflects the sum of policy acquisition costs and insurance operating expenses divided by net premiums earned. All items included in these components of the combined ratio are presented in our GAAP consolidated financial statements.
The loss ratio is loss and settlement expenses divided by net premiums earned. The expense ratio reflects the sum of policy acquisition costs and insurance operating expenses divided by net premiums earned. All items included in these components of the combined ratio are presented in our GAAP consolidated financial statements.
The numbers below are the changes in estimated ultimate loss and ALAE in millions of dollars as of December 31, 2023, resulting from the change in the parameters shown.
The numbers below are the changes in estimated ultimate loss and ALAE in millions of dollars as of December 31, 2024, resulting from the change in the parameters shown.
The borrowing matures on November 12, 2024 and monthly interest is paid at an annualized rate of 5.44 percent. We are not party to any off-balance sheet arrangements. See note 4 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for more information on our debt.
The borrowing matures on November 12, 2025 and monthly interest is paid at an annualized rate of 4.44 percent. We are not party to any off-balance sheet arrangements. See note 3 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for more information on our debt.
We believe that both liquidity and interest rate risk can be minimized by such asset/liability management. As of December 31, 2023, our fixed income portfolio’s duration was 4.6 years. ​ Consistent underwriting income allows a portion of our investment portfolio to be invested in equity securities and other risk asset classes.
We believe that both liquidity and interest rate risk can be minimized by such asset/liability management. As of December 31, 2024, our fixed income portfolio’s duration was 4.9 years. ​ Consistent underwriting income allows a portion of our investment portfolio to be invested in equity securities and other risk asset classes.
These asset pools can include items such as credit card payments, auto loans, structured bank loans in the form of collateralized loan obligations (CLOs) and residential or commercial mortgages. As of December 31, 2023, ABS/CMBS/RMBS investments were 10 percent of the fixed income portfolio, compared to 9 percent as of December 31, 2022.
These asset pools can include items such as credit card payments, auto loans, structured bank loans in the form of collateralized loan obligations (CLOs) and residential or commercial mortgages. As of December 31, 2024, ABS/CMBS/RMBS investments were 13 percent of the fixed income portfolio, compared to 10 percent as of December 31, 2023.
Reinsurance balances recoverable on unpaid loss and settlement reserves totaled $757 million at December 31, 2023, compared to $740 million in 2022. ​ The next largest contractual obligation relates to debt outstanding. On September 15, 2023, we accessed $50 million from our revolving line of credit with PNC Bank, N.A. (PNC).
Reinsurance balances recoverable on unpaid loss and settlement reserves totaled $755 million at December 31, 2024, compared to $757 million in 2023. ​ The next largest contractual obligation relates to debt outstanding. On September 15, 2023, we accessed $50 million from our revolving line of credit with PNC Bank, N.A. (PNC).
This information is used when determining management’s best estimate of booked reserves. ​ We do not use discounting (recognition of the time value of money) in reporting our estimated reserves for losses and settlement expenses. ​ Loss reserve estimates are subject to a high degree of variability due to the inherent uncertainty of ultimate settlement values.
This information is used when determining management’s best estimate of booked reserves. ​ We do not use discounting in reporting our estimated reserves for losses and settlement expenses. ​ Loss reserve estimates are subject to a high degree of variability due to the inherent uncertainty of ultimate settlement values.
As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of December 31, 2023, our holding company had $1.4 billion in equity.
As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of December 31, 2024, our holding company had $1.5 billion in equity.
Our gross liability for both case and IBNR reserves is reduced by reinsurance balances recoverable on unpaid losses and settlement expenses to calculate our net reserve balance. This net reserve balance increased to $1.7 billion at December 31, 2023, from $1.6 billion as of December 31, 2022.
Our gross liability for both case and IBNR reserves is reduced by reinsurance balances recoverable on unpaid losses and settlement expenses to calculate our net reserve balance. This net reserve balance increased to $1.9 billion at December 31, 2024, from $1.7 billion as of December 31, 2023.
Debt outstanding comprised 7 percent of total capital as of December 31, 2023. ​ At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders.
Debt outstanding comprised 6 percent of total capital as of December 31, 2024. ​ At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders.
Equities comprised 16 percent of our total 2023 portfolio, up from 15 percent at the end of 2022, as equity markets rose over the course of the year. Securities within the equity portfolio are well diversified and are primarily invested in broad index exchange traded funds (ETFs).
Equities comprised 18 percent of our total 2024 portfolio, up from 16 percent at the end of 2023, as equity markets rose over the course of the year. Securities within the equity portfolio are well diversified and are primarily invested in broad index exchange traded funds (ETFs).
Growth is measured in terms of gross premiums written, and profitability is analyzed through combined ratios, which are further subdivided into their respective loss and expense components. ​ KEY PERFORMANCE MEASURES ​ Following is a list of key performance measures found throughout this report with their definitions, relationships to GAAP measures and explanations of their importance to our operations. ​ Underwriting Income ​ Underwriting income or profit represents one measure of the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs and insurance operating expenses from net premiums earned, which are all GAAP financial measures.
Growth is measured in terms of gross premiums written, and profitability is analyzed through underwriting income and combined ratios. ​ KEY PERFORMANCE MEASURES ​ Following is a list of key performance measures found throughout this report with their definitions, relationships to GAAP measures and explanations of their importance to our operations. ​ Underwriting Income ​ Underwriting income or profit represents one measure of the pretax profitability of our insurance operations and is derived by subtracting losses and settlement expenses, policy acquisition costs and insurance operating expenses from net premiums earned, which are all GAAP financial measures.
As of December 31, 2023, all of the securities in our agency MBS portfolio were rated AA and issued by Government Sponsored Enterprises (GSEs) such as the Governmental National Mortgage Association, Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. ​ 43 Table of Contents Variability in the average life of principal repayment is an inherent risk of owning mortgage-related securities.
As of December 31, 2024, all the securities in our agency MBS portfolio were rated AA and issued by Government Sponsored Enterprises (GSEs) such as the Governmental National Mortgage Association, Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. ​ Variability in the average life of principal repayment is an inherent risk of owning mortgage-related securities.
In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution. ​ Our 191st consecutive dividend payment was declared in February 2024 and will be paid on March 20, 2024, in the amount of $0.27 per share.
In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution. ​ Our 195th consecutive dividend payment was declared in February 2025 and will be paid on March 20, 2025, in the amount of $0.15 per share.
For a discussion of relevant prospective accounting standards, see note 1.D. to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​ 49 Table of Contents
For a discussion of relevant prospective accounting standards, see note 1.D. to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data. ​
During 2023, the average after-tax yield on the taxable fixed income portfolio was 2.8 percent, an increase from 2.3 percent in the prior year.
During 2024, the average after-tax yield on the taxable fixed income portfolio was 3.0 percent, an increase from 2.8 percent in the prior year.
Additionally, see note 2 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for information on our obligations for other invested assets. ​ At December 31, 2023, we had cash, short-term investments and other investments maturing within one year of approximately $328 million and an additional $911 million of investments maturing between 1 to 5 years.
Additionally, see note 2 to the consolidated financial statements within Item 8, Financial Statements and Supplementary Data for information on our obligations for other invested assets. ​ At December 31, 2024, we had cash, short-term investments and other investments maturing within one year of approximately $372 million and an additional $739 million of investments maturing between 1 to 5 years.
The higher loss ratio in 2023 was due to lower amounts of favorable development on prior years’ reserves and strengthening our current accident year reserves for our personal umbrella and transportation products.
The higher loss ratio in 2024 was due to lower amounts of favorable development on prior years’ reserves and strengthening our current accident year reserves for our personal umbrella, transportation and professional services products.
Our insurance subsidiaries must maintain certain minimum 47 Table of Contents capital levels in order to meet the requirements of the states in which we are regulated.
Our insurance subsidiaries must maintain certain minimum capital levels in order to meet the requirements of the states in which we are regulated.
As of December 31, 2023 and 2022, 42 percent of our shareholders’ equity was invested in equities. 48 Table of Contents ​ The fixed income portfolio is structured to meet policyholder obligations and optimize the generation of after-tax investment income and total return. ​ FINANCING ACTIVITIES ​ In addition to the previously discussed operating and investing activities, we also engage in financing activities to manage our capital structure.
As of December 31, 2024, 48 percent of our shareholders’ equity was invested in equities versus 42 percent at year-end 2023. ​ The fixed income portfolio is structured to meet policyholder obligations and optimize the generation of after-tax investment income and total return. ​ 49 Table of Contents FINANCING ACTIVITIES ​ In addition to the previously discussed operating and investing activities, we also engage in financing activities to manage our capital structure.
The revenue sources include sectors such as sewer and water, public improvement, school, transportation and colleges and universities. As of December 31, 2023, approximately 46 percent of the municipal fixed income securities in the investment portfolio were GO and the remaining 54 percent were revenue based.
The revenue sources include sectors such as sewer and water, public improvement, school, transportation and colleges and universities. As of December 31, 2024, approximately 50 percent of the municipal fixed income securities in the investment portfolio were GO and the remaining 50 percent were revenue based.
The corporate allocation includes floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio. Non-investment grade bonds totaled $144 million while non-rated Regulation D securities totaled $60 million at the end of 2023.
The corporate allocation includes floating rate bank loans and bonds that are below investment grade in credit quality and offer incremental yield over our core fixed income portfolio. Non-investment grade bonds totaled $148 million while non-rated Regulation D securities totaled $90 million at the end of 2024.
This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $145 million in liquid investment assets, which exceeds our normal annual holding company expenditures.
This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $39 million in liquid investment assets, which approximates two-thirds of our normal annual holding company expenditures.
We hire underwriters and claim examiners with deep expertise and provide exceptional customer service and support. We maintain a highly diverse product portfolio and underwrite for profit in all market conditions. In 2023, we achieved our 28th consecutive year of underwriting profitability. Over the 28-year period, we averaged an 88.2 combined ratio.
We hire underwriters and claim examiners with deep expertise and provide exceptional customer service and support. We maintain a highly diverse product portfolio and underwrite for profit in all market conditions. In 2024, we achieved our 29th consecutive year of underwriting profitability. Over the 29-year period, we averaged an 88.1 combined ratio.
Shortly after such occurrence, we review insured locations exposed to the event and industry loss estimates of the event. We also consider our knowledge of frequency and severity from early claim reports to determine an appropriate reserve for the catastrophe.
Shortly after such occurrence, we review insured locations exposed to the event. We also consider our knowledge of frequency and severity from early claim reports and onsite reviews of damage to determine an appropriate reserve for the catastrophe.
Dividends from our equity method investees have been irregular in nature, and while they provide added liquidity when received, we do not rely on those dividends to meet our liquidity needs. ​ INCOME TAXES ​ Our effective tax rates were 19.3 percent and 19.0 percent for 2023 and 2022, respectively.
Dividends from our equity method investees have been irregular in nature, and while they provide added liquidity when received, we do not rely on those dividends to meet our liquidity needs. ​ 46 Table of Contents INCOME TAXES ​ Our effective tax rates were 19.1 percent and 19.3 percent for 2024 and 2023, respectively.
As of December 31, 2023, our portfolio had a carrying value of $3.7 billion. Portfolio assets at December 31, 2023, increased by $404 million, or 12 percent, from December 31, 2022. ​ Our overall investment philosophy is designed to first protect policyholders by maintaining sufficient funds to meet corporate and policyholder obligations and then generate long-term growth in shareholders’ equity.
As of December 31, 2024, our portfolio had a carrying value of $4.1 billion. Portfolio assets at December 31, 2024 increased by $408 million, or 11 percent, from December 31, 2023. ​ Our overall investment philosophy is designed to first protect policyholders by maintaining sufficient funds to meet corporate and policyholder obligations and then generate long-term growth in shareholders’ equity.
We had $63 million in unrealized losses in these asset classes as of December 31, 2023. ​ Municipal Fixed Income Securities ​ As of December 31, 2023, municipal bonds composed 19 percent of our fixed income portfolio, compared to 20 percent as of December 31, 2022.
We had $63 million in unrealized losses in these asset classes as of December 31, 2024. ​ Municipal Fixed Income Securities ​ As of December 31, 2024, municipal bonds comprised 14 percent of our fixed income portfolio, compared to 19 percent as of December 31, 2023.
Additionally, we maintain a quota share reinsurance treaty with Prime, which contributed $7 million of gross premiums written and $13 million of net premiums earned during 2023, compared to $21 million of gross premiums written and $23 million of net premiums earned during 2022.
Additionally, we maintain a quota share reinsurance treaty with Prime, which contributed $9 million of gross premiums written and $8 million of net premiums earned during 2024, compared to $7 million of gross premiums written and $13 million of net premiums earned during 2023.
As of December 31, 2023, our capital structure consisted of $100 million in debt and $1.4 billion of shareholders’ equity.
As of December 31, 2024, our capital structure consisted of $100 million in debt and $1.5 billion of shareholders’ equity.
Ordinary dividends are further restricted by the requirement that they be paid from earned surplus. In 2023 and 2022, our principal insurance subsidiary paid ordinary dividends totaling $145 million and $13 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI.
Ordinary dividends are further restricted by the requirement that they be paid from earned surplus. In 2024 and 2023, RLI Ins. paid ordinary dividends totaling $152 million and $145 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI.
The municipal portfolio includes 58 percent taxable and 42 percent tax-exempt securities. ​ Corporate Debt Securities ​ As of December 31, 2023, our corporate debt portfolio comprised 43 percent of the fixed income portfolio, compared to 39 percent as of December 31, 2022.
The municipal portfolio includes 66 percent taxable and 34 percent tax-exempt securities. ​ Corporate Debt Securities ​ As of December 31, 2024, our corporate debt portfolio comprised 42 percent of the fixed income portfolio, compared to 43 percent as of December 31, 2023.
Storm losses on casualty-oriented package policies that include property coverage resulted in $2 million of losses in 2023, compared to $8 million of hurricane and storm losses in 2022. ​ The segment’s loss ratio was 55.1 in 2023, compared to 53.6 in 2022.
Hurricane and storm losses on casualty-oriented package policies that include property coverage resulted in $5 million of losses in 2024, compared to $2 million of storm losses in 2023. ​ The segment’s loss ratio was 61.5 in 2024, compared to 55.1 in 2023.
These parameters were applied to a general liability net loss and LAE reserve balance of $215 million, in addition to associated ULAE and latent liability reserves, at December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ Result from favorable Result from unfavorable (in millions) ​ change in parameter ​ change in parameter +/- 5 point change in expected loss ratio for all accident years ​ $ (18.7) ​ $ 16.9 +/- 10% change in expected emergence patterns ​ $ (6.5) ​ $ 4.4 +/- 30% change in actual loss emergence over a calendar year ​ $ (10.0) ​ $ 8.2 Simultaneous change in expected loss ratio (5pts), expected emergence patterns (10%) and actual loss emergence (30%). ​ $ (32.8) ​ $ 31.8 ​ There are often significant interrelationships between our reserving assumptions that have offsetting or compounding effects on the reserve estimate.
These parameters were applied to a general liability net loss and LAE reserve balance, which was $209 million at December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ Result from favorable Result from unfavorable (in millions) ​ change in parameter ​ change in parameter +/- 5 point change in expected loss ratio for all accident years ​ $ (18) ​ $ 18 +/- 10% change in expected emergence patterns ​ $ (5) ​ $ 6 +/- 30% change in actual loss emergence over a calendar year ​ $ (7) ​ $ 8 Simultaneous change in expected loss ratio (5pts), expected emergence patterns (10%) and actual loss emergence (30%). ​ $ (30) ​ $ 32 ​ There are often significant interrelationships between our reserving assumptions that have offsetting or compounding effects on the reserve estimate.
However, we reduce our portfolio’s exposure to prepayment risk by seeking characteristics that tighten the probable scenarios for expected cash flows. As of December 31, 2023, the agency MBS portfolio contained 65 percent of pure pass-throughs, the same as of December 31, 2022.
However, we reduce our portfolio’s exposure to prepayment risk by seeking characteristics that tighten the probable scenarios for expected cash 44 Table of Contents flows. As of December 31, 2024, the agency MBS portfolio contained 68 percent of pure pass-throughs, up from 65 percent as of December 31, 2023.
The average annual yields on our investments were as follows for 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 PRETAX YIELD ​ ​ ​ ​ ​ Taxable (on book value) 3.51 % 2.94 % Tax-exempt (on book value) 2.80 % 2.71 % Equities (on fair value) 2.27 % 2.20 % ​ ​ ​ ​ ​ ​ AFTER-TAX YIELD ​ ​ ​ ​ ​ Taxable (on book value) 2.77 % 2.32 % Tax-exempt (on book value) 2.65 % 2.57 % Equities (on fair value) 1.97 % 1.91 % ​ The after-tax yield reflects the different tax rates applicable to each category of investment.
The average annual yields on our investments were as follows for 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 PRETAX YIELD ​ ​ ​ ​ ​ Taxable (on book value) 3.82 % 3.51 % Tax-exempt (on book value) 2.87 % 2.80 % Equities (on fair value) 1.97 % 2.27 % ​ ​ ​ ​ ​ ​ AFTER-TAX YIELD ​ ​ ​ ​ ​ Taxable (on book value) 3.02 % 2.77 % Tax-exempt (on book value) 2.72 % 2.65 % Equities (on fair value) 1.71 % 1.97 % ​ The after-tax yield reflects the different tax rates applicable to each category of investment.
The municipal portfolio is diversified amongst 326 issues. ​ 44 Table of Contents Ninety percent of our municipal fixed income securities were rated AA or better, while 99 percent were rated A or better.
The municipal portfolio is diversified amongst 282 issues. ​ Ninety-three percent of our municipal fixed income securities were rated AA or better, while 99 percent were rated A or better.
The decline was the result of decreased favorable development on prior accident years’ reserves and a slight increase in current accident year losses and expenses. ​ Favorable development on prior accident years’ loss reserves contributed to underwriting earnings in each of the past two years.
The decline was the result of decreased favorable development on prior accident years’ reserves and an increase in current accident year losses, primarily on auto related exposures. ​ Favorable development on prior accident years’ loss reserves contributed to underwriting earnings in each of the past two years.
The average after-tax yield on the tax-exempt portfolio increased slightly to 2.7 percent. ​ The fixed income portfolio increased by $189 million during the year, as we allocated the majority of available cash flow to investment grade bonds and experienced strong market performance throughout the year. The tax-adjusted total return on a mark-to-market basis was 6.7 percent.
The average after-tax yield on the tax-exempt portfolio was 2.7 percent for both 2024 and 2023. ​ The fixed income portfolio increased by $320 million during the year, as we allocated the majority of available cash flow to investment grade bonds and experienced positive market performance throughout the year. The tax-adjusted total return on a mark-to-market basis was 3.4 percent.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, incorporated herein by reference. ​ Consolidated revenue for 2023 totaled $1.5 billion, down $186 million from 2022 as the sale of our equity method investment in Maui Jim, Inc.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, incorporated herein by reference. ​ Consolidated revenue for 2024 totaled $1.8 billion, up $258 million from 2023.
Our equity portfolio increased by $92 million to $590 million in 2023 as a result of strong equity market returns during the year.
Our equity portfolio increased by $146 million to $736 million in 2024 as a result of strong equity market returns during the year.
The total return for the year on the equity portfolio was 19.3 percent. ​ Our investment results for the last five years are shown in the following table: 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax Equivalent ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized ​ Annualized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Return on ​ Return on ​ ​ Average ​ Net ​ ​ ​ ​ Unrealized ​ Avg. ​ Avg. ​ ​ Invested ​ Investment ​ Net Realized ​ Appreciation ​ Invested ​ Invested (in thousands) Assets (1) Income (2)(3) Gains (3)(4) (3)(5) Assets Assets 2019 ​ $ 2,377,295 ​ $ 68,870 ​ $ 17,520 ​ $ 161,848 10.4 % 10.5 % 2020 ​ 2,698,721 ​ 67,893 ​ 17,885 ​ 99,451 6.9 % 6.9 % 2021 ​ 3,000,025 ​ 68,862 ​ 64,222 ​ (6,280) 4.2 % 4.3 % 2022 ​ 3,217,635 ​ 86,078 ​ 588,515 ​ (462,981) 6.6 % 6.6 % 2023 ​ 3,474,310 ​ 120,383 ​ 32,518 ​ 144,569 8.6 % 8.6 % 5-yr Avg. ​ $ 2,953,597 ​ $ 82,417 ​ $ 144,132 ​ $ (12,679) 7.3 % 7.4 % (1) Average market values at beginning and end of year (inclusive of cash and short-term investments).
The total return for the year on the equity portfolio was 21.1 percent. ​ 41 Table of Contents Our investment results for the last five years are shown in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ ​ ​ Pre-tax Equivalent ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Annualized ​ Annualized ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in ​ Return on ​ Return on ​ ​ Average ​ Net ​ ​ ​ ​ Unrealized ​ Avg. ​ Avg. ​ ​ Invested ​ Investment ​ Net Realized ​ Appreciation ​ Invested ​ Invested (in thousands) Assets (1) Income (2)(3) Gains (3)(4) (3)(5) Assets Assets 2020 ​ 2,698,721 ​ 67,893 ​ 17,885 ​ 99,451 6.9 % 6.9 % 2021 ​ 3,000,025 ​ 68,862 ​ 64,222 ​ (6,280) 4.2 % 4.3 % 2022 ​ 3,217,635 ​ 86,078 ​ 588,515 ​ (462,981) 6.6 % 6.6 % 2023 ​ 3,474,310 ​ 120,383 ​ 32,518 ​ 144,569 8.6 % 8.6 % 2024 ​ 3,880,475 ​ 142,278 ​ 19,966 ​ 64,912 5.9 % 5.9 % 5-yr Avg. ​ $ 3,254,233 ​ $ 97,099 ​ $ 144,621 ​ $ (32,066) 6.4 % 6.5 % (1) Average market values at beginning and end of year (inclusive of cash and short-term investments).
Underwriting performance for each year reflects a combination of positive current accident year results and favorable development in prior accident years’ loss reserves. Results for 2023 included favorable development on prior accident years’ reserves, which decreased loss and settlement expenses for the segment by $9 million.
Underwriting performance for each year reflects a combination of positive current accident year results and favorable development in prior accident years’ loss reserves. Favorable development on prior accident years’ reserves decreased loss and settlement expenses for the segment by $9 million for 2024 and 2023. ​ The segment’s loss ratio was 11.2 in 2024, compared to 10.7 in 2023.
The effective rate was higher in 2023 due to lower levels of tax-favored adjustments, such as dividends paid to our Employee Stock Ownership Plan (ESOP), tax credits and excess tax benefits on share-based compensation. ​ Dividends paid to our ESOP result in a tax deduction.
The effective rate was slightly lower in 2024 due to higher levels of tax-favored adjustments, such as excess tax benefits on share-based compensation. ​ Dividends paid to our ESOP result in a tax deduction. Dividends paid to the ESOP in 2024 and 2023 resulted in tax benefits of $3 million and $2 million, respectively.
Results for 2022 included $25 million of favorable development on prior years’ loss and catastrophe reserves, primarily from the marine business, $31 million of hurricane losses and $12 million of other storm losses. ​ A larger earned premium base resulted in higher levels of underwriting income as well as a lower expense ratio.
Results for 2023 included $21 million of favorable development on prior years’ loss and catastrophe reserves, primarily from the commercial property business; $49 million of losses and $12 million of reinsurance reinstatement premium from Hawaiian wildfires; as well as $29 million of other storm losses. ​ A larger earned premium base resulted in higher levels of underwriting income as well as a lower expense ratio.
Additionally, we borrowed $50 million from the Federal Home Loan Bank of Chicago (FHLBC) that matures on November 12, 2024 and pays interest monthly at an annualized rate of 5.44 percent.
The borrowing may be repaid at any time and carries an adjustable interest rate of 5.98 percent as of the end of 2024. Additionally, we borrowed $50 million from the Federal Home Loan Bank of Chicago (FHLBC) that matures on November 12, 2025 and pays interest monthly at an annualized rate of 4.44 percent.
Sixty-four percent of the securities in the ABS/CMBS/RMBS portfolio were rated AAA as of December 31, 2023, while 93 percent were rated A or better.
Fifty-five percent of the securities in the ABS/CMBS/RMBS portfolio were rated AAA as of December 31, 2024, while 85 percent were rated A or better.
The expense ratio for the casualty segment was 37.1 in 2023, compared to 36.0 in 2022. ​ Property ​ Underwriting income from the property segment was $86 million on a 78.5 combined ratio in 2023, compared to $73 million on a 76.4 combined ratio in 2022.
The expense ratio for the casualty segment was 36.4 in 2024, compared to 37.1 in 2023. ​ 40 Table of Contents Property ​ Underwriting income from the property segment was $168 million on a 68.5 combined ratio in 2024, compared to $86 million on a 78.5 combined ratio in 2023.
This reflects incurred losses of $604 million in 2023 offset by paid losses of $491 million, compared to incurred losses of $514 million offset by $374 million paid in 2022.
This reflects net incurred losses of $739 million in 2024 offset by paid losses of $490 million, compared to net incurred losses of $604 million offset by $491 million paid in 2023.
As of December 31, 2023, the portfolio had a fair value of $3.7 billion, an increase of $404 million from the end of 2022.
As of December 31, 2024, the portfolio had a fair value of $4.1 billion, an increase of $408 million from the end of 2023.
The following table summarizes these three cash flows over the last two years: ​ 46 Table of Contents ​ ​ ​ ​ ​ ​ ​ (in thousands) 2023 2022 Net cash provided by operating activities ​ $ 464,257 ​ $ 250,448 Net cash provided by (used in) investing activities ​ ​ (211,803) ​ ​ 48,879 Net cash used in financing activities ​ ​ (238,848) ​ ​ (365,313) ​ We have posted positive operating cash flow in the last two years.
The following table summarizes these three cash flows over the last two years: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2024 2023 Net cash provided by operating activities ​ $ 560,219 ​ $ 464,257 Net cash used in investing activities ​ ​ (318,870) ​ ​ (211,803) Net cash used in financing activities ​ ​ (237,983) ​ ​ (238,848) ​ We have posted positive operating cash flow in the last two years.
While we have certain rights under our shareholder agreement, we are subject to the decisions of the 45 Table of Contents controlling shareholder, which may impact the value of our investment. In 2023, we recorded $10 million in investee earnings for Prime, compared to $13 million in 2022.
While we have certain rights under our shareholder agreement and maintain a position on Prime’s board of directors, we are subject to the decisions of the controlling shareholder, which may impact the value of our investment. In 2024, we recorded $5 million in investee losses for Prime, compared to $10 million of investee earnings in 2023.
The total benefit from favorable development on prior years’ reserves was $78 million for 2023, which was broadly attributable to accident years 2015 through 2022. Favorable development was widespread, with notable amounts from commercial excess, general liability, personal umbrella, executive products, professional services, and transportation.
The total benefit from favorable development on prior years’ reserves was $53 million for 2024, which was largely attributable to accident years 2019 through 2023. Favorable development was widespread, with notable amounts from commercial excess, general liability, executive products, professional services and our mortgage reinsurance program within other casualty.
A reconciliation of net earnings to underwriting income follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) 2023 2022 Net earnings ​ $ 304,611 ​ $ 583,411 Income tax expense ​ ​ 72,654 ​ ​ 137,267 Earnings before income taxes ​ $ 377,265 ​ $ 720,678 Equity in earnings of unconsolidated investees ​ ​ (9,610) ​ ​ (9,853) General corporate expenses ​ ​ 15,917 ​ ​ 12,900 Interest expense on debt ​ ​ 7,301 ​ ​ 8,047 Net unrealized (gains) losses on equity securities ​ ​ (64,787) ​ ​ 121,037 Net realized gains ​ ​ (32,518) ​ ​ (588,515) Net investment income ​ ​ (120,383) ​ ​ (86,078) Underwriting income ​ $ 173,185 ​ $ 178,216 ​ Combined Ratio ​ The combined ratio, which is derived from components of underwriting income, is a common industry performance measure of profitability for underwriting operations and is calculated in two components.
A reconciliation of net earnings to underwriting income follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) 2024 2023 Net earnings ​ $ 345,779 ​ $ 304,611 Income tax expense ​ ​ 81,772 ​ ​ 72,654 Earnings before income taxes ​ $ 427,551 ​ $ 377,265 Equity in earnings of unconsolidated investees ​ ​ 4,869 ​ ​ (9,610) General corporate expenses ​ ​ 15,880 ​ ​ 15,917 Interest expense on debt ​ ​ 6,331 ​ ​ 7,301 Net unrealized gains on equity securities ​ ​ (81,734) ​ ​ (64,787) Net realized gains ​ ​ (19,966) ​ ​ (32,518) Net investment income ​ ​ (142,278) ​ ​ (120,383) Underwriting income ​ $ 210,653 ​ $ 173,185 ​ Combined Ratio ​ The combined ratio, which is derived from components of underwriting income, is a common industry performance measure of profitability for underwriting operations and is calculated in two components.
In 2022, we recognized $20 million of net realized gains in the equity portfolio, $3 million of net realized gains in the fixed income portfolio and $571 million of other net realized gains, primarily from our sale of Maui Jim. ​ Investment income was aided by higher interest rates in 2023, as the Federal Reserve raised the Fed Funds target to fight inflation.
In 2023, we recognized $22 million of net realized gains in the equity portfolio, $3 million of net realized losses in the fixed income portfolio and $14 million of other net realized gains, primarily from the payout of the working capital escrow associated with our sale of Maui Jim. ​ Investment income was aided by higher interest rates in 2024, as the Federal Reserve kept the Fed Funds target high relative to recent history.
For example, our general liability emergence has ranged from 17 percent to 20 percent favorable and our small commercial emergence has ranged from 27 percent adverse to 9 percent favorable over the last three years, while our overall emergence for all products combined has ranged from 16 percent to 27 percent favorable.
For example, our general liability calendar year emergence on prior accident years has ranged from 17 percent to 27 percent favorable and our transportation emergence has ranged from 30 percent adverse to 40 percent favorable over the last three calendar years, while our overall emergence for all products combined has ranged from 13 percent to 25 percent favorable.
The securities within the equity portfolio are well diversified and are primarily invested in broad index ETFs that represent market indexes similar to the Russell 3000 Index, Russell 1000 Index, S&P 500 Index and S&P 600 Index.
The securities within the equity portfolio are well diversified and are primarily invested in broad index ETFs that represent market indexes similar to the Russell 3000 Index, Russell 1000 Index and S&P 500 Index. The ETF portfolio is congruent with the actively managed equity portfolios and solves for exposures that line up with our overall benchmark index, the Russell 3000.
As the borrowing may be repaid at any time and carries a floating interest rate of 7.07 percent, which will reset during the first quarter of 2024, interest on this $50 million borrowing is excluded from the table above. Additionally, on November 10, 2023 we borrowed $50 million from the FHLBC.
As the borrowing may be repaid at any time and carries an adjustable interest rate of 5.98 percent as of the end of 2024, interest on this $50 million borrowing is excluded from the table above. Additionally, on November 12, 2024 we borrowed $50 million from the FHLBC.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeComparatively, our equity portfolio had a fair value of $498 million as of December 31, 2022 and scenarios of the S&P 500 Index declining by 10 percent and 20 percent would have resulted in approximate decreases of $46 million and $93 million, respectively. 50 Table of Contents ​ While the declines in market value outlined below are modeled as instantaneous changes, we would expect movements in capital markets to occur over time, with investment income offering an offset to any decrease in prices. ​ Under the assumptions of rising interest rates and a decreasing S&P 500 Index, the fair value of our assets will decrease from their present levels by the indicated amounts. ​ Effect of a 100 basis-point increase in interest rates and a 10 percent decline in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/23 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 2,855,849 ​ $ (131,647) ​ $ — Equity securities ​ ​ 590,041 ​ ​ — ​ ​ (54,927) Total ​ $ 3,445,890 ​ $ (131,647) ​ $ (54,927) ​ Effect of a 200 basis-point increase in interest rates and a 20 percent decline in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/23 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 2,855,849 ​ $ (254,624) ​ $ — Equity securities ​ ​ 590,041 ​ ​ — ​ ​ (109,854) Total ​ $ 3,445,890 ​ $ (254,624) ​ $ (109,854) ​ Comparatively, under the assumptions of falling interest rates and an increasing S&P 500 Index, the fair value of our assets will increase from their present levels by the indicated amounts. ​ Effect of a 100 basis-point decrease in interest rates and a 10 percent increase in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/23 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 2,855,849 ​ $ 141,076 ​ $ — Equity securities ​ ​ 590,041 ​ ​ — ​ ​ 54,927 Total ​ $ 3,445,890 ​ $ 141,076 ​ $ 54,927 ​ Effect of a 200 basis-point decrease in interest rates and 20 percent increase in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/23 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 2,855,849 ​ $ 291,715 ​ $ — Equity securities ​ ​ 590,041 ​ ​ — ​ ​ 109,854 Total ​ $ 3,445,890 ​ $ 291,715 ​ $ 109,854 ​ ​ ​ ​ 51 Table of Contents ​
Biggest changeComparatively, our equity portfolio had a fair value of $590 million as of December 31, 2023 and scenarios of the S&P 500 Index declining by 10 percent and 20 percent would have resulted in approximate decreases of $55 million and $110 million, respectively. ​ While the declines in market value outlined below are modeled as instantaneous changes, we would expect movements in capital markets to occur over time, with investment income offering an offset to any decrease in prices. ​ Under the assumptions of rising interest rates and a decreasing S&P 500 Index, the fair value of our assets will decrease from their present levels by the indicated amounts. ​ 51 Table of Contents Effect of a 100 basis-point increase in interest rates and a 10 percent decline in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/24 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 3,175,796 ​ $ (157,600) ​ $ — Equity securities ​ ​ 736,191 ​ ​ — ​ ​ (68,726) Total ​ $ 3,911,987 ​ $ (157,600) ​ $ (68,726) ​ Effect of a 200 basis-point increase in interest rates and a 20 percent decline in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/24 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 3,175,796 ​ $ (303,414) ​ $ — Equity securities ​ ​ 736,191 ​ ​ — ​ ​ (137,453) Total ​ $ 3,911,987 ​ $ (303,414) ​ $ (137,453) ​ Comparatively, under the assumptions of falling interest rates and an increasing S&P 500 Index, the fair value of our assets will increase from their present levels by the indicated amounts. ​ Effect of a 100 basis-point decrease in interest rates and a 10 percent increase in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/24 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 3,175,796 ​ $ 171,741 ​ $ — Equity securities ​ ​ 736,191 ​ ​ — ​ ​ 68,726 Total ​ $ 3,911,987 ​ $ 171,741 ​ $ 68,726 ​ Effect of a 200 basis-point decrease in interest rates and 20 percent increase in the S&P 500: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/24 Fair ​ Interest ​ Equity (in thousands) Value Rate Risk Risk Held for non-trading purposes: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities ​ $ 3,175,796 ​ $ 356,926 ​ $ — Equity securities ​ ​ 736,191 ​ ​ — ​ ​ 137,453 Total ​ $ 3,911,987 ​ $ 356,926 ​ $ 137,453 ​ ​ ​ ​ 52 Table of Contents ​
Listed on each table is the December 31, 2023 fair value for our assets and the expected pretax reduction in fair value given the stated hypothetical events. This sensitivity analysis assumes the composition of our assets remains constant over the period being measured and also assumes interest rate changes are reflected uniformly across the yield curve.
Listed on each table is the December 31, 2024 fair value for our assets and the expected pretax reduction in fair value given the stated hypothetical events. This sensitivity analysis assumes the composition of our assets remains constant over the period being measured and also assumes interest rate changes are reflected uniformly across the yield curve.
This lower beta statistic reflects our long-term emphasis on maintaining a value-oriented, dividend-driven investment philosophy for our equity portfolio. ​ SENSITIVITY ANALYSIS ​ The tables that follow detail information on the market risk exposure for our financial investments as of December 31, 2023.
This lower beta statistic reflects our long-term emphasis on maintaining a value-oriented, dividend-driven investment philosophy for our equity portfolio. ​ SENSITIVITY ANALYSIS ​ The tables that follow detail information on the market risk exposure for our financial investments as of December 31, 2024.
We manage our exposure to market risk by using the following tools: ​ ● Monitoring the fair value of all financial assets on a constant basis, ​ ● Changing the character of future investment purchases as needed and ​ ● Maintaining a balance between existing asset and liability portfolios. ​ FIXED INCOME AND INTEREST RATE RISK ​ The most significant short-term influence on our fixed income portfolio is a change in interest rates.
We manage our exposure to market risk by using the following tools: ​ ● Monitoring the fair value of all financial assets on a constant basis, 50 Table of Contents ​ ● Changing the character of future investment purchases as needed and ​ ● Maintaining a balance between existing asset and liability portfolios. ​ FIXED INCOME AND INTEREST RATE RISK ​ The most significant short-term influence on our fixed income portfolio is a change in interest rates.
The examples given are not predictions of future market events, but rather illustrations of the effect such events may have on the fair value of our investment portfolio. ​ As of December 31, 2023, our fixed income portfolio had a fair value of $2.9 billion.
The examples given are not predictions of future market events, but rather illustrations of the effect such events may have on the fair value of our investment portfolio. ​ As of December 31, 2024, our fixed income portfolio had a fair value of $3.2 billion.
The base sensitivity analysis uses market scenarios of the S&P 500 Index declining both 10 percent and 20 percent. These scenarios would result in approximate decreases in the equity fair value of $55 million and $110 million, respectively.
The base sensitivity analysis uses market scenarios of the S&P 500 Index declining both 10 percent and 20 percent. These scenarios would result in approximate decreases in the equity fair value of $69 million and $137 million, respectively.
The sensitivity analysis uses scenarios of interest rates increasing 100 and 200 basis points from their December 31, 2023, levels with all other variables held constant. Such scenarios would result in modeled decreases in the fair value of the fixed income portfolio of $132 million and $255 million, respectively.
The sensitivity analysis uses scenarios of interest rates increasing 100 and 200 basis points from their December 31, 2024, levels with all other variables held constant. Such scenarios would result in modeled decreases in the fair value of the fixed income portfolio of $158 million and $303 million, respectively.
Comparatively, our fixed income portfolio had a fair value of $2.7 billion as of December 31, 2022 and scenarios of interest rates increasing 100 and 200 basis points would have resulted in modeled decreases of $111 million and $215 million, respectively. ​ As of December 31, 2023, our equity portfolio had a fair value of $590 million.
Comparatively, our fixed income portfolio had a fair value of $2.9 billion as of December 31, 2023 and scenarios of interest rates increasing 100 and 200 basis points would have resulted in modeled decreases of $132 million and $255 million, respectively. ​ As of December 31, 2024, our equity portfolio had a fair value of $736 million.

Other RLI 10-K year-over-year comparisons