Good morning and welcome ladies and gentlemen to the RLI Corp. Fourth Quarter Earnings Teleconference. At the request of the company, we will open the conference up for questions and answers after the presentation. Before we get started let me remind everyone that through the course of the teleconference, RLI management may make comments that reflect their intentions, beliefs, and expectations for the future. As always these forward-looking statements are subject to certain Risk Factors which could cause actual results to differ materially. These Risk Factors are listed in the company's various SEC filings including in the Annual Report on Form 10-K which should be reviewed carefully. The company has filed a Form 8-K with the Securities and Exchange Commission that contains the press release announcing fourth quarter results. RLI management may make reference during the call to operating earnings and earnings per share from operations which are non-GAAP measures of financial results. RLI's operating earnings and earnings per share from operations consist of net earnings after the elimination of after-tax realized gains or losses and after-tax unrealized gains or losses on equity securities. RLI's management believes these measures are useful in gauging core operating performance across reporting periods but may not be comparable to other company's definitions of operating earnings. The Form 8-K contains a reconciliation between operating earnings and net earnings. The Form 8-K and press release are available at the company's website at www.rlicorp.com. I’d now like to turn the conference over to RLI’s Vice President, Chief Investment Officer and Treasurer, Aaron Diefenthaler. Sir, please go ahead.

Thank you and good morning. Welcome to RLI’s first earnings call of the New Year, covering financial results through the fourth quarter of 2019. Joining us today are Jon Michael, Chairman & CEO, Craig Kliethermes, President and Chief Operating Officer and Todd Bryant, Chief Financial Officer. Todd will give some opening comments on the quarter’s financial results. Craig will then discuss operations and market conditions. We will open the call to questions and Jon will close with some final thoughts. Todd?

Thanks, Aaron. Good morning, everyone. Last night, we reported fourth quarter operating earnings of $0.63 per share up 58% from the same period last year. Result for 2019 reflects fairly benign loss activity from catastrophes and other storms as well as increased favorable benefits from prior accident year’s reserves. Investment income continued to outpace prior years driven largely by our increased asset base. Gross premiums written advanced 6% in the quarter and cash flow from operations remained strong at $90 million for the quarter and $277 million on a year-to-date basis and book value per share ended the year at $22.18, up 33% inclusive of dividends. Craig will talk more about products and market conditions in a minute. But from a top-line standpoint, as mentioned, gross premiums written was up 6% in the quarter and ended the year up 8%. A majority of products in our diversified portfolio experienced growth in both the quarter and on a full-year basis excluding previously announced exits and repositioning. Net of these decisions, premium was up 14% in the quarter and 15% on a year-to-date basis. From an underwriting perspective, we posted a fourth quarter combined ratio of 92.4 compared to 98.9 a year-ago. Our loss ratio declined 11 points as catastrophe losses declined and benefits from prior year’s reserve development increased. You may recall that losses from Hurricane Michael added about 10 points to our combined ratio during the fourth quarter last year. This year storm activity and modestly elevated property losses only added about two points to the quarter’s combined ratio. From a reserve perspective, net of expenses, prior year’s benefits were $16 million for the quarter and totaled $63 million on a full-year basis up nearly $20 million from benefits recorded in 2018. From a segment perspective, the majority of favorable…

Thank you, Todd, and good morning, everyone. As Todd mentioned, we grew the top-line 6% for the quarter and 8% year-to-date while recording a 92 combined ratio for both periods. We did have a little more headwinds on the top-line this quarter as a result of previously announced reshaping of our portfolio. Growth was over 10% in the quarter for our ongoing businesses. Overall, our underwriters pulse on the market is cautiously optimistic as we move into 2020. We continue to see positive rate momentum across most of the property and casualty portfolio. The increases are differentiated and the opportunities to get rate are greatest in the most distressed portions of the market. We caution in drawing conclusions about market conditions solely found in the size of the rate increases or submission counts. Large rate increases are often the result of significant underperformance. The disciplined underwriter doesn't anchor on the size of the increase but whether the market rate is adequate for the risk. We’re at a point in the cycle, we're having experienced underwriters with consistent appetite and confidence to execute are beneficial. I will offer a little more color by segment. In casualty, we grew the top line 1% for the quarter and 8% for the year. We reported 96 combined ratio for both periods. Growth in ongoing business was 12% for the quarter. Both commercial and personal excess liability have grown over 15% for the quarter and year from a combination of rate increases and exposure, while generating good bottom line results. We're also seeing double-digit growth in our Executive Products Group where rates have been up nearly 30% for two consecutive quarters. Small admitted contractors’ primary liability business is also growing at a rapid pace as a result of retrenchment in the market. Our transportation book…

Thank you, sir. The question-and- answer session will begin at this time. [Operator Instructions]. Our first question will come from Randy Binner with B. Riley FBR.

Hey, good morning. Thanks. I wanted to ask about the bonus accrual that hit the corporate G&A line. If we were to expect a similar level of profitability in 2020 would we see a roughly similar level of accrual in the fourth quarter meaning is it driven by EPS or is there something else we should look at?

Hey, Randy, it's Todd. I think from the standpoint you think in terms of if we were again at $6 roughly of comprehensive earnings, so where we're at from a combined ratio standpoint and those types of things, I think it's reasonable that would be fairly similar. It's really -- it really is the larger driver of what’s going on with those expenses.

Okay and then continuing at the kind of holding company level but what was the reason that the investment in Prime was higher on profitability this quarter?

Yes, they -- Randy, Todd again. Their growth has been significant. So I mean revenue is up considerably and net profits are nearly and nearly double what they were last year. So that's what's going on there. Great -- great year for Prime.

Okay. And I'm sorry, just what is it about their market that enabled them to double revs?

Yes, I think there is a couple of things. I mean, I think they are seeing -- they are just seeing so much more opportunity from a rate standpoint and more distress business, I think, going their way.

Okay.

Yes, this is -- Randy, this is Craig. I mean, their target is much more of a distressed business. I mean, we -- that's not something we necessarily target as ROI, but it is something that's a specific target of theirs, they are deemed to be the market of last resort.

Okay. And then, speaking of markets of last resort or different markets, can you -- I missed it if you covered in your opening script, but can you discuss non-admitted submission activity and maybe quantify where that is relative to previous periods?

Sure, Randy. This is Craig. I mean, we're seeing on our excess and surplus lines book of business which is about 30% of our overall portfolio, I mean, submissions are up, I'm going to say, 10% year-to-date and maybe a little more than that for the quarter, collectively, so that's what we're seeing in the E&S space. I mean, I actually, frankly, the -- our submissions are up even greater in some of our specialty admitted lines of business.

And just -- I'll just do one more. With the executive products, is that a new category that you called out in casualty lines?

I apologize. I know it's not very descriptive, but I mean, I think, that's how we define it in our K and Q, but it basically covers D&O and other management liability products, it could be fiduciary, fidelity, EPLI, some of our cyber is in there, but half of it is public and private D&O.

Does that tend to focus on a smaller business like small and medium-size businesses or is it across the board?

Well, it has both. Obviously, the public part of that is, obviously, bigger accounts. We, typically -- we play excess on most of those bigger accounts. That's I think where you're seeing the most disruption in the market right now is public D&O though.

Thank you. Our next question comes from Christopher Campbell with KBW.

I guess first question is just in surety. It's like the second quarter we haven't seen any development. I guess can you just give us color on what you're seeing in terms of the prior year loss activity in that line?

Hey, Chris. It's Todd. I mean, that can move up and down a little bit. I mean, I think full year, it's in the $7 million range. So, I don't know if there's anything particular to call out of. I mean, I think their current accident year loss ratio is very solid. So, I don't think there's anything particular or any conclusions to draw on a one or two quarter basis, still very solid from a loss and combined ratio.

Okay, got it. Because I know -- I think, Craig had mentioned that you all were exiting some of the programs in there. And so, I didn't know if there was a potential that some of those could develop adversely.

No, I don't think the exited programs, we expect that at all.

Okay.

It wasn’t -- it wasn't due to loss performance.

Okay, got it. That's helpful. What was that due to, Todd?

Yes, I don't know if there's anything specific that we would want to talk about. I mean, I think, it's an individual program with an individual relationship. I mean, it's a program actually that we feel pretty good about, so, from a product standpoint. So, we're working on some things in that area.

Okay. So, no broader trends that we would read through the rest of the book?

No, not at all.

Okay. Wonderful. And then, just one last one on the casualty reserves, which were obviously really strong this quarter. What accident years and lines are contributing the most to the strong releases in that segment?

Yes. It is fairly widespread from a line standpoint. I mean, GL is certainly a decent amount. Transportation is more favorable cup [ph] is the excess liability. I mean it is pretty broad, Randy, but -- and even from an accident year standpoint, I mean it's -- there is some in 2013, 2014, I mean, all the way through 2017, a little bit in 2018. It is for the shorter tail stuff, very broad.

Thank you. Our next question comes from Jeff Schmitt with William Blair.

Hi, good morning, everyone. Question on the construction book, which I think in the past you've said majority of the E&S book is in construction. Can you maybe discuss what you're seeing there, just in terms of loss activity and rate levels? I mean, how is that market looking?

Sure, Jeff. This is Craig. I mean, construction -- we play in the construction space and the liability side, both on a admitted and the E&S basis, primary and excess. So, I mean, it does vary a little bit, and also geographically. I mean, on the primary business to start with, that's really a business that we acquired when we bought CBIC some years back and it's been more regionally focused and just happens to be that we've -- there's been some exits of some competitors in that space and it's created an opportunity for us within admitted, pretty much box underwritten product that we haven't loosened, same underwriter, same team. So, we feel like that's just an opportunity to take advantage of someone else's either misfortune or decision to exit. As you move into the E&S space, I mean, primary construction business, it's still very, very competitive across the country, so on the E&S side, for the most part. And then excess, it really depends regionally. Some places, it's still competitive, although I think that we're able to get more rate then we have been in the past. Part of that, I think, is driven because excess; typically you're talking about $5 million limits, sometimes $10 million limits. So, what you're finding is any place where limits are required. Rate, you're getting -- people on the casualty space, they are having opportunities to raise rates, so that's where we're seeing our greatest opportunity for rate increases on excess business and the construction space.

Which regions is that more focused on?

Well, I think it's -- I mean, I think we're seeing momentum broadly across the country, more recently, across the country.

Right then -- I think your construction was [indiscernible]?

Metro areas are more difficult than -- than rural areas.

Okay. And then, just thinking about the books you moved out of, which were the healthcare facility and then I think some underperforming GL in REITs, have you completely exited there? I mean should that not be a drag going forward or is there more to expect there?

So, Jeff, we did have -- I mean, because we announced that we were exiting that business last year at the very beginning of the year, I think, it was during this call last year, but we were still in some of that for, I'll say, a couple of months, although it was declining fairly quickly. So, I mean, we might have a little bit of headwind, but it's not that big in next quarter, but after that, I think, it's pretty much gone.

Okay. And then, do you have much exposure in the habitational market?

Jeff, we used to write a lot of habitational business and we couldn't figure out how to make money. So, we are not really a major player in habitational space, whether it be on admitted or excess or excess and surplus lines basis. Although, yes, there's a big disruption there.

Thank you. Our next question comes from Mark Dwelle with RBC Capital Markets. Mark, your line is open; please make sure your phone is not on mute. Hearing no response, we'll move to the next. Our next question comes from Ron Bobman with Capital Returns.

Could you expand on your comment about, I think, it was commercial auto struggled and I think you're referring to the top-line in the quarter and what was the dynamic behind that?

Ron, yes, this is Craig. I mean, we write a little bigger accounts in that business. So, whether we write a few or we don't write a few, can move the top-line a little bit. I mean, we're able to continue to get rate increases. I mean, we're in a fair number of broad, I'll say, classes of business there. So, we still see some competition from time to time, more than we want, or would like, but especially in the -- I'll say, in the truck space, it's still very, very competitive. And so, it could be a little lumpy, I guess, in that line. But I mean we feel good about the product line, bottom line was very good. The rate -- top-line rate increases continue to be very good and I wouldn't necessarily read anything into a given quarter in that particular product.

Thank you. If there are no further questions, I will now turn the conference back to Mr. Jonathan Michael.

Thank you and thanks for attending the call. It's a very satisfying year. Premiums advanced 8% to eclipse the $1 billion mark for the first time ever. So, 24th consecutive year of underwriting profitability. Combined ratio in the low-90s. 33% increase in book value per share to $1 billion basically. I want to say a big thank you to all of our associates for delivering once again and a thank you to all of our stakeholders for continuing to hold us accountable and for having faith in our ability to deliver these results. Thanks again. We'll talk to you again after the first quarter.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1 (888) 203-1112 with an ID number of 5312523. This concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.