Schedule 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant //
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
/ X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
RLI CORP.
...................................................................................................................................................................................
(Name of Registrant as Specified In Its Charter)
...................................................................................................................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DELIVERED. STRENGTH. DISCIPLINE. REWARDS. RLI CORP. NOTICE OF 2014 ANNUAL MEETING AND PROXY STATEMENT |
n RLI Corp. | 9025 N. Lindbergh Drive | Peoria, IL 61615-1431 P: 309-692-1000 | F: 309-692-1068 | www.rlicorp.com |
RLI Corp.
9025 North Lindbergh Drive
Peoria, Illinois 61615
March 22, 201220, 2014
Dear Shareholders:
Please consider this letter your personal invitation to attend the 20122014 RLI Corp. Annual Shareholders Meeting. It will be held at the Mt. Hawley Country Club, 7724Company’s office at 9025 North Knoxville Avenue,Lindbergh Drive, Peoria, Illinois, 61614,61615, on May 3, 2012,1, 2014, at 2 p.m. CDT.
Business scheduled to be considered at the meeting includes the election of directors, ratification of KPMG LLP as our independent registered public accounting firm for the current year and an advisory vote on executive compensation (the “Say-on-Pay” vote).compensation. In addition, we will review significant events of 20112013 and their impact on you and your Company.
WeAgain, this year we are pleasedfurnishing our proxy materials via the Internet. Shareholders will receive a mailed notice card with instructions on how to be taking advantage of the Securities and Exchange Commission rule that allows companies to furnish theirview our proxy materials over the Internet. As a result, we are mailing our shareholders a notice instead of a paper copy of this 2012 Proxy StatementInternet and our 2011 Annual Report to Shareholders. The notice contains instructions on how to access those documents over the Internet.other information.
Thank you for your interest in RLI as well as your confidence in, and support of, our future.
Sincerely,
Jonathan E. Michael
Chairman & Chief Executive Officer
RLI Corp. | 9025 N. Lindbergh Drive | Peoria, Illinois 61615 |
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
May |
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To the Shareholders of RLI Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of RLI Corp. (“Company”) will be held at the Mt. Hawley Country Club, 77249025 North Knoxville Avenue,Lindbergh Drive, Peoria, Illinois, 61614,61615, on Thursday, May 3, 2012,1, 2014, at 2 p.m. Central Daylight Time for the following purposes:
1. to elect nine (9)eleven (11) directors for a one-year term expiring at the 20132015 Annual Meeting;
2. to ratify the selection of KPMG LLP as the independent registered public accounting firm of the Company for the current year;
3. to hold an advisory vote on executive compensation (the “Say-on-Pay” vote); and
4. to transact such other business as may properly be brought before the meeting.
Only holders of Common Stock of the Company of record at the close of business on March 6, 2012,3, 2014, are entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
By Order of the Board of Directors Daniel O. Kennedy Vice President, General Counsel & Corporate Secretary Peoria, Illinois March It is important, regardless of the number of shares you hold, that you personally be present or be represented by proxy at the Annual Meeting. Even if you expect to attend, it is important that you submit your proxy You have the right to revoke your proxy at any time prior to its use by filing a written notice of revocation with the Corporate Secretary of the Company prior to the convening of the Annual Meeting, or by presenting another proxy card with a later date or voting by telephone or over the Internet at a later date. If you attend the Annual Meeting and desire to vote in person, your proxy may be withdrawn upon request. 22, 201220, 2014as follows:by any method described below:•· By Internet: by submitting your proxy over the Internet in accordance with the instructions provided on your proxy card or Notice of Internet Availability of Proxy Materials;•· By Phone: by submitting your proxy by telephone, toll-free, in accordance with the instructions provided on your proxy card, or Notice of Internet Availability of Proxy Materials, or•· By Mail: if you received your proxy card by mail, by completing the proxy card and signing, dating and returning it as promptly as possible.
Table of ContentsTABLE OF CONTENTS
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RLI Corp. 2014 Proxy Statement | ||
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RLI Corp. | 9025 N. Lindbergh Drive | Peoria, Illinois 61615
PROXY STATEMENT
Annual Meeting of Shareholders to be held May 3, 20121, 2014
This Proxy Statement is furnished to the shareholders of RLI Corp., an Illinois corporation (“Company”), in connection with the solicitation, by the Board of Directors of the Company (“Board” or “Board of Directors”), of proxies to be used at the Annual Meeting of Shareholders (“Annual Meeting”) to be held at 2 p.m. Central Daylight Time on Thursday, May 3, 2012,1, 2014, at the Mt. Hawley Country Club, 7724Company’s office at 9025 North Knoxville Avenue,Lindbergh Drive, Peoria, Illinois, 61614,61615, and at any adjournments of the Annual Meeting.
This year, we are pleased to again be taking advantage of a Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to our shareholders a Notice of Internet Availability of Proxy Materials (“E-Proxy Notice”) instead of a paper copy of the proxy materials. The E-Proxy Notice contains instructions that will enable shareholders receiving the E-Proxy Notice to access these materials over the Internet and, if so desired, to request a paper copy of these proxy materials by mail. Shareholders who do not receive the E-Proxy Notice will receive a paper copy of the proxy materials by mail. The Company intends to mail the E-Proxy Notice to shareholders on or about March 22, 2012.20, 2014.
Because many shareholders cannot attend the Annual Meeting in person, it is necessary that a large number of our voting shares be represented at the Annual Meeting by proxy to achieve a quorum. Pursuant to the Company’s By-Laws, at least a majority of the outstanding voting shares must be present (in person or by proxy) at the Annual Meeting to conduct the meeting, which is known as a “quorum” of shares. Even if you expect to attend, it is important that you vote your shares in advance.
Whether you hold your shares directly as the shareholder of record or through a broker, trustee, or other nominee (“in street name”), you may vote by proxy without attending the Annual Meeting in three different ways:
· Internet: Shareholders may submit their proxy over the Internet by following the instructions provided on the proxy card or on the E-Proxy Notice. Shareholders will need to have the control number appearing on their proxy card or E-Proxy Notice available in order to submit their proxy over the Internet.
· Telephone: Shareholders may submit their proxy by telephone, toll-free, by following the instructions provided on the proxy card or on the E-Proxy Notice.card. Shareholders will need to have the control number appearing on their proxy card or E-Proxy Notice available in order to submit their proxy by telephone.
· Mail: Shareholders who receive a paper copy of a proxy card by mail may submit their proxy by signing, dating and returning the proxy card as promptly as possible in the envelope enclosed for that purpose.
Shareholders can save the Company expense by submitting their proxy by telephone or over the Internet. If you submit your proxy by telephone or over the Internet, you do not need to also submit a proxy card, although you may do so as one method of changing your vote as described below. The method of voting will not limit a shareholder’s right to attend the Annual Meeting.
Each proxy will be voted in accordance with the shareholder’s specifications. If you return a signed proxy card without providing voting instructions or do not designate a voting preference when using the other methods, your shares will be voted as recommended by the Board of Directors. All proxies delivered pursuant to this solicitation are revocable at any time prior to the meeting at the option of the shareholder either by giving written notice to the Corporate Secretary at 9025 North Lindbergh Drive, Peoria, Illinois, 61615, or by timely delivery of a properly completed proxy, whether by proxy card or by Internet or telephone vote, bearing a later date, or by voting in person at the Annual Meeting. All shares represented by valid, unrevoked proxies will be voted at the Annual Meeting.
RLI Corp. 2014 Proxy Statement | ||
Assuming the presence, in person or by proxy, of a quorum, the election of directors requires the affirmative vote of a majority of the shares represented in person or by proxy at the meetingAnnual Meeting and entitled to vote. With respect to the election of directors, shareholders may vote in favor of all nominees, or withhold their votes as to all nominees, or withhold their votes as to specific nominees. Votes withheld are deemed present at the meeting and thus will be counted for quorum purposes and have the effect of a vote against the director.
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Assuming the presence, in person or by proxy, of a quorum, the affirmative vote of a majority of the shares represented in person or by proxy at the meeting and entitled to vote shall be required to approve Proposal Two. The Proposal Three (Say-on-Pay)(“Say-on-Pay”) vote is advisory (not binding) in nature so there is no specified voting requirement for approval. However, the Board of Directors will consider that the shareholders have approved executive compensation on an advisory basis if this agenda item receives the affirmative vote of a majority of the votes cast (in person or by proxy).
With respect to Proposals Two and Three, shareholders may vote “For,” “Against” or “Abstain” on each proposal. Abstentions are deemed present at the meeting, and thus will be counted for quorum purposes, but will have the same effect as a vote against the matters respectively set forth in Proposals Two and Three.
Brokers who hold shares for the accounts of their clients “in street name” may vote such shares either as directed by their clients or at their own discretion if permitted by the New York Stock Exchange (“NYSE”) and other organizations of which they are members. If an executed proxy is returned by a broker on behalf of its client that indicates the broker does not have discretionary authority as to certain shares to vote on one or more matters (a “broker non-vote”), such shares will be considered present at the Annual Meeting for purposes of determining a quorum, but are not considered entitled to vote on that matter. Therefore, broker non-votes will not have any effect on any of the proposals being voted upon at the meeting. If your broker holds your shares “in street name” and you do not instruct your broker how to vote, your broker will have discretion to vote your shares on routine matters, such as Proposal Two, the ratification of the selection of the Company’s independent public accounting firm.
Your broker will not, however, have discretion to vote on non-routine matters absent direction from you. Among other matters, brokers are not entitled to use their discretion to vote uninstructed proxies in director elections or executive compensation matters. As a result, your broker will not be able to vote your shares on Proposals One and Three without your direction.Therefore, it is important that you provide your broker with voting instructions on all proposals. If your shares are held by your broker “in street name,” you will receive a voting instruction form from your broker or the broker’s agent asking you how your shares should be voted. Please complete the form and return it in the envelope providedas instructed by the broker or agent.
Shareholders of record at the close of business on March 6, 2012,3, 2014, the record date, shall be entitled to vote at the 20122014 Annual Meeting. As of the record date, the Company had 21,205,95342,986,521 shares of Common Stock outstanding and entitled to vote. Common share ownership entitles the holder to one vote per share upon each matter to be voted at the 20122014 Annual Meeting.
The Company will bear the cost of solicitation of proxies. In addition to the use of the mail, proxies may be solicited in person or by telephone, facsimile or other electronic means, by directors, officers or employees of the Company. No additional compensation will be paid to such persons for their services. In accordance with the regulations of the SEC and the NYSE, the Company will reimburse banks, brokerage firms, investment advisors and other custodians, nominees, fiduciaries and service bureaus for their reasonable out-of-pocket expenses for forwarding soliciting material to beneficial owners of the Company’s Common Stock and obtaining their proxies or voting instructions.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT TO SHAREHOLDERS
This Notice of Annual Meeting and Proxy Statement and the 2011Company’s 2013 Annual Report to Shareholders are available on the Company’s Internet sitewebsite at www.rlicorp.com and at www.proxyvote.com.
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Share Ownership of Certain Beneficial OwnersSHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The followingCompany has reported the Company’s founder, Mr. Gerald D. Stephens’ beneficial stock ownership for over thirty years. As of December 31, 2013, Mr. Stephen’s beneficial ownership dropped slightly below 5 percent and, therefore, the Company is no longer required to report his Company stock ownership.
Following are the persons or entities known to the Company who beneficially own more than 5 percent of the Company’s Common Stock as of December 31, 2011:2013 (pre-January 15, 2014 two-for-one stock split):
Name and Address |
| Number of Shares |
| Percent of Outstanding |
| Number of Shares |
| Percent of Outstanding |
of Beneficial Owner |
| Beneficially Owned |
| Common Stock |
| Beneficially Owned |
| Common Stock |
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State Street Corporation (1) |
| 2,031,368 |
| 9.60% |
| 2,153,047 |
| 10.00% |
One Lincoln Street |
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Boston, Massachusetts 02111 |
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Neuberger Berman Group LLC (2) |
| 1,923,777 |
| 9.13% | ||||
BlackRock, Inc.(2) |
| 1,693,262 |
| 7.90% | ||||
40 East 52nd Street |
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New York, New York 10022 |
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Neuberger Berman Group LLC (3) |
| 1,688,077 |
| 7.87% | ||||
605 Third Avenue |
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New York, New York 10158 |
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BlackRock, Inc.(3) |
| 1,381,813 |
| 6.55% | ||||
40 East 52nd Street |
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New York, New York 10022 |
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Kayne Anderson Rudnick |
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Investment Management LLC(4) |
| 1,299,367 |
| 6.09% |
| 1,532,183 |
| 7.04% |
1800 Avenue of the Stars |
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2nd Floor |
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Los Angeles, California 90067 |
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Gerald D. Stephens (5) |
| 1,188,450 |
| 5.60% | ||||
493 East High Point Drive |
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Peoria, Illinois 61614 |
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The Vanguard Group, Inc. (6) |
| 1,124,610 |
| 5.33% | ||||
The Vanguard Group, Inc. (5) |
| 1,288,818 |
| 6.00% | ||||
100 Vanguard Boulevard |
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Malvern, Pennsylvania 19355 |
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Franklin Resources, Inc.(7) |
| 1,086,953 |
| 5.20% | ||||
One Franklin Parkway |
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San Mateo, California 94403
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(1) The information shown is based solely on ana Schedule 13G dated February 9, 2012,3, 2014, filed with the SEC by State Street Corporation (“State Street”), which filing indicates that State Street Bank and Trust Company (“Trustee”), a subsidiary of State Street, in its capacity as trustee of the Company’s Employee Stock Ownership Plan (“ESOP”), held 1,608,9351,691,457 shares on behalf of participants in such plan. State Street further disclosed no sole voting or sole dispositive power with respect to the shares, and shared voting and shared dispositive power with respect to 2,031,3682,153,047 shares. Each ESOP participant or beneficiary may direct the Trustee as to the manner in which the shares allocated to each participant under the ESOP are to be voted. The Trustee has sole voting power with respect to all unallocated shares and sole investment power as to all allocated and unallocated shares. With respect to allocated shares for which no votes are received, the Trustee will vote such shares in proportion to the votes cast on behalf of allocated shares for which votes are received.
(2) The information shown is based solely on a Schedule 13G dated January 17, 2014, filed with the SEC by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G, BlackRock is the beneficial owner of 1,693,262 shares, and has sole voting with respect to 1,630,530 shares and sole dispositive power with respect to 1,693,262 shares.
(3)The information shown is based solely on a Schedule 13G dated February 14, 2012,13, 2014, filed with the SEC by Neuberger Berman Group LLC (“Neuberger”). According to the Schedule 13G, Neuberger is the beneficial owner of 1,923,7771,688,077 shares, has shared voting power with respect to 1,716,2771,685,177 shares and shared dispositive power with respect to 1,923,7771,688,077 shares.
(3)The information shown is based solely on a Schedule 13G dated January 20, 2012, filed with the SEC by BlackRock, Inc. (“BlackRock”). According to the Schedule 13G, BlackRock is the beneficial owner of 1,381,813 shares, and has sole voting and sole dispositive power with respect to 1,381,813 shares.
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(4) The information shown is based solely on a Schedule 13G dated FebruaryJanuary 10, 2012,2014, filed with the SEC by Kayne Anderson Rudnick Investment Management LLC (“Kayne”). According to the Schedule 13G, Kayne is the beneficial owner of 1,299,3671,532,183 shares, and has sole voting and sole dispositive power with respect to 1,299,3671,532,183 shares.
(5) The information shown is based solely on a Schedule 13G dated January 23, 2012, filed with the SEC by Gerald D. Stephens, the retired Chairman of the Company’s Board of Directors. Includes 17,512 shares held in custodian accounts for the benefit of Mr. Stephens’ grandchildren, over which Mr. Stephens has sole voting and investment power; 19,151 shares owned by the Gerald D. and Helen M. Stephens Foundation, over which Mr. Stephens, as President, has sole voting and investment power; 451,091 shares owned by the Gerald D. Stephens Grantor Annuity Trusts, over which Mr. Stephens, as trustee, has sole voting and investment power. Excludes 162,135 shares owned by Mr. Stephens’ spouse, over which Mr. Stephens has no voting or investment power, as to which Mr. Stephens disclaims beneficial ownership.
(6)The information shown is based solely on a Schedule 13G dated February 6, 2012,2014, filed with the SEC by The Vanguard Group, Inc. (“Vanguard”). According to the Schedule 13G, Vanguard is the beneficial owner of 1,124,6101,288,818 shares, and has sole voting with respect to 29,947 shares, sole dispositive power with respect to 1,260,171 shares, and shared dispositive power with respect to 27,671 shares, and sole dispositive power with respect to 1,096,93928,647 shares.
(7)The information shown is based solely on a Schedule 13G dated February 9, 2012, filed with the SEC by Franklin Resources, Inc., (“Franklin”), Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisory Services, LLC, which filing indicates one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin, have sole voting power with respect to 1,073,828 shares and sole dispositive power with respect to 1,085,428 shares. Messrs. Johnson and Johnson are the principal shareholders of Franklin.
RLI Corp. 2014 Proxy Statement |
The following is information regarding beneficial ownership of the Company’s Common Stock by each current director and named executive officer (whose compensation is disclosed in this Proxy Statement), and the directors and executive officers of the Company as a group, as of December 31, 2011.January 16, 2014. Ownership has been adjusted to reflect the two-for-one stock split that occurred on January 15, 2014.
Name of Individual or |
| Number of Shares |
| Percent of Outstanding |
Number of Persons in Group |
| Beneficially Owned (1) |
| Common Stock |
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Kaj Ahlmann |
| 676 |
| * |
Barbara R. Allen |
| 9,810 |
| * |
John T. Baily (2) (3) |
| 19,787 |
| * |
Thomas L. Brown |
| 0 |
| * |
Jordan W. Graham (2) |
| 14,880 |
| * |
Daniel O. Kennedy (4) (5) |
| 16,399 |
| * |
Craig W. Kliethermes (4) (5) (6) |
| 32,901 |
| * |
Gerald I. Lenrow (2) (7) |
| 68,423 |
| * |
Charles M. Linke (2) |
| 27,804 |
| * |
F. Lynn McPheeters (2) (8) |
| 37,416 |
| * |
Jonathan E. Michael (4) (5) (6) (9) (10) |
| 556,256 |
| 2.6% |
Michael J. Stone (4) (5) (6) (11) |
| 229,807 |
| 1.1% |
Robert O. Viets (2) (8) (12) |
| 92,224 |
| * |
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Directors and executive officers |
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as a group (14 persons) (4)(6)
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| 1,118,259 |
| 5.2% |
Name of Individual or |
| Number of Shares |
| Percent of Outstanding | |
Number of Persons in Group |
| Beneficially Owned (1) |
| Common Stock | |
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Kaj Ahlmann(2) (3) |
| 3,044 |
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| * |
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Barbara R. Allen(3) |
| 20,759 |
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| * |
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Michael E. Angelina |
| - |
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| * |
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John T. Baily (2) (3) (4) |
| 51,478 |
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| * |
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Thomas L. Brown(5) (6) (7) |
| 20,369 |
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| * |
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Jordan W. Graham (2) (3) |
| 39,248 |
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| * |
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Daniel O. Kennedy (5) (6) (7) |
| 49,436 |
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| * |
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Craig W. Kliethermes (5) (6) (7) |
| 104,083 |
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| * |
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Gerald I. Lenrow (2) (3) (8) |
| 156,096 |
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| * |
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Charles M. Linke (2) (3) |
| 73,896 |
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| * |
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F. Lynn McPheeters (2) (3) |
| 78,816 |
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| * |
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Jonathan E. Michael (5) (6) (7) (9) |
| 1,203,982 |
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| 2.8% |
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Michael J. Stone (5) (6) (7) (10) |
| 471,058 |
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| 1.1% |
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Robert O. Viets (2) (3) (11) |
| 194,048 |
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| * |
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Directors and executive officers |
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as a group (16 persons) (5) (6) (7) |
| 2,508,223 |
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| 5.7% |
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*Less than 1% of Class.
(1) Unless otherwise noted, each person has sole voting power and sole investment power with respect to the shares reported.
(2) Includes shares held by a bank trustee under an irrevocable trust established by the Company pursuant to the RLI Corp. Nonemployee Director Deferred Compensation Plan (“Deferred Plan”) for the benefit of the following: Mr. Ahlmann 1,185 shares; Mr. Baily 7,01722,701 shares; Mr. Graham 13,40235,557 shares; Mr. Lenrow 61,356141,138 shares; Mr. Linke 12,54434,298 shares; Mr. McPheeters 15,75136,234 shares; and Mr. Viets 45,978110,570 shares. Each participating director has no voting or investment power with respect to such shares.
(3) Includes 3,000290 restricted shares awarded to the named persons in February 2013, to which such persons have sole voting and no investment power.
(4)Includes 6,000 shares held by Mr. Baily’s spouse.
(4)(5) Includes shares allocated to the named persons under the ESOP with respect to which such persons have sole voting power and no investment power. As of December 31, 2011,January 16, 2014, the following shares were allocated under the ESOP: Mr. Brown 488 shares; Mr. Kennedy 2,8207,499 shares; Mr. Kliethermes 2,8227,504 shares; Mr. Michael 84,100194,670 shares; and Mr. Stone 19,49546,092 shares. During 2011, Jonathan E.2013, Messrs. Michael and Michael J. Stone were eligible to elect to diversify their respective ESOP shares.
(5)(6) Includes shares allocated to the named persons which shares are held by a bank trustee under an irrevocable trust established by the Company pursuant to the Deferred Agreement for the benefit of the following: Mr. Brown 2,263 shares; Mr. Kennedy 4951,141 shares; Mr. Kliethermes 4,94912,955 shares; Mr. Michael 18,54942,674 shares; and Mr. Stone 22,74552,327 shares. Each participant has no voting or investment power with respect to such shares.
(6)(7) Includes shares that may be acquired by the named persons within 60 days after December 31, 2011,January 16, 2014, under the Incentive Stock Option Plan (“ISOP”), the Omnibus Stock Plan and the Long-Term Incentive Plan, upon the exercise of outstanding stock options as follows: Mr. Brown 11,200 shares; Mr. Kennedy 4,000 shares; Mr. Kliethermes 19,30059,200 shares; Mr. Michael 168,200325,200 shares; and Mr. Stone 50,400 shares67,200 shares.
(8) Includes 176406 shares held by Mr. Lenrow’s daughter, as to which Mr. Lenrow disclaims any beneficial interest.
(8)Includes shares that may be acquired by the named persons within 60 days after December 31, 2011, under the Directors’ Stock Option Plan for Outside Directors (“Director Plan”), upon the exercise of outstanding stock options as follows: Mr. McPheeters 5,400 shares; and Mr. Viets 3,600 shares.
(9) Includes 45,968105,740 shares allocated under the Key Plan, over which Mr. Michael has no voting or investment power; 14,920and 21,339 shares owned by the Jonathan E. Michael Grantor Retained Annuity Trusts, over which Mr. Michael, as Trustee, has sole voting and sole investment power; and 5,060 shares owned by the Michael Charitable Fund, over which Mr. Michael has no voting power and sole investment power.
(10) Includes shares held in margin securities or pledged asset accounts at brokerage firms. At December 31, 2011, the following number of shares were held in such accounts: Mr. Michael 83,521 shares.
(11)Includes 46,13178,344 shares owned by the Michael J. Stone Grantor Retained Annuity Trusts, over which Mr. Stone, as Trustee, has sole voting and sole investment power.
(12)(11) Includes 13,633950 shares owned byheld in the Robert O.Karen Viets Grantor Retained Annuity Trusts,Revocable Trust Agreement, over which Mr. Viets, as Trustee,Co-Trustee, has soleshared voting and sole investment power.
The information with respect to beneficial ownership of Common Stock of the Company is based on information furnished to the Company by each individual included in the table.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and beneficial owners of more than 10 percent of the Common Stock of the Company to file with the SEC certain reports regarding their ownership of Common Stock or any changes in such ownership.
Based solely on its review of the copies of such reports received by it, and/or written representations from certain reporting persons, the Company believes that during the year ended December 31, 2011,2013, the reporting persons have complied with all filing requirements of Section 16(a) (except one). The Company filed a voluntary Form 4 with the SEC in November 2013, to report shares which were exempt from current reporting, but had been acquired through a Director’s automated dividend reinvestment plan from 2010 through September 2013. Such amounts should have been included in the Director’s direct holdings’ ending balance at each respective year end.
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PROPOSAL ONE: ELECTION OF DIRECTORS
At this year’s Annual Meeting, all (nine)(eleven) directors are to be elected, each to hold office for a one-year term expiring at the 20132015 Annual Meeting unless that director dies, resigns or is removed prior to that time. Unless otherwise instructed, the shares represented by a signed proxy card will be voted for the election of the nineeleven nominees named below. The affirmative vote of a majority of the shares of common stock of the Company present in person or represented by proxy at the Annual Meeting and entitled to vote is required for the election of directors. Votes will be tabulated by an Inspector of Election appointed at the Annual Meeting. Shares may be voted for, or withheld from, each nominee. Cumulative voting for the directors is not permitted under the Company’s Articles of Incorporation.
Mr. Michael E. Angelina was appointed to the Board on December 20, 2013. Messrs. Kaj Ahlmann, Michael E. Angelina, John T. Baily, Jordan W. Graham, Gerald I. Lenrow, Charles M. Linke, F. Lynn McPheeters, Jonathan E. Michael, Michael J. Stone and Robert O. Viets and Ms. Barbara R. Allen, each a current director, are standing for election. Each is nominated to serve for a one-year term expiring in 2013.
2015.
The Board of Directors has no reason to believe that any nominee will be unable to serve if elected. In the event that any nominee shall become unavailable for election, the shares represented by a proxy will be voted for the election of a substitute nominee selected by the persons appointed as proxies and recommended by the Board, unless the Board should determine to reduce the number of directors pursuant to the Company’s By-Laws or allow the vacancy to stay open until a replacement is designated by the Board.
The Board of Directors recommends the shareholders vote “For” election of all nineeleven nominees listed below.
Below are specific qualifications, skills, attributes and experience with respect to the director nominees to the Board of Directors furnished to the Company by such individuals, summarized herein and more fully detailed in the individual professional history below, which information led to the conclusion that they are qualified to serve as a director and are beneficial to the Company. The Nominating/Corporate Governance Committee and the Board considered, in particular, the following with respect to each director: Mr. Ahlmann—Ahlmann — his broad reinsurance and insurance expertise as well as his global experience. Ms. Allen—Allen — her extensive executive management skills as well as her strategy background. Mr. Baily—Angelina — his significant insurance
RLI Corp. 2014 Proxy Statement |
industry experience including his extensive risk management background; Mr. Baily — his extensive experience in accounting and auditing in the insurance and reinsurance industry.industries. Messrs. McPheeters and Viets—Viets — their significant experience, expertise and background regarding accounting matters, together with their various executive management experience. Mr. Graham—Graham — his strong financial services, strategy, merger/acquisition and advisory experience as well as deep information technology and internet background. Mr. Lenrow—Lenrow — his significant experience, expertise and knowledge of the insurance industry including accounting matters and insurance taxation. Mr. Linke—Linke — his many years of experience in the financial field including the broad perspective brought by Mr. Linke’s experience in consulting to clients in many diverse industries. The Board also considered the over 3031 years of experience with the Company represented by Mr. Michael (our Chairman, President & Chief Executive Officer). and over 36 years of insurance industry experience (18 years at the Company) represented by Mr. Stone.
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Kaj Ahlmann |
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| Joined Deutsche Bank in October 2009 as Global Head, Strategic Services and Chair, Advisory Board after having provided independent services to the Council of Global Insurance Asset Management, Deutsche Asset Management, since 2006. Mr. Ahlmann brings nearly 35 years of experience with various companies related to the reinsurance and insurance industries and asset management. From 2001 to 2003, Mr. Ahlmann was the Chairman and CEO of inreon, a global electronic reinsurance venture created by Munich Re, Swiss Re, Internet Capital Group and Accenture. He was Vice Chairman and Executive Officer of E.W. Blanch Holdings, Inc., a provider of integrated risk management and distribution services, from 1999 to 2001. Prior to that, from 1993 to 1999, he was Chairman, President and CEO of Employers Reinsurance Corporation, a global reinsurance company and served as a director of the parent organization, GE Capital Services. He served on the boards of Erie Indemnity Company, Erie Insurance Group from 2003 to 2008 and SCPIE Holdings, Inc., from 2006 to 2008. Mr. Ahlmann, with his family, owns and operates the Six Sigma Ranch & Winery in Lower Lake, California, which produces artisanal wines for retail distribution. Mr. Ahlmann currently serves on the boards of the American Institute for CPCU and the Advisory Board of Six Sigma Academy. He has a Bachelor’s degree in Mathematics and a Master’s degree in Mathematical Statistics and Probability and Actuarial Science, both from the University of Copenhagen. |
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Barbara R. Allen |
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| Retired after serving from November 2005 through August 2008 as President of Proactive Partners, a division of Tennis Corporation of America, which owns and operates athletic facilities in North America. Former Partner with The Everest Group, a strategy and general management consulting firm, from 2003 through October 2005. For 23 years, Ms. Allen held various executive management positions with The Quaker Oats Company including Executive Vice President, International Foods responsible for Quaker’s food business outside the United States; Vice President, Corporate Strategic Planning responsible for development of worldwide strategic plans and annual operating budgets; and, President, Frozen Foods Division and Vice President Marketing. Additionally, Ms. Allen served as President of the Corporate Supplier Division for Corporate Express and as CEO for the women’s pro-soccer league start-up, the WUSA. Ms. Allen is a former director for Maytag Corporation, Tyson Foods, Inc., Converse Inc., Chart House Enterprises, Inc., Lance, Inc., and Coty, Inc., serving on audit and compensation committees. Ms. Allen currently serves as Director for Hooray Puree and is on the advisory board at The University of Arizona Eller College of Management. She has a Bachelor’s degree in Psychology from the University of Illinois-Champaign and a Master’s degree in Marketing and Finance from the University of Chicago. |
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Kaj Ahlmann(1) |
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| Joined Deutsche Bank in October 2009 as Global Head, Strategic Services and Chair, Advisory Board after having provided independent services to the Council of Global Insurance Asset Management, Deutsche Asset Management, since 2006. Mr. Ahlmann brings nearly 35 years of experience with various companies related to the reinsurance and insurance industries and asset management. From 2001 to 2003, Mr. Ahlmann was the Chairman and CEO of inreon, a global electronic reinsurance venture created by Munich Re, Swiss Re, Internet Capital Group and Accenture. He was Vice Chairman and Executive Officer of E.W. Blanch Holdings, Inc., a provider of integrated risk management and distribution services, from 1999 to 2001. Prior to that, from 1993 to 1999, he was Chairman, President and CEO of Employers Reinsurance Corporation, a global reinsurance company and served as a director of the parent organization, GE Capital Services. He served on the boards of Erie Indemnity Company, Erie Insurance Group from 2003 to 2008 and SCPIE Holdings, Inc., from 2006 to 2008. Mr. Ahlmann, with his family, owns and operates the Six Sigma Ranch & Winery in Lower Lake, California, which produces artisanal wines for retail distribution. Mr. Ahlmann currently serves on the boards of the American Institute for CPCU and the Advisory Board of Six Sigma Academy. He has a Bachelor’s degree in Mathematics and a Master’s degree in Mathematical Statistics and Probability and Actuarial Science, both from the University of Copenhagen.
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Barbara R. Allen(2)
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| Retired after serving from November 2005 through August 2008 as President of Proactive Partners, a division of Tennis Corporation of American, which owns and operates athletic facilities in North America. Former Partner with The Everest Group, a strategy and general management consulting firm, from 2003 through October 2005. For 23 years, Ms. Allen held various executive management positions with The Quaker Oats Company including Executive Vice President, International Foods responsible for Quaker’s food business outside the United States; Vice President, Corporate Strategic Planning responsible for development of worldwide strategic plans and annual operating budgets; and, President, Frozen Foods Division and Vice President Marketing. Additionally, Ms. Allen served as President of the Corporate Supplier Division for Corporate Express and as CEO for the women’s pro-soccer league start-up, the WUSA. Ms. Allen is a former director for Maytag Corporation, Tyson Foods, Inc., Converse Inc., Chart House Enterprises, Inc., Lance, Inc., and Coty, Inc., serving on audit and compensation committees. She has a Bachelor’s degree in Psychology from the University of Illinois-Champaign and a Master’s degree in Marketing and Finance from the University of Chicago.
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John T. Baily (3)
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| Retired after serving as President of Swiss Re Capital Partners from 1999 through 2002. In this role, he was involved in investments and acquisitions in the insurance industry. Previously National Insurance Industry Chairman and Partner of the accounting firm of Coopers & Lybrand LLP (C&L) (now known as PricewaterhouseCoopers LLP) retiring in 1999 after 33 years, 23 years as a partner. He served as Chairman of the C&L insurance practice for 13 years, where he was responsible for all of the firms’ services to the insurance industry (including audit, tax, actuarial, management consulting). He was also past Chairman of C&L’s International Insurance Companies Committee. He was also a member of C&L’s governing body, U.S. Board of Partners. He is a past Chairman of the AICPA Insurance Companies committee. He served on the Investment Committee of both Securitas Capital and Conning Capital Partners. Mr. Baily serves on the boards of Endurance Specialty Holdings, Inc., Golub Capital BDC, Inc., CIFG Holdings, Ltd., and its affiliates. and is Chairman of the Board of Albright College. He previously served on the board of Erie Indemnity Company and NYMagic, Inc. He has served as the Chair of the Audit Committee of both private and public companies. He has a Bachelor’s degree in Economics from Albright College and a Master’s degree in Business Administration from the University of Chicago.
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Michael E. Angelina |
The following footnotes reflect directorships held within the past five years at publicly traded companies:
(1) Mr. Baily currently serves as a director of Endurance Specialty Holdings Ltd. and Golub Capital BDC, Inc. Mr. Baily previously served as a director of NYMagic, Inc., Erie Indemnity Company and its subsidiary, Erie Family Life Insurance Company. (2) Mr. Michael currently serves as a Director of SS&C Technologies Holdings, Inc. (3) Mr. Viets previously served PROPOSAL TWO: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has selected KPMG LLP (“KPMG”), the Company’s independent registered public accounting firm since Representatives of KPMG are expected to be present at the Annual Meeting with the opportunity to make a statement, if they desire, and will be available to respond to appropriate questions from the shareholders. The affirmative vote of the holders of at least a majority of the shares of Common Stock of the Company present and entitled to vote at the Annual Meeting is required for adoption of this proposal. The Board of Directors recommends the shareholders vote “FOR” Proposal Two and the ratification of selection of KPMG LLP as independent registered public accounting firm of the Company for the current fiscal year. FEES PAID TO THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Fees for services rendered by KPMG, the Company’s Independent Registered Public Accounting Firm, for the past two fiscal years for each of the following categories of services, are set forth below: Fiscal Year Fiscal Year 2013 2012 Audit Fees $ 962,200 $ 930,100 Audit-Related Fees $ 0 $ 0 Tax Fees Tax Compliance $ 0 $ 0 Other Tax Services $ 0 $ 0 All Other Fees $ 0 $ 0 Total Fees $ 962,200 $ 930,100 Audit fees relate to professional services rendered for the audit of the consolidated financial statements of the Company, audits of the statutory financial statements of certain subsidiaries, review of quarterly consolidated financial statements and assistance with review of documents filed with the SEC, including attestation as required under Section 404 of the Sarbanes-Oxley Act of 2002. PROPOSAL THREE: NON-BINDING, ADVISORY VOTE REGARDING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we seek a non-binding vote from our shareholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the Compensation Discussion & Analysis (“CD&A”), compensation tables and related disclosures in this Proxy Statement. As discussed in our CD&A starting on page Our Executive Resources Committee developed an overall compensation philosophy that is built on a foundation of the following principles: ·The focus is on the linkage between long-term shareholder value creation and executive pay; ·Incentives for executives directly involved in underwriting are based on underwriting profit measured over a period of years consistent with the income and risk to the Company; ·Compensation should reflect both the Company’s and individual’s performance; ·A meaningful element of equity-based compensation and significant executive equity holdings are important to ensure alignment of management and shareholder interests; ·The Company’s overall executive pay levels must be competitive in the marketplace for executive talent to enable the Company to attract, motivate and retain the best talent; and ·Appropriate safeguards must be in place to ensure annual incentives are aligned with long-term risk and value creation to protect against unnecessary and excessive risk to the Company. 14 We are asking you to indicate your support for our executive compensation programs as described in this Proxy Statement. This proposal, commonly known as a any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and procedures described in this Proxy Statement. Accordingly, we ask the shareholders to vote “FOR” the following resolution at the Annual Meeting: RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the CD&A, compensation tables and any related material disclosed in the Company’s Proxy Statement is hereby APPROVED. Your vote is advisory, and therefore not binding on the Executive Resources Committee or the Board. However, we value your opinions and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our shareholders’ concerns. The Executive Resources Committee will evaluate whether any actions are necessary to address those concerns. The Board of Directors recommends that shareholders vote “FOR” the proposal to approve the compensation of the Company’s named executive officers as described in this Proxy Statement. CORPORATE GOVERNANCE AND BOARD MATTERS CORPORATE GOVERNANCE PRINCIPLES The Company is committed to having sound corporate governance principles that are designed to ensure that the Board exercises reasonable business judgment in discharging its obligations to the Company and its shareholders. Corporate governance practices also help to ensure that full and transparent disclosures are made to the Company’s shareholders and the SEC. The Company’s published Corporate Governance Guidelines, which are publicly available on the Company’s The Company has developed an orientation process for new directors and also encourages new directors to attend a director seminar in their first year as a director. Each incumbent director is expected to attend an accredited director education seminar at least once a year, and each Audit Committee member is expected to attend an audit committee forum/conference at least once a year. The Board is required to affirmatively determine the independence of each director and to disclose such determination in the proxy statement for each Annual Meeting of Shareholders of the Company. The Board has established guidelines, which are set forth below, to assist it in making this determination, which incorporate all of the NYSE independence standards. Only independent directors serve on the Company’s Audit Committee, Executive Resources Committee and Nominating/Corporate Governance Committee. It is the policy of the Board of Directors of the Company that a majority of its members be independent. To be considered independent under the NYSE Listing Standards, the Board must affirmatively determine that a director or director nominee (collectively referred to as “director”) has no material relationship with the Company (directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and also meets other specific independence tests. The Board examines the independence of each of its members once per year, and again if a member’s outside affiliations change substantially during the year. With the exception of the The Board has established the following categorical standards, incorporating the NYSE’s independence standards to assist it in determining director independence: (a) A Director will not be independent if: (i) the Director is, or has been within the last three years, an employee of RLI, or an immediate family member of the Director is, or has been within the last three years, an executive officer of RLI; (ii) the Director has received, or has an immediate family member who has received, during any 12-month period within the last three years, more than $120,000 in direct compensation from RLI, other than Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service); (iii) (A) the Director is a current partner or employee of a firm that is RLI’s internal or external auditor; (B) the Director has an immediate family member who is a current partner of such firm; (C) the Director has an immediate family member who is a current employee of such firm and personally works on RLI’s audit; or (D) the Director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on RLI’s audit within that time; (iv) the Director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of RLI’s present executive officers at the same time serves or served on that company’s compensation committee; or (v) the Director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, RLI for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2 percent of such other company’s consolidated gross revenues. (b) The following commercial and charitable relationships will not be considered to be material relationships that would impair a Director’s independence: (i) if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that has made payments to, or received payments from, RLI for property or services in an amount which, in the last fiscal year, does not exceed the greater of $1 million, or 2 percent of such other company’s consolidated gross revenues; (ii) if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that is indebted to RLI, or to which RLI is indebted, and the total amount of either company’s indebtedness to the other does not exceed the greater of $1 million, or 2 percent of such other company’s total consolidated assets; (iii) if a Director, or an immediate family member of the Director, is an executive officer, director or employee of a company in which RLI owns an equity interest, and the amount of RLI’s equity interest in such other company does not exceed the greater of $1 million, or 2 percent of such other company’s total shareholders’ equity; (iv) if a Director, or an immediate family member of the Director, is a holder of an equity interest of a company of which a class of equity security is registered under the Securities Exchange Act of 1934, as amended, and in which RLI owns an equity interest; (v) if a Director, or an immediate family member of the Director, is an executive officer, director, employee or holder of an equity interest of a company that owns an equity interest in RLI; and (vi) if a Director, or an immediate family member of the Director, serves as an officer, director or trustee of a tax exempt organization, and the contributions from RLI to such tax exempt organization in the last fiscal year do not exceed the greater of $1 million, or 2 percent of such tax exempt organization’s consolidated gross revenues. (RLI’s automatic matching of employee charitable contributions will not be included in the amount of RLI’s contributions for this purpose.) (c) For relationships not covered by the standards in subsection (b) above, the determination of whether the relationship is material or not, and therefore whether the Director would be independent or not, shall be made by the Directors who satisfy the independence standards set forth in subsections (a) and (b) above. RLI is required to explain in its proxy statement the basis for any Board determination that a relationship was immaterial, despite the fact that it did not meet the categorical standards of immateriality set forth in subsection (b) above. Director Independent Management Kaj Ahlmann X Barbara R. Allen X Michael E. Angelina X John T. Baily X David B. Duclos X* Jordan W. Graham X Gerald I. Lenrow X Charles M. Linke X F. Lynn McPheeters X Jonathan E. Michael X Michael J. Stone X Robert O. Viets X *On February 26, 2013, Mr. Duclos resigned from the Board to become CEO of QBE-North America. The following relationships were reviewed in connection with determining director independence but were determined to not be material relationships and that they do not affect such Mr. Baily is a director of Endurance Specialty Holdings Ltd., affiliates of which include reinsurance companies. From time to time, the Company enters into reinsurance arrangements with the Endurance companies. To ensure that thorough attention is given to individual and collective Directors’ performance and optimizing the composition of our Board, the Board and Committees utilize an annual evaluation process. Each Director self-evaluates the performance of the Committees on which he/she serves as well as the Board as a whole. Detailed composites are completed to obtain perspective on each Committee’s performance in relationship to its respective Charter, effectiveness, functionality, areas of improvement and overall performance. The Annual Board Evaluation focuses on board processes, policies, effectiveness, committee composition and strategy as well as performance whereby establishing activities to maximize shareholder value. This process is handled by the Nominating/Corporate Governance Committee (“NCG Committee”). Further, each Director participates in a robust evaluation process, wherein annually all Directors provide a written peer evaluation on a variety of director characteristics. Those written evaluations are reviewed by the NCG Committee, and each reviewed Board member meets with the Chairman of the Board and/or Lead Director to discuss the consolidated comments. Based on the cumulative results of each Director’s overall performance, the NCG Committee reviews and evaluates the Board candidates and their respective qualifications in detail to determine if it is in the best interest of the Company and its shareholders to nominate each Director to stand for election. The · A reputation for the highest professional and personal ethics and values, fairness, honesty and good judgment; · A significant breadth of experience, knowledge and abilities to assist the Board in fulfilling its responsibilities; · Been in a generally recognized position of leadership in his or her field of endeavor; and · Nominees with insurance and accounting backgrounds are particularly desirable. A nominee should not have a conflict of interest that would impair the nominee’s ability to represent the interests of the Company’s shareholders and fulfill the responsibilities of a director. The The The Company has adopted a Code of Conduct, which is designed to help directors, officers and employees maintain ethical behavior and resolve ethical issues in an increasingly complex global business environment. The Code of Conduct applies to all directors, officers and employees, including the Chief Executive Officer, the Chief Financial Officer, the Controller, the General Counsel and any other employee with any responsibility for the preparation and filing of documents with the SEC. The Code of Conduct covers topics including, but not limited to, ethical behavior, conflicts of interest, corporate opportunities, confidentiality of information and compliance with laws and regulations. A copy of our Code of Conduct is available at the Company’s website under the Investors section at www.rlicorp.com. Any amendments to the Code of Conduct will be posted on the website, and any waiver that applies to a director or executive officer will be disclosed in accordance with the Rules of the NYSE. SHAREHOLDER AND INTERESTED PARTIES COMMUNICATIONS Any shareholder or other interested party who desires to communicate with the Board’s Lead Director of the Board’s independent directors or any of the other members of the Company’s Board of Directors may do so electronically by sending an email to the following address: Lead.Director@rlicorp.com. Alternatively, a shareholder or other interested party may communicate with the Lead Director or any of the other members of the Board by writing to: Lead Director, RLI Corp. 9025 N. Lindbergh Drive, Peoria, Illinois 61615. Communications may be addressed to the Lead Director, an individual director, a Board Committee, the independent directors or the full Board. Communications received by the Lead Director will then be distributed to the appropriate directors. Solicitations for the sale of merchandise, publications or services of any kind will not be forwarded to the directors. COMPANY POLICY ON RELATED PARTY TRANSACTIONS The Company recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore has adopted a written policy which shall be followed in connection with all related party transactions involving the Company. The policy generally requires approval by the Nominating/Corporate Governance Committee for all transactions above $10,000 between the Company and its directors, officers, shareholders owning in excess of 5 percent of the Common Stock of the Company, and their family members and affiliates. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In 18 RLI Corp. 2014 Proxy Statement COMMITTEES OF THE BOARD OF DIRECTORS The Board has five standing committees: Audit, Executive Resources, Finance and Investment, Nominating/Corporate Governance and Strategy. The Audit, Executive Resources and Nominating/Corporate Governance Committees are composed solely of independent directors in compliance with the Company’s requirements and the NYSE Listing Standards. The Nominating/Corporate Governance Committee annually evaluates both Committee members and Committee Chairs, and rotates as necessary. In his discretion, the Chairman of the Board may attend any or all Committee meetings. All committees meet at least quarterly and also hold informal discussions from time to time. Charters for each committee are available on the Company’s website under The Company’s Audit Committee, composed exclusively of independent directors, met Fiscal Year Fiscal Year 2011 2010 Audit Fees $ 970,100 (1) $ 775,500 Audit-Related Fees $ 0 $ 3,500 Tax Fees Tax Compliance $ 0 $ 0 Other Tax Services $ 0 $ 0 All Other Fees $ 17,500 $ 19,485 Total Fees $ 987,600 $ 798,485 The Audit Committee is responsible for approving every engagement of KPMG to perform audit or non-audit services on behalf of the Company or any of its subsidiaries before KPMG is engaged to provide those The Board of Directors annually determines the “financial literacy” of the members of the Audit Committee pursuant to the NYSE required standards. The Board has determined that based on those standards, each member of the Audit Committee is independent and financially literate, and that each member possesses accounting or related financial management expertise. The Board of Directors has further determined that each of Members of the committee were Messrs. Baily (Chair), Lenrow and Viets and Ms. Allen. The Company’s Executive Resources Committee, composed exclusively of independent directors, met Members of the committee were Ms. Allen (Chair) and Messrs. Graham, Lenrow and FINANCE AND INVESTMENT COMMITTEE The Company’s Finance and Investment Committee Members of the committee were Messrs. McPheeters (Chair), Ahlmann, Linke and NOMINATING/CORPORATE GOVERNANCE COMMITTEE The Company’s Nominating/Corporate Governance Committee, composed exclusively of independent directors, met Until February 26, 2013, members of the committee were Messrs. Linke (Chair), Baily, Duclos and Viets. Mr. Duclos resigned from the Board on February 26, 2013. Mr. Angelina became a member of the committee on December 20, 2013. The Company’s Strategy Committee Until Executive Nominating/ Finance and Director Audit Resources Corporate Governance Investment Strategy Kaj Ahlmann X X* Barbara R. Allen X X* Michael E. Angelina X X John T. Baily X* X David B. Duclos** X X Jordan W. Graham X X Gerald I. Lenrow X X Charles M. Linke X F. Lynn McPheeters X X* Jonathan E. Michael Michael J. Stone X X Robert O. Viets X X * Chair of Committee ** On February 26, 2013, Mr. Duclos resigned from the Board to become CEO of QBE-North America. BOARD MEETINGS AND COMPENSATION During During Annual Board Retainer: $ 95,000 $ 95,000 Annual Committee Retainer: Audit $ 15,000 $ 15,000 All Other Committees $ 10,000 $ 10,000 Additional Annual Committee Chair Retainer: Audit $ 20,000 $ 20,000 Executive Resources $ 20,000 $ 20,000 All Other Committees $ 10,000 $ 10,000 Non-Executive Chairman of the Board Fee $ 85,000 Effective February 6, 2013, the Independent Directors receive an annual award of $10,000 in Company stock, which vests on the first to occur of: the one year anniversary from date of issuance or when a Director leaves the Board. Effective January 1, 2014, the Lead Director will receive a $10,000 annual retainer. Directors are also reimbursed for actual travel and related expenses incurred and are provided a travel accident policy funded by the Company. The following table provides the compensation of the Company’s Board of Directors earned for the fiscal year ended December 31, Change in Pension Value and Nonqualified Fees Earned Non-Equity Deferred or Paid in Stock Option Incentive Plan Compensation All Other Name Cash ($)(1) Awards ($) Awards ($) Compensation ($) Earnings Compensation ($) Total ($) (a) (b) (c) (d) (e) (f) (g) (h) Kaj Ahlmann 121,534 121,534 Barbara R. Allen 138,267 138,267 John T. Baily 140,000 (2) 140,000 Jordan W. Graham 118,459 118,459 Gerald I. Lenrow 120,000 (2) 120,000 Charles M. Linke 125,000 (2) 125,000 F. Lynn McPheeters 126,722 (2) 126,722 Jonathan E. Michael (3) Gerald D. Stephens 66,915 (4) 33,266 (5) 98,986 Robert O. Viets 120,000 (2) 120,000 Change in Pension Value and Nonqualified Fees Earned Non-Equity Deferred or Paid in Stock Option Incentive Plan Compensation All Other Name Cash ($)(1) Awards ($) Awards ($) Compensation ($) Earnings Compensation ($) Total ($) (a) (b) (c) (d) (e) (f) (g) (h) Kaj Ahlmann 125,000 10,000 135,000 Barbara R. Allen 140,000 10,000 150,000 Michael E. Angelina 3,466 (2) 3,466 John T. Baily 140,000 10,000 150,000 David B. Duclos 17,958 (3) 17,958 Jordan W. Graham 115,000 10,000 125,000 Gerald I. Lenrow 120,000 10,000 130,000 Charles M. Linke 125,000 10,000 135,000 F. Lynn McPheeters 125,000 10,000 135,000 Jonathan E. Michael (4) Michael J. Stone (5) Robert O. Viets 120,000 10,000 130,000 (1) Outside directors elect the form of their Annual Board Retainer, Annual Committee Retainer and Annual Committee Chair Retainer, if applicable, which may be received either in cash or in Company stock, or a combination of both, in accordance with the Directors Deferred Compensation Plan (“Deferred Plan”). Amounts shown include the value of fees taken in the form of Company stock. (2) (3)Mr. Duclos was appointed to the Board on August 16, 2012. He resigned from the Board effective February 26, 2013, to become CEO of QBE-North America. (4) Mr. Michael, as Chairman of the Board and a management director, does not receive director fees. His compensation as President and CEO is disclosed under the Executive Compensation Summary Compensation Table. NONEMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN (DEFERRED PLAN) Prior to the beginning of each year, an Outside Directors are encouraged to, within five years of their initial appointment as The Nominating/Corporate Governance Committee monitors directors’ share ownership and may make allowances to accommodate periodic adjustments to the Annual Board Retainer, and other factors affecting a director’s share ownership level. Immediately following the The Company does not have a formal policy regarding separation of the offices of chairman of the board and chief executive officer. The Board believes that the decision whether to combine or separate such positions will vary from company to company and depends upon a company’s particular circumstances at a given point in time. The Board believes that a joint board chairman and chief executive officer position is advisable and in the best interests of the Company and its shareholders given our current Board and Lead Director configuration. This structure promotes unified leadership, continuity and direction for the Company. This combined position also provides a clear focus for management to execute the Company’s strategy and business plan, while fostering clear accountability and decision-making in such roles. The Board believes the designation of an empowered “Lead Director” provides a counterbalancing governance structure and enables an appropriate balance between strategic execution and independent oversight of management. The Lead Director (an independent director) is the Chairperson of the Board’s Nominating/Corporate Governance Committee and is sessions of the independent directors, (b) serves as a liaison between the Chairman and the independent directors, (c) assists in setting Board meeting agendas and schedules, (d) assists in determining information sent to directors for meetings, (e) may call meetings of the independent directors, (f) may consult with major shareholders if requested by the Chairman or the Board, and (g) consults with the Chairman/CEO regarding results of annual performance reviews of the Board Committees, Board members and CEO, all as set forth in the charter for the Lead Director position. Several factors promote a strong and independent Board at our Company. Currently, all directors except for The following report by the Audit Committee (the “Committee”) of the Company’s Board of Directors is required by the rules of the SEC to be included in this Proxy Statement and shall not be considered incorporated by reference in other filings by the Company with the SEC. The The primary role of the Committee is to assist the Board of Directors in its oversight of (a) the Company’s corporate accounting and reporting practices, (b) the quality and integrity of the Company’s financial statements, (c) the performance of the Company’s system of internal accounting and financial controls, (d) the Company’s compliance with related legal and regulatory requirements, RLI Corp. 2014 Proxy Statement In addition to those primary roles, the Committee also performs other roles and functions as outlined in its charter, including preliminary review of earnings releases and other activities. The Committee also acts as the audit committee for each of the Company’s insurance company subsidiaries. A more detailed description of the Committee’s roles, functions and activities is set forth in the description of Board committees elsewhere in this Proxy Statement and in the Committee’s The Board of Directors has determined that each of the members of the Audit Committee qualifies as “independent” within the meaning of the NYSE Listing Standards and the rules of the SEC. The Board of Directors has further determined that each of Ms. Allen and Messrs. Baily, Lenrow and Viets is an “audit committee financial expert” within the meaning of the SEC rules. The Committee reviews the internal audit function of the Company, including the independence and authority of its reporting obligations, the proposed audit plans for the coming year and the coordination of such plans with the The Committee The Company’s current independent registered public accounting firm is KPMG LLP (“KPMG”). KPMG has been the Company’s independent registered public accounting firm since 1983 and the Audit Committee has selected KPMG to be the Company’s independent registered public accounting firm for fiscal 2014. The Committee contracts with and sets the fees paid to the independent registered public accounting firm. The fees for services for KPMG’s audit services the past two fiscal years are set forth in Proposal Two on pages 13-14. Audit fees relate to professional services rendered for the audit of consolidated financial statements of the Company, audits of the statutory financial statements of certain subsidiaries, review of quarterly consolidated financial statements and assistance with review of documents filed with the SEC, including attestation as required under Section 404 of the Sarbanes Oxley Act of 2002. There are not currently any non-audit services being provided by KPMG. Any non-audit services must be reviewed and pre-approved by the Chair of the Audit Committee. The Chair will report such hiring to the Committee no later than the next scheduled Committee meeting. The Committee annually conducts an evaluation of the Auditor to determine if they will recommend the retention of the Auditor. As part of the evaluation of the Auditor, the Committee surveys select RLI management and all members of the Committee to determine if the Auditor is meeting Company expectations. The results of the survey are presented to the Committee and assist the Committee in the decision to recommend reappointment of the Auditor. The Auditor evaluations include whether the Auditor : 1) maintains independence, integrity and objectivity combined with an attitude of professional skepticism; 2) maintains candid and open dialog, communicates in a timely, forthright manner with sufficient clarity and frequency; and 3) understands the Company’s business operations and strategy. In addition, the Committee obtains and reviews, at least annually, a report by the Auditor describing; the firm’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the Auditor’s independence) all relationships between the Auditor and the Company. Based upon the results of the evaluations mentioned, the Committee recommends the retention of the Auditor based upon the quality of audit services and sufficiency of resources provided. The Committee received reports and reviewed and discussed the audited financial statements with management and the The Committee received from the Company’s Pursuant to the Sarbanes Oxley Act of 2002 and the rules of the PCAOB, the Auditor’s lead engagement partner is required to rotate every five years. In 2014, KPMG’s current lead engagement partner for the Company’s audit is in the fifth year of a five year rotation period. Among the Committee’s responsibilities during such a rotation include reviewing desirable partner attributes with KPMG management and conducting telephonic and in-person meetings in order to ensure the new lead engagement partner makes a smooth transition into the new position. Based on the Committee’s discussion with and review of reports from management, the Company’s internal auditors and the Company’s The foregoing report has been approved by all members of the Audit Committee. MEMBERS OF THE AUDIT COMMITTEE John T. Baily (Chair) Barbara R. Allen Gerald I. Lenrow Robert O. Viets EXECUTIVE RESOURCES COMMITTEE REPORT The Executive Resources Committee has reviewed and discussed with management of the Company the Compensation Discussion and Analysis section of this Proxy Statement. Based on the Executive Resources Committee’s review and discussions, it recommended to the Board, and the Board approved, that the Compensation Discussion and Analysis be included in the Company’s MEMBERS OF THE EXECUTIVE RESOURCES COMMITTEE Barbara R. Allen (Chair) Jordan W. Graham Gerald I. Lenrow F. Lynn McPheeters COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Executive Resources Committee is a current or former employee or officer of the Company or otherwise had any relationships to be disclosed within the scope of SEC regulations. RLI Corp. 2014 Proxy Statement The Executive Resources Committee (“ERC”) 2013 2012 Gross Written Premium $843.2 million $784.8 million Operating Earnings $111.9 million $ 86.9 million (Net Earnings minus Investment Gains Net of Tax) Combined Ratio 83.1 89.0 (Net Loss and Operating Expense/Net Premiums Earned) Operating Return on Equity 14.1% 11.0% (Operating Earnings/Shareholder’s Equity) Market Value Potential (MVP) $133.8 million $ 82.7 million (After Tax Returns Above Cost of Capital) Five-Year Growth in Book Value: Rank Among Peer Companies 2/14 3/14 As shown above, our results for 2013 were outstanding. We achieved improvements in key absolute and relative financial metrics. Growth in gross written premium was $58.4 million, or 7.4 percent. Operating earnings were up 28.9 percent for the year, which resulted in a With the exception of gross written premium, the financial metrics above are used as targets in our incentive plans and actual results are used to calculate annual incentives for our KEY ATTRIBUTES OF RLI EXECUTIVE COMPENSATION · · · ·Significant executive stock ownership: Our compensation programs encourage our employees to build and maintain an ownership interest in the Company. We have established specific executive stock ownership guidelines and our executive officers whose compensation is included in the Summary Compensation Table (referred to herein collectively as “named executive officers” or “NEOs”), as well as our other executive officers, currently maintain significant share ownership in the Company. As reflected on page 7, as of January 16, 2014, executive officers and Directors beneficially held 5.7 percent of Company shares, providing strong alignment with shareholders. The ERC believes that the Company’s overall compensation approach provided meaningful incentives for the talented management team at the Company to provide outstanding results for shareholders again this year. In 2013, the Company returned capital to our shareholders through our 38th consecutive year of paying regular dividends and a $1.50 per share special dividend (adjusted for the two-for-one stock split on January 15, 2014). In The ERC operates under a Charter, which can be found on the Company’s website at www.rlicorp.com. The ERC Charter is reviewed annually by the ERC and any proposed changes to the Charter are submitted to the Nominating/Corporate Governance Committee for recommendation to the full Board for approval. The ERC is responsible to the Board for (1) reviewing and providing advice regarding the Company’s executive The ERC held At the May 2013 annual shareholder’s meeting, we held a shareholder advisory vote on the compensation of our named executive officers, referred to as a Say-on-Pay vote, with over 95 percent of shareholder votes cast on that item in favor of our executive compensation programs. We considered this vote to represent strong support by shareholders for our long-standing executive compensation policies and practices. In 2013, therefore, the ERC continued its general approach to executive compensation, as described above in “KEY ATTRIBUTES OF RLI EXECUTIVE COMPENSATION.” Mr. Michael plays an important role in the ERC’s consideration of executive compensation levels and the design of executive compensation plans and programs for other senior executive officers. For these individuals, Mr. Michael recommends the following components of executive compensation to the ERC for review and recommendation to the Board: ·annual base salary levels; ·annual ·the form and amount of long-term incentives. RLI Corp. 2014 Proxy Statement Mr. Michael makes such compensation recommendations based on external market data; achievement of respective performance criteria by each executive; and his judgment related to internal pay equity among Company executives, potential for advancement, and contribution to team initiatives. Mr. Michael also relies upon the input of The ERC Charter specifically provides that if a compensation consultant is to assist in the evaluation of CEO or senior executive compensation, the ERC has sole authority to retain and terminate the consulting firm including sole authority to approve the firm’s fees and retention terms. Management also has authority to retain a compensation consultant, but may not retain the same compensation consulting firm retained by the ERC without approval in advance by the ERC. The Committee did not retain a compensation consultant in 2013. OVERVIEW OF RLI EXECUTIVE COMPENSATION The objective of the Company’s executive compensation program is to provide a competitive total executive compensation program linked to Company performance that will attract, retain and motivate talented executives critical to the Company’s long-term success. ELEMENTS OF COMPANY EXECUTIVE COMPENSATION The Company’s total executive compensation program is comprised of the following components, each of which is described in greater detail below: (1) Total annual cash compensation consisting of: (a)Base salary; (b) Annual (c) Annual (d) Annual (2) Long-term incentive compensation granted under the Long-Term Incentive (3) Limited perquisites. All Company executives are provided with travel accident insurance and are reimbursed for out of pocket costs for an annual health examination not covered by the Company’s health plan. The CEO and COO are permitted to use the Company’s fractionally-owned aircraft BALANCE OF SHORT-TERM AND LONG-TERM COMPENSATION The ERC works to balance short-term and long-term elements of total compensation, as described in the following sections. The goal is to provide a meaningful level of long-term compensation to align with long-term value creation and mitigate the risk that management make decisions or take actions solely to increase short-term compensation while adding excessive risk to the Company. In that regard, the ERC believes that a greater percentage of total compensation should be in the form of long-term compensation the more senior the role is. The Committee also takes into account the significant ownership in Company stock by Messrs. Michael and Stone when determining their respective long-term incentive awards. We consider those salary and annual incentive amounts earned and paid in 2013 to be short-term compensation, while MVP Program payments made from amounts credited to the bonus bank for prior year MVP Program awards and the grant date fair value of stock options awards in 2013 to be long-term compensation. The following table compares the percentage of total compensation, which is short-term in nature, to the percentage, which is long-term. Long-Term as % of Total Compensation Short-Term as % of Total Compensation (Payment from Bonus Bank for Prior Years and Name (Salary and Annual Incentive Earned and Paid in 2013) Grant Date Fair Value of Stock Options Awarded) Jonathan E. Michael 53% 47% Michael J. Stone 53% 47% Thomas L. Brown 69% 31% (1) Craig W. Kliethermes 61% 39% Daniel O. Kennedy 79% 21% (2) (1)Mr. Brown joined the company in 2011 and has less long-term compensation than the other NEOs because of fewer contributions to his MVP Program bonus bank, which pays out over time. (2)Mr. Kennedy does not participate in the MVP Program, but instead participates in the MIP, which does not have a bonus bank or long-term payout feature, and consequently his long-term percentage is less than the other NEOs. MARKET VALUE POTENTIAL EXECUTIVE INCENTIVE PROGRAM (MVP PROGRAM) — GENERAL MVP Defined. As discussed in further detail below, the MVP Program provides a mechanism with which the ERC can correlate incentive compensation to long-term shareholder value creation. The MVP Program uses an economic profit measure called “Market Value Potential” (“MVP”), which measures the after-tax returns earned by the Company above its cost of capital, as a gauge of shareholder value creation. MVP is defined as (1) the Actual Return (the increase in U.S. generally accepted accounting principles “GAAP” book value), less (2) the Required Return (beginning capital multiplied by the blended cost of capital). If the Company does not earn the Required Return in a given year and MVP is negative, no incentive award is made pursuant to the MVP Program for that year. For the purposes of the MVP Program, the increase or decrease in GAAP book value is calculated as ending capital less beginning capital. Ending capital is defined as ending GAAP book value, less unrealized gains or losses net of tax on available-for-sale fixed maturity investments, plus outstanding long-term debt instruments at the end of the period; and adjusted for capital transactions during the year. Beginning capital is defined as beginning GAAP book value, less unrealized gains or losses net of tax on available-for-sale fixed maturity investments, plus outstanding long-term instruments at the beginning of the period. The Company’s blended cost of capital is defined as the weighted average of the cost of equity capital and the cost of debt capital. The cost of equity capital is the average ten year U.S. Treasury Note rate, plus a market risk premium multiplied by the Company’s beta. The Company’s cost of debt capital is the forward market rate on debt outstanding on the outstanding long-term debt. MVP Program Participation. Participation in the MVP Program, percentage incentive awards and the formula to calculate MVP are recommended by the ERC and approved annually by the independent Directors of the Board for Mr. Michael and by the entire Board for other participants. Mr. Stone does not approve Mr. Michael’s or his own percentage award. In 2013, participation in the MVP Program was limited to Messrs. Michael, Stone, Brown and Kliethermes. The Board has concluded based on the position responsibilities and ongoing assessment of individual performance against operational and financial goals that the senior executive management team (the CEO, COO, CFO and Executive Vice President, Operations) is most responsible for the operating and investment decisions and actions that directly impact the creation of long-term shareholder value, and, therefore, should be rewarded with a portion of their incentive compensation being directly and exclusively tied to the creation of MVP. As discussed in more detail below, there are two components to the MVP Program. The first component, based on strategic objectives, represents annual compensation. The second component, based on financial objectives, is paid out over time out of amounts credited to a bonus bank, which is at risk of forfeiture based on future performance and as such represents long-term compensation. For 2013, each participant in the MVP Program received a MVP incentive award expressed as a percentage of MVP created by the Company in that calendar year. Each year the ERC confirms that the percentage awards remain appropriate by reviewing historical incentive award payouts, projected future payouts and resulting total compensation for MVP Program participants, which in turn, is compared to the performance of the Company necessary to achieve such payouts. The ERC compares the RLI Corp. 2014 Proxy Statement performance of the Company and total compensation of the MVP Program participants with comparable performance metrics and compensation at companies in the peer group. The MVP percentage award, expressed as a percentage of MVP, for each participant for 2013 was as follows: 2.7 percent for Mr. Michael, 1.8 percent for Mr. Stone and 1.0 percent each for Messrs. Brown and Kliethermes. The percentage award for Mr. Michael was reduced from 3.0 percent in 2012 to 2.7 percent in 2013, and the percentage award for Mr. Stone was reduced from 2.0 percent in 2012 to 1.8 percent in 2013. The ERC set the percentage incentive awards for 2013 based on the factors described above and based on the range of expected MVP to be created by the Company in 2013 and the projected incentive awards and incentive payouts that would result. The reductions in the percentage awards for Messrs. Michael and Stone were made at Mr. Michael’s request to maintain annual awards in a competitive range in light of the positive trend of increasing annual MVP created by the Company, on which such awards are based. Individual MVP Award payments during any fiscal year, including payments from amounts credited to a bonus bank in prior years, are capped at $7.5 million under the terms of the RLI Corp. Annual Incentive Compensation Plan approved by Shareholders in 2011. Pursuant to the Annual Incentive Plan, under which the MVP Program operates, the Board of Directors may exercise discretion to decrease MVP Awards based on such objective or subjective criteria it deems appropriate. Executive base salaries are targeted to be at the median base salary for comparable positions in the insurance industry, taking into account performance, experience, potential and the level of base salary necessary to attract and retain top executive talent. In Each year, the ERC compares the relative ranking among the Company and peer companies based on the most recently available public data (2012 data reviewed in 2013 comparison) for base salaries and total compensation for the CEO, COO and CFO positions to the relative performance ranking for the following publicly available performance metrics for the prior year: price-to-book ratio; Performance Metric Price/Book Return on Equity Combined Ratio One-Year TSR Five-Year TSR Ten-Year TSR Market Cap RLI Rank 1 2 3 12 2 2 7 Base salaries and total compensation for other NEOs and executive positions are established by reference to the publicly available survey data, including median base salary levels, for comparable executives in the insurance industry. At the May 2011 MVP Program Bonus Awards and Payouts Participant 2011 MVP 2011 MVP (C = A x B) December 31, (D) Bonus Bank (E = C+D) Payout to (F = E x .33) Remaining Michael, J. E. $98,436,000 3.0% $2,953,080 $4,507,675 $7,460,755 $2,462,049 $4,998,706 Stone, M. J. $98,436,000 1.9% $1,870,284 $2,773,069 $4,643,353 $1,532,307 $3,111,047 Dondanville, J. E. $58,934,000 (3) 1.25% $736,675 $1,839,074 $2,575,749 N/A N/A Kliethermes, C. W. $98,436,000 0.625% $615,225 $782,500 $1,397,725 $461,249 $936,476 (A) (B) (C = A x B) (D = C x 20%) (E = % Achieved) (F = D x E) 2013 MVP Percentage 2013 Preliminary 20% Annual Component Achievement 2013 Annual Participant Created Award MVP Award Based on Strategic Goals Rating Incentive Award J. Michael $133.8 million 2.7% $3,612,168 $722,434 80% $577,947 M. Stone $133.8 million 1.8% $2,408,112 $481,622 80% $385,298 T. Brown $133.8 million 1.0% $1,337,840 $267,568 80% $214,054 C. Kliethermes $133.8 million 1.0% $1,337,840 $267,568 80% $214,054 MANAGEMENT INCENTIVE PROGRAM (MIP) Participants in the MIP include home office vice presidents, assistant vice presidents and other senior managers. ROE and combined ratio are used as financial goals to provide an incentive to increase annual profitability. ROE is a ratio calculated as our operating earnings divided by our beginning equity adjusted for capital transactions such as share repurchases and special dividends. Operating earnings, in turn, are our net earnings minus realized investment gains or losses net of tax. Combined ratio is an expense measure and is calculated as the sum of our incurred losses and settlement expenses plus our policy acquisition costs and operating expenses, divided by our net premiums earned. The difference between the combined ratio and 100 reflects the per-dollar rate of underwriting income or loss. MVP is used as a financial goal as a proxy for shareholder value Actual awards for a year are paid in For RLI Corp. Combined ROE % Bonus % MVP Bonus % Ratio Bonus % Greater than 6.0 0.000 Greater than $ – 0.000 Greater than 100.0 0.000 8.0 4.000 15,000,000 4.000 99.0 1.212 10.0 8.000 25,000,000 6.667 97.0 3.636 12.0 12.000 35,000,000 9.333 95.0 6.061 13.0 14.000 45,000,000 12.000 92.6 8.970 14.0 16.000 55,000,000 14.667 90.0 12.121 15.0 18.000 65,000,000 17.334 87.6 15.030 16.0 20.000 75,000,000 20.000 85.0 18.182 17.0 22.000 85,000,000 22.667 82.6 21.091 Max 18.0 24.000 Max 90,000,000 24.000 Max 80.0 24.000 MIP Maximum 75 Percent Target Target ROE % Target ROE % Bonus % Target MVP Bonus % Combined Ratio Bonus % Combined ROE % Bonus% MVP Bonus % Ratio Bonus% Greater than 6.0 0.000 Greater than $ – 0.000 Greater than 100.0 0.000 8.0 3.333 15,000,000 3.333 99.0 1.010 10.0 6.667 25,000,000 5.556 97.0 3.030 12.0 10.000 35,000,000 7.778 95.0 5.051 13.0 11.667 45,000,000 10.000 92.6 7.475 Less than 6.0 0.000 Less than $ 0 0.000 Greater than 100.0 0.000 14.0 13.333 55,000,000 12.222 90.0 10.101 8.0 3.333 15,000,000 3.333 99.0 1.010 10.0 6.667 25,000,000 5.556 97.0 3.030 15.0 15.000 65,000,000 14.444 87.6 12.526 12.0 10.000 35,000,000 7.778 95.0 5.051 13.0 11.667 45,000,000 10.000 92.6 7.475 16.0 16.667 75,000,000 16.667 85.0 15.152 14.0 13.333 55,000,000 12.222 90.0 10.101 15.0 15.000 65,000,000 14.444 87.6 12.526 17.0 18.333 85,000,000 18.889 82.6 17.576 16.0 16.667 75,000,000 16.667 85.0 15.152 17.0 18.333 85,000,000 18.889 82.6 17.576 Max 18.0 20.000 Max 90,000,000 20.000 Max 80.0 20.000 18.0 20.000 Max 90,000,000 20.000 Max 80.0 20.000 In MARKET VALUE POTENTIAL EXECUTIVE INCENTIVE PROGRAM — LONG-TERM INCENTIVE COMPENSATION COMPONENT The MVP Program is described above on pages 28 and 30. Eighty percent of the preliminary MVP award calculated under that program (which will be positive if MVP is positive, or negative if MVP is negative) is subject to an assessment of Company performance compared to peer companies (the “financial component”). This represents the long-term component of the MVP award. The financial component of a preliminary award will be adjusted in a range from a 20 percent reduction (minimum) to a 25 percent increase (maximum) based on the Company’s long-term performance relative to peers measured by five-year growth in book value per share. RLI’s relative growth in book value is calculated by comparing its compound annual growth rate (“CAGR”) in GAAP comprehensive earnings over the applicable five-year period to that of its Peer Companies. CAGR in comprehensive earnings is calculated based on publicly disclosed comprehensive earnings of Peer Companies for the five-year period ending at the third quarter of the fifth year. The adjustment to the financial component is made according to the following schedule: RLI’s Relative Five-Year Book Value per Share Growth 125% (maximum) 90th percentile of peers or greater 100% (target) 60th percentile of peers 80% (minimum) 33rd percentile of peers or less Results between the stated values for relative performance will be interpolated to determine the achievement rating. As noted above, the Company must perform at the 60th percentile, above the median of long-term performance of peer companies, in order for 100 percent of the long-term financial component of an MVP award to be made. The financial component of an MVP award earned is not immediately paid to participants; rather it is credited (if positive) or charged (if negative) to each participant’s long-term bonus bank. A bonus bank, in turn, may be positive or negative based on prior year results. The bonus bank is paid annually at a rate of 33 percent of a positive bank balance, meaning that it will take more than ten years to completely pay out an incentive award for a given year deposited into a bonus bank. Until paid out, all amounts in the MVP Program bonus bank are subject to a risk of forfeiture if future financial performance results in a negative MVP calculation. In other words, negative MVP charged to a bonus bank will reduce a positive balance in that bonus bank, effectively causing a forfeiture of such positive balance. If a bonus bank is negative after the financial component of an MVP award is credited or charged to a bonus bank, no award will be paid from the bank until it is positive as a result of future positive amounts credited to the bank. The forfeiture provision in the MVP Program bonus bank concept in the event of negative MVP, in effect, operates as a clawback for negative shareholder results by reducing the amount payable from the bonus bank when the Company has negative MVP. The ERC has considered implementing broader clawback provisions for the MVP Program and long-term incentives in anticipation of expected regulations implementing the federal Dodd-Frank Act clawback requirements. However, given the complexity inherent in creating such provisions and the uncertainty created by the lack of a regulatory framework, the ERC has decided to wait to implement broader clawback provisions until after such regulations are promulgated. The Company’s MVP in 2013 was $133.8 million, compared to MVP of $82.7 million in 2012, and $98.4 million in 2011. The following table shows the manner in which 2013 annual and long-term MVP award payouts and remaining at-risk bank balances were calculated for Messrs. Michael, Stone, Brown and Kliethermes. 2013 MVP Program Incentive Awards and Payouts Personal Objectives Achieved 80.00% Peer Company Adjustment Factor RLI Rank 2/14 125% (A) 2013 MVP Achieved (after tax) $133,784,000 Formula for (E = D x % (G = F x Peer 2013 MVP Award: (B) (C = A x B) (D = C x 20%) Achieved) (F = C x 80%) Factor) Personal Personal Preliminary Objectives Objectives Financial Financial Participant MVP % MVP Award ($) Component ($) Award ($) Component ($) Award ($) Jonathan E. Michael 2.7 3,612,168 722,434 577,947 2,889,734 3,612,168 Michael J. Stone 1.8 2,408,112 481,622 385,298 1,926,490 2,408,112 Thomas L. Brown 1.0 1,337,840 267,568 214,054 1,070,272 1,337,840 Craig W. Kliethermes 1.0 1,337,840 267,568 214,054 1,070,272 1,337,840 Formula for 2013 (G) Payout from MVP Bank: (H) (from above) (I = G + H) (J = I x 33%) (K = I - J) Beginning Bank 2013 Award Total Pre-payout Payout Remaining Participant Balance ($)(1) Credited to Bank ($) Balance ($) of Bank ($) At-Risk Bank Jonathan E. Michael 4,981,647 3,612,168 8,593,815 2,835,959 5,757,856 Michael J. Stone 3,118,064 2,408,112 5,526,176 1,823,638 3,702,538 Thomas L. Brown 536,175 1,337,840 1,874,015 618,425 1,255,590 Craig W. Kliethermes 1,168,108 1,337,840 2,505,948 826,963 1,678,985 Formula for Total (J) (E) 2013 MVP Payout: (from above) (from above) (L = J + E) Payout of 2013 Payout Personal Objectives Total 2013 Participant of Bank ($) Component ($) Payout ($) Jonathan E. Michael 2,835,959 577,947 3,413,906 Michael J. Stone 1,823,638 385,298 2,208,936 Thomas L. Brown 618,425 214,054 832,479 Craig W. Kliethermes 826,963 214,054 1,041,017 RLI Corp. 2014 Proxy Statement (1)Under the terms of the MVP Program, interest at the three-year U.S. Government Treasury Note rate (0.36 percent) was accrued on the unpaid bonus bank balance on December 31, 2013. The following interest was accrued to the December 31, 2013 bonus bank balance as follows: Mr. Michael, $17,870; Mr. Stone, $11,185; Mr. Kliethermes, $4,190; and Mr. Brown, $1,923. DEFERRED COMPENSATION PLAN (DEFERRED PLAN) Under the Company’s Deferred Plan, an executive officer may elect to defer up to 100 percent of total cash compensation after payroll deductions. Upon an election by an executive officer to defer compensation, the Company transfers cash equal to the amount deferred to a bank trustee under an irrevocable trust established by the Company, and the trustee purchases a number of shares of Common Stock of the Company representing an amount equal to the compensation deferred by the executive officer. Pursuant to the Deferred Plan, dividends paid on the shares in such trust are used by the trustee to purchase additional shares of Common Stock of the Company, which are placed in the trust. The trust is considered to be a “Rabbi Trust” or grantor trust for tax purposes. The assets of the trust are subject to claims by the Company’s creditors. The Deferred Plan generally provides that the shares credited to the participant’s account will be transferred to the participant upon termination of employment over five years. OMNIBUS STOCK PLAN (OMNIBUS PLAN) Under the Company’s Omnibus Plan, which was adopted in 2005, certain employees, officers, consultants and directors of the Company were eligible to receive long-term incentive compensation in a variety of forms including non-qualified stock options, incentive stock options, stock appreciation rights, performance units, restricted stock awards and other equity awards. The Long-Term Incentive Plan, described immediately below, was adopted in 2010 and LONG-TERM INCENTIVE PLAN (LTIP) The purpose of the Under the Company’s The ERC believes equity awards serve as incentives to executives to maximize long-term growth and profitability of the Company, an arrangement that benefits both the executives and shareholders. Equity awards also provide a means to attract and retain key employees. The ERC establishes and recommends to the independent In The Company targets long-term incentives at approximately the median of competitive market data. Mr. Michael recommends to the ERC proposed stock option awards within the target range for each executive officer based on the executive officer’s position and a subjective assessment of the executive officer’s individual performance and anticipated future contributions to the Company. The ERC considers Mr. Michael’s recommendations and then recommends stock option awards to the Board for approval. Options granted prior to May 2009 expire ten years after grant, options awarded from May 2009 and after expire eight years after grant. The change in 2009 to an eight-year term for stock options was implemented to reduce the expense of option grants. Stock options vest over five years at the rate of 20 percent per year, or upon termination of employment due to the death, disability or qualified retirement of the recipient. Upon termination of employment (other than due to death, disability or retirement), vested options must be exercised within the earlier of 90 days of termination or expiration of the option award, except that all unexercised options granted in May 2006 and thereafter are forfeited in the event the employment of an option recipient is terminated for cause. Stock options awarded by the Company do not include provisions that would automatically vest stock options in the event of a change in control of the Company (single trigger), although the Board has discretion pursuant to the LTIP in the event of a change in control to make adjustments to the number, kind and exercise price of options to prevent inappropriate dilution or enlargement of the rights of an optionee. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The Company’s ESOP offers another performance-based means of retaining and motivating employees, including executive officers, who work 1,000 or more hours per year, by offering ownership in the Company on a long-term basis. The Board may approve an annual contribution to the ESOP based on the profitability of the Company that is used by the ESOP to purchase Common Stock on behalf of participating employees, including executive officers. All ESOP participants, including executive officers, may receive an annual contribution expressed as a percentage of eligible compensation (limited for an individual employee to an annual cap of KEY EMPLOYEE EXCESS BENEFIT PLAN (KEY PLAN) The purpose of the Key Plan is to restore benefits lost to certain executive officers under the ESOP and 401(k) Plan due to limitations on benefits contained in the Internal Revenue Code. The Company transfers to a bank trustee under an irrevocable trust established by the Company such number of shares of Common Stock of the Company representing an amount equal to the benefits the participant would have earned in the 401(k) and ESOP but for the limitation in the Internal Revenue Code on the maximum compensation on which those benefits may be calculated. The trust is considered to be a “Rabbi Trust” or grantor trust for tax purposes. The assets of the trust are subject to claims by the Company’s creditors. The Key Plan generally provides that dividends are credited to the participant’s account and reinvested in shares of Common Stock of the Company. The shares credited to the participant’s account pursuant to the Key Plan will be paid upon termination of employment in five annual installments. Mr. Michael ceased active participation in the Key Plan in 2005. Dividends on his shares held in the Key Plan continue to be credited to his account in the Key Plan. No other employee participates or has participated in the Key RLI Corp. 2014 Proxy Statement ELEMENTS OF POST-TERMINATION COMPENSATION AND BENEFITS The following table shows potential amounts payable to each NEO had their employment terminated on December 31, 2013 based on the following scenarios: Departure other than death, disability, or retirement; Departure from death, disability, or retirement; For cause; and Change-in-control. Post Termination Compensation Deferred Termination of Compensation Name Employment Scenarios MVP/MIP ($) LTIP ($) ($) Key Plan ($) Total ($) Jonathan E. Michael Departure Other Than Death, Disability, or Retirement NA (1) NA (1) 7,226,348 5,148,539 12,374,887 Departure From Death, Disability, or Retirement 5,757,856 14,487,824 7,226,348 5,148,539 32,620,567 For Cause 0 0 7,226,348 5,148,539 12,374,887 Change in Control 5,757,856 14,487,824 7,226,348 5,148,539 32,620,567 Michael J. Stone Departure Other Than Death, Disability, or Retirement NA (1) NA (1) 2,547,808 0 2,547,808 Departure From Death, Disability, or Retirement 3,702,538 4,866,832 2,547,808 0 11,117,178 For Cause 0 0 2,547,808 0 2,547,808 Change in Control 3,702,538 4,866,832 2,547,808 0 11,117,178 Thomas L. Brown Departure Other Than Death, Disability, or Retirement 0 229,808 110,205 0 340,013 Departure From Death, Disability, or Retirement 1,255,590 1,622,080 110,205 0 2,987,875 For Cause 0 0 110,205 0 110,205 Change in Control 1,255,590 1,622,080 110,205 0 2,987,875 Craig W. Kliethermes Departure Other Than Death, Disability, or Retirement 0 1,721,220 630,815 0 2,352,035 Departure From Death, Disability, or Retirement 1,678,985 3,892,784 630,815 0 6,202,584 For Cause 0 0 630,815 0 630,815 Change in Control 1,678,985 3,892,784 630,815 0 6,202,584 Daniel O. Kennedy Departure Other Than Death, Disability, or Retirement 0 73,360 55,573 0 128,933 Departure From Death, Disability, or Retirement 207,370 1,322,150 55,573 0 1,585,093 For Cause 0 0 55,573 0 55,573 Change in Control 207,370 1,322,150 55,573 0 1,585,093 (1) Messrs. Michael and Stone have met the requisite age and years of service to automatically qualify for retirement upon their departure from the Company. Except as described below, the Company has not entered into any employment or severance agreements or arrangements with any of its executive officers that would compensate the executive officers for or after departing the Company. MVP/MIP. Under the Company’s Annual Incentive Plan (which governs MVP and MIP), an employee must be employed on the date a bonus is paid or amount is paid from a bonus bank, generally paid in March of the following calendar year, unless the employee’s termination of employment was due to death disability, or retirement. Retirement requires: (1) the termination of employment of an employee who has reached age and years of service equal to or greater than 75 at the time of departure; or (2) the termination of employment of an employee who satisfies a non-competition covenant or other terms and conditions specified by the Company. The death, disability, or retirement assuming all NEOs would have met the definition of retirement at year-end 2013, although only Messrs. Michael and Stone Upon the termination of employment of a participant qualifying as retirement, a positive MVP bonus bank calculated on the last day of the quarter during which the participant’s employment ended will be paid to a participant in a lump sum and the Company may, in its discretion, pay the lower of the calculated bonus banks. All such payments upon a termination of employment qualifying as retirement are subject to ongoing restrictions on: the participant’s employment in the insurance industry; solicitation of Company Under the terms of the In For Cause. In the event of a termination for cause, all unpaid bonuses, amounts in a bonus bank, and unexercised stock options are forfeited. Change-in-control. The Company does not have change in control agreements with its executives. However, in the event of a change-in-control, the Board of Directors may, but is not obligated to, cancel each stock option by paying an amount for each cancelled option by which the fair market value per share exceeds the exercise price per share (“in-the-money value”). For illustration purposes, the table shown above assumes the Board of Directors had STOCK OWNERSHIP/RETENTION GUIDELINE It is the Company’s belief that key executives should hold significant amounts of Company stock. The value of all shares owned, including those held outright and in benefit plans, but excluding the value of stock options held, must equal or exceed a multiple of their annual base salary, as shown below: Position $ Value of Shares CEO 6.0 x Base Salary COO 4.0 x Base Salary CFO; Exec. VP, Operations 3.0 x Base Salary Other Executives 1.5 x Base Salary Executives to whom this Guideline applies are encouraged to reach their respective stock ownership level within five years of the date on which an individual assumes an executive position covered by this Guideline. Until an executive reaches the required ownership level, all net shares obtained from the exercise of stock options or other long-term incentive awards must be retained and may not be sold. The ERC reviews the progress of executives, to whom the Guideline applies, toward their stock ownership goal each year. RLI Corp. 2014 Proxy Statement The following information is provided as to each current executive officer of the Company: Name Age Position with Company Executive Officer Since Jonathan E. Michael 58 President & Chief Executive Officer 1985 Michael J. Stone 63 President & Chief Operating Officer of the Company’s principal insurance subsidiaries 1997 Thomas L. Brown 55 Vice President, Chief Financial Officer, and Treasurer 2011 Craig W. Kliethermes (1) 47 Senior Vice President, Risk Services of the Company’s principal insurance subsidiaries 2007 Daniel O. Kennedy 47 Vice President, General Counsel & Corporate Secretary 2006 Todd W. Bryant (2) 43 Vice President, Controller 2009 Aaron P. Diefenthaler(3) 38 Vice President, Chief Investment Officer 2012 Name Age Position with Company Executive Officer Since Jonathan E. Michael 60 President & Chief Executive Officer 1985 Michael J. Stone 65 President & Chief Operating Officer of the Company’s principal insurance subsidiaries 1997 Thomas L. Brown (1) 57 Vice President, Chief Financial Officer, and Treasurer 2011 Craig W. Kliethermes 49 Executive Vice President, Operations of the Company’s principal insurance subsidiaries 2007 Daniel O. Kennedy 49 Vice President, General Counsel & Corporate Secretary 2006 Todd W. Bryant (2) 45 Vice President, Controller 2009 Aaron P. Diefenthaler (3) 40 Vice President, Chief Investment Officer 2012 (1) Mr. (2) Mr. Bryant was promoted to Vice President, Controller of the Company in February 2009. Prior to his promotion, Mr. Bryant had been Assistant Vice President, Financial Reporting since August 2006, and previously held various managerial and accounting positions since he joined the Company in 1993. (3) Mr. Diefenthaler joined the Company as Vice President, Chief Investment Officer on January 23, 2012. Mr. Diefenthaler was Principal and Portfolio Manager with AAM Insurance Investment Management from 2002 to January 2012. The aggregate compensation earned from the Company and its subsidiaries during the last fiscal year is set forth below for the Company’s President & Chief Executive Officer, Change In Pension Value and Non-Equity Nonqualified Stock Option Incentive Plan Deferred All Other Name and Bonus Awards Awards Compensation Compensation Compensation Principal Position Year Salary ($)(1) ($)(2) ($) ($)(3) ($)(4) Earnings ($) ($)(5)(6)(7) Total ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Jonathan E. Michael 2011 715,400 691,940 2,462,049 42,374 3,911,763 President & Chief 2010 728,000 - - 450,898 2,198,434 - 40,543 3,417,875 Executive Officer 2009 728,000 - - 521,798 1,749,407 - 39,087 3,038,292 Michael J. Stone President & Chief 2011 486,496 386,840 1,532,307 37,461 2,443,104 Operating Officer of 2010 485,250 - - 229,980 1,352,451 - 32,650 2,100,331 the Company’s principal 2009 485,250 346,240 1,049,403 - 36,338 1,917,231 insurance subsidiaries Joseph E. Dondanville 2011 319,637 205,560 -0- 2,584,268 3,109,465 Senior Vice President, 2010 362,400 - - 213,621 896,516 - 35,599 1,508,136 Chief Financial Officer 2009 362,400 - - 250,519 700,298 - 36,782 1,349,999 Thomas L. Brown 2011 104,077 50,000 124,400 92,089 -0- 370,566 Vice President, Chief Financial Officer, and Treasurer Craig W. Kliethermes 2011 321,000 232,560 461,249 37,925 1,052,734 Senior Vice President, 2010 320,000 - - 174,460 381,632 - 33,033 909,125 Risk Services of the 2009 315,000 - - 151,480 252,350 - 38,475 757,305 Company’s principal insurance subsidiaries Daniel O. Kennedy 2011 300,031 129,200 215,707 36,950 681,888 Vice President, 2010 296,000 - - 118,096 195,447 - 32,650 642,193 General Counsel & 2009 296,000 111,446 173,900 - 42,869 624,215 Corporate Secretary The key elements of compensation presented in the summary compensation table include base salary (column c); payouts under annual incentive programs (column g); and stock option awards (column f). Amounts reflected in the column titled “Non-Equity Incentive Plan” for Messrs. Michael, Stone, and Kliethermes reflect payouts from each of their respective MVP Program bonus bank accounts of amounts earned in prior years based on financial performance of the Company in those years. As described in greater detail on page 31, payouts under the long-term component of the MVP Program are reflective of amounts earned in prior years, which are banked and paid out over a period of time of up to 10 years. Change In Pension Value and Non-Equity Nonqualified Stock Option Incentive Plan Deferred All Other Name and Bonus Awards Awards Compensation Compensation Compensation Principal Position Year Salary ($) ($)(1) ($) ($)(2) ($)(3) Earnings ($) ($)(4)(5)(6) Total ($) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Jonathan E. Michael 2013 750,000 – – 687,550 3,413,906 – 45,103 4,896,559 President & Chief 2012 742,385 – – 794,850 2,941,106 – 45,690 4,524,031 Executive Officer 2011 715,400 – – 691,940 2,462,049 – 36,950 3,906,339 Michael J. Stone 2013 515,000 – – 496,560 2,208,936 – 52,256 3,272,752 President & Chief 2012 509,808 – – 423,920 1,844,552 – 26,958 2,805,238 Operating Officer of 2011 486,496 – – 386,840 1,532,307 – 36,950 2,442,593 the Company’s principal insurance subsidiaries Thomas L. Brown 2013 373,731 – – 258,800 832,479 – 40,593 1,505,603 Vice President, Chief 2012 349,615 50,000 – 235,260 428,559 – 26,233 1,089,667 Financial Officer, and 2011 104,077 50,000 – 124,400 92,089 – – 370,566 Treasurer Craig W. Kliethermes 2013 385,692 – – 258,800 1,041,017 – 40,593 1,726,102 EVP, Operations of 2012 349,615 – – 235,260 738,693 – 26,233 1,349,801 the Company’s 2011 321,000 – – 232,560 461,249 – 37,925 1,052,734 principal insurance subsidiaries Daniel O. Kennedy 2013 325,102 – – 129,400 207,370 – 40,593 702,465 Vice President, 2012 315,885 – – 130,700 165,998 – 26,233 638,816 General Counsel & 2011 300,031 – – 129,200 215,707 – 36,950 681,888 Corporate Secretary (1)The amount included in column (d) for Mr. Brown reflects the initial payment of a sign-on bonus of $100,000, $50,000 of which was paid on September 1, 2011, at the commencement of his employment, and $50,000 which was paid in February 2012 when Company annual incentive plan payments for 2011 were made. (2)The amounts shown in column (f) reflect the aggregate grant date fair value of stock option awards computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in footnote 8 to the Company’s audited financial reports for the fiscal year ended December 31, 2013, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2014. RLI Corp. 2014 Proxy Statement (3)The amount shown in column (g) for Messrs. Michael, Stone, Brown and Kliethermes reflects the cash awards paid under the MVP Program, which is discussed in further detail on pages 28 and 30-32, and includes the annual award payout under that Program and long-term payout reflecting 33 percent of their respective bonus bank balances. The bank balance, in turn, includes amounts credited to their bonus banks for 2013. The amounts reflected in column (g) for Mr. Kennedy for 2011 – 2013 and Mr. Brown for 2011 reflect the cash awards paid under the MIP, which is discussed in further detail on page 30. (4)The amounts shown in column (i) include: a.A Company contribution to the ESOP of $23,991 for 2011 for each of Messrs. Michael, Stone, Kliethermes and Kennedy. Mr. Brown was not eligible for an ESOP contribution in 2011; and a Company contribution to the ESOP of $26,240 for 2013 and $16,048 for 2012 for each of the NEOs. b.A Company contribution to the 401(k) Plan of $12,939 for 2011 for each of Messrs. Michael, Stone, Kliethermes and Kennedy. Mr. Brown was not eligible for a 401(k) contribution in 2011; and a Company contribution to the 401(k) Plan of $14,337 for 2013 and $10,168 for 2012 for each of the NEOs. (5)Messrs. Michael and Stone were authorized by the Board to use the Company’s fractionally-owned aircraft for personal use in 2013, at an hourly rate established from time to time by the Board, limited to the maximum hourly charges equal to 6.5 percent of base salary. In August 2011 it was set at $1,700 and in August 2012 it was set at $1,800, which rate continued in 2013. All rates took into account the variable hourly operating cost, including fuel prices, of the Company aircraft. In 2011, Mr. Michael paid $8,230 for 5.9 hours use; Mr. Stone paid $3,740 for 2.2 hours use. In 2012, Mr. Michael paid $25,410 for 14.4 hours use; Mr. Stone did not use the Company aircraft for personal use in 2012. In 2013, Mr. Michael paid $9,900 for 2.9 hours use; Mr. Stone paid $10,620 for 7.5 hours use. The amounts included in the All Other Compensation column for Messrs. Michael and Stone reflect the difference between the aggregate incremental cost to the Company of each flight hour, comprised of hourly variable operating costs, less the hourly rates paid by them for such flights. For 2011, the hourly rate paid exceeded the hourly aggregate incremental cost to the Company and therefore no amount was added to the All Other Compensation column with respect to personal use of the Company aircraft for those years. For 2012, the rate paid similarly exceeded the aggregate incremental cost until September 1 when the Company purchased fractional shares in aircraft with associated increased variable operating cost of $3,435 per hour. For 2013, the variable operating cost associated with the purchased fractional shares in aircraft was $3,355. For 2012, the amount for Mr. Michael includes $19,457 for 11.9 personal flight hours times $1,635, the difference between the hourly rate of $1,800 and the hourly variable cost of $3,435. Mr. Stone did not use the Company aircraft for personal use in 2012 after September 1. For 2013, the amount for Mr. Michael includes $4,510 for 2.9 personal flight hours and for Mr. Stone includes $11,663 for 7.5 personal flight hours times $1,555, the difference between the hourly rate of $1,800 and the hourly variable cost of $3,355. (6)In 1996, when the Company acquired an equity ownership interest in Maui Jim, Inc. (“Maui Jim”), Mr. Michael, along with the Company’s President, Gerald Stephens, and CFO, Joseph Dondanville, were elected to the Board of Directors of Maui Jim. Of those three, only Mr. Michael continues to hold this position. Messrs. Stephens, Michael and Dondanville were paid an initial board of director retainer in the form of 20,000 non-qualified options to purchase shares of Maui Jim stock and were paid a director fee of $1,500 for each of the nine Maui Jim board meetings held from December 1996 through February 2002. Mr. Michael elected to be paid his entire Maui Jim director fees in the form of non-qualified options to purchase shares of Maui Jim stock valued pursuant to an annual appraisal, which election was available to members of the Maui Jim Board of Directors who were not Maui Jim employees. After February 2002, no further director fees were paid to Messrs. Stephens, Michael and Dondanville for their service as GRANTS OF PLAN-BASED AWARDS (1) The following table sets forth information about estimated possible payouts under non-equity incentive plan awards, which consist of potential payouts under the long-term component of the MVP Program for Messrs. Michael, All Other Exercise Option Awards: or Base Grant Date Estimated Possible Payouts Under Number of Price of Fair Value All Other Exercise Grant Non-Equity Incentive Plan Awards(1) (2) Securities Option of Stock Option Awards: or Base Grant Date Estimated Possible Payouts Under Number of Price of Fair Value Approval Maximum ($) Underlying Awards and Option Grant Non-Equity Incentive Plan Awards(2) (3) Securities Option of Stock Approval Maximum ($) Underlying Awards and Option Name Grant Date Date Threshold ($) Target ($) Probable Cap Options (#)(3) ($/Sh)(4) Awards($) Grant Date Date Threshold ($) Target ($) Probable Cap Options (#)(4) ($/Sh)(5) Awards($) (a) (b) (c) (d) (e) (f) (g) (h) Jonathan E. Michael 02/01/13 05/03/12 30,000 33.24 200,550 05/02/13 05/02/13 20,000 34.42 129,400 (a) (b) (c) (d) (e) (f) (g) (h) Jonathan E. Michael 02/01/11 05/06/10 8,500 50.28 05/05/11 05/05/11 15,000 53.73 08/01/13 05/02/13 20,000 40.27 168,200 08/01/11 05/05/11 15,000 57.62 11/01/13 05/02/13 20,000 45.55 189,400 11/01/11 05/05/11 15,000 62.59 N/A 0 2,636,193 3,628,443 7,500,000 N/A 0 2,230,033 2,972,533 7,500,000 Michael J. Stone 02/01/11 05/06/10 6,000 50.28 02/01/13 05/03/12 16,000 33.24 106,960 05/05/11 05/05/11 8,000 53.73 05/02/13 05/02/13 16,000 34.42 103,520 08/01/11 05/05/11 8,000 57.62 08/01/13 05/02/13 16,000 40.27 134,560 11/01/11 05/05/11 8,000 62.59 11/01/13 05/02/13 16,000 45.55 151,520 N/A 0 1,385,363 1,855,613 7,500,000 N/A 0 1,690,461 2,351,961 7,500,000 Joseph E. Dondanville 02/01/11 05/06/10 4,000 50.28 Thomas L. Brown 05/02/13 05/02/13 40,000 34.42 258,800 05/05/11 05/05/11 4,000 53.73 N/A 0 544,438 911,938 7,500,000 08/01/11 05/05/11 4,000 57.62 Craig W. Kliethermes 05/02/13 05/02/13 40,000 34.42 258,800 11/01/11 05/05/11 4,000 62.59 N/A 0 752,976 1,120,476 7,500,000 N/A 0 915,987 1,225,362 7,500,000 Thomas L. Brown 10/03/11 08/18/11 0 66,172 99,257 99,257 10,000 56.50 Craig W. Kliethermes 05/05/11 05/05/11 18,000 53.73 N/A 0 412,913 567,600 7,500,000 Daniel O. Kennedy 05/05/11 05/05/11 10,000 53.73 05/02/13 05/02/13 20,000 34.42 129,400 N/A 0 155,000 232,500 232,500 N/A 0 164,250 246,375 246,375 (1)The option numbers, market value and exercise price have been adjusted for the two-for-one stock split that occurred on January 15, 2014. (2)The MVP Program does not provide for specific threshold awards and the amounts shown in column (c) are therefore zero. If in a given year the Company’s performance results in a negative MVP calculation such that it reduces a participant’s MVP Program “bank balance” to zero or below, no MVP Program incentive payment would be made for that year. For Messrs. Michael, Kliethermes, Stone and Brown, the amounts shown in column (d) reflect the potential payouts for 2013 under the MVP Program, which is discussed in further detail on pages 28 and 30-32. The MVP Program does not utilize express target amounts, either individually or in the aggregate, and thus the identified amounts were determined based on reference to 2013 corporate objectives affecting MVP, which results in an aggregate MVP level of $75 million. The amounts shown in column (e) reflect probable maximum payouts assuming $150 million in MVP was created. The probable maximum level of $150 million of MVP created was selected based on the maximum MVP created by the Company in prior years and an assessment of possible operational and investment outcomes. The cap of $7.5 million shown in column (e) represents the maximum incentive award permitted under the RLI Corp. Annual Incentive Compensation Plan approved by shareholders in 2011, which governs the MVP Program. (3)For Mr. Kennedy, the amounts shown in column (c) represent the minimum award under the MIP, discussed in further detail on page 30, which is equal to 0 if personal objectives and financial goals are not met; column (d) represents the target award which is equal to 50 percent of his annual base salary rate at year-end; and column (e) represents the maximum award and cap which is equal to 75 percent of his annual base salary at year-end. (4)Twenty percent of each option grant becomes exercisable one year after the date of the grant and each year thereafter in 20 percent increments. Options granted prior to May 2009 expire on the tenth anniversary of the grant date. Options granted in May 2009 and later expire on the eighth anniversary of the grant date. The 2013 grants were granted pursuant RLI Corp. to the LTIP. The stock option grants vest upon the death or the termination of employment of a stock option recipient due to disability or retirement. Retirement is defined as termination of employment of an employee with combined age and years of service of 75 or greater. Under FASB ASC Topic 718, option awards to recipients who are current employees, but who qualify for retirement upon departure from the Company, must be expensed at the time of grant, rather than over the five-year vesting period. Because Messrs. Michael OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth information with respect to the named executive officers regarding the outstanding stock option awards as of December 31, Option Awards Option Awards Number of Number of Equity Incentive Plan Awards: Number of Number of Equity Incentive Plan Awards: Securities Underlying Securities Underlying Number of Securities Option Securities Underlying Securities Underlying Number of Securities Option Unexercised Options (#) Unexercised Options (#) Underlying Unexercised Option Expiration Unexercised Options (#) Unexercised Options (#) Underlying Unexercised Option Expiration Name Exercisable(1) Unexercisable(1) Unearned Options (#) Exercise Price(2) Date Exercisable(1) Unexercisable(1) Unearned Options (#) Exercise Price(2) Date (a) (b) (c) (d) (e) (f) (b) (c) (d) (e) (f) Jonathan E. Michael 45,000 32.54 05/05/15 21,000 17.02 11/03/16 10,500 38.15 05/04/16 21,000 18.11 02/02/17 10,500 35.44 08/04/16 21,000 18.05 05/03/17 10,500 42.04 11/03/16 21,000 18.34 08/03/17 8,400 2,100 44.21 02/02/17 21,000 18.02 11/02/17 8,400 2,100 44.09 05/03/17 21,000 17.71 02/01/18 8,400 2,100 44.67 08/03/17 21,000 17.18 08/01/18 8,400 2,100 44.03 11/02/17 21,000 18.37 11/03/18 6,300 4,200 43.41 02/01/18 16,800 4,200 18.45 02/02/19 6,300 4,200 38.00 05/01/18 0 3,900 13.45 05/07/17 6,300 4,200 42.36 08/01/18 3,900 3,900 15.25 08/03/17 6,300 4,200 44.73 11/03/18 3,900 3,900 14.95 11/02/17 4,200 6,300 44.89 02/02/19 11,700 7,800 15.81 02/01/18 3,900 5,850 34.90 05/07/17 10,200 6,800 18.17 05/06/18 3,900 5,850 38.49 08/03/17 10,200 6,800 18.10 08/02/18 3,900 5,850 37.90 11/02/17 10,200 6,800 18.63 11/01/18 1,950 7,800 39.62 02/01/18 6,800 10,200 21.14 02/01/19 1,700 6,800 44.34 05/06/18 12,000 18,000 22.87 05/05/19 1,700 6,800 44.20 08/02/18 12,000 18,000 24.81 08/01/19 1,700 6,800 45.26 11/01/18 12,000 18,000 27.30 11/01/19 8,500 50.28 02/01/19 6,000 24,000 32.31 02/01/20 15,000 53.73 05/05/19 6,000 24,000 30.35 05/03/20 15,000 57.62 08/01/19 6,000 24,000 27.63 08/01/20 15,000 62.59 11/01/19 6,000 24,000 29.92 11/01/20 0 30,000 33.24 02/01/21 Michael J. Stone 25,200 6,300 44.09 05/03/17 20,400 13,600 38.00 05/01/18 0 20,000 34.42 05/02/21 19,200 34.90 05/07/17 0 20,000 40.27 08/01/21 1,200 4,800 44.34 05/06/18 0 20,000 45.55 11/01/21 1,200 4,800 44.20 08/02/18 1,200 4,800 45.26 11/01/18 6,000 50.28 02/01/19 8,000 53.73 05/05/19 8,000 57.62 08/01/19 8,000 62.59 11/01/19 Option Awards Option Awards Number of Number of Equity Incentive Plan Awards: Number of Number of Equity Incentive Plan Awards: Securities Underlying Securities Underlying Number of Securities Option Securities Underlying Securities Underlying Number of Securities Option Unexercised Options (#) Unexercised Options (#) Underlying Unexercised Option Expiration Unexercised Options (#) Unexercised Options (#) Underlying Unexercised Option Expiration Name Exercisable(1) Unexercisable(1) Unearned Options (#) Exercise Price(2) Date Exercisable(1) Unexercisable(1) Unearned Options (#) Exercise Price(2) Date (a) (b) (c) (d) (e) (f) (b) (c) (d) (e) (f) Joseph E. Dondanville 10,000 32.54 11/01/14 17,500 38.15 11/01/14 18,000 44.09 11/01/14 Michael J. Stone 0 12,800 13.45 05/07/17 5,000 38.00 11/01/14 7,200 4,800 18.17 05/06/18 5,000 42.36 11/01/14 7,200 4,800 18.10 08/02/18 5,000 44.73 11/01/14 7,200 4,800 18.63 11/01/18 5,000 44.89 11/01/14 4,800 7,200 21.14 02/01/19 4,700 34.90 11/01/14 6,400 9,600 22.87 05/05/19 4,700 38.49 11/01/14 6,400 9,600 24.81 08/01/19 4,700 37.90 11/01/14 6,400 9,600 27.30 11/01/19 4,700 39.62 11/01/14 3,200 12,800 32.31 02/01/20 4,000 44.34 11/01/14 3,200 12,800 30.35 05/03/20 4,000 44.20 11/01/14 3,200 12,800 27.63 08/01/20 4,000 45.26 11/01/14 3,200 12,800 29.92 11/01/20 4,000 50.28 11/01/14 0 16,000 33.24 02/01/21 4,000 53.73 11/01/14 0 16,000 34.42 05/02/21 4,000 57.62 11/01/14 0 16,000 40.27 08/01/21 4,000 62.59 11/01/14 0 16,000 45.55 11/01/21 Thomas L. Brown 10,000 56.50 10/03/19 4,000 12,000 24.25 10/03/19 7,200 28,800 30.35 05/03/20 0 40,000 34.42 05/02/21 Craig W. Kliethermes 7,200 1,800 44.09 05/03/17 22,000 0 15.00 05/01/18 0 5,600 13.45 05/07/17 6,600 4,400 38.00 05/01/18 15,600 10,400 18.17 05/06/18 2,900 8,400 34.90 05/07/17 14,400 21,600 22.87 05/05/19 2,600 10,400 44.34 05/06/18 7,200 28,800 30.35 05/03/20 18,000 53.73 05/05/19 0 40,000 34.42 05/02/21 Daniel O. Kennedy 1,800 44.09 05/03/17 0 4,120 13.45 05/07/17 4,400 38.00 05/01/18 0 7,040 18.17 05/06/18 6,180 34.90 05/07/17 0 12,000 22.87 05/05/19 7,040 44.34 05/06/18 4,000 16,000 30.35 05/03/20 10,000 53.73 05/05/19 0 20,000 34.42 05/02/21 (1)These grants are included in column (f) of the Summary Compensation Table on page 38 and do not constitute additional compensation from what is reported there. Options vest 20 percent per year over five years; options granted prior to May 2009 expire on the 10th anniversary of the grant date; options granted from and after May 2009 expire on the eighth anniversary of the grant date. (2)Option exercise price adjusted to reflect $7.00 special dividend paid December 29, 2010, $5.00 special dividend paid December 20, 2011, $5.00 special dividend paid December 20, 2012, and $3.00 special dividend paid December 20, 2013. RLI Corp. 2014 Proxy Statement OPTION EXERCISES AND STOCK VESTED The following table sets forth information with respect to the named executive officers regarding the exercise of options during the last fiscal year Option Awards Number of Shares Value Realized Name Acquired on Exercise (#) on Exercise ($) (a) (b) (c) Jonathan E. Michael 96,000 4,780,544 Michael J. Stone 78,300 4,223,663 Thomas L. Brown 2,000 40,100 Craig W. Kliethermes 17,500 975,175 Daniel O. Kennedy 17,840 826,592 Option Awards Stock Awards Number of Shares Value Realized Number of Shares Value Realized Name Acquired on Exercise (#) on Exercise ($) Acquired on Vesting (#) on Vesting ($) (a) (b) (c) (d) (e) Jonathan E. Michael 120,001 $4,164,037 Michael J. Stone 90,300 $2,361,939 Joseph E. Dondanville 53,000 $1,441,300 Craig W. Kliethermes 7,700 $239,071 Daniel O. Kennedy 32,927 $891,171 NON-QUALIFIED DEFERRED COMPENSATION The following table sets forth information on the non-qualified deferred compensation for the named executive officers in Executive Contributions Aggregate Earnings Aggregate Balance in Last FY in Last FY at Last FYE Name ($) ($)(1)(2) ($) (a) (b) (c) (d) Jonathan E. Michael – $1,584,131 $4,700,809 Michael J. Stone – $558,475 $1,657,232 Joseph E. Dondanville – $274,765 $815,344 Thomas L. Brown Craig W. Kliethermes $30,531 $119,128 $360,721 Daniel O. Kennedy $4,000 $11,907 $36,148 Executive Contributions Aggregate Earnings Aggregate Balance in Last FY in Last FY at Last FYE Name ($) ($)(1)(2) ($) (a) (b) (c) (d) Jonathan E. Michael - 2,649,080 7,226,348 Michael J. Stone - 933,993 2,547,808 Thomas L. Brown 80,783 29,422 110,205 Craig W. Kliethermes 20,000 229,575 630,815 Daniel O. Kennedy - 20,372 55,573 (1) The amounts shown in column (c) for Mr. Michael reflect the dividends paid on, and change in the value of, Company shares held in his accounts under the Deferred Plan, which is described in further detail (2) The amounts shown for Messrs. Stone, SAFEGUARDS AGAINST UNNECESSARY OR EXCESSIVE RISK Management of the Company, including leaders in legal and human resources, undertook analysis of the Company’s compensation structure considering the Company’s compensation policies and practices with respect to the named executive officers, as well as the other employees of the Company, to determine whether incentives arising from compensation policies or practices relating to any of the Company’s employees would be reasonably likely to have a material adverse effect on the Company. This analysis was reviewed and discussed by the ERC and Audit Committee. Based on the analysis and discussions, the ERC and management concluded that the Company’s compensation policies and practices do not create risks reasonably likely to have a material adverse effect on the Company, and again confirmed that the mix of compensation types and time frames tend to align risk-taking with appropriate medium and long-term rewards for the Company. The following is a discussion of how the Company’s compensation policies and practices for its employees will affect risk management practices and risk-taking incentives. The Company is in the business of insurance and therefore takes on the risk of others in return for appropriate premiums. The Company is therefore particularly sensitive to matching the annual incentives it pays to its employees with the long-term risk and value created by the insurance business it writes. The following discussion is broken into four areas: (1) Senior Management Compensation; (2) Underwriting Compensation; (3) Investment Compensation; and (4) Employee and Executive Equity Ownership. SENIOR MANAGEMENT COMPENSATION The Company’s CEO, COO, CFO and creation used to determine incentive awards. The first is a banking feature that deposits The second is a peer company adjustment factor applicable to the financial component of an MVP Program award that rates the relative performance of the Company to that of its peer group with respect to growth in book value over a five-year period. The The ERC believes that the risk-based cost of capital target, long-term banking feature, peer company adjustment factor for five-year growth in book value and Board approval limit provision in the MVP Program significantly reduce the likelihood that senior management will take high-risk actions solely to improve short-term financial results to the detriment of long-term performance. Underwriters are paid annual incentives under one of two annual incentive programs, the Underwriter Profit Program (“UPP”) or the Underwriter Incentive Plan (“UIP”). Participants in UPP, product group executives with oversight responsibility for respective product group underwriting, earn an annual incentive equal to a percentage of underwriting profit created. All other underwriters at the Company participate in UIP. UIP provides incentives based on specific performance factors such as individual and product group loss ratio, underwriting profit, combined ratio, gross written premium and new business generation. To calculate underwriting profit for purposes of UPP and UIP, actual and estimated losses are subtracted from net premiums to ensure that the annual incentives based on underwriting profit reflect losses that occur over several years. For most products, actual and estimated losses are measured over a four to eight-year period. Over that four to eight-year period, only a partial RLI Corp. 2014 Proxy Statement The ERC believes that the following controls protect the Company against the Company taking excessive and unnecessary risk to maximize short-term investment results: · The Company’s investment portfolio is managed pursuant to the oversight of the Finance and Investment Committee of the Board (FIC); · The FIC has established an Investment Policy Statement setting forth detailed investment objectives, benchmarks, constraints and operating policies for the portfolio; · All security transactions must be approved by three Company officers; and · All investment actions must comply with state insurance regulatory provisions related to the investments in the portfolio. EMPLOYEE AND EXECUTIVE EQUITY OWNERSHIP Finally, the Company has a long-standing employee ownership culture, reflected by its ESOP implemented in 1975. The ownership culture creates strong alignment between the interests of employees and shareholders to foster a long-term shareholder value creation perspective. To further support the employee ownership culture, the ERC has designed the executive compensation program to provide equity-based long-term incentives and has implemented a stock ownership guideline requiring significant levels of stock ownership for key executives, described in detail at page BOARD’S ROLE IN RISK OVERSIGHT The Board’s risk oversight is accomplished both at the full Board level and through its committee structure. The full Board discusses and considers risk management issues at each of its meetings. The Board will adjust its practices with respect to risk management oversight when it determines it needs to do so and will involve itself in particular areas or business circumstances where its proper exercise of oversight demands it. The Board’s role in risk oversight is consistent with the Company’s leadership structure, with the Chief Executive Officer and other members of senior management having responsibility for assessing and managing the Company’s risk exposure, and the Board and its committees providing oversight in connection with these efforts. The individual Committee responsibilities with respect to risk oversight are included in their respective Charters. The Audit Committee generally oversees overall enterprise risk management, risk profile and risk assessment. The Audit Committee has sole authority to retain and compensate outside auditors and reviews and monitors loss reserves, among other activities. The Company’s Vice President, Internal Audit reports jointly to Mr. Michael, administratively, and EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of December 31, Number of securities Number of securities remaining available for to be issued upon exercise Weighted-average exercise future issuance under equity of outstanding options, price of outstanding options, compensation plans (excluding Plan Category warrants and rights warrants and rights securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by shareholders (1) 1,280,866(2) $43.23 1,510,452 (3) Equity compensation plans not approved by shareholders (4) – – (5) Total 1,280,866 $43.23 1,510,452 Number of securities Number of securities remaining available for to be issued upon exercise Weighted-average exercise future issuance under equity of outstanding options, price of outstanding options, compensation plans (excluding Plan Category warrants and rights warrants and rights securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by shareholders (1) 2,595,084(2) $26.04 1,762,924(3) Equity compensation plans not approved by shareholders (4) - - (5) Total 2,595,084 $26.04 1,762,924 (1) Consists of the (2) Includes options to purchase (3) Shares available for future issuance under the LTIP. (4) Consists of the Deferred Plan and the Deferred Agreement. (5) No specific number of shares of the Company’s Common Stock are reserved for future issuance under these plans. Under the Company’s Deferred Plan and Deferred Agreement, executive officers and directors may elect to defer compensation otherwise payable to them. Under the Deferred Plan and Deferred Agreement, the Company must transfer to a bank trustee, under an irrevocable trust established by the Company, such number of shares of Common Stock as are equal to the compensation earned and deferred. To be included in the Company’s Proxy Statement for the The Pursuant to our By-Laws, in order for a shareholder to nominate a Board candidate at Company shareholder meetings, such nomination must be submitted in writing to the Company no later than 90 days prior to the anniversary of the previous year’s annual shareholder meeting or 10 days after public disclosure of any special meeting of shareholders. The notice must provide information regarding (a) the proposed Board nominee(s), (b) the person making the nomination (proponent), (c) share ownership by the nominee(s) and the proponent, (d) arrangements between the proponent and the nominee(s) RLI Corp. 2014 Proxy Statement Proposals and business desired to be brought by shareholders at Company shareholder meetings (other than director nominations) must be submitted in writing to the Company no later than 90 days prior to the anniversary of the previous year’s annual shareholder meeting or 10 days after public disclosure of any special meeting of shareholders. The notice must provide information regarding (a) the nature of the proposed business, (b) the shareholder and its Company stock ownership, (c) certain relationships and arrangements involving the shareholder and other parties and (d) certain arrangements involving the shareholder and the Company’s stock. The shareholder must also make certain representations, including updating the information provided in the notice and other matters. Therefore, in order for a shareholder to nominate a candidate for director or raise another matter at the January 31, 2015. These descriptions are summaries only, and for the complete provisions, The Board of Directors knows of no other business to be presented at the Annual Meeting; however, if any other matters do properly come before the meeting, it is intended that the persons appointed as proxies will vote in accordance with their best judgment. It is important that proxies be voted promptly so the presence of a quorum may be assured well in advance of the Annual Meeting, thus avoiding the expense of follow-up solicitations. Accordingly, even if you expect to attend the Annual Meeting, you are requested to By Order of the Board of Directors Daniel O. Kennedy Vice President, General Counsel & Corporate Secretary Peoria, Illinois March 20, 2014 The As a convenience, RLI shareholders may vote their proxies via the Internet at http://www.proxyvote.com. Instructions are in your E-Proxy Notice or in the proxy card that you receive. Registered shareholders may sign up to access Shareholders of record with requests concerning individual account balances, stock certificates, dividends, stock transfers, tax information or address corrections should contact the Company’s transfer agent and registrar: Wells Fargo Shareholder Services P.O. Box 64854 St. Paul, MN 55164-0854 Phone: 800-468-9716 or 651-450-4064 Fax: 651-450-4033 Email: stocktransfer@wellsfargo.com If you wish to sign up for an automatic dividend reinvestment and stock purchase plan or to have your dividends deposited directly into your checking, savings or money market accounts, send your request to the transfer agent and registrar. REQUESTS FOR ADDITIONAL INFORMATION Electronic versions of the following documents are available on our website: MULTIPLE SHAREHOLDERS HAVING THE SAME ADDRESS If you and other residents at your mailing address own shares of common stock “in street name,” your broker or bank may have sent you a notice that your household will receive only one copy of our For investor relations requests and management’s perspective on specific issues, contact Aaron Jacoby, Vice President, Corporate Development at 309-693-5880 or at aaron.jacoby@rlicorp.com. Our corporate website is www.rlicorp.com (Information on the website is not incorporated by reference into this Proxy Statement.) RLI Corp. 2014 Proxy Statement 9025 N. LINDBERGH DRIVE P: 309-692-1000 www.rlicorp.com *** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Proxy Materials Available to VIEW or RECEIVE: NOTICE AND PROXY STATEMENT ANNUAL REPORT How to View Online: Have the information that is printed in the box marked by the arrow (located on the following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET: www.proxyvote.com 2) BY TELEPHONE: 1-800-579-1639 3) BY E-MAIL*: sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow (located on the following page) in the subject line. . XXXX XXXX XXXX . XXXX XXXX XXXX Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April Voting Items The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) Kaj Ahlmann 02) Barbara R. Allen 03) Michael E. Angelina 04) John T. Baily *** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Proxy Materials Available to VIEW or RECEIVE: NOTICE AND PROXY STATEMENT ANNUAL REPORT How to View Online: Have the information that is printed in the box marked by the arrow (located on the following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET: www.proxyvote.com 2) BY TELEPHONE: 1-800-579-1639 3) BY E-MAIL*: sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow (located on the following page) in the subject line. . XXXX XXXX XXXX . XXXX XXXX XXXX Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) Kaj Ahlmann 02) Barbara R. Allen 03) Michael E. Angelina 04) John T. Baily RLI CORP. 9025 NORTH LINDBERGH DRIVE PEORIA, IL 61615 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. Signature (Joint Owners) Date Signature [PLEASE SIGN WITHIN BOX] Date VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report & Notice and Proxy Statement are available at www.proxyvote.com. RLI CORP. 9025 NORTH LINDBERGH DRIVE PEORIA, IL 61615 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 P.M. Eastern Time, Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report & Notice and Proxy Statement are available at www.proxyvote.com. |