8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 19, 2010

RLI Corp.

(Exact name of registrant as specified in its charter)

Illinois	001-09463	37-0889946
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

9025 North Lindbergh Drive, Peoria, IL	61615
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (309) 692-1000

Not applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On July 19, 2010, RLI Corp. announced its results of operations for the second quarter of 2010.  Furnished as Exhibit 99.1 and incorporated herein by reference is the press release issued by RLI Corp.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release dated July 19, 2010 (this Exhibit is furnished pursuant to Item 2.02 hereof and should not be deemed to be “filed” under the Securities Exchange Act of 1934).

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	RLI CORP.
Date: July 19, 2010	By:	/s/ Daniel O. Kennedy
	Daniel O. Kennedy
	Vice President and General Counsel

3

EXHIBIT INDEX

Exhibit No.	Exhibit
99.1	Press Release dated July 19, 2010 (this Exhibit is furnished pursuant to Item 2.02 hereof and should not be deemed to be “filed” under the Securities Exchange Act of 1934).

4

EX-99.1

Exhibit 99.1

		NEWS RELEASE
RLI Corp.	9025 N. Lindbergh Drive | Peoria, IL 61615-1431
	P: 309-692-1000 | F: 309-692-1068 | www.rlicorp.com

FOR IMMEDIATE RELEASE	CONTACT: John Robison
	(309) 693-5846
	John.Robison@rlicorp.com
	www.rlicorp.com

RLI reports second quarter earnings

PEORIA, ILLINOIS, July 19, 2010 — RLI Corp. (NYSE: RLI) — RLI Corp. reported second quarter 2010 operating earnings of $32.2 million ($1.52 per share) compared to $28.7 million ($1.32 per share) for the same period in 2009. For the six months ended June 30, 2010, operating earnings were $52.2 million ($2.45 per share) compared to $51.1 million ($2.35 per share) for the same period in 2009.

	Second Quarter
Earnings Per Diluted Share	2010		2009
Operating earnings	$	1.52	$	1.32
Net earnings	$	1.65	$	1.57

Highlights for the quarter included:

·Operating earnings of $32.2 million ($1.52 per share).

·Underwriting income of $30.8 million.

·Combined ratio of 74.7.

·Book value per share of $41.02, an increase of 4.8% from year end 2009.

·$19.0 million ($0.58 per share) pretax favorable development in prior years’ loss reserves, net of effects on bonus and profit sharing-related expenses.

·Net operating cash flow of $37.9 million.

·Return on equity for the trailing four quarters was 14.6%

“We continue to deliver excellent financial results in a difficult insurance marketplace,” said RLI Corp. President & CEO Jonathan E. Michael.  “During the second quarter economic conditions remained weak and competition intense.”

“RLI’s property segment experienced increased written premiums, as we expanded our diversification into crop and other assumed property reinsurance. Our surety segment had growth from geographical expansion, the result of adding new underwriting talent. As expected, our casualty business remained soft and written premiums were down due to difficult economic conditions, especially in construction and transportation-related coverages. We continue to seek new opportunities to diversify our product mix and expand our product footprint, while keeping our balance sheet strong. For example, our design professional product group is executing on its business plan and making progress toward introducing new product offerings for architects and engineers.”

“Our results were positively influenced by favorable reserve development on prior accident-year reserves in the casualty and surety segments.  Quarterly results also included $3.5 million of catastrophe losses, largely attributable to Southeast flooding and Midwest storms in the U.S.”

“The persistence of a soft insurance market continues to place importance on underwriting selection, an RLI strength.  The industry has too much capital chasing too little premium. In the past three years, RLI has returned over $250 million of capital to shareholders in the form of increased dividends and share repurchases. We remain committed to our policyholders, while enhancing shareholder value,” said Michael.

Second quarter underwriting results

RLI achieved $30.8 million of underwriting income in the second quarter of 2010 on a 74.7 combined ratio, compared to $25.1 million of underwriting income on a 79.5 combined ratio in the same quarter for 2009.

— more —

Underwriting Income	Second Quarter
(in millions)	2010		2009
Casualty	$	13.8	$	14.0
Property	9.3		9.2
Surety	7.7		1.9
Total	$	30.8	$	25.1

Combined Ratio	Second Quarter
(%)	2010	2009
Casualty	76.4	79.1
Property	78.6	76.1
Surety	60.9	88.8
Total	74.7	79.5

RLI reported year-to-date underwriting income of $43.5 million representing an 81.7 combined ratio through June 30, 2010, versus $40.3 million of underwriting income representing an 83.7 combined ratio for the same period last year.

Other income

In the second quarter, investment income was $16.8 million compared to $16.5 million for the same period in 2009. For the six month period ended June 30, 2010, investment income was $33.4 million versus $34.2 million for the same period in 2009.  The investment portfolio’s total return for the quarter was 0.4%; the bond portfolio was 2.7% and the equity portfolio return was -10.8%. Through six months, the investment portfolio’s total return was 2.9% with the bond portfolio returning 4.6% and equities returned-6.4%.

Comprehensive earnings, which include after-tax unrealized gains/losses from the investment portfolio, were $23.2 million for the quarter ($1.09 per share) versus $56.9 million ($2.62 per share) over the same period in 2009. Year-to-date comprehensive earnings were $56.7 million ($2.66 per share), compared to $58.7 million ($2.70 per share) for the same period last year.

During the quarter, equity in earnings of Maui Jim, Inc. was $3.4 million compared to $2.7 million from the same period last year.  For the six month period, earnings were $5.7 million versus $4.1 million in 2009.

Other news

The RLI Corp. board of directors on May 6, 2010 declared a 4% dividend increase to $0.29 per share payable on July 15, 2010. RLI has paid dividends for 136 consecutive quarters and increased dividends in each of the last 35 years. The Company’s dividend yield would be 2.2%, based on the $1.16 annualized dividend and today’s closing stock price of $52.26.

In the second quarter, we completed our $200 million share repurchase program initiated in 2007. During the quarter, the board also implemented a new $100 million share repurchase program. A total of 189,375 shares were repurchased at an average cost of $55.78 per share ($10.6 million) in the second quarter. At the end of the quarter, $96.1 million of capacity remained for stock repurchases.

During the second quarter, the Company’s A+ rating by A.M. Best was reaffirmed by the industry rating agency. In its release, A.M. Best attributed RLI’s rating to “superior capitalization, outstanding long-term operating profitability and financial flexibility.” Best cited RLI’s “strict underwriting discipline and rate adequacy” as the driving forces behind its “excellent history.”

On July 13, 2010, RLI received the distinction of being named to Ward’s 50® Top P&C Performers group for the 20th consecutive year. RLI is one of only five property and casualty insurers, from over 3,000 companies, to be recognized every year since the group’s inception in 1991.  Ward’s noted, “In general, the Ward’s 50 companies demonstrate the ability to grow their business profitably in changing market conditions.”

At 10 a.m. CDT tomorrow, July 20, 2010, RLI management will hold a conference call to discuss quarterly results with insurance industry analysts. Interested parties may listen to the discussion through the Internet at RLI’s website, www.rlicorp.com.

Underwriting income, operating earnings, earnings per share (EPS) from operations and other per share items are non-GAAP financial measures, and we believe that investors’ understanding of RLI’s core operating performance is enhanced by our disclosure of these financial measures. Underwriting income or profit represents 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 premium earned.

2

Operating earnings and EPS from operations consist of our net earnings adjusted by net realized investment gains/(losses) and taxes related to net realized gains/(losses). Our definitions of these items may not be comparable to the definitions used by other companies.  Net earnings and net earnings per share are the GAAP financial measures that are most directly comparable to operating earnings and EPS from operations. All earnings per share data are calculated using fully diluted shares. Combined ratio refers to a GAAP combined ratio.

Except for historical information, this news release may include forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) including, without limitation, statements reflecting our current expectations about the future performance of our company or our business segments or about future market conditions. These statements are subject to certain risk factors that could cause actual results to differ materially. Various risk factors that could affect future results are listed in the Company’s filings with the Securities and Exchange Commission, including the Form 10-K Annual Report for the year ended December 31, 2009.

RLI, a specialty insurance company, offers a diversified portfolio of property and casualty coverages and surety bonds serving niche or underserved markets. RLI operates in all 50 states from office locations across the country. The company’s talented associates have delivered underwriting profits in 29 of the last 33 years, including the last 14. RLI’s insurance subsidiaries — RLI Insurance Company, Mt. Hawley Insurance Company and RLI Indemnity Company — are rated A+ “Superior” by A.M. Best Company and A+ “Strong” by Standard & Poor’s.

For additional information, contact John Robison, Chief Investment Officer (309) 693-5846 or at John.Robison@rlicorp.com or visit our website at www.rlicorp.com.

	Operating Earnings Per Share
	2010			2009			2010			2009
	2nd Qtr			2nd Qtr			6 Mos.			6 Mos.
Operating Earnings Per Share	$	1.52		$	1.32		$	2.45		$	2.35
Specific items included in operating earnings per share: (1) (2)
·Gain from casualty prior years’ reserve development	$	0.47		$	0.53		$	0.62		$	0.82
·  Loss from property prior years’ reserve development	$	(0.02	)	$	(0.03	)	$	(0.02	)	$	(0.12	)
·  Gain/(loss) from surety prior years’ reserve development	$	0.13		$	(0.01	)	$	0.18		$	(0.01	)

(1) Includes bonus and profit sharing-related impacts which affected other insurance and general corporate expenses.

(2) Reserve developments reflect revisions for previously estimated losses.

3

RLI CORP.

2010 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended June 30,							Six Months Ended June 30,
	2010			2009		% Change		2010			2009			% Change
SUMMARIZED INCOME STATEMENT DATA:
Net premiums earned	$	121,758		$	122,492	-0.6	%	$	238,022		$	248,174		-4.1	%
Net investment income	16,765			16,496		1.6	%	33,365			34,199			-2.4	%
Net realized investment gains (losses)	4,291			5,754		-25.4	%	10,754			(27,774		)
Consolidated revenue	142,814			144,742		-1.3	%	282,141			254,599			10.8	%
Loss and settlement expenses	45,072			48,780		-7.6	%	99,329			110,001			-9.7	%
Policy acquisition costs	37,715			38,556		-2.2	%	78,180			79,569			-1.7	%
Other insurance expenses	8,170			10,072		-18.9	%	16,997			18,334			-7.3	%
Interest expense on debt	1,513			1,513		0.0	%	3,025			3,025			0.0	%
General corporate expenses	1,541			2,042		-24.5	%	3,258			3,670			-11.2	%
Total expenses	94,011			100,963		-6.9	%	200,789			214,599			-6.4	%
Equity in earnings of unconsolidated investee	3,426			2,724		25.8	%	5,679			4,122			37.8	%
Earnings before income taxes	52,229			46,503		12.3	%	87,031			44,122			97.3	%
Income tax expense	17,235			12,423		38.7	%	27,816			11,858			134.6	%
Net earnings	$	34,994		$	34,080	2.7	%	$	59,215		$	32,264		83.5	%
Other comprehensive earnings (loss) , net of tax	(11,765		)	22,810				(2,490		)	26,388
Comprehensive earnings	$	23,229		$	56,890	-59.2	%	$	56,725		$	58,652		-3.3	%
Operating earnings:(1)
Net earnings	$	34,994		$	34,080	2.7	%	$	59,215		$	32,264		83.5	%
Less: Realized investment gains (losses), net of tax	2,789			5,416		-48.5	%	6,990			(18,853		)
Operating earnings	$	32,205		$	28,664	12.4	%	$	52,225		$	51,117		2.2	%
Return on Equity:
Net earnings (trailing four quarters)								14.6		%	6.4		%
Comprehensive earnings (trailing four quarters)								18.7		%	5.1		%
Per Share Data
Diluted:
Weighted average shares outstanding (in 000’s)	21,223			21,721				21,298			21,744
EPS from operations (1)	$	1.52		$	1.32	15.2	%	$	2.45		$	2.35		4.3	%
Realized gains (losses), net of tax	0.13			0.25		-48.0	%	0.33			(0.87		)
Net earnings per share	$	1.65		$	1.57	5.1	%	$	2.78		$	1.48		87.8	%
Comprehensive earnings per share	$	1.09		$	2.62	-58.4	%	$	2.66		$	2.70		-1.5	%
Cash dividends per share	$	0.29		$	0.27	7.4	%	$	0.57		$	0.53		7.5	%
Net Cash Flow provided by Operations	$	37,907		$	57,639	-34.2	%	$	35,459		$	61,600		-42.4	%

(1)  See discussion of non-GAAP financial measures on page 2.

4

RLI CORP.

2010 FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

	June 30,		December 31,
	2010		2009		% Change
SUMMARIZED BALANCE SHEET DATA:
Fixed income	$	1,490,483	$	1,485,347	0.3	%
(amortized cost - $1,433,081 at 6/30/10)
(amortized cost - $1,452,084 at 12/31/09)
Equity securities	272,840		262,693		3.9	%
(cost - $215,046 at 6/30/10)
(cost - $177,681 at 12/31/09)
Short-term investments	113,793		104,462		8.9	%
Total investments	1,877,116		1,852,502		1.3	%
Premiums and reinsurance balances receivable	106,564		83,961		26.9	%
Ceded unearned premiums	60,537		65,379		-7.4	%
Reinsurance recoverable on unpaid losses	361,876		336,392		7.6	%
Deferred acquisition costs	79,062		75,880		4.2	%
Property and equipment	18,112		19,110		-5.2	%
Investment in unconsolidated investee	49,268		44,286		11.2	%
Goodwill	26,214		26,214		—
Other assets	33,361		34,929		-4.5	%
Total assets	$	2,612,110	$	2,538,653	2.9	%
Unpaid losses and settlement expenses	$	1,183,008	$	1,146,460	3.2	%
Unearned premiums	328,232		312,527		5.0	%
Reinsurance balances payable	21,619		22,431		-3.6	%
Long-term debt - bonds payable	100,000		100,000		—
Income taxes - deferred	25,117		24,299		3.4	%
Accrued expenses	26,099		41,835		-37.6	%
Other liabilities	69,529		58,851		18.1	%
Total liabilities	1,753,604		1,706,403		2.8	%
Shareholders’ equity	858,506		832,250		3.2	%
Total liabilities & shareholders’ equity	$	2,612,110	$	2,538,653	2.9	%
OTHER DATA
Common shares outstanding (in 000’s)	20,931		21,265
Book value per share	$	41.02	$	39.14	4.8	%
Closing stock price per share	$	52.51	$	53.25	-1.4	%
Cash dividends per share (annualized)	$	1.15	$	1.08	6.5	%
Statutory Surplus	$	782,450	$	784,161	-0.2	%

5

RLI CORP.

2010 FINANCIAL HIGHLIGHTS

UNDERWRITING SEGMENT DATA

(Unaudited)

(Dollars in thousands, except per share amounts)

			GAAP				GAAP					GAAP				GAAP
Three Months Ended June 30,	Casualty		Ratios		Property		Ratios		Surety			Ratios		Total		Ratios
2010
Gross premiums written	$	83,843			$	83,806			$	23,317				$	190,966
Net premiums written	61,695				67,880				20,791					150,366
Net premiums earned	58,397				43,644				19,717					121,758
Net loss & settlement expenses	25,430		43.5	%	20,272		46.4	%	(630		)	-3.2	%	45,072		37.0	%
Net operating expenses	19,204		32.9	%	14,038		32.2	%	12,643			64.1	%	45,885		37.7	%
Underwriting income	$	13,763	76.4	%	$	9,334	78.6	%	$	7,704		60.9	%	$	30,801	74.7	%
2009
Gross premiums written	$	91,724			$	64,777			$	22,370				$	178,871
Net premiums written	66,152				49,735				17,980					133,867
Net premiums earned	67,282				38,373				16,837					122,492
Net loss & settlement expenses	30,068		44.7	%	15,041		39.2	%	3,671			21.8	%	48,780		39.8	%
Net operating expenses	23,167		34.4	%	14,175		36.9	%	11,286			67.0	%	48,628		39.7	%
Underwriting income	$	14,047	79.1	%	$	9,157	76.1	%	$	1,880		88.8	%	$	25,084	79.5	%

			GAAP				GAAP				GAAP				GAAP
Six Months Ended June 30,	Casualty		Ratios		Property		Ratios		Surety		Ratios		Total		Ratios
2010
Gross premiums written	$	153,128			$	134,141			$	45,003			$	332,272
Net premiums written	113,317				104,965				40,287				258,569
Net premiums earned	117,443				81,966				38,613				238,022
Net loss & settlement expenses	63,155		53.8	%	34,287		41.8	%	1,887		4.9	%	99,329		41.7	%
Net operating expenses	39,503		33.6	%	30,298		37.0	%	25,376		65.7	%	95,177		40.0	%
Underwriting income	$	14,785	87.4	%	$	17,381	78.8	%	$	11,350	70.6	%	$	43,516	81.7	%
2009
Gross premiums written	$	171,596			$	112,782			$	42,930			$	327,308
Net premiums written	127,458				84,283				35,023				246,764
Net premiums earned	137,972				75,565				34,637				248,174
Net loss & settlement expenses	72,475		52.5	%	30,390		40.2	%	7,136		20.6	%	110,001		44.3	%
Net operating expenses	45,447		32.9	%	29,818		39.5	%	22,638		65.4	%	97,903		39.4	%
Underwriting income	$	20,050	85.4	%	$	15,357	79.7	%	$	4,863	86.0	%	$	40,270	83.7	%

6