RLI (RLI) 10-Q 26 Jul 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 14, 2017
Document and Entity Information
Entity Registrant Name	RLI CORP
Entity Central Index Key	84,246
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		44,046,316
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2

Consolidated Statements of Earn

Consolidated Statements of Earnings and Comprehensive Earnings - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
Net premiums earned	$ 184,331	$ 180,226	$ 367,616	$ 357,144
Net investment income	13,238	13,048	26,243	26,418
Net realized gains (losses)	(1,359)	2,710	1,355	14,110
Other-than-temporary-impairment (OTTI) losses on investments			(2,090)
Consolidated revenue	196,210	195,984	393,124	397,672
Losses and settlement expenses	90,347	80,277	183,737	161,448
Policy acquisition costs	60,695	60,521	124,198	122,764
Insurance operating expenses	13,546	13,412	26,881	25,612
Interest expense on debt	1,857	1,856	3,713	3,713
General corporate expenses	2,535	2,768	5,860	5,143
Total expenses	168,980	158,834	344,389	318,680
Equity in earnings of unconsolidated investees	6,806	5,191	11,744	8,942
Earnings before income taxes	34,036	42,341	60,479	87,934
Income tax expense:
Total tax expense	7,828	13,264	14,443	27,464
Net earnings	26,208	29,077	46,036	60,470
Other comprehensive earnings, net of tax	10,599	19,066	22,368	40,829
Comprehensive earnings	$ 36,807	$ 48,143	$ 68,404	$ 101,299
Basic:
Net earnings per share (in dollars per share)	$ 0.60	$ 0.67	$ 1.05	$ 1.39
Comprehensive earnings per share (in dollars per share)	0.84	1.10	1.56	2.32
Diluted:
Net earnings per share (in dollars per share)	0.59	0.65	1.03	1.36
Comprehensive earnings per share (in dollars per share)	$ 0.83	$ 1.08	$ 1.54	$ 2.28
Weighted average number of common shares outstanding
Basic (in shares)	44,005	43,721	43,983	43,659
Diluted (in shares)	44,519	44,423	44,517	44,381
Cash dividends paid per common share	$ 0.21	$ 0.20	$ 0.41	$ 0.39

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Fixed income:
Available-for-sale, at fair value (amortized cost - $1,621,451 at 6/30/17 and $1,596,227 at 12/31/16)	$ 1,651,657	$ 1,605,209
Equity securities available-for-sale, at fair value (cost - $193,052 at 6/30/17 and $187,573 at 12/31/16	387,802	369,219
Short-term investments, at cost which approximates fair value	18,057	5,015
Other invested assets	25,310	24,115
Cash	21,355	18,269
Total investments and cash	2,104,181	2,021,827
Accrued investment income	15,204	14,593
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $16,075 at 6/30/17 and $15,981 at 12/31/16	133,171	126,387
Ceded unearned premium	52,654	52,173
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $10,467 at 6/30/17 and $10,699 at 12/31/16	280,568	288,224
Deferred policy acquisition costs	76,276	73,147
Property and equipment, at cost, net of accumulated depreciation of $44,999 at 6/30/17 and $41,999 at 12/31/16	56,547	54,606
Investment in unconsolidated investees	84,032	72,240
Goodwill and intangibles	60,582	64,371
Other assets	18,367	10,065
TOTAL ASSETS	2,881,582	2,777,633
Liabilities:
Unpaid losses and settlement expenses	1,183,185	1,139,337
Unearned premiums	436,477	433,777
Reinsurance balances payable	22,216	17,928
Funds held	75,152	72,742
Income taxes - deferred	79,868	64,494
Bonds payable, long-term debt	148,835	148,741
Accrued expenses	35,130	51,992
Other liabilities	22,985	25,050
TOTAL LIABILITIES	2,003,848	1,954,061
Shareholders' Equity
Common stock ($1 par value, authorized 100,000,000 shares, issued 66,976,530 shares at 6/30/17 and 66,874,911 shares at 12/31/16, and outstanding 44,046,316 shares at 6/30/17 and 43,944,697 shares at 12/31/16)	66,977	66,875
Paid-in capital	233,471	229,779
Accumulated other comprehensive earnings	144,978	122,610
Retained earnings	825,307	797,307
Deferred compensation	7,642	11,496
Less: Treasury shares at cost (22,930,214 shares at 6/30/17 and 12/31/16)	(400,641)	(404,495)
TOTAL SHAREHOLDERS’ EQUITY	877,734	823,572
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 2,881,582	$ 2,777,633

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Condensed Consolidated Balance Sheets
Available-for-sale, amortized cost	$ 1,621,451	$ 1,596,227
Equity securities available-for-sale, cost	193,052	187,573
Premiums and reinsurance balances receivable, allowances for uncollectible amounts	16,075	15,981
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts	10,467	10,699
Property and equipment, accumulated depreciation	$ 44,999	$ 41,999
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	66,976,530	66,874,911
Common stock, shares outstanding (in shares)	44,046,316	43,944,697
Treasury stock, shares (in shares)	22,930,214	22,930,214

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Condensed Consolidated Statements of Cash Flows
Net cash provided by operating activities	$ 74,570	$ 69,571
Cash Flows from Investing Activities
Investments purchased	(207,963)	(296,684)
Investments sold	110,679	195,185
Investments called or matured	56,501	58,517
Net change in short-term investments	(10,995)	12,627
Net property and equipment purchased	(5,372)	(8,574)
Acquisition of agency	(92)	(850)
Net cash provided by (used in) investing activities	(57,242)	(39,779)
Cash Flows from Financing Activities
Cash dividends paid	(18,036)	(17,033)
Proceeds from stock option exercises	(3,794)	(807)
Excess tax benefit from exercise of stock options		4,992
Net cash used in financing activities	(14,242)	(11,234)
Net increase in cash	3,086	18,558
Cash at the beginning of the period	18,269	11,081
Cash at the end of the period	$ 21,355	$ 29,639

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. BASIS OF PRESENTATION The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2016 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at June 30, 2017 and the results of operations of RLI Corp. and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2016 to conform to the classifications used in the current year. The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates. B. ADOPTED ACCOUNTING STANDARDS ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ASU 2016-09 was issued to simplify the accounting for share-based payment awards. The guidance requires that, prospectively, all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to excess tax benefits being recognized in additional paid-in-capital under the previous guidance. The ASU also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. This change is required to be applied on a modified retrospective basis, with a cumulative-effect adjustment to opening retained earnings. Additionally, all tax related cash flows resulting from share-based payments are to be reported as operating activities on the statement of cash flows, a change from the previous requirement to present tax benefits as an inflow from financing activities and an outflow from operating activities. Finally, entities will be allowed to withhold an amount up to the employees’ maximum individual tax rate (as opposed to the minimum statutory tax rate) in the relevant jurisdiction without resulting in liability classification of the award. The change in withholding requirements will be applied on a modified retrospective approach. We adopted ASU 2016-09 on January 1, 2017. The guidance’s primary impact on our financial statements relates to the provision concerning the recognition of tax effects through the income statement in 2017 and forward. Excess tax benefits of $0.4 million and $2.8 million were recognized in the first and second quarters of 2017, respectively, as a reduction to income tax expense rather than as an increase to additional paid-in-capital. The future impact to our income statement will vary depending upon the level of intrinsic value associated with option exercises in a particular period. Additionally, the changes in cash flow presentation resulted in $3.2 million more operating cash flows and $3.2 million less financing cash flows for the six month period ended June 30, 2017 than would have been recognized under the previous guidance. We have historically estimated the number of forfeitures as part of our option valuation process and will continue to do so under the new guidance. As no aspect of the guidance that requires retrospective adoption impacted the Company, no prior period adjustments were made. ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ASU 2017-04 was issued to simplify the subsequent measurement of goodwill. This update changes the impairment test by requiring an entity to compare the fair value of a reporting unit with its carrying amount as opposed to comparing the carrying amount of goodwill with its implied fair value. We adopted ASU 2017-04 during the second quarter of 2017 to coincide with the annual testing of our energy surety, small commercial and miscellaneous and contract surety reporting units. As most of RLI’s assets and liabilities associated with a reporting unit are measured at fair value, the impact of measuring the impairment at the reporting unit level rather than at the goodwill asset level was believed to be minimal. C. PROSPECTIVE ACCOUNTING STANDARDS ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities This ASU was issued to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to GAAP as follows: a. Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; b. Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; c. Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; d. Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; e. Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; f. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and g. Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is only permitted for provision (e) above. Upon adoption, a cumulative-effect adjustment to the balance sheet will be made as of the beginning of the fiscal year of adoption. The primary impact this guidance will have on our financial statements relates to the provision requiring the recognition of changes in the fair value of equity securities through the income statement rather than through other comprehensive income. The impact to our income statement will vary depending upon the level of volatility in the performance of the securities held in our equity portfolio and the overall market. ASU 2016-02, Leases (Topic 842) ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. We currently have approximately $30 million of undiscounted future lease liabilities that would have to be added to the balance sheet with a corresponding right-of-use asset if the guidance were applicable on June 30, 2017. We do not expect that there will be a materially different annual rental expense upon adoption. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Current GAAP delays the recognition of credit losses until it is probable a loss has been incurred. The update will require a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale securities is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through an irreversible write-down. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. Upon adoption, the update will be applied using the modified-retrospective approach, by which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period presented. We do not have any assets measured at amortized cost that would be impacted by this update. Additionally, as our fixed income portfolio is weighted towards higher rated bonds (82.7 percent rated A or better at June 30, 2017), we do not expect that credit loss on our available-for-sale debt securities will be material. ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ASU 2016-15 was issued to reduce the diversity in practice of how certain cash receipts and payments, for which current guidance is silent, are classified in the statement of cash flows. The update addresses eight specific issues, including contingent consideration payments made after a business combination, distributions received from equity method investees and the classification of cash receipts and payments that have aspects of more than one class of cash flows. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. Upon adoption, the update will be applied using the retrospective transition method. We do not expect a material impact on our statement of cash flows. D. INTANGIBLE ASSETS In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangible assets totaled $60.6 million and $64.4 million at June 30, 2017 and December 31, 2016, respectively, as detailed in the following table. Goodwill and Intangible Assets (in thousands) June 30, December 31, Reporting Unit 2017 2016 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Medical professional liability * 3,595 5,208 Total goodwill $ 49,657 $ 51,270 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $4,077 at 6/30/17 and $5,546 at 12/31/16 3,425 5,601 Total intangibles $ 10,925 $ 13,101 Total goodwill and intangibles $ 60,582 $ 64,371 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $8.8 million and $7.2 million as of June 30, 2017 and December 31, 2016, respectively. All definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets was $0.2 million for the second quarter of 2017 and $0.4 million for the six-month period ended June 30, 2017, compared to $0.2 million for the second quarter of 2016 and $0.5 million for the six-month period ended June 30, 2016. Annual impairment testing was performed on our energy surety goodwill, miscellaneous and contract surety goodwill, small commercial goodwill and state insurance license indefinite-lived intangible asset during the second quarter of 2017. Based upon these reviews, none of the assets were impaired. In addition, as of June 30, 2017, there were no triggering events that would suggest an updated review was necessary on the above mentioned goodwill and intangible assets. As previously disclosed for our medical professional liability reporting unit, rate and volume declines coupled with adverse loss experience resulted in a triggering event during the second quarter of 2016. A fair value was determined by using a weighted average of a market approach and income approach (or discounted cash flow method) valuation. It was determined that the carrying cost of our medical professional liability goodwill exceeded the fair value, resulting in a $7.2 million non-cash impairment charge. Further adverse loss experience triggered the need to test the medical professional liability reporting unit during the second quarter of 2017, resulting in an additional $3.4 million non-cash impairment charge. A fair value for the medical professional liability reporting unit’s agency relationships, carried as a definite-lived intangible, was determined by using a discounted cash flow valuation. The carrying value exceeded the fair value, resulting in a $1.8 million non-cash impairment charge. Similar to in 2016, a fair value for the medical professional liability reporting unit’s goodwill was determined by using a weighted average of a market approach and discounted cash flow valuation. The carrying value exceeded the fair value, resulting in a $1.6 million non-cash impairment charge. All impairment charges were recorded as net realized losses in the respective period’s consolidated statement of earnings. E. EARNINGS PER SHARE Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements. For the Three-Month Period For the Three-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 26,208 44,005 $ 0.60 $ 29,077 43,721 $ 0.67 Effect of Dilutive Securities Stock options - 514 - 702 Diluted EPS Income available to common shareholders $ 26,208 44,519 $ 0.59 $ 29,077 44,423 $ 0.65 For the Six-Month Period For the Six-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 46,036 43,983 $ 1.05 $ 60,470 43,659 $ 1.39 Effect of Dilutive Securities Stock options - 534 - 722 Diluted EPS Income available to common shareholders $ 46,036 44,517 $ 1.03 $ 60,470 44,381 $ 1.36 F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus unrealized gains and losses on our available-for-sale investment securities, net of tax. In reporting comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 35 percent. Unrealized gains, net of tax, for the first six months of 2017 were $22.4 million, compared to $40.8 million during the same period last year. Unrealized gains in the first six months of 2017 were led by increases in the fixed income portfolio due to slight declines in interest rates since year-end 2016, followed by positive pricing movements in equity securities. In 2016, larger unrealized gains were the result of sharper declines in interest rates, while the equity portfolio experienced a similar amount of unrealized change as 2017. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the unaudited condensed consolidated interim financial statements. (in thousands) For the Three-Month Periods For the Six-Month Periods Ended June 30, Ended June 30, Unrealized Gains/Losses on Available-for-Sale Securities 2017 2016 2017 2016 Beginning balance $ 134,379 $ 145,537 $ 122,610 $ 123,774 Other comprehensive earnings before reclassifications 11,753 25,561 23,925 54,731 Amounts reclassified from accumulated other comprehensive earnings (1,154) (6,495) (1,557) (13,902) Net current-period other comprehensive earnings $ 10,599 $ 19,066 $ 22,368 $ 40,829 Ending balance $ 144,978 $ 164,603 $ 144,978 $ 164,603 The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month For the Six-Month Component of Accumulated Periods Ended June 30, Periods Ended June 30, Affected line item in the Other Comprehensive Earnings 2017 2016 2017 2016 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 1,775 $ 9,992 $ 4,485 $ 21,388 Net realized gains - - (2,090) - Other-than-temporary impairment (OTTI) losses on investments $ 1,775 $ 9,992 $ 2,395 $ 21,388 Earnings before income taxes (621) (3,497) (838) (7,486) Income tax expense $ 1,154 $ 6,495 $ 1,557 $ 13,902 Net earnings

INVESTMENTS

INVESTMENTS	6 Months Ended
	Jun. 30, 2017
INVESTMENTS
INVESTMENTS	2. INVESTMENTS Our investments are primarily composed of fixed income debt securities and common stock equity securities. As disclosed in our 2016 Annual Report on Form 10-K, we present all of our investments as available-for-sale, which are carried at fair value. When available, we obtain quoted market prices to determine fair value for our investments. If a quoted market price is not available, fair value is estimated using a secondary pricing source or using quoted market prices of similar securities. We have no investment securities for which fair value is determined using Level 3 inputs as defined in note 3 to the unaudited condensed consolidated interim financial statements, “Fair Value Measurements.” Available-for-Sale Securities The amortized cost and fair value of available-for-sale securities at June 30, 2017 and December 31, 2016 were as follows: Available-for-sale (in thousands) June 30, 2017 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 82,090 $ 195 $ (345) $ 81,940 U.S. agency 5,475 346 - 5,821 Non-U.S. govt. & agency 9,504 121 (170) 9,455 Agency MBS 289,628 4,261 (2,908) 290,981 ABS/CMBS* 79,561 688 (372) 79,877 Corporate 525,377 13,448 (2,406) 536,419 Municipal 629,816 19,291 (1,943) 647,164 Total Fixed Income $ 1,621,451 $ 38,350 $ (8,144) $ 1,651,657 Equity $ 193,052 $ 196,776 $ (2,026) $ 387,802 *Non-agency asset-backed and commercial mortgage-backed Available-for-sale (in thousands) December 31, 2016 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 77,054 $ 88 $ (579) $ 76,563 U.S. agency 5,473 340 - 5,813 Non-U.S. govt. & agency 9,517 2 (368) 9,151 Agency MBS 283,002 4,635 (3,568) 284,069 ABS/CMBS* 93,791 676 (557) 93,910 Corporate 503,041 10,996 (5,670) 508,367 Municipal 624,349 9,575 (6,588) 627,336 Total Fixed Income $ 1,596,227 $ 26,312 $ (17,330) $ 1,605,209 Equity $ 187,573 $ 182,912 $ (1,266) $ 369,219 *Non-agency asset-backed and commercial mortgage-backed The following table presents the amortized cost and fair value of available-for-sale debt securities by contractual maturity dates as of June 30, 2017: June 30, 2017 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 16,177 $ 16,009 Due after one year through five years 342,614 349,467 Due after five years through 10 years 564,926 578,370 Due after 10 years 328,545 336,953 Mtge/ABS/CMBS* 369,189 370,858 Total available-for-sale $ 1,621,451 $ 1,651,657 *Mortgage-backed, asset-backed and commercial mortgage-backed Unrealized Losses We conduct and document periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. The following tables are used as part of our impairment analysis and illustrate the total value of securities that were in an unrealized loss position as of June 30, 2017 and December 31, 2016. The tables segregate the securities based on type, noting the fair value, cost (or amortized cost) and unrealized loss on each category of investment as well as in total. The tables further classify the securities based on the length of time they have been in an unrealized loss position. As of June 30, 2017 unrealized losses, as shown in the following tables, were 0.5 percent of total invested assets. Unrealized losses decreased in the first half of 2017, as interest rates declined slightly from the end of 2016, which increased the fair value of securities held in the fixed income portfolio. June 30, 2017 December 31, 2016 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. Government Fair value $ 37,158 $ 2,002 $ 39,160 $ 48,500 $ — $ 48,500 Cost or amortized cost 37,489 2,016 39,505 49,079 — 49,079 Unrealized Loss $ (331) $ (14) $ (345) $ (579) $ — $ (579) Non-U.S. government Fair value $ 5,834 $ — $ 5,834 $ 7,647 $ — $ 7,647 Cost or amortized cost 6,004 — 6,004 8,015 — 8,015 Unrealized Loss $ (170) $ — $ (170) $ (368) $ — $ (368) Agency MBS Fair value $ 176,566 $ 10,084 $ 186,650 $ 175,858 $ 5,737 $ 181,595 Cost or amortized cost 179,182 10,376 189,558 179,238 5,925 185,163 Unrealized Loss $ (2,616) $ (292) $ (2,908) $ (3,380) $ (188) $ (3,568) ABS/CMBS* Fair value $ 32,907 $ 9,563 $ 42,470 $ 48,907 $ 5,272 $ 54,179 Cost or amortized cost 33,041 9,801 42,842 49,372 5,364 54,736 Unrealized Loss $ (134) $ (238) $ (372) $ (465) $ (92) $ (557) Corporate Fair value $ 110,521 $ 8,338 $ 118,859 $ 144,353 $ 15,535 $ 159,888 Cost or amortized cost 111,823 9,442 121,265 146,979 18,579 165,558 Unrealized Loss $ (1,302) $ (1,104) $ (2,406) $ (2,626) $ (3,044) $ (5,670) Municipal Fair value $ 117,611 $ 2,357 $ 119,968 $ 250,930 $ — $ 250,930 Cost or amortized cost 119,434 2,477 121,911 257,518 — 257,518 Unrealized Loss $ (1,823) $ (120) $ (1,943) $ (6,588) $ — $ (6,588) Subtotal, fixed income Fair value $ 480,597 $ 32,344 $ 512,941 $ 676,195 $ 26,544 $ 702,739 Cost or amortized cost 486,973 34,112 521,085 690,201 29,868 720,069 Unrealized Loss $ (6,376) $ (1,768) $ (8,144) $ (14,006) $ (3,324) $ (17,330) Equity securities Fair value $ 7,147 $ 2,565 $ 9,712 $ 7,438 $ 1,973 $ 9,411 Cost or amortized cost 8,059 3,679 11,738 8,029 2,648 10,677 Unrealized Loss $ (912) $ (1,114) $ (2,026) $ (591) $ (675) $ (1,266) Total Fair value $ 487,744 $ 34,909 $ 522,653 $ 683,633 $ 28,517 $ 712,150 Cost or amortized cost 495,032 37,791 532,823 698,230 32,516 730,746 Unrealized Loss $ (7,288) $ (2,882) $ (10,170) $ (14,597) $ (3,999) $ (18,596) * Non-agency asset-backed and commercial mortgage-backed The following table shows the composition of the fixed income securities in unrealized loss positions at June 30, 2017 by the National Association of Insurance Commissioners (NAIC) rating and the generally equivalent Standard & Poor’s (S&P) and Moody’s ratings. The vast majority of the securities are rated by S&P and/or Moody’s. Equivalent Equivalent (dollars in thousands) NAIC S&P Moody’s Amortized Unrealized Percent Rating Rating Rating Cost Fair Value Loss to Total 1 AAA/AA/A Aaa/Aa/A $ 455,748 $ 449,428 $ (6,320) % 2 BBB Baa 49,192 48,504 (688) % 3 BB Ba 6,737 6,671 (66) % 4 B B 7,470 6,777 (693) % 5 CCC or lower Caa or lower 1,938 1,561 (377) % 6 — — — — Total $ 521,085 $ 512,941 $ (8,144) % Evaluating Investments for OTTI The fixed income portfolio contained 294 securities in an unrealized loss position as of June 30, 2017. The $8.1 million in associated unrealized losses for these 294 securities represents 0.5 percent of the fixed income portfolio’s cost basis. Of these 294 securities, 32 have been in an unrealized loss position for 12 consecutive months or longer. All fixed income securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed income securities we do not plan to sell and for which we are not more likely than not to be required to sell is recognized in net earnings, with the non-credit related impairment recognized in comprehensive earnings. Based on our analysis, our fixed income portfolio is of high credit quality and we believe we will recover the amortized cost basis of our fixed income securities. We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. In the first half of 2017, we recognized $2.1 million in other-than-temporary impairment (OTTI) charges in earnings on two fixed income securities that we no longer had the intent to hold. Comparatively, we did not recognize any OTTI losses in earnings on the fixed income portfolio in same period in 2016. There were no OTTI losses recognized in other comprehensive earnings on the fixed income portfolio for the periods presented. As of June 30, 2017, we held four common stock securities that were in an unrealized loss position. The unrealized loss on these securities was $2.0 million. Based on our analysis, we believe each security will recover in a reasonable period of time and we have the intent and ability to hold them until recovery. One equity security has been in an unrealized loss position for 12 consecutive months or longer. There were no OTTI losses recognized in the periods presented on the equity portfolio. Other Invested Assets Other invested assets include investments in three low income housing tax credit partnerships (LIHTC), carried at amortized cost, membership in the Federal Home Loan Bank of Chicago (FHLBC), carried at cost, an investment in a real estate fund, carried at cost, and an investment in a business development company (BDC), carried at fair value. Due to the nature of the LIHTC and our membership in the FHLBC, their carrying amounts approximate fair value. Our LIHTC interests had a balance of $16.5 million at June 30, 2017, compared to $17.5 million at December 31, 2016 and recognized a total tax benefit of $0.6 million during the second quarter of 2017 compared to $0.4 million during the second quarter of 2016. For the six-month periods ended June 30, 2017 and 2016, our LIHTC interests recognized a total benefit of $1.3 million and $0.8 million, respectively. Our investment in FHLBC stock totaled $1.0 million at June 30, 2017, compared to $1.6 million at December 31, 2016. As of June 30, 2017, $10.0 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of FHLBC stock provides. No assets were pledged as collateral as of December 31, 2016. As of and during the six month period ending June 30, 2017, there were no outstanding borrowings with the FHLBC. Our investment in the real estate fund was carried at $3.1 million which approximated fair value at June 30, 2017, compared to a carrying value of $5.0 million which approximated fair value at December 31, 2016. During the first half of 2017, we made an investment in a BDC which had a fair value of $4.8 million at June 30, 2017. The investment in the BDC is restricted from being transferred until after a qualified IPO unless prior consent is provided by the BDC. Our unfunded commitments related to these investments totaled $20.2 million at June 30, 2017. Cash and Short-term Investments Cash consists of uninvested balances in bank accounts. We had a cash balance of $21.4 million at June 30, 2017, compared to $18.3 million at the end of 2016. Short-term investments of $18.1 million and $5.0 million at June 30, 2017 and December 31, 2016, respectively, are carried at cost, which approximates fair value.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	6 Months Ended
	Jun. 30, 2017
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS	3. FAIR VALUE MEASUREMENTS Assets and Liabilities Recorded at Fair Value on a Recurring Basis Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. GAAP guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance also describes three levels of inputs that may be used to measure fair value. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level: Pricing Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. Pricing Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. Pricing Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in approximate order of priority for use) benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All corporate, agency, government and municipal securities were deemed Level 2. Mortgage-backed Securities (MBS)/Commercial Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (non-volatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, prepayment assumptions and to incorporate collateral performance. To evaluate MBS and CMBS volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMBS and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMBS and ABS are deemed Level 2. Common Stock: Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). All of our common stock holdings are deemed Level 1. For the Level 2 securities, as described above, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. Second, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. In both comparisons, when discrepancies are found, we compare our prices to actual reported trade data for like securities. Based on this assessment, we determined that the fair values of our Level 2 securities provided by our pricing services are reasonable. For common stock, we receive prices from a nationally recognized pricing service. Prices are based on observable inputs in an active market and are therefore disclosed as Level 1. Based on this assessment, we determined that the fair values of our Level 1 securities provided by our pricing service are reasonable. The investment in the BDC is measured using the investment’s net asset value per share and is not categorized within the fair value hierarchy. Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Assets measured at fair value in the accompanying unaudited condensed consolidated interim financial statements on a recurring basis are summarized below: As of June 30, 2017 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Available-for-sale securities U.S. government $ — $ 81,940 $ — $ 81,940 U.S. agency — 5,821 — 5,821 Non-U.S. govt. & agency — 9,455 — 9,455 Agency MBS — 290,981 — 290,981 ABS/CMBS* — 79,877 — 79,877 Corporate — 536,419 — 536,419 Municipal — 647,164 — 647,164 Equity 387,802 — — 387,802 Total available-for-sale securities $ 387,802 $ 1,651,657 $ — $ 2,039,459 As of December 31, 2016 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Available-for-sale securities U.S. government $ — $ 76,563 $ — $ 76,563 U.S. agency — 5,813 — 5,813 Non-U.S. govt. & agency — 9,151 — 9,151 Agency MBS — 284,069 — 284,069 ABS/CMBS* — 93,910 — 93,910 Corporate — 508,367 — 508,367 Municipal — 627,336 — 627,336 Equity 369,219 — — 369,219 Total available-for-sale securities $ 369,219 $ 1,605,209 $ — $ 1,974,428 * Non-agency asset-backed and commercial mortgage-backed As noted in the above table, we did not have any assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period. Additionally, there were no securities transferred in or out of levels 1 or 2 during the six-month period ended June 30, 2017.

HISTORICAL LOSS AND LAE DEVELOP

HISTORICAL LOSS AND LAE DEVELOPMENT	6 Months Ended
	Jun. 30, 2017
HISTORICAL LOSS AND LAE DEVELOPMENT
HISTORICAL LOSS AND LAE DEVELOPMENT	4. HISTORICAL LOSS AND LAE DEVELOPMENT The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the first six months of 2017 and 2016. For the Six-Month Periods Ended June 30, (in thousands) 2017 2016 Unpaid losses and LAE at beginning of year Gross $ 1,139,337 $ 1,103,785 Ceded (288,224) (297,844) Net $ 851,113 $ 805,941 Increase (decrease) in incurred losses and LAE Current accident year $ 203,371 $ 191,465 Prior accident years (19,634) (30,017) Total incurred $ 183,737 $ 161,448 Loss and LAE payments for claims incurred Current accident year $ (18,732) $ (15,530) Prior accident year (113,501) (118,243) Total paid $ (132,233) $ (133,773) Net unpaid losses and LAE at June 30, $ 902,617 $ 833,616 Unpaid losses and LAE at June 30, Gross $ 1,183,185 $ 1,123,472 Ceded (280,568) (289,856) Net $ 902,617 $ 833,616 As disclosed in the 2016 Annual Report on Form 10-K, our actuaries have historically performed a ground up reserve study of the expected value of unpaid losses and LAE using multiple standard actuarial methodologies three times a year. As a result of efficiency improvements in our reserving process, our actuaries began performing ground up reserve studies on a quarterly basis during the first quarter of 2017. We continue to perform an emergence analysis on a quarterly basis to determine if further adjustments are necessary. We then review all of the various estimates of ultimate loss by accident year and determine the appropriateness of the reserve balance as we have done in the past.

INCOME TAXES

INCOME TAXES	6 Months Ended
	Jun. 30, 2017
INCOME TAXES
INCOME TAXES	5. INCOME TAXES Our effective tax rate for the three and six-month periods ended June 30, 2017 was 23.0 percent and 23.9 percent, respectively, compared to 31.3 percent and 31.2 percent, respectively, for the same periods in 2016. Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective rate was lower for the three and six-month periods ended June 30, 2017 due largely to the adoption of FASB ASU 2016-09, as the standard requires the excess tax benefit on share-based compensation to run through income tax expense in 2017 and forward. Prior to the adoption of FASB ASU 2016-09, excess tax benefits on share-based compensation were recorded directly to shareholders’ equity and had no impact on the effective tax rate. Additionally, lower levels of pre-tax earnings caused the tax favored adjustments to be larger on a percentage basis in 2017 compared to the prior year. Income tax expense attributable to income from operations for the three and six-month periods ended June 30, 2017 and 2016 differed from the amounts computed by applying the U.S. federal tax rate of 35 percent to pretax income as a result of the following: For the Three-Month Periods Ended June 30, For the Six-Month Periods Ended June 30, 2017 2016 2017 2016 (in thousands) Amount % Amount % Amount % Amount % Provision for income taxes at the statutory rate of 35% $ 11,912 % $ 14,819 % $ 21,168 % $ 30,777 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (2,791) % — % (3,234) % — % Tax exempt interest income (1,160) % (1,028) % (2,338) % (2,129) % Dividends received deduction (405) % (484) % (935) % (1,049) % ESOP dividends paid deduction (251) % (243) % (484) % (475) % Other items, net 523 % 200 % 266 % 340 % Total tax expense $ 7,828 % $ 13,264 % $ 14,443 % $ 27,464 %

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION	6 Months Ended
	Jun. 30, 2017
STOCK BASED COMPENSATION
STOCK BASED COMPENSATION	6. STOCK BASED COMPENSATION Our RLI Corp. Omnibus Stock Plan (omnibus plan) was in place from 2005 to 2010. The omnibus plan provided for equity-based compensation, including stock options, up to a maximum of 3,000,000 shares of common stock (subject to adjustment for changes in our capitalization and other events). Between 2005 and 2010, we granted 2,458,059 stock options under this plan, including incentive stock options (ISOs), which were adjusted as part of the special dividends paid in 2014 and prior years. The omnibus plan was replaced in 2010. In 2010, our shareholders approved the RLI Corp. Long-Term Incentive Plan (2010 LTIP), which provides for equity-based compensation and replaced the omnibus plan. In conjunction with the adoption of the 2010 LTIP, effective May 6, 2010, options were no longer granted under the omnibus plan. The 2010 LTIP provided for equity-based compensation, including stock options, up to a maximum of 4,000,000 shares of common stock (subject to adjustment for changes in our capitalization and other events). Between 2010 and 2015, we granted 2,878,000 stock options under the 2010 LTIP. The 2010 LTIP was replaced in 2015. In 2015, our shareholders approved the 2015 RLI Corp. Long-Term Incentive Plan (2015 LTIP), which provides for equity-based compensation and replaced the 2010 LTIP. In conjunction with the adoption of the 2015 LTIP, effective May 7, 2015, options were no longer granted under the 2010 LTIP. Awards under the 2015 LTIP may be in the form of restricted stock, restricted stock units, stock options (non-qualified only), stock appreciation rights, performance units as well as other stock-based awards. Eligibility under the 2015 LTIP is limited to employees and directors of the company or any affiliate. The granting of awards under the 2015 LTIP is solely at the discretion of the board of directors. The maximum number of shares of common stock available for distribution under the 2015 LTIP is 4,000,000 shares (subject to adjustment for changes in our capitalization and other events). Since 2015, we have granted 1,374,075 awards under the 2015 LTIP, including 423,325 thus far in 2017. Stock Options Under the 2015 LTIP, as under the 2010 LTIP and omnibus plan, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant (subject to adjustments for changes in our capitalization, special dividends and other events as set forth in such plans). Options generally vest and become exercisable ratably over a five-year period and expire eight years after grant. For most participants, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75, the requisite service period is deemed to be met and options are immediately expensed on the date of grant. For participants who will become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares. The following tables summarize option activity for the periods ended June 30, 2017 and 2016: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2017 2,207,110 $ Options granted 407,875 $ Options exercised (134,090) $ $ 4,328 Options canceled/forfeited (40,600) $ Outstanding options at June 30, 2017 2,440,295 $ $ 29,968 Exercisable options at June 30, 2017 1,162,455 $ $ 22,859 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2016 2,582,220 $ Options granted 382,250 $ Options exercised (383,795) $ $ 16,271 Options canceled/forfeited (6,240) $ Outstanding options at June 30, 2016 2,574,435 $ $ 77,881 Exercisable options at June 30, 2016 1,155,740 $ $ 45,119 The majority of our stock options are granted annually at our regular board meeting in May. In addition, options are approved at the May meeting for quarterly grants to certain retirement eligible employees. Since stock option grants to retirement eligible employees are fully expensed when issued, the approach allows for a more even expense distribution throughout the year. Thus far in 2017, 407,875 stock options were granted with a weighted average exercise price of $56.88 and a weighted average fair value of $7.94. We recognized $1.2 million of expense in the second quarter of 2017 and $2.0 million in the first six months of 2017 related to options vesting. Since options granted under our 2010 LTIP and 2015 LTIP are non-qualified, we recorded a tax benefit of $0.4 million in the second quarter of 2017 and $0.7 million in the first six months of 2017 related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $6.9 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $1.2 million of expense in the second quarter of 2016 and $2.1 million in the first six months of 2016. We recorded a tax benefit of $0.4 million in the second quarter of 2016 and $0.7 million in the first six months of 2016 related to this compensation expense. The fair value of options was estimated using a Black-Scholes based option pricing model with the following weighted average grant-date assumptions and weighted average fair values as of June 30: 2017 2016 Weighted-average fair value of grants $ 7.94 $ Risk-free interest rates % % Dividend yield % % Expected volatility % % Expected option life 5.05 years years The risk-free rate was determined based on U.S. treasury yields that most closely approximated the option’s expected life. The dividend yield for 2017 was determined based on the average annualized quarterly dividends paid during the most recent five-year period and incorporated a consideration for special dividends paid in recent history. The dividend yield in 2016 and prior was determined based on the average annualized quarterly dividends paid during the most recent five-year period, exclusive of considerations for special dividends. The expected volatility was calculated based on the median of the rolling volatilities for the expected life of the options. The expected option life was determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant. Restricted Stock Units In addition to stock options, restricted stock units (RSUs) were granted for the first time in May 2017. RSUs have a grant date value equal to the closing stock price of the Company’s stock on the dates the shares are granted. Generally, these units have a three-year cliff vesting. When participants become retirement eligible, defined by the plan as those individuals whose age and years of service equals 75, the units become fully vested. In addition, the RSUs have dividend participation which accrues and is settled in additional shares with all granted stock units at the end of the three-year period. As of June 30, 2017, 15,450 RSUs have been granted and are outstanding. The weighted average grant date fair value was $56.71. We recognized $0.2 million of expense on these units in the second quarter of 2017. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $0.6 million, which will be recognized over the remainder of the three-year vesting period.

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION	6 Months Ended
	Jun. 30, 2017
OPERATING SEGMENT INFORMATION
OPERATING SEGMENT INFORMATION	7. OPERATING SEGMENT INFORMATION Selected information by operating segment is presented in the table below. Additionally, the table reconciles segment totals to total earnings and total revenues. For the Three-Month Periods For the Six-Month Periods REVENUES Ended June 30, Ended June 30, (in thousands) 2017 2016 2017 2016 Casualty $ 119,259 $ 112,360 $ 236,243 $ 220,953 Property 34,485 37,794 70,290 76,479 Surety 30,587 30,072 61,083 59,712 Net premiums earned $ 184,331 $ 180,226 $ 367,616 $ 357,144 Net investment income 13,238 13,048 26,243 26,418 Net realized gains (losses) (1,359) 2,710 (735) 14,110 Total consolidated revenue $ 196,210 $ 195,984 $ 393,124 $ 397,672 NET EARNINGS (in thousands) 2017 2016 2017 2016 Casualty $ 8,648 $ 11,125 $ 1,767 $ 20,231 Property 2,863 7,245 11,667 13,443 Surety 8,232 7,646 19,366 13,646 Net underwriting income $ 19,743 $ 26,016 $ 32,800 $ 47,320 Net investment income 13,238 13,048 26,243 26,418 Net realized gains (losses) (1,359) 2,710 (735) 14,110 General corporate expense and interest on debt (4,392) (4,624) (9,573) (8,856) Equity in earnings of unconsolidated investees 6,806 5,191 11,744 8,942 Total earnings before income taxes $ 34,036 $ 42,341 $ 60,479 $ 87,934 Income tax expense 7,828 13,264 14,443 27,464 Total net earnings $ 26,208 $ 29,077 $ 46,036 $ 60,470 The following table further summarizes revenues by major product type within each operating segment: For the Three-Month Periods For the Six-Month Periods NET PREMIUMS EARNED Ended June 30, Ended June 30, (in thousands) 2017 2016 2017 2016 Casualty Commercial and personal umbrella $ 28,861 $ 27,536 $ 57,438 $ 54,666 General liability 22,851 21,448 44,434 42,172 Commercial transportation 20,395 20,206 41,496 38,480 Professional services 20,016 18,892 39,242 37,430 Small commercial 11,765 11,367 24,052 22,267 Executive products 4,438 4,575 8,850 9,410 Medical professional liability 4,265 4,182 8,556 7,997 Other casualty 6,668 4,154 12,175 8,531 Total $ 119,259 $ 112,360 $ 236,243 $ 220,953 Property Commercial property $ 15,873 $ 17,113 $ 31,591 $ 34,709 Marine 11,607 11,806 23,893 24,106 Specialty personal 5,508 6,237 11,526 12,545 Property reinsurance 1,479 2,619 3,262 5,381 Crop reinsurance - 19 5 (262) Other property 18 - 13 - Total $ 34,485 $ 37,794 $ 70,290 $ 76,479 Surety Miscellaneous $ 11,854 $ 11,493 $ 23,711 $ 22,590 Contract 7,147 6,683 14,231 13,426 Commercial 6,938 7,455 14,081 14,809 Energy 4,648 4,441 9,060 8,887 Total $ 30,587 $ 30,072 $ 61,083 $ 59,712 Grand Total $ 184,331 $ 180,226 $ 367,616 $ 357,144

SUMMARY OF SIGNIFICANT ACCOUN13

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION	A. BASIS OF PRESENTATION The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited condensed consolidated interim financial statements should be read in conjunction with our 2016 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at June 30, 2017 and the results of operations of RLI Corp. and subsidiaries for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the operating results for a full year. Certain reclassifications were made to 2016 to conform to the classifications used in the current year. The preparation of the unaudited condensed consolidated interim financial statements requires management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ significantly from these estimates.
ADOPTED ACCOUNTING STANDARDS	B. ADOPTED ACCOUNTING STANDARDS ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ASU 2016-09 was issued to simplify the accounting for share-based payment awards. The guidance requires that, prospectively, all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to excess tax benefits being recognized in additional paid-in-capital under the previous guidance. The ASU also removes the requirement to delay recognition of a tax benefit until it reduces current taxes payable. This change is required to be applied on a modified retrospective basis, with a cumulative-effect adjustment to opening retained earnings. Additionally, all tax related cash flows resulting from share-based payments are to be reported as operating activities on the statement of cash flows, a change from the previous requirement to present tax benefits as an inflow from financing activities and an outflow from operating activities. Finally, entities will be allowed to withhold an amount up to the employees’ maximum individual tax rate (as opposed to the minimum statutory tax rate) in the relevant jurisdiction without resulting in liability classification of the award. The change in withholding requirements will be applied on a modified retrospective approach. We adopted ASU 2016-09 on January 1, 2017. The guidance’s primary impact on our financial statements relates to the provision concerning the recognition of tax effects through the income statement in 2017 and forward. Excess tax benefits of $0.4 million and $2.8 million were recognized in the first and second quarters of 2017, respectively, as a reduction to income tax expense rather than as an increase to additional paid-in-capital. The future impact to our income statement will vary depending upon the level of intrinsic value associated with option exercises in a particular period. Additionally, the changes in cash flow presentation resulted in $3.2 million more operating cash flows and $3.2 million less financing cash flows for the six month period ended June 30, 2017 than would have been recognized under the previous guidance. We have historically estimated the number of forfeitures as part of our option valuation process and will continue to do so under the new guidance. As no aspect of the guidance that requires retrospective adoption impacted the Company, no prior period adjustments were made. ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ASU 2017-04 was issued to simplify the subsequent measurement of goodwill. This update changes the impairment test by requiring an entity to compare the fair value of a reporting unit with its carrying amount as opposed to comparing the carrying amount of goodwill with its implied fair value. We adopted ASU 2017-04 during the second quarter of 2017 to coincide with the annual testing of our energy surety, small commercial and miscellaneous and contract surety reporting units. As most of RLI’s assets and liabilities associated with a reporting unit are measured at fair value, the impact of measuring the impairment at the reporting unit level rather than at the goodwill asset level was believed to be minimal.
PROSPECTIVE ACCOUNTING STANDARDS	C. PROSPECTIVE ACCOUNTING STANDARDS ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities This ASU was issued to improve the recognition and measurement of financial instruments. The new guidance makes targeted improvements to GAAP as follows: a. Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; b. Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; c. Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; d. Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; e. Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; f. Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements; and g. Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is only permitted for provision (e) above. Upon adoption, a cumulative-effect adjustment to the balance sheet will be made as of the beginning of the fiscal year of adoption. The primary impact this guidance will have on our financial statements relates to the provision requiring the recognition of changes in the fair value of equity securities through the income statement rather than through other comprehensive income. The impact to our income statement will vary depending upon the level of volatility in the performance of the securities held in our equity portfolio and the overall market. ASU 2016-02, Leases (Topic 842) ASU 2016-02 was issued to improve the financial reporting of leasing transactions. Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the agreement as a capital lease, are met. This update will require the recognition of a right-of-use asset and a corresponding lease liability, discounted to the present value, for all leases that extend beyond 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. This ASU is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. We currently have approximately $30 million of undiscounted future lease liabilities that would have to be added to the balance sheet with a corresponding right-of-use asset if the guidance were applicable on June 30, 2017. We do not expect that there will be a materially different annual rental expense upon adoption. ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) ASU 2016-13 was issued to provide more decision-useful information about the expected credit losses on financial instruments. Current GAAP delays the recognition of credit losses until it is probable a loss has been incurred. The update will require a financial asset measured at amortized cost to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net income. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses. However, the amendments would limit the amount of the allowance to the amount by which fair value is below amortized cost. The measurement of credit losses on available-for-sale securities is similar under current GAAP, but the update requires the use of the allowance account through which amounts can be reversed, rather than through an irreversible write-down. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted beginning after December 15, 2018. Upon adoption, the update will be applied using the modified-retrospective approach, by which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period presented. We do not have any assets measured at amortized cost that would be impacted by this update. Additionally, as our fixed income portfolio is weighted towards higher rated bonds (82.7 percent rated A or better at June 30, 2017), we do not expect that credit loss on our available-for-sale debt securities will be material. ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ASU 2016-15 was issued to reduce the diversity in practice of how certain cash receipts and payments, for which current guidance is silent, are classified in the statement of cash flows. The update addresses eight specific issues, including contingent consideration payments made after a business combination, distributions received from equity method investees and the classification of cash receipts and payments that have aspects of more than one class of cash flows. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. Upon adoption, the update will be applied using the retrospective transition method. We do not expect a material impact on our statement of cash flows.
INTANGIBLE ASSETS	D. INTANGIBLE ASSETS In accordance with GAAP guidelines, the amortization of goodwill and indefinite-lived intangible assets is not permitted. Goodwill and indefinite-lived intangible assets remain on the balance sheet and are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Goodwill and intangible assets totaled $60.6 million and $64.4 million at June 30, 2017 and December 31, 2016, respectively, as detailed in the following table. Goodwill and Intangible Assets (in thousands) June 30, December 31, Reporting Unit 2017 2016 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Medical professional liability * 3,595 5,208 Total goodwill $ 49,657 $ 51,270 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $4,077 at 6/30/17 and $5,546 at 12/31/16 3,425 5,601 Total intangibles $ 10,925 $ 13,101 Total goodwill and intangibles $ 60,582 $ 64,371 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $8.8 million and $7.2 million as of June 30, 2017 and December 31, 2016, respectively. All definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets was $0.2 million for the second quarter of 2017 and $0.4 million for the six-month period ended June 30, 2017, compared to $0.2 million for the second quarter of 2016 and $0.5 million for the six-month period ended June 30, 2016. Annual impairment testing was performed on our energy surety goodwill, miscellaneous and contract surety goodwill, small commercial goodwill and state insurance license indefinite-lived intangible asset during the second quarter of 2017. Based upon these reviews, none of the assets were impaired. In addition, as of June 30, 2017, there were no triggering events that would suggest an updated review was necessary on the above mentioned goodwill and intangible assets. As previously disclosed for our medical professional liability reporting unit, rate and volume declines coupled with adverse loss experience resulted in a triggering event during the second quarter of 2016. A fair value was determined by using a weighted average of a market approach and income approach (or discounted cash flow method) valuation. It was determined that the carrying cost of our medical professional liability goodwill exceeded the fair value, resulting in a $7.2 million non-cash impairment charge. Further adverse loss experience triggered the need to test the medical professional liability reporting unit during the second quarter of 2017, resulting in an additional $3.4 million non-cash impairment charge. A fair value for the medical professional liability reporting unit’s agency relationships, carried as a definite-lived intangible, was determined by using a discounted cash flow valuation. The carrying value exceeded the fair value, resulting in a $1.8 million non-cash impairment charge. Similar to in 2016, a fair value for the medical professional liability reporting unit’s goodwill was determined by using a weighted average of a market approach and discounted cash flow valuation. The carrying value exceeded the fair value, resulting in a $1.6 million non-cash impairment charge. All impairment charges were recorded as net realized losses in the respective period’s consolidated statement of earnings.
EARNINGS PER SHARE	E. EARNINGS PER SHARE Basic earnings per share (EPS) excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of common stock equivalents increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding the common stock equivalents. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the unaudited condensed consolidated interim financial statements. For the Three-Month Period For the Three-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 26,208 44,005 $ 0.60 $ 29,077 43,721 $ 0.67 Effect of Dilutive Securities Stock options - 514 - 702 Diluted EPS Income available to common shareholders $ 26,208 44,519 $ 0.59 $ 29,077 44,423 $ 0.65 For the Six-Month Period For the Six-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 46,036 43,983 $ 1.05 $ 60,470 43,659 $ 1.39 Effect of Dilutive Securities Stock options - 534 - 722 Diluted EPS Income available to common shareholders $ 46,036 44,517 $ 1.03 $ 60,470 44,381 $ 1.36
COMPREHENSIVE EARNINGS	F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus unrealized gains and losses on our available-for-sale investment securities, net of tax. In reporting comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 35 percent. Unrealized gains, net of tax, for the first six months of 2017 were $22.4 million, compared to $40.8 million during the same period last year. Unrealized gains in the first six months of 2017 were led by increases in the fixed income portfolio due to slight declines in interest rates since year-end 2016, followed by positive pricing movements in equity securities. In 2016, larger unrealized gains were the result of sharper declines in interest rates, while the equity portfolio experienced a similar amount of unrealized change as 2017. The following table illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the unaudited condensed consolidated interim financial statements. (in thousands) For the Three-Month Periods For the Six-Month Periods Ended June 30, Ended June 30, Unrealized Gains/Losses on Available-for-Sale Securities 2017 2016 2017 2016 Beginning balance $ 134,379 $ 145,537 $ 122,610 $ 123,774 Other comprehensive earnings before reclassifications 11,753 25,561 23,925 54,731 Amounts reclassified from accumulated other comprehensive earnings (1,154) (6,495) (1,557) (13,902) Net current-period other comprehensive earnings $ 10,599 $ 19,066 $ 22,368 $ 40,829 Ending balance $ 144,978 $ 164,603 $ 144,978 $ 164,603 The sale or other-than-temporary impairment of an available-for-sale security results in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month For the Six-Month Component of Accumulated Periods Ended June 30, Periods Ended June 30, Affected line item in the Other Comprehensive Earnings 2017 2016 2017 2016 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 1,775 $ 9,992 $ 4,485 $ 21,388 Net realized gains - - (2,090) - Other-than-temporary impairment (OTTI) losses on investments $ 1,775 $ 9,992 $ 2,395 $ 21,388 Earnings before income taxes (621) (3,497) (838) (7,486) Income tax expense $ 1,154 $ 6,495 $ 1,557 $ 13,902 Net earnings

SUMMARY OF SIGNIFICANT ACCOUN14

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	6 Months Ended
	Jun. 30, 2017
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schedule of goodwill and intangible assets	Goodwill and Intangible Assets (in thousands) June 30, December 31, Reporting Unit 2017 2016 Goodwill Energy surety $ 25,706 $ 25,706 Miscellaneous and contract surety 15,110 15,110 Small commercial 5,246 5,246 Medical professional liability * 3,595 5,208 Total goodwill $ 49,657 $ 51,270 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $4,077 at 6/30/17 and $5,546 at 12/31/16 3,425 5,601 Total intangibles $ 10,925 $ 13,101 Total goodwill and intangibles $ 60,582 $ 64,371 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $8.8 million and $7.2 million as of June 30, 2017 and December 31, 2016, respectively.
Schedule of reconciliation of numerator and denominator of the basic and diluted earnings per share computations	For the Three-Month Period For the Three-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 26,208 44,005 $ 0.60 $ 29,077 43,721 $ 0.67 Effect of Dilutive Securities Stock options - 514 - 702 Diluted EPS Income available to common shareholders $ 26,208 44,519 $ 0.59 $ 29,077 44,423 $ 0.65 For the Six-Month Period For the Six-Month Period Ended June 30, 2017 Ended June 30, 2016 Income Shares Per Share Income Shares Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS Income available to common shareholders $ 46,036 43,983 $ 1.05 $ 60,470 43,659 $ 1.39 Effect of Dilutive Securities Stock options - 534 - 722 Diluted EPS Income available to common shareholders $ 46,036 44,517 $ 1.03 $ 60,470 44,381 $ 1.36
Schedule of changes in the balance of each component of accumulated other comprehensive earnings	(in thousands) For the Three-Month Periods For the Six-Month Periods Ended June 30, Ended June 30, Unrealized Gains/Losses on Available-for-Sale Securities 2017 2016 2017 2016 Beginning balance $ 134,379 $ 145,537 $ 122,610 $ 123,774 Other comprehensive earnings before reclassifications 11,753 25,561 23,925 54,731 Amounts reclassified from accumulated other comprehensive earnings (1,154) (6,495) (1,557) (13,902) Net current-period other comprehensive earnings $ 10,599 $ 19,066 $ 22,368 $ 40,829 Ending balance $ 144,978 $ 164,603 $ 144,978 $ 164,603
Schedule of effects of reclassifications out of accumulated other comprehensive earnings	Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month For the Six-Month Component of Accumulated Periods Ended June 30, Periods Ended June 30, Affected line item in the Other Comprehensive Earnings 2017 2016 2017 2016 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 1,775 $ 9,992 $ 4,485 $ 21,388 Net realized gains - - (2,090) - Other-than-temporary impairment (OTTI) losses on investments $ 1,775 $ 9,992 $ 2,395 $ 21,388 Earnings before income taxes (621) (3,497) (838) (7,486) Income tax expense $ 1,154 $ 6,495 $ 1,557 $ 13,902 Net earnings

INVESTMENTS (Tables)

INVESTMENTS (Tables)	6 Months Ended
	Jun. 30, 2017
Schedule of securities in an unrealized loss position segregated by type and length of time in an unrealized loss position	June 30, 2017 December 31, 2016 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. Government Fair value $ 37,158 $ 2,002 $ 39,160 $ 48,500 $ — $ 48,500 Cost or amortized cost 37,489 2,016 39,505 49,079 — 49,079 Unrealized Loss $ (331) $ (14) $ (345) $ (579) $ — $ (579) Non-U.S. government Fair value $ 5,834 $ — $ 5,834 $ 7,647 $ — $ 7,647 Cost or amortized cost 6,004 — 6,004 8,015 — 8,015 Unrealized Loss $ (170) $ — $ (170) $ (368) $ — $ (368) Agency MBS Fair value $ 176,566 $ 10,084 $ 186,650 $ 175,858 $ 5,737 $ 181,595 Cost or amortized cost 179,182 10,376 189,558 179,238 5,925 185,163 Unrealized Loss $ (2,616) $ (292) $ (2,908) $ (3,380) $ (188) $ (3,568) ABS/CMBS* Fair value $ 32,907 $ 9,563 $ 42,470 $ 48,907 $ 5,272 $ 54,179 Cost or amortized cost 33,041 9,801 42,842 49,372 5,364 54,736 Unrealized Loss $ (134) $ (238) $ (372) $ (465) $ (92) $ (557) Corporate Fair value $ 110,521 $ 8,338 $ 118,859 $ 144,353 $ 15,535 $ 159,888 Cost or amortized cost 111,823 9,442 121,265 146,979 18,579 165,558 Unrealized Loss $ (1,302) $ (1,104) $ (2,406) $ (2,626) $ (3,044) $ (5,670) Municipal Fair value $ 117,611 $ 2,357 $ 119,968 $ 250,930 $ — $ 250,930 Cost or amortized cost 119,434 2,477 121,911 257,518 — 257,518 Unrealized Loss $ (1,823) $ (120) $ (1,943) $ (6,588) $ — $ (6,588) Subtotal, fixed income Fair value $ 480,597 $ 32,344 $ 512,941 $ 676,195 $ 26,544 $ 702,739 Cost or amortized cost 486,973 34,112 521,085 690,201 29,868 720,069 Unrealized Loss $ (6,376) $ (1,768) $ (8,144) $ (14,006) $ (3,324) $ (17,330) Equity securities Fair value $ 7,147 $ 2,565 $ 9,712 $ 7,438 $ 1,973 $ 9,411 Cost or amortized cost 8,059 3,679 11,738 8,029 2,648 10,677 Unrealized Loss $ (912) $ (1,114) $ (2,026) $ (591) $ (675) $ (1,266) Total Fair value $ 487,744 $ 34,909 $ 522,653 $ 683,633 $ 28,517 $ 712,150 Cost or amortized cost 495,032 37,791 532,823 698,230 32,516 730,746 Unrealized Loss $ (7,288) $ (2,882) $ (10,170) $ (14,597) $ (3,999) $ (18,596) * Non-agency asset-backed and commercial mortgage-backed
Schedule of credit quality indicators for investments in unrealized loss positions	Equivalent Equivalent (dollars in thousands) NAIC S&P Moody’s Amortized Unrealized Percent Rating Rating Rating Cost Fair Value Loss to Total 1 AAA/AA/A Aaa/Aa/A $ 455,748 $ 449,428 $ (6,320) % 2 BBB Baa 49,192 48,504 (688) % 3 BB Ba 6,737 6,671 (66) % 4 B B 7,470 6,777 (693) % 5 CCC or lower Caa or lower 1,938 1,561 (377) % 6 — — — — Total $ 521,085 $ 512,941 $ (8,144) %
Available for sale securities
Schedule of amortized cost and fair value of available-for-sale securities	Available-for-sale (in thousands) June 30, 2017 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 82,090 $ 195 $ (345) $ 81,940 U.S. agency 5,475 346 - 5,821 Non-U.S. govt. & agency 9,504 121 (170) 9,455 Agency MBS 289,628 4,261 (2,908) 290,981 ABS/CMBS* 79,561 688 (372) 79,877 Corporate 525,377 13,448 (2,406) 536,419 Municipal 629,816 19,291 (1,943) 647,164 Total Fixed Income $ 1,621,451 $ 38,350 $ (8,144) $ 1,651,657 Equity $ 193,052 $ 196,776 $ (2,026) $ 387,802 *Non-agency asset-backed and commercial mortgage-backed Available-for-sale (in thousands) December 31, 2016 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 77,054 $ 88 $ (579) $ 76,563 U.S. agency 5,473 340 - 5,813 Non-U.S. govt. & agency 9,517 2 (368) 9,151 Agency MBS 283,002 4,635 (3,568) 284,069 ABS/CMBS* 93,791 676 (557) 93,910 Corporate 503,041 10,996 (5,670) 508,367 Municipal 624,349 9,575 (6,588) 627,336 Total Fixed Income $ 1,596,227 $ 26,312 $ (17,330) $ 1,605,209 Equity $ 187,573 $ 182,912 $ (1,266) $ 369,219 *Non-agency asset-backed and commercial mortgage-backed
Schedule of contractual maturity of securities	June 30, 2017 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 16,177 $ 16,009 Due after one year through five years 342,614 349,467 Due after five years through 10 years 564,926 578,370 Due after 10 years 328,545 336,953 Mtge/ABS/CMBS* 369,189 370,858 Total available-for-sale $ 1,621,451 $ 1,651,657 *Mortgage-backed, asset-backed and commercial mortgage-backed

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	6 Months Ended
	Jun. 30, 2017
FAIR VALUE MEASUREMENTS
Schedule of assets measured at fair value on recurring basis	As of June 30, 2017 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Available-for-sale securities U.S. government $ — $ 81,940 $ — $ 81,940 U.S. agency — 5,821 — 5,821 Non-U.S. govt. & agency — 9,455 — 9,455 Agency MBS — 290,981 — 290,981 ABS/CMBS* — 79,877 — 79,877 Corporate — 536,419 — 536,419 Municipal — 647,164 — 647,164 Equity 387,802 — — 387,802 Total available-for-sale securities $ 387,802 $ 1,651,657 $ — $ 2,039,459 As of December 31, 2016 Fair Value Measurements Using Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs (in thousands) (Level 1) (Level 2) (Level 3) Total Available-for-sale securities U.S. government $ — $ 76,563 $ — $ 76,563 U.S. agency — 5,813 — 5,813 Non-U.S. govt. & agency — 9,151 — 9,151 Agency MBS — 284,069 — 284,069 ABS/CMBS* — 93,910 — 93,910 Corporate — 508,367 — 508,367 Municipal — 627,336 — 627,336 Equity 369,219 — — 369,219 Total available-for-sale securities $ 369,219 $ 1,605,209 $ — $ 1,974,428 * Non-agency asset-backed and commercial mortgage-backed

HISTORICAL LOSS AND LAE DEVEL17

HISTORICAL LOSS AND LAE DEVELOPMENT (Tables)	6 Months Ended
	Jun. 30, 2017
HISTORICAL LOSS AND LAE DEVELOPMENT
Schedule of reconciliation of unpaid losses and settlement expenses (LAE)	For the Six-Month Periods Ended June 30, (in thousands) 2017 2016 Unpaid losses and LAE at beginning of year Gross $ 1,139,337 $ 1,103,785 Ceded (288,224) (297,844) Net $ 851,113 $ 805,941 Increase (decrease) in incurred losses and LAE Current accident year $ 203,371 $ 191,465 Prior accident years (19,634) (30,017) Total incurred $ 183,737 $ 161,448 Loss and LAE payments for claims incurred Current accident year $ (18,732) $ (15,530) Prior accident year (113,501) (118,243) Total paid $ (132,233) $ (133,773) Net unpaid losses and LAE at June 30, $ 902,617 $ 833,616 Unpaid losses and LAE at June 30, Gross $ 1,183,185 $ 1,123,472 Ceded (280,568) (289,856) Net $ 902,617 $ 833,616

INCOME TAXES (Tables)

INCOME TAXES (Tables)	6 Months Ended
	Jun. 30, 2017
INCOME TAXES
Schedule of reconciliation of income tax expense attributable to income from operations with amounts computed by applying the U.S. federal tax rate to pretax income from continuing operations	For the Three-Month Periods Ended June 30, For the Six-Month Periods Ended June 30, 2017 2016 2017 2016 (in thousands) Amount % Amount % Amount % Amount % Provision for income taxes at the statutory rate of 35% $ 11,912 % $ 14,819 % $ 21,168 % $ 30,777 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (2,791) % — % (3,234) % — % Tax exempt interest income (1,160) % (1,028) % (2,338) % (2,129) % Dividends received deduction (405) % (484) % (935) % (1,049) % ESOP dividends paid deduction (251) % (243) % (484) % (475) % Other items, net 523 % 200 % 266 % 340 % Total tax expense $ 7,828 % $ 13,264 % $ 14,443 % $ 27,464 %

STOCK BASED COMPENSATION (Table

STOCK BASED COMPENSATION (Tables)	6 Months Ended
	Jun. 30, 2017
STOCK BASED COMPENSATION
Schedule of stock option activity	Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2017 2,207,110 $ Options granted 407,875 $ Options exercised (134,090) $ $ 4,328 Options canceled/forfeited (40,600) $ Outstanding options at June 30, 2017 2,440,295 $ $ 29,968 Exercisable options at June 30, 2017 1,162,455 $ $ 22,859 Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2016 2,582,220 $ Options granted 382,250 $ Options exercised (383,795) $ $ 16,271 Options canceled/forfeited (6,240) $ Outstanding options at June 30, 2016 2,574,435 $ $ 77,881 Exercisable options at June 30, 2016 1,155,740 $ $ 45,119
Schedule of stock option assumptions for fair value estimate	2017 2016 Weighted-average fair value of grants $ 7.94 $ Risk-free interest rates % % Dividend yield % % Expected volatility % % Expected option life 5.05 years years

OPERATING SEGMENT INFORMATION (

OPERATING SEGMENT INFORMATION (Tables)	6 Months Ended
	Jun. 30, 2017
OPERATING SEGMENT INFORMATION
Schedule of revenues and net earnings by segment	For the Three-Month Periods For the Six-Month Periods REVENUES Ended June 30, Ended June 30, (in thousands) 2017 2016 2017 2016 Casualty $ 119,259 $ 112,360 $ 236,243 $ 220,953 Property 34,485 37,794 70,290 76,479 Surety 30,587 30,072 61,083 59,712 Net premiums earned $ 184,331 $ 180,226 $ 367,616 $ 357,144 Net investment income 13,238 13,048 26,243 26,418 Net realized gains (losses) (1,359) 2,710 (735) 14,110 Total consolidated revenue $ 196,210 $ 195,984 $ 393,124 $ 397,672 NET EARNINGS (in thousands) 2017 2016 2017 2016 Casualty $ 8,648 $ 11,125 $ 1,767 $ 20,231 Property 2,863 7,245 11,667 13,443 Surety 8,232 7,646 19,366 13,646 Net underwriting income $ 19,743 $ 26,016 $ 32,800 $ 47,320 Net investment income 13,238 13,048 26,243 26,418 Net realized gains (losses) (1,359) 2,710 (735) 14,110 General corporate expense and interest on debt (4,392) (4,624) (9,573) (8,856) Equity in earnings of unconsolidated investees 6,806 5,191 11,744 8,942 Total earnings before income taxes $ 34,036 $ 42,341 $ 60,479 $ 87,934 Income tax expense 7,828 13,264 14,443 27,464 Total net earnings $ 26,208 $ 29,077 $ 46,036 $ 60,470
Schedule of net premiums earned by major product type	For the Three-Month Periods For the Six-Month Periods NET PREMIUMS EARNED Ended June 30, Ended June 30, (in thousands) 2017 2016 2017 2016 Casualty Commercial and personal umbrella $ 28,861 $ 27,536 $ 57,438 $ 54,666 General liability 22,851 21,448 44,434 42,172 Commercial transportation 20,395 20,206 41,496 38,480 Professional services 20,016 18,892 39,242 37,430 Small commercial 11,765 11,367 24,052 22,267 Executive products 4,438 4,575 8,850 9,410 Medical professional liability 4,265 4,182 8,556 7,997 Other casualty 6,668 4,154 12,175 8,531 Total $ 119,259 $ 112,360 $ 236,243 $ 220,953 Property Commercial property $ 15,873 $ 17,113 $ 31,591 $ 34,709 Marine 11,607 11,806 23,893 24,106 Specialty personal 5,508 6,237 11,526 12,545 Property reinsurance 1,479 2,619 3,262 5,381 Crop reinsurance - 19 5 (262) Other property 18 - 13 - Total $ 34,485 $ 37,794 $ 70,290 $ 76,479 Surety Miscellaneous $ 11,854 $ 11,493 $ 23,711 $ 22,590 Contract 7,147 6,683 14,231 13,426 Commercial 6,938 7,455 14,081 14,809 Energy 4,648 4,441 9,060 8,887 Total $ 30,587 $ 30,072 $ 61,083 $ 59,712 Grand Total $ 184,331 $ 180,226 $ 367,616 $ 357,144

SUMMARY OF SIGNIFICANT ACCOUN21

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets and EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2017	Mar. 31, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
ADOPTED ACCOUNTING STANDARDS
Increase to operating cash flows				$ 74,570	$ 69,571
Decrease to financing cash flows				14,242	11,234
Goodwill	$ 49,657			49,657		$ 51,270
State insurance licenses	7,500			7,500		7,500
Definite-lived intangibles, net of accumulated amortization of $4,077 at 6/30/17 and $5,546 at 12/31/16	3,425			3,425		5,601
Total intangibles	10,925			10,925		13,101
Goodwill and intangibles	60,582			60,582		64,371
Accumulated amortization of definite-lived intangibles	4,077			4,077		5,546
Amortization of intangible assets	200		$ 200	400	500
Basic EPS, Income (Numerator)
Income available to common shareholders	26,208		29,077	46,036	60,470
Diluted EPS, Income (Numerator)
Income available to common shareholders	$ 26,208		$ 29,077	$ 46,036	$ 60,470
Basic EPS, Weighted Average Shares (Denominator)
Number of shares outstanding	44,005		43,721	43,983	43,659
Effect of Dilutive Securities, Shares (Denominator)
Stock options (in shares)	514		702	534	722
Diluted EPS, Weighted Average Shares (Denominator)
Number of shares outstanding	44,519		44,423	44,517	44,381
Basic EPS, Per Share Amount
Basic net earnings per share (in dollars per share)	$ 0.60		$ 0.67	$ 1.05	$ 1.39
Diluted EPS, Per Share Amount
Diluted earnings per share (in dollars per share)	$ 0.59		$ 0.65	$ 1.03	$ 1.36
Accounting Standards Update 2016-09
ADOPTED ACCOUNTING STANDARDS
Reduction to income tax expense	$ 2,800	$ 400
Increase to operating cash flows				$ 3,200
Decrease to financing cash flows				3,200
Prior period adjustment				0
Energy Surety
ADOPTED ACCOUNTING STANDARDS
Goodwill	25,706			25,706		25,706
Miscellaneous and Contract Surety
ADOPTED ACCOUNTING STANDARDS
Goodwill	15,110			15,110		15,110
Small commercial
ADOPTED ACCOUNTING STANDARDS
Goodwill	5,246			5,246		5,246
Medical professional liability
ADOPTED ACCOUNTING STANDARDS
Goodwill	3,595			3,595		5,208
Goodwill and Intangible Asset Impairment	3,400
Goodwill, Impairment Loss	1,600		$ 7,200
Goodwill, Impaired, Accumulated Impairment Loss	8,800			$ 8,800		$ 7,200
Impairment of Intangible Assets, Finite-lived	$ 1,800

SUMMARY OF SIGNIFICANT ACCOUN22

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in Accumulated Other Comprehensive Earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
COMPREHENSIVE EARNINGS
Tax rate used (as a percent)	35.00%	35.00%	35.00%	35.00%
Changes in the balance of each component of accumulated other comprehensive earnings
Beginning balance			$ 122,610
Net current-period other comprehensive earnings (loss)	$ 10,599	$ 19,066	22,368	$ 40,829
Ending balance	144,978		144,978
Unrealized Gains and Losses on Available-for-Sale Securities
Changes in the balance of each component of accumulated other comprehensive earnings
Beginning balance	134,379	145,537	122,610	123,774
Other comprehensive earnings before reclassifications	11,753	25,561	23,925	54,731
Amounts reclassified from accumulated other comprehensive earnings	(1,154)	(6,495)	(1,557)	(13,902)
Net current-period other comprehensive earnings (loss)	10,599	19,066	22,368	40,829
Ending balance	$ 144,978	$ 164,603	$ 144,978	$ 164,603

SUMMARY OF SIGNIFICANT ACCOUN23

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Effects of Reclassifications Out of Accumulated Other Comprehensive Earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Amount Reclassified from Accumulated Other Comprehensive Earnings
Net realized gains (losses)	$ (1,359)	$ 2,710	$ 1,355	$ 14,110
Earnings before income taxes	34,036	42,341	60,479	87,934
Income tax expense	(7,828)	(13,264)	(14,443)	(27,464)
Net earnings	26,208	29,077	46,036	60,470
Reclassifications out of accumulated other comprehensive earnings | Unrealized Gains and Losses on Available-for-Sale Securities
Amount Reclassified from Accumulated Other Comprehensive Earnings
Net realized gains (losses)	1,775	9,992	4,485	21,388
Other-than-temporary impairment (OTTI) losses on investments			2,090
Earnings before income taxes	1,775	9,992	2,395	21,388
Income tax expense	(621)	(3,497)	(838)	(7,486)
Net earnings	$ 1,154	$ 6,495	$ 1,557	$ 13,902

INVESTMENTS - Amortized Cost an

INVESTMENTS - Amortized Cost and Fair Value (Details) - USD ($) $ in Thousands		Jun. 30, 2017	Dec. 31, 2016
Amortized Cost
Due in one year or less		$ 16,177
Due after one year through five years		342,614
Due after five years through 10 years		564,926
Due after 10 years		328,545
Mtge/ABS/CMBS	[1]	369,189
Total amortized cost		1,621,451	$ 1,596,227
Fair Value
Due in one year or less		16,009
Due after one year through five years		349,467
Due after five years through 10 years		578,370
Due after 10 years		336,953
Mtge/ABS/CMBS	[1]	370,858
Total fair value		1,651,657	1,605,209
Fair value measured on recurring basis
Available-for-sale
Fair Value		2,039,459	1,974,428
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3)
INVESTMENTS
Total assets at fair value		0
Debt securities
Available-for-sale
Amortized Cost		1,621,451	1,596,227
Gross Unrealized Gains		38,350	26,312
Gross Unrealized Losses		(8,144)	(17,330)
Fair Value		1,651,657	1,605,209
U.S. government
Available-for-sale
Amortized Cost		82,090	77,054
Gross Unrealized Gains		195	88
Gross Unrealized Losses		(345)	(579)
Fair Value		81,940	76,563
U.S. Agency
Available-for-sale
Amortized Cost		5,475	5,473
Gross Unrealized Gains		346	340
Fair Value		5,821	5,813
Non-U.S. govt. & agency
Available-for-sale
Amortized Cost		9,504	9,517
Gross Unrealized Gains		121	2
Gross Unrealized Losses		(170)	(368)
Fair Value		9,455	9,151
Mortgage-backed
Available-for-sale
Amortized Cost		289,628	283,002
Gross Unrealized Gains		4,261	4,635
Gross Unrealized Losses		(2,908)	(3,568)
Fair Value		290,981	284,069
ABS/CMBS
Available-for-sale
Amortized Cost	[2]	79,561	93,791
Gross Unrealized Gains	[2]	688	676
Gross Unrealized Losses	[2]	(372)	(557)
Fair Value	[2]	79,877	93,910
Corporate Debt
Available-for-sale
Amortized Cost		525,377	503,041
Gross Unrealized Gains		13,448	10,996
Gross Unrealized Losses		(2,406)	(5,670)
Fair Value		536,419	508,367
Municipal
Available-for-sale
Amortized Cost		629,816	624,349
Gross Unrealized Gains		19,291	9,575
Gross Unrealized Losses		(1,943)	(6,588)
Fair Value		647,164	627,336
Equity securities
Available-for-sale
Amortized Cost		193,052	187,573
Gross Unrealized Gains		196,776	182,912
Gross Unrealized Losses		(2,026)	(1,266)
Fair Value		$ 387,802	$ 369,219
[1]	Mortgage-backed, asset-backed and commercial mortgage-backed
[2]	Non-agency asset-backed and commercial mortgage-backed

INVESTMENTS - Unrealized Losses

INVESTMENTS - Unrealized Losses (Details) - USD ($) $ in Thousands		Jun. 30, 2017	Dec. 31, 2016
Investment positions with unrealized losses
Unrealized losses relative to total invested assets (as a percent)		0.50%
Fair value
Less than 12 months		$ 487,744	$ 683,633
12 Months and Greater		34,909	28,517
Total Fair value		522,653	712,150
Cost or amortized Cost
Less than 12 months		495,032	698,230
12 months and greater		37,791	32,516
Total Cost or Amortized Cost		532,823	730,746
Unrealized Loss
Less than 12 months		(7,288)	(14,597)
12 Months and Greater		(2,882)	(3,999)
Total Unrealized Loss		(10,170)	(18,596)
Debt securities
Fair value
Less than 12 months		480,597	676,195
12 Months and Greater		32,344	26,544
Total Fair value		512,941	702,739
Cost or amortized Cost
Less than 12 months		486,973	690,201
12 months and greater		34,112	29,868
Total Cost or Amortized Cost		521,085	720,069
Unrealized Loss
Less than 12 months		(6,376)	(14,006)
12 Months and Greater		(1,768)	(3,324)
Total Unrealized Loss		$ (8,144)	(17,330)
Percent to Total		100.00%
Debt securities | NAIC Rating 1 | AAA/AA/A | Aaa/Aa/A
Fair value
Total Fair value		$ 449,428
Cost or amortized Cost
Total Cost or Amortized Cost		455,748
Unrealized Loss
Total Unrealized Loss		$ (6,320)
Percent to Total		77.60%
Debt securities | NAIC Rating 2 | BBB | Baa
Fair value
Total Fair value		$ 48,504
Cost or amortized Cost
Total Cost or Amortized Cost		49,192
Unrealized Loss
Total Unrealized Loss		$ (688)
Percent to Total		8.50%
Debt securities | NAIC Rating 3 | BB | Ba
Fair value
Total Fair value		$ 6,671
Cost or amortized Cost
Total Cost or Amortized Cost		6,737
Unrealized Loss
Total Unrealized Loss		$ (66)
Percent to Total		0.80%
Debt securities | NAIC Rating 4 | B
Fair value
Total Fair value		$ 6,777
Cost or amortized Cost
Total Cost or Amortized Cost		7,470
Unrealized Loss
Total Unrealized Loss		$ (693)
Percent to Total		8.50%
Debt securities | NAIC Rating 5 | CCC or lower
Fair value
Total Fair value		$ 1,561
Cost or amortized Cost
Total Cost or Amortized Cost		1,938
Unrealized Loss
Total Unrealized Loss		$ (377)
Percent to Total		4.60%
U.S. government
Fair value
Less than 12 months		$ 37,158	48,500
12 Months and Greater		2,002
Total Fair value		39,160	48,500
Cost or amortized Cost
Less than 12 months		37,489	49,079
12 months and greater		2,016
Total Cost or Amortized Cost		39,505	49,079
Unrealized Loss
Less than 12 months		(331)	(579)
12 Months and Greater		(14)
Total Unrealized Loss		(345)	(579)
Non-U.S. govt. & agency
Fair value
Less than 12 months		5,834	7,647
Total Fair value		5,834	7,647
Cost or amortized Cost
Less than 12 months		6,004	8,015
Total Cost or Amortized Cost		6,004	8,015
Unrealized Loss
Less than 12 months		(170)	(368)
Total Unrealized Loss		(170)	(368)
Mortgage-backed
Fair value
Less than 12 months		176,566	175,858
12 Months and Greater		10,084	5,737
Total Fair value		186,650	181,595
Cost or amortized Cost
Less than 12 months		179,182	179,238
12 months and greater		10,376	5,925
Total Cost or Amortized Cost		189,558	185,163
Unrealized Loss
Less than 12 months		(2,616)	(3,380)
12 Months and Greater		(292)	(188)
Total Unrealized Loss		(2,908)	(3,568)
ABS/CMBS
Fair value
Less than 12 months	[1]	32,907	48,907
12 Months and Greater	[1]	9,563	5,272
Total Fair value	[1]	42,470	54,179
Cost or amortized Cost
Less than 12 months	[1]	33,041	49,372
12 months and greater	[1]	9,801	5,364
Total Cost or Amortized Cost	[1]	42,842	54,736
Unrealized Loss
Less than 12 months	[1]	(134)	(465)
12 Months and Greater	[1]	(238)	(92)
Total Unrealized Loss	[1]	(372)	(557)
Corporate Debt
Fair value
Less than 12 months		110,521	144,353
12 Months and Greater		8,338	15,535
Total Fair value		118,859	159,888
Cost or amortized Cost
Less than 12 months		111,823	146,979
12 months and greater		9,442	18,579
Total Cost or Amortized Cost		121,265	165,558
Unrealized Loss
Less than 12 months		(1,302)	(2,626)
12 Months and Greater		(1,104)	(3,044)
Total Unrealized Loss		(2,406)	(5,670)
Municipal
Fair value
Less than 12 months		117,611	250,930
12 Months and Greater		2,357
Total Fair value		119,968	250,930
Cost or amortized Cost
Less than 12 months		119,434	257,518
12 months and greater		2,477
Total Cost or Amortized Cost		121,911	257,518
Unrealized Loss
Less than 12 months		(1,823)	(6,588)
12 Months and Greater		(120)
Total Unrealized Loss		(1,943)	(6,588)
Equity securities
Fair value
Less than 12 months		7,147	7,438
12 Months and Greater		2,565	1,973
Total Fair value		9,712	9,411
Cost or amortized Cost
Less than 12 months		8,059	8,029
12 months and greater		3,679	2,648
Total Cost or Amortized Cost		11,738	10,677
Unrealized Loss
Less than 12 months		(912)	(591)
12 Months and Greater		(1,114)	(675)
Total Unrealized Loss		$ (2,026)	$ (1,266)
[1]	Non-agency asset-backed and commercial mortgage-backed

INVESTMENTS Debt Securities and

INVESTMENTS Debt Securities and Common Stock (Details)	6 Months Ended
	Jun. 30, 2017USD ($)securityposition	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)
Securities in unrealized loss positions
Unrealized Loss	$ 10,170,000		$ 18,596,000
Other-than-temporary impairment (OTTI) losses	$ 2,090,000
Debt securities
Securities in unrealized loss positions
Number of unrealized loss positions | position	294
Number of securities in unrealized loss positions for 12 months or longer | security	32
Unrealized losses as percentage of fixed income portfolio cost basis	0.50%
Number of securities with OTTI losses recognized in earnings | security	2
Other than Temporary Impairment Losses recognized in earnings	$ 2,100,000	$ 0
Other than Temporary Impairment Losses recognized in other comprehensive earnings	$ 0	$ 0
Common stock security
Securities in unrealized loss positions
Number of unrealized loss positions | position	4
Number of securities in unrealized loss positions for 12 months or longer | security	1
Unrealized Loss	$ 2,000,000
Other-than-temporary impairment (OTTI) losses	$ 0

INVESTMENTS Debt and Short-term

INVESTMENTS Debt and Short-term Investments (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017USD ($)item	Jun. 30, 2016USD ($)	Jun. 30, 2017USD ($)item	Jun. 30, 2016USD ($)	Dec. 31, 2016USD ($)	Dec. 31, 2015USD ($)
Other invested assets
Other investments	$ 25,310		$ 25,310		$ 24,115
Total tax benefit on investments in housing tax credit partnership	600	$ 400	1,300	$ 800
Investment in FHLBC	1,000		1,000		1,600
Federal Home Loan Bank Borrowings, Fair Value Disclosure	0		0
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments	20,200		20,200
Cash and Short-term Investments
Cash	21,355	$ 29,639	21,355	$ 29,639	18,269	$ 11,081
Short-term investments, at cost which approximates fair value	$ 18,057		$ 18,057		5,015
Investment In Low Income Housing Tax Credit Partnership Net Of Amortization Member
Other invested assets
Number of investments in low income housing tax credit partnerships | item	3		3
Other investments	$ 16,500		$ 16,500		17,500
Investment in Federal Home Loan Bank Stock [Member]
Other invested assets
Available-for-sale Securities Pledged as Collateral	10,000		10,000		0
Investment in Real Estate Fund
Other invested assets
Other investments	3,100		3,100		5,000
Other investments fair value	3,100		3,100		$ 5,000
Investment in BDC
Other invested assets
Other investments fair value	$ 4,800		$ 4,800

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands		Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Transfers in (out of) level 1		$ 0
Transfers in (out of) level 2		0
Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		2,039,459	$ 1,974,428
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		387,802	369,219
Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		1,651,657	1,605,209
U.S. government | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		81,940	76,563
U.S. government | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		81,940	76,563
U.S. Agency | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		5,821	5,813
U.S. Agency | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		5,821	5,813
Non-U.S. govt. & agency | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		9,455	9,151
Non-U.S. govt. & agency | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		9,455	9,151
Mortgage-backed | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		290,981	284,069
Mortgage-backed | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		290,981	284,069
ABS/CMBS | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	[1]	79,877	93,910
ABS/CMBS | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities	[1]	79,877	93,910
Corporate Bond Securities [Member] | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		536,419	508,367
Corporate Bond Securities [Member] | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		536,419	508,367
Municipal | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		647,164	627,336
Municipal | Significant Other Observable Inputs (Level 2) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		647,164	627,336
Equity securities | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		387,802	369,219
Equity securities | Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities		$ 387,802	$ 369,219
[1]	Non-agency asset-backed and commercial mortgage-backed

HISTORICAL LOSS AND LAE DEVEL29

HISTORICAL LOSS AND LAE DEVELOPMENT - Unpaid Losses and Settlement Expenses (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Unpaid losses and LAE at beginning of year:
Gross	$ 1,139,337	$ 1,103,785
Ceded	(288,224)	(297,844)
Net	851,113	805,941
Increase (decrease) in incurred losses and LAE:
Current accident year	203,371	191,465
Prior accident years	(19,634)	(30,017)
Total incurred	183,737	161,448
Loss and LAE payments for claims incurred:
Current accident year	(18,732)	(15,530)
Prior accident year	(113,501)	(118,243)
Total paid	(132,233)	(133,773)
Net unpaid losses and LAE at June 30,	851,113	805,941	$ 902,617	$ 833,616
Unpaid losses and LAE at June 30,
Gross	1,183,185	1,123,472
Ceded	(280,568)	(289,856)
Net	$ 851,113	$ 805,941	$ 902,617	$ 833,616

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Reconciliation of income tax expense reported to amount computed by applying the U.S. federal tax rate
Provision for income taxes at the statutory rate of 35%	$ 11,912	$ 14,819	$ 21,168	$ 30,777
Excess tax benefit on share-based compensation	(2,791)		(3,234)
Tax-exempt interest income	(1,160)	(1,028)	(2,338)	(2,129)
Dividends received deduction	(405)	(484)	(935)	(1,049)
ESOP dividends paid deduction	(251)	(243)	(484)	(475)
Other items, net	523	200	266	340
Total tax expense	$ 7,828	$ 13,264	$ 14,443	$ 27,464
Reconciliation of income tax expense rate to the U.S. federal tax rate
U.S. federal tax rate (as a percent)	35.00%	35.00%	35.00%	35.00%
Excess tax benefit on share-based compensation	(8.20%)		(5.30%)	(0.00%)
Effective rate reduction due to tax exempt interest income (as a percent)	(3.40%)	(2.40%)	(3.90%)	(2.40%)
Effective rate reduction due to dividend received (as a percent)	(1.20%)	(1.10%)	(1.50%)	(1.20%)
Effective rate reduction due to dividend paid to ESOP (as a percent)	(0.70%)	(0.60%)	(0.80%)	(0.50%)
Effective rate reduction due to other items, net (as a percent)	1.50%	0.40%	0.40%	0.30%
Effective tax rates (as a percent)	23.00%	31.30%	23.90%	31.20%

STOCK BASED COMPENSATION (Detai

STOCK BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended		26 Months Ended	60 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	May 06, 2015	May 05, 2010
Weighted Number of Options Outstanding
Outstanding options at the beginning of the period (in shares)			2,207,110	2,582,220
Options granted (in shares)			407,875	382,250
Options exercised (in shares)			(134,090)	(383,795)
Options canceled/forfeited (in shares)			(40,600)	(6,240)
Outstanding options at the end of the period (in shares)	2,440,295	2,574,435	2,440,295	2,574,435	2,440,295
Exercisable options at the end of the period (in shares)	1,162,455	1,155,740	1,162,455	1,155,740	1,162,455
Weighted Average Exercise Price
Outstanding options at the beginning of the period (in dollars per share)			$ 40.90	$ 32.42
Options granted (in dollars per share)			56.88	63.82
Options exercised (in dollars per share)			25.23	22.70
Options canceled/forfeited (in dollars per share)			48.09	35.47
Outstanding options at the end of the period (in dollars per share)	$ 44.32	$ 38.53	44.32	38.53	$ 44.32
Exercisable options at the end of the period (in dollars per share)	$ 35.77	$ 29.74	$ 35.77	$ 29.74	$ 35.77
Weighted Average Remaining Contractual Life
Weighted-average remaining contractual term of options outstanding			5 years 11 days	5 years 2 months 1 day
Weighted-average remaining contractual term of exercisable options			3 years 5 months 19 days	3 years 8 months 27 days
Aggregate Intrinsic Value
Options exercised (in dollars)			$ 4,328	$ 16,271
Outstanding options at the end of the period (in dollars)	$ 29,968	$ 77,881	29,968	77,881	$ 29,968
Exercisable options at the end of the period (in dollars)	22,859	45,119	$ 22,859	$ 45,119	22,859
Weighted-average fair value of grants (in dollars per share)			$ 7.94	$ 11.41
Stock-based compensation expenses (in dollars)	1,200	1,200	$ 2,000	$ 2,100
Income tax benefit from stock-based compensation (in dollars)	400	$ 400	700	$ 700
Unrecognized stock-based compensation expense (in dollars)	6,900		$ 6,900		6,900
Weighted average grant date assumptions and weighted average fair value
Weighted-average fair value of grants (in dollars per share)			$ 7.94	$ 11.41
Risk-free interest rates (as a percent)			1.89%	1.22%
Dividend yield (as a percent)			3.60%	1.61%
Expected volatility (as a percent)			22.95%	23.06%
Expected option life			5 years 18 days	5 years 15 days
Period for which annualized dividends is considered to calculate dividend yield			5 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award
Award vesting period			3 years
Age and period of service of the participant to be eligible for retirement			75 years
Aggregate Intrinsic Value
Stock-based compensation expenses (in dollars)	200
Unrecognized stock-based compensation expense (in dollars)	$ 600		$ 600		$ 600
Weighted average grant date assumptions and weighted average fair value
RSUs Granted	15,450
Weighted average grant date fair value of RSUs	$ 56.71
RLI Corp. Long-Term Incentive Plan (LTIP) and Omnibus Stock Plan
Share-based Compensation Arrangement by Share-based Payment Award
Award vesting period			5 years
Term of options			8 years
Age and period of service of the participant to be eligible for retirement			75 years
Omnibus Stock Plan
Share-based Compensation Arrangement by Share-based Payment Award
Shares authorized for grant							3,000,000
Weighted Number of Options Outstanding
Options granted (in shares)							2,458,059
RLI Corp. Long-Term Incentive Plan (2010 LTIP)
Share-based Compensation Arrangement by Share-based Payment Award
Shares authorized for grant						4,000,000
Weighted Number of Options Outstanding
Options granted (in shares)						2,878,000
RLI Corp. Long-Term Incentive Plan (2015 LITP)
Share-based Compensation Arrangement by Share-based Payment Award
Shares authorized for grant	4,000,000		4,000,000		4,000,000
Weighted Number of Options Outstanding
Options granted (in shares)			423,325		1,374,075

OPERATING SEGMENT INFORMATION -

OPERATING SEGMENT INFORMATION - Reconciliation of Segment Totals to Total Earnings (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
REVENUES
Net premiums earned	$ 184,331	$ 180,226	$ 367,616	$ 357,144
Net investment income	13,238	13,048	26,243	26,418
Net realized gains (losses)	(1,359)	2,710	(735)	14,110
Consolidated revenue	196,210	195,984	393,124	397,672
NET EARNINGS
Net underwriting income	19,743	26,016	32,800	47,320
Net investment income	13,238	13,048	26,243	26,418
Net realized gains (losses)	(1,359)	2,710	(735)	14,110
General corporate expense and interest on debt	(4,392)	(4,624)	(9,573)	(8,856)
Equity in earnings of unconsolidated investees	6,806	5,191	11,744	8,942
Earnings before income taxes	34,036	42,341	60,479	87,934
Income tax expense	7,828	13,264	14,443	27,464
Net earnings	26,208	29,077	46,036	60,470
Casualty segment
REVENUES
Net premiums earned	119,259	112,360	236,243	220,953
NET EARNINGS
Net underwriting income	8,648	11,125	1,767	20,231
Property segment
REVENUES
Net premiums earned	34,485	37,794	70,290	76,479
NET EARNINGS
Net underwriting income	2,863	7,245	11,667	13,443
Surety segment
REVENUES
Net premiums earned	30,587	30,072	61,083	59,712
NET EARNINGS
Net underwriting income	$ 8,232	$ 7,646	$ 19,366	$ 13,646

OPERATING SEGMENT INFORMATION33

OPERATING SEGMENT INFORMATION - Major Products (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenue by major product
Net premiums earned	$ 184,331	$ 180,226	$ 367,616	$ 357,144
Casualty segment
Revenue by major product
Net premiums earned	119,259	112,360	236,243	220,953
Casualty segment | Commercial and personal umbrella
Revenue by major product
Net premiums earned	28,861	27,536	57,438	54,666
Casualty segment | General liability
Revenue by major product
Net premiums earned	22,851	21,448	44,434	42,172
Casualty segment | Transportation
Revenue by major product
Net premiums earned	20,395	20,206	41,496	38,480
Casualty segment | Professional services
Revenue by major product
Net premiums earned	20,016	18,892	39,242	37,430
Casualty segment | Small commercial
Revenue by major product
Net premiums earned	11,765	11,367	24,052	22,267
Casualty segment | Executive products
Revenue by major product
Net premiums earned	4,438	4,575	8,850	9,410
Casualty segment | Medical professional liability
Revenue by major product
Net premiums earned	4,265	4,182	8,556	7,997
Casualty segment | Other casualty
Revenue by major product
Net premiums earned	6,668	4,154	12,175	8,531
Property segment
Revenue by major product
Net premiums earned	34,485	37,794	70,290	76,479
Property segment | Commercial
Revenue by major product
Net premiums earned	15,873	17,113	31,591	34,709
Property segment | Marine
Revenue by major product
Net premiums earned	11,607	11,806	23,893	24,106
Property segment | Specialty Personal
Revenue by major product
Net premiums earned	5,508	6,237	11,526	12,545
Property segment | Property reinsurance
Revenue by major product
Net premiums earned	1,479	2,619	3,262	5,381
Property segment | Crop reinsurance business
Revenue by major product
Net premiums earned		19	5
Net premiums earned				(262)
Property segment | Other property
Revenue by major product
Net premiums earned	18		13
Surety segment
Revenue by major product
Net premiums earned	30,587	30,072	61,083	59,712
Surety segment | Miscellaneous
Revenue by major product
Net premiums earned	11,854	11,493	23,711	22,590
Surety segment | Contract
Revenue by major product
Net premiums earned	7,147	6,683	14,231	13,426
Surety segment | Commercial surety product
Revenue by major product
Net premiums earned	6,938	7,455	14,081	14,809
Surety segment | Energy Surety
Revenue by major product
Net premiums earned	$ 4,648	$ 4,441	$ 9,060	$ 8,887