RLI (RLI) 10-Q 25 Apr 18 2018 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 13, 2018
Document and Entity Information
Entity Registrant Name	RLI CORP
Entity Central Index Key	84,246
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
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		44,253,126
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q1

Consolidated Statements of Earn

Consolidated Statements of Earnings and Comprehensive Earnings - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Condensed Consolidated Statements of Earnings and Comprehensive Earnings
Net premiums earned	$ 190,027	$ 183,285
Net investment income	14,232	13,005
Net realized gains	8,460	2,714
Other-than-temporary-impairment (OTTI) losses on investments	(56)	(2,090)
Net unrealized losses on equity securities	(26,772)
Consolidated revenue	185,891	196,914
Losses and settlement expenses	92,421	93,390
Policy acquisition costs	66,734	63,503
Insurance operating expenses	13,385	13,335
Interest expense on debt	1,856	1,856
General corporate expenses	2,283	3,325
Total expenses	176,679	175,409
Equity in earnings of unconsolidated investees	5,166	4,938
Earnings before income taxes	14,378	26,443
Income tax expense:
Total tax expense	2,162	6,615
Net earnings	12,216	19,828
Other comprehensive earnings (loss), net of tax	(26,398)	11,769
Comprehensive earnings (loss)	$ (14,182)	$ 31,597
Basic:
Net earnings per share (in dollars per share)	$ 0.28	$ 0.45
Comprehensive earnings (loss) per share (in dollars per share)	(0.32)	0.72
Diluted:
Net earnings per share (in dollars per share)	0.27	0.45
Comprehensive earnings (loss) per share (in dollars per share)	$ (0.32)	$ 0.71
Weighted average number of common shares outstanding
Basic (in shares)	44,221	43,961
Diluted (in shares)	44,650	44,502
Cash dividends paid per common share	$ 0.21	$ 0.20

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Fixed income:
Available-for-sale, at fair value (amortized cost - $1,661,490 at 3/31/18 and $1,646,411 at 12/31/17)	$ 1,653,674	$ 1,672,239
Equity Securities, at fair value (cost - $186,520 at 3/31/18 and $182,002 at 12/31/17)	378,253	400,492
Short-term investments, at cost which approximates fair value		9,980
Other invested assets	35,065	33,808
Cash	28,927	24,271
Total investments and cash	2,095,919	2,140,790
Accrued investment income	14,079	15,166
Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $16,984 at 3/31/18 and $16,935 at12/31/17	132,682	134,351
Ceded unearned premium	57,356	57,928
Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $9,945 at 3/31/18 and $10,014 at 12/31/17	308,703	301,991
Deferred policy acquisition costs	77,622	77,716
Property and equipment, at cost, net of accumulated depreciation of $49,350 at 3/31/18 and $47,676 at 12/31/17	56,153	55,849
Investment in unconsolidated investees	85,564	90,067
Goodwill and intangibles	54,793	59,302
Other assets	11,321	14,084
TOTAL ASSETS	2,894,192	2,947,244
Liabilities:
Unpaid losses and settlement expenses	1,303,131	1,271,503
Unearned premiums	444,296	451,449
Reinsurance balances payable	12,233	21,624
Funds held	67,415	74,560
Income taxes - deferred	40,234	53,768
Bonds payable, long-term debt	148,975	148,928
Accrued expenses	26,621	52,848
Other liabilities	18,354	18,966
TOTAL LIABILITIES	2,061,259	2,093,646
Shareholders' Equity
Common stock ($1 par value, authorized 100,000,000 shares, issued 67,183,340 shares at 3/31/18 and 67,078,569 shares at 12/31/17, and outstanding 44,253,126 shares at 3/31/18 and 44,148,355 shares at 12/31/17)	67,183	67,079
Paid-in capital	235,694	233,077
Accumulated other comprehensive earnings	(6,973)	157,919
Retained earnings	930,028	788,522
Deferred compensation	8,056	8,640
Less: Treasury shares at cost (22,930,214 shares at 3/31/18 and 12/31/17)	(401,055)	(401,639)
TOTAL SHAREHOLDERS’ EQUITY	832,933	853,598
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 2,894,192	$ 2,947,244

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Condensed Consolidated Balance Sheets
Available-for-sale, amortized cost	$ 1,661,490	$ 1,646,411
Equity Securities, FV-NI, Cost	186,520	182,002
Premiums and reinsurance balances receivable, allowances for uncollectible amounts	16,984	16,935
Reinsurance balances recoverable on unpaid losses and settlement expenses, allowances for uncollectible amounts	9,945	10,014
Property and equipment, accumulated depreciation	$ 49,350	$ 47,676
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	67,183,340	67,078,569
Common stock, shares outstanding (in shares)	44,253,126	44,148,355
Treasury stock, shares (in shares)	22,930,214	22,930,214

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Condensed Consolidated Statements of Cash Flows
Net Cash Provided by Operating Activities	$ 15,393	$ 11,265
Net Cash Provided by (Used in) Investing Activities [Abstract]
Investments purchased	(177,324)	(88,910)
Investments sold	123,869	67,667
Investments called or matured	41,337	33,880
Net change in short-term investments	9,980	(3,435)
Net property and equipment purchased	(2,065)	(3,298)
Proceeds from Other Investing Activities	35
Net Cash Provided by (Used in) Investing Activities, Total	(4,168)	5,904
Net Cash Provided by (Used in) Financing Activities [Abstract]
Cash dividends paid	(9,290)	(8,793)
Proceeds from stock option exercises	2,721	1,499
Net Cash Used in Financing Activities, Total	(6,569)	(7,294)
Net increase in cash	4,656	9,875
Cash at the beginning of the period	24,271	18,269
Cash at the end of the period	$ 28,927	$ 28,144

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Mar. 31, 2018
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 2017 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 March 31, 2018 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 2017 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 2014-09, Revenue from Contracts with Customers (Topic 606) ASU 2014-09 was issued to clarify and remove inconsistencies within revenue recognition requirements. The core principle of the update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the transaction price for a contract is allocated among separately identifiable performance obligations and a portion of the transaction price is recognized as revenue when the associated performance obligation has been completed or transferred to the customer. All contracts and fulfillment activities within the scope of Topic 944, Financial Services – Insurance, investment income, investment related gains and losses and equity in earnings of unconsolidated investees are outside the scope of this ASU. We adopted ASU 2014-09 on January 1, 2018. However, nearly all (over 99 percent) of our consolidated revenue is scoped out and therefore exempt from the guidance contained within this ASU. For the remaining portion, the revenue recognition policy we utilize aligns with the new guidance and there were no changes to the way we recognize revenue. Although the recognition of earnings from equity method investees is out of scope from the update, the recognition of revenue by our two equity method investees would be subject to the new guidance if the revenue streams are within this update’s scope. Any impact on revenues would affect the net income of each of the equity method investees, upon which we calculate our portion of earnings to recognize. Our equity method investees are private companies and this guidance becomes effective for private companies in periods beginning after December 15, 2018. As a result, their earnings and our portion of those earnings are not impacted in 2018. We expect that revenue generated by both of our equity method investees will either be outside the scope of this update or largely unaffected by the changes. 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 earnings; 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 earnings 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. We adopted ASU 2016-01 on January 1, 2018. A cumulative-effect adjustment to the balance sheet was made as of the beginning of the year, which moved $142.2 million of net unrealized gains and losses on equity securities from accumulated other comprehensive earnings to retained earnings. During the first quarter of 2018, we recognized $26.8 million of unrealized losses on equity securities within net earnings and $5.6 million of income tax benefit. This compares to $6.5 million of unrealized gains on equity securities, net of tax, that was recognized through other comprehensive earnings in 2017. The future impact to our net earnings will vary depending upon the level of volatility in the performance of the securities held in our equity portfolio and the overall market. ASU 2016-15, 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. We adopted ASU 2016-15 on January 1, 2018. The adoption did not have a material impact on our statement of cash flows. ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ASU 2018-02 was issued as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA) on December 22, 2017. Accounting guidance required deferred tax items to be revalued based on the new tax laws (the most significant of which reduced the corporate tax rate to 21 percent from 35 percent) with the change included in income from continuing operations. Since other comprehensive income was not affected by the revaluation of the deferred tax items, the net accumulated other comprehensive income (AOCI) balance was reflective of the historic 35 percent tax rate instead of the newly enacted rate, a difference that is referred to as a stranded tax effect. This ASU allows for the option to reclassify the stranded tax effects resulting from the implementation of the TCJA out of AOCI and into retained earnings. ASU 2018-02 does not replace the guidance requiring changes from the enactment of other tax laws or rates to be included within income from continuing operations and is applicable only to changes from the TCJA. We adopted ASU 2018-02 during the first quarter of 2018. A current period adjustment was made to the balance sheet, which moved $3.7 million of stranded tax effects on the unrealized balances of our fixed income securities and equity method investees from accumulated other comprehensive earnings to retained earnings. The entire unrealized balance on equity securities was reclassified from AOCI into retained earnings from the adoption of ASU 2016-01 on January 1, 2018 and was therefore unaffected by this ASU. As there was no impact to net earnings and the balance sheet effect is limited to a reclassification within the equity section, there was not a material impact on our financial statements. C. PROSPECTIVE ACCOUNTING STANDARDS 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 do not have any financing leases. Approximately $31 million of undiscounted future lease liabilities would have to be discounted to present value and added to our balance sheet with a corresponding right-of-use asset if the guidance were applicable on March 31, 2018. We have approximately $7 million of annual operating lease expenses and 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, including reinsurance balances recoverable, to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net earnings. 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 accounting standards update. Additionally, as our fixed income portfolio is weighted towards higher rated bonds (84 percent rated A or better at March 31, 2018) and we purchase reinsurance from financially strong reinsurers, we do not expect that credit loss will be material. D. INTANGIBLE ASSETS Goodwill and intangible assets totaled $54.8 million and $59.3 million at March 31, 2018 and December 31, 2017, respectively, as detailed in the following table. Goodwill and Intangible Assets March 31, December 31, (in thousands) 2018 2017 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 Total goodwill $ 46,062 $ 49,657 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $2,763 at 3/31/18 and $5,678 at 12/31/17 1,231 2,145 Total intangibles $ 8,731 $ 9,645 Total goodwill and intangibles $ 54,793 $ 59,302 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $12.4 million and $8.8 million as of March 31, 2018 and December 31, 2017, respectively. All definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the first quarter of 2018, compared to $0.2 million for the first quarter of 2017. 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 2017. Based upon these reviews, none of the assets were impaired. In addition, as of March 31, 2018, there were no triggering events that would suggest an updated review was necessary on the above mentioned goodwill and intangible assets. In contrast, the medical professional liability reporting unit had adverse loss experience during the first quarter of 2018, which triggered the need to review the reporting unit for impairment. Testing of the reporting unit resulted in a $4.4 million non-cash impairment charge. The 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 $0.8 million non-cash impairment charge. The 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 model implied the reporting unit had no value, resulting in a $3.6 million non-cash impairment charge. Subsequent to this impairment, the medical professional liability reporting unit had no remaining goodwill or intangible assets. All impairment charges were recorded as net realized losses in the 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 March 31, 2018 Ended March 31, 2017 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 $ 12,216 44,221 $ 0.28 $ 19,828 43,961 $ 0.45 Effect of Dilutive Securities Stock options - 429 - 541 Diluted EPS Income available to common shareholders $ 12,216 44,650 $ 0.27 $ 19,828 44,502 $ 0.45 F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio in 2018. In 2017, after-tax unrealized gains and losses on our fixed income and equity portfolios were also included. With the adoption of ASU 2016-01 on January 1, 2018, we began recognizing unrealized gains and losses on the equity portfolio through net income. See note 1.B to the unaudited condensed consolidated interim financial statements for more information. In reporting comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 21 percent in 2018 and 35 percent in 2017. Unrealized losses, net of tax, on the fixed income portfolio for the first three months of 2018 were $26.4 million, compared to $11.8 million of unrealized gains, net of tax, on the fixed income and equity portfolios during the same period last year. Unrealized losses in the first three months of 2018 were mainly attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. In 2017, unrealized gains were the result of strong equity market returns for the quarter and a slight decline in interest rates. 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. The 2017 activity and balances include the net unrealized gain and loss activity on both fixed income and equity securities, while the 2018 activity and ending balance reflect only the net unrealized gain and loss activity on fixed income securities due to the aforementioned adoption of ASU 2016-01. (in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2018 2017 Beginning balance $ 157,919 $ 122,610 Cumulative effect adjustment of ASU 2016-01 (142,219) - Adjusted beginning balance $ 15,700 $ 122,610 Other comprehensive earnings before reclassifications (26,410) 12,172 Amounts reclassified from accumulated other comprehensive earnings 12 (403) Net current-period other comprehensive earnings (loss) $ (26,398) $ 11,769 Reclassification of stranded tax effect per ASU 2018-02 3,725 - Ending balance $ (6,973) $ 134,379 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. As previously mentioned, 2018 activity is reflective of activity on fixed income securities classified as available-for-sale, while 2017 also includes activity from the equity portfolio. Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2018 2017 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 41 $ 2,710 Net realized gains (56) (2,090) Other-than-temporary impairment (OTTI) losses on investments $ (15) $ 620 Earnings before income taxes 3 (217) Income tax expense $ (12) $ 403 Net earnings

INVESTMENTS

INVESTMENTS	3 Months Ended
	Mar. 31, 2018
INVESTMENTS
INVESTMENTS	2. INVESTMENTS Our investments are primarily composed of fixed income debt securities and common stock equity securities. We carry our equity securities at fair value and categorize all of our debt securities 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.” Fixed Income Securities - Available-for-Sale The amortized cost and fair value of available-for-sale securities at March 31, 2018 and December 31, 2017 were as follows: Available-for-sale (in thousands) March 31, 2018 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 119,660 $ 54 $ (2,179) $ 117,535 U.S. agency 18,541 208 (408) 18,341 Non-U.S. govt. & agency 8,193 35 (145) 8,083 Agency MBS 359,232 2,148 (9,896) 351,484 ABS/CMBS* 91,073 199 (774) 90,498 Corporate 527,845 5,331 (7,184) 525,992 Municipal 536,946 8,629 (3,834) 541,741 Total Fixed Income $ 1,661,490 $ 16,604 $ (24,420) $ 1,653,674 Available-for-sale (in thousands) December 31, 2017 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 92,561 $ 23 $ (895) $ 91,689 U.S. agency 18,541 347 (110) 18,778 Non-U.S. govt. & agency 7,501 143 (56) 7,588 Agency MBS 329,129 3,420 (4,078) 328,471 ABS/CMBS* 70,405 436 (315) 70,526 Corporate 508,128 12,575 (1,681) 519,022 Municipal 620,146 17,272 (1,253) 636,165 Total Fixed Income $ 1,646,411 $ 34,216 $ (8,388) $ 1,672,239 *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 March 31, 2018: March 31, 2018 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 35,667 $ 35,502 Due after one year through five years 328,700 330,089 Due after five years through 10 years 553,968 552,243 Due after 10 years 292,850 293,858 Mtge/ABS/CMBS* 450,305 441,982 Total available-for-sale $ 1,661,490 $ 1,653,674 *Mortgage-backed, asset-backed and commercial mortgage-backed Unrealized Losses on Fixed Income Securities We conduct and document periodic reviews of all fixed income 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 fixed income securities that were in an unrealized loss position as of March 31, 2018 and December 31, 2017. 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 March 31, 2018 unrealized losses on fixed income securities, as shown in the following tables, were 1.2 percent of total invested assets. Unrealized losses increased through the first three months of 2018, as interest rates increased from the end of 2017, which decreased the fair value of securities held in the fixed income portfolio. March 31, 2018 December 31, 2017 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. Government Fair value $ 64,861 $ 31,191 $ 96,052 $ 58,009 $ 30,888 $ 88,897 Cost or amortized cost 66,407 31,824 98,231 58,443 31,349 89,792 Unrealized Loss $ (1,546) $ (633) $ (2,179) $ (434) $ (461) $ (895) U.S. Agency Fair value $ 12,655 $ — $ 12,655 $ 10,917 $ — $ 10,917 Cost or amortized cost 13,063 — 13,063 11,027 — 11,027 Unrealized Loss $ (408) $ — $ (408) $ (110) $ — $ (110) Non-U.S. government Fair value $ 2,768 $ 1,781 $ 4,549 $ — $ 1,840 $ 1,840 Cost or amortized cost 2,797 1,897 4,694 — 1,896 1,896 Unrealized Loss $ (29) $ (116) $ (145) $ — $ (56) $ (56) Agency MBS Fair value $ 190,033 $ 110,400 $ 300,433 $ 122,130 $ 111,306 $ 233,436 Cost or amortized cost 195,213 115,116 310,329 123,559 113,955 237,514 Unrealized Loss $ (5,180) $ (4,716) $ (9,896) $ (1,429) $ (2,649) $ (4,078) ABS/CMBS* Fair value $ 48,135 $ 18,248 $ 66,383 $ 23,406 $ 21,587 $ 44,993 Cost or amortized cost 48,635 18,522 67,157 23,491 21,817 45,308 Unrealized Loss $ (500) $ (274) $ (774) $ (85) $ (230) $ (315) Corporate Fair value $ 248,217 $ 27,617 $ 275,834 $ 86,946 $ 28,600 $ 115,546 Cost or amortized cost 253,724 29,294 283,018 87,736 29,491 117,227 Unrealized Loss $ (5,507) $ (1,677) $ (7,184) $ (790) $ (891) $ (1,681) Municipal Fair value $ 117,781 $ 48,961 $ 166,742 $ 71,059 $ 60,049 $ 131,108 Cost or amortized cost 119,784 50,792 170,576 71,534 60,827 132,361 Unrealized Loss $ (2,003) $ (1,831) $ (3,834) $ (475) $ (778) $ (1,253) Total fixed income Fair value $ 684,450 $ 238,198 $ 922,648 $ 372,467 $ 254,270 $ 626,737 Cost or amortized cost 699,623 247,445 947,068 375,790 259,335 635,125 Unrealized Loss $ (15,173) $ (9,247) $ (24,420) $ (3,323) $ (5,065) $ (8,388) * Non-agency asset-backed and commercial mortgage-backed The following table shows the composition of the fixed income securities in unrealized loss positions at March 31, 2018 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 $ 821,528 $ 800,794 $ (20,734) % 2 BBB Baa 95,823 93,384 (2,439) % 3 BB Ba 18,431 17,862 (569) % 4 B B 9,281 8,787 (494) % 5 CCC Caa 1,389 1,250 (139) % 6 CC or lower Ca or lower 616 571 (45) 0.2 % Total $ 947,068 $ 922,648 $ (24,420) % Evaluating Fixed Income Securities for OTTI The fixed income portfolio contained 551 securities in an unrealized loss position as of March 31, 2018. The $24.4 million in associated unrealized losses for these 551 securities represents 1.5 percent of the fixed income portfolio’s cost basis. Of these 551 securities, 126 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 three months of 2018, we recognized $0.1 million in other-than-temporary impairment (OTTI) charges in earnings on one fixed income security that we no longer had the intent to hold. Comparatively, we recognized $2.1 million in OTTI losses in earnings on two fixed income securities that we no longer had the intent to hold in same period in 2017. There were no OTTI losses recognized in other comprehensive earnings on the fixed income portfolio for the periods presented. Unrealized Gains and Losses on Equity Securities The portion of net unrealized losses for the first quarter of 2018 that relates to equity securities held as of March 31, 2018 was $12.3 million. Other Invested Assets Other invested assets include investments in three low income housing tax credit partnerships (LIHTC), membership in the Federal Home Loan Bank of Chicago (FHLBC), an investment in a real estate fund, an investment in a business development company (BDC) and an investment in a global credit fund. Our LIHTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC and our membership in the FHLBC, their carrying amounts approximate fair value. Our investments in the BDC and global credit fund are carried at fair value. The investment in the real estate fund was carried at cost through 2017, but is carried at fair value in 2018 and forward due to the adoption of ASU 2016-01. Our LIHTC interests had a balance of $15.0 million at March 31, 2018, compared to $15.5 million at December 31, 2017 and recognized a total tax benefit of $0.6 million during the first quarter of 2018, the same as the prior year. Our unfunded commitment for our LIHTC investments totaled $2.5 million at March 31, 2018 and will be paid out in installments through 2025. Our investment in FHLBC stock totaled $1.0 million at March 31, 2018 and December 31, 2017. As of March 31, 2018, $18.2 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. Comparatively, $18.9 million of investments were pledged as collateral as of December 31, 2017. As of and during the three month period ending March 31, 2018, there were no outstanding borrowings with the FHLBC. Our investment in the real estate fund had a fair value of $2.6 million at March 31, 2018, compared to a carrying value of $2.5 million which approximated fair value at December 31, 2017. Our investment in the BDC had a fair value of $9.2 million at March 31, 2018, compared to $7.3 million at December 31, 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 this investment totaled $15.7 million at March 31, 2018. Lastly, our investment in a global credit fund that specializes in consumer loans had a fair value of $7.3 million at March 31, 2018, compared to $7.5 million at December 31, 2017. We had a $7.2 million unfunded commitment related to the global credit fund investment at March 31, 2018. Cash and Short-term Investments Cash consists of uninvested balances in bank accounts. We had a cash balance of $28.9 million at March 31, 2018, compared to $24.3 million at the end of 2017. We did not have any short-term investments at March 31, 2018, but had $10.0 million of short-term investments that were carried at cost and approximated fair value at December 31, 2017.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	3 Months Ended
	Mar. 31, 2018
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. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring 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. Our investments in the BDC, real estate fund and global credit fund are measured using each investment’s net asset value per share and are 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 March 31, 2018 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 Fixed income securities - available-for-sale U.S. government $ — $ 117,535 $ — $ 117,535 U.S. agency — 18,341 — 18,341 Non-U.S. govt. & agency — 8,083 — 8,083 Agency MBS — 351,484 — 351,484 ABS/CMBS* — 90,498 — 90,498 Corporate — 525,992 — 525,992 Municipal — 541,741 — 541,741 Total fixed income securities - available-for-sale $ — $ 1,653,674 $ — $ 1,653,674 Equity securities 378,253 — — 378,253 Total $ 378,253 $ 1,653,674 $ — $ 2,031,927 As of December 31, 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 Fixed income securities - available-for-sale U.S. government $ — $ 91,689 $ — $ 91,689 U.S. agency — 18,778 — 18,778 Non-U.S. govt. & agency — 7,588 — 7,588 Agency MBS — 328,471 — 328,471 ABS/CMBS* — 70,526 — 70,526 Corporate — 519,022 — 519,022 Municipal — 636,165 — 636,165 Total fixed income securities - available-for-sale $ — $ 1,672,239 $ — $ 1,672,239 Equity securities 400,492 — — 400,492 Total $ 400,492 $ 1,672,239 $ — $ 2,072,731 * 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 three-month period ended March 31, 2018.

HISTORICAL LOSS AND LAE DEVELOP

HISTORICAL LOSS AND LAE DEVELOPMENT	3 Months Ended
	Mar. 31, 2018
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 three months of 2018 and 2017. For the Three-Month Periods Ended March 31, (in thousands) 2018 2017 Unpaid losses and LAE at beginning of year Gross $ 1,271,503 $ 1,139,337 Ceded (301,991) (288,224) Net $ 969,512 $ 851,113 Increase (decrease) in incurred losses and LAE Current accident year $ 107,011 $ 99,249 Prior accident years (14,590) (5,859) Total incurred $ 92,421 $ 93,390 Loss and LAE payments for claims incurred Current accident year $ (3,384) $ (3,395) Prior accident year (64,121) (60,427) Total paid $ (67,505) $ (63,822) Net unpaid losses and LAE at March 31, $ 994,428 $ 880,681 Unpaid losses and LAE at March 31, Gross $ 1,303,131 $ 1,152,027 Ceded (308,703) (271,346) Net $ 994,428 $ 880,681 For the first three months of 2018, incurred losses and LAE included $14.6 million of favorable development on prior years’ loss reserves. Commercial and personal umbrella, general liability and small commercial were drivers of the favorable development within the casualty segment. Property and surety segments also developed favorably, contributing to the decrease in incurred losses on prior accident years. For the first three months of 2017, incurred losses and LAE included $5.9 million of favorable development on prior years’ loss reserves. The property segment and surety segments had favorable development, primarily from commercial property, marine, contract surety and commercial surety. The casualty segment experienced unfavorable development, driven by commercial transportation.

INCOME TAXES

INCOME TAXES	3 Months Ended
	Mar. 31, 2018
INCOME TAXES
INCOME TAXES	5. INCOME TAXES Our effective tax rate for the three-month period ended March 31, 2018 was 15.0 percent, compared to 25.0 percent for the same period in 2017. Effective rates are dependent upon components of pretax earnings and the related tax effects. Pre-tax earnings were lower for the first quarter of 2018 due to the adoption of ASU 2016-01 on January 1, 2018, which resulted in the inclusion of $26.8 million of unrealized losses on equity securities within pre-tax earnings. The lower pretax earnings caused the tax favored adjustments to be larger on a percentage basis in 2018 compared to the prior year. Additionally, the Tax Cuts and Jobs Act of 2017 (TCJA) lowered the federal corporate tax rate from 35 percent to 21 percent effective January 1, 2018. There have been no changes to the provisional amounts that we recorded in the fourth quarter of 2017 associated with the TCJA. Income tax expense attributable to income from operations for the three-month periods ended March 31, 2018 and 2017 differed from the amounts computed by applying the U.S. federal tax rate of 21 percent and 35 percent, respectively, to pretax income by the items detailed in the below table. In interim periods, income taxes are adjusted to reflect the effective tax rate we anticipate for the year, with adjustments flowing through the other items line. For the Three-Month Periods Ended March 31, 2018 2017 (in thousands) Amount % Amount % Provision for income taxes at the statutory rate of 21% in 2018 and 35% in 2017 $ 3,019 % $ 9,255 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (1,143) % (443) % Tax exempt interest income (581) % (1,179) % Dividends received deduction (196) % (530) % ESOP dividends paid deduction (139) % (233) % Other items, net 1,202 % (255) % Total tax expense $ 2,162 % $ 6,615 %

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION	3 Months Ended
	Mar. 31, 2018
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 1,485,325 awards under the 2015 LTIP, including 36,750 thus far in 2018. 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 March 31, 2018 and 2017: Weighted Weighted Average Aggregate Number of Average Remaining Intrinsic Options Exercise Contractual Value Outstanding Price Life (in 000’s) Outstanding options at January 1, 2018 2,257,015 $ 46.80 Options granted 36,750 $ 64.42 Options exercised (147,370) $ 30.01 $ 5,001 Options canceled/forfeited (4,800) $ 62.55 Outstanding options at March 31, 2018 2,141,595 $ 48.22 4.90 $ 32,883 Exercisable options at March 31, 2018 853,835 $ 40.27 3.32 $ 19,834 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 $ 40.90 Options granted 23,125 $ 59.77 Options exercised (32,960) $ 33.05 $ 891 Options canceled/forfeited — $ 0.00 Outstanding options at March 31, 2017 2,197,275 $ 41.22 4.73 $ 42,954 Exercisable options at March 31, 2017 891,235 $ 31.89 3.12 $ 25,118 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 2018, 36,750 stock options were granted with a weighted average exercise price of $64.42 and a weighted average fair value of $9.16. We recognized $1.0 million of expense in the first quarter of 2018 related to options vesting. Since options granted under our 2010 LTIP and 2015 LTIP are non-qualified, we recorded a tax benefit of $0.2 million in the first quarter of 2018 related to this compensation expense. Total unrecognized compensation expense relating to outstanding and unvested options was $5.0 million, which will be recognized over the remainder of the vesting period. Comparatively, we recognized $0.9 million of expense in the first quarter of 2017. We recorded a tax benefit of $0.3 million in the first quarter of 2017 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 March 31: 2018 2017 Weighted-average fair value of grants $ 9.16 $ Risk-free interest rates % % Dividend yield % % Expected volatility % % Expected option life 5.13 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 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 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 terminate employment with the Company after having met the definition of retirement under the 2015 LTIP, defined as those individuals whose age and years of service equals 75, the RSUs will 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 March 31, 2018, 15,450 RSUs have been granted and 15,150 remain outstanding. No RSUs were granted in the first quarter of 2018. We recognized $0.1 million of expense on these units in the first quarter of 2018. Total unrecognized compensation expense relating to outstanding and unvested RSUs was $0.4 million, which will be recognized over the remainder of the three-year vesting period.

OPERATING SEGMENT INFORMATION

OPERATING SEGMENT INFORMATION	3 Months Ended
	Mar. 31, 2018
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 REVENUES Ended March 31, (in thousands) 2018 2017 Casualty $ 125,850 $ 116,984 Property 35,182 35,805 Surety 28,995 30,496 Net premiums earned $ 190,027 $ 183,285 Net investment income 14,232 13,005 Net realized gains 8,404 624 Net unrealized losses on equity securities (26,772) - Total consolidated revenue $ 185,891 $ 196,914 NET EARNINGS (in thousands) 2018 2017 Casualty $ 1,561 $ (6,881) Property 5,882 8,804 Surety 10,044 11,134 Net underwriting income $ 17,487 $ 13,057 Net investment income 14,232 13,005 Net realized gains 8,404 624 Net unrealized losses on equity securities (26,772) - General corporate expense and interest on debt (4,139) (5,181) Equity in earnings of unconsolidated investees 5,166 4,938 Total earnings before income taxes $ 14,378 $ 26,443 Income tax expense 2,162 6,615 Total net earnings $ 12,216 $ 19,828 The following table further summarizes revenues by major product type within each operating segment: For the Three-Month Periods NET PREMIUMS EARNED Ended March 31, (in thousands) 2018 2017 Casualty Commercial and personal umbrella $ 29,952 $ 28,577 General liability 23,165 21,583 Professional services 19,823 19,226 Commercial transportation 19,175 21,101 Small commercial 12,890 12,287 Executive products 5,052 4,412 Medical professional liability 4,472 4,291 Other casualty 11,321 5,507 Total $ 125,850 $ 116,984 Property Commercial property $ 16,951 $ 15,718 Marine 13,857 12,286 Specialty personal 4,142 6,018 Property reinsurance 12 1,783 Other property 220 - Total $ 35,182 $ 35,805 Surety Miscellaneous $ 11,642 $ 11,857 Commercial 6,713 7,143 Contract 6,346 7,084 Energy 4,294 4,412 Total $ 28,995 $ 30,496 Grand Total $ 190,027 $ 183,285

SUMMARY OF SIGNIFICANT ACCOUN13

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Mar. 31, 2018
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 2017 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 March 31, 2018 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 2017 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 2014-09, Revenue from Contracts with Customers (Topic 606) ASU 2014-09 was issued to clarify and remove inconsistencies within revenue recognition requirements. The core principle of the update is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the transaction price for a contract is allocated among separately identifiable performance obligations and a portion of the transaction price is recognized as revenue when the associated performance obligation has been completed or transferred to the customer. All contracts and fulfillment activities within the scope of Topic 944, Financial Services – Insurance, investment income, investment related gains and losses and equity in earnings of unconsolidated investees are outside the scope of this ASU. We adopted ASU 2014-09 on January 1, 2018. However, nearly all (over 99 percent) of our consolidated revenue is scoped out and therefore exempt from the guidance contained within this ASU. For the remaining portion, the revenue recognition policy we utilize aligns with the new guidance and there were no changes to the way we recognize revenue. Although the recognition of earnings from equity method investees is out of scope from the update, the recognition of revenue by our two equity method investees would be subject to the new guidance if the revenue streams are within this update’s scope. Any impact on revenues would affect the net income of each of the equity method investees, upon which we calculate our portion of earnings to recognize. Our equity method investees are private companies and this guidance becomes effective for private companies in periods beginning after December 15, 2018. As a result, their earnings and our portion of those earnings are not impacted in 2018. We expect that revenue generated by both of our equity method investees will either be outside the scope of this update or largely unaffected by the changes. 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 earnings; 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 earnings 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. We adopted ASU 2016-01 on January 1, 2018. A cumulative-effect adjustment to the balance sheet was made as of the beginning of the year, which moved $142.2 million of net unrealized gains and losses on equity securities from accumulated other comprehensive earnings to retained earnings. During the first quarter of 2018, we recognized $26.8 million of unrealized losses on equity securities within net earnings and $5.6 million of income tax benefit. This compares to $6.5 million of unrealized gains on equity securities, net of tax, that was recognized through other comprehensive earnings in 2017. The future impact to our net earnings will vary depending upon the level of volatility in the performance of the securities held in our equity portfolio and the overall market. ASU 2016-15, 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. We adopted ASU 2016-15 on January 1, 2018. The adoption did not have a material impact on our statement of cash flows. ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ASU 2018-02 was issued as a result of the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA) on December 22, 2017. Accounting guidance required deferred tax items to be revalued based on the new tax laws (the most significant of which reduced the corporate tax rate to 21 percent from 35 percent) with the change included in income from continuing operations. Since other comprehensive income was not affected by the revaluation of the deferred tax items, the net accumulated other comprehensive income (AOCI) balance was reflective of the historic 35 percent tax rate instead of the newly enacted rate, a difference that is referred to as a stranded tax effect. This ASU allows for the option to reclassify the stranded tax effects resulting from the implementation of the TCJA out of AOCI and into retained earnings. ASU 2018-02 does not replace the guidance requiring changes from the enactment of other tax laws or rates to be included within income from continuing operations and is applicable only to changes from the TCJA. We adopted ASU 2018-02 during the first quarter of 2018. A current period adjustment was made to the balance sheet, which moved $3.7 million of stranded tax effects on the unrealized balances of our fixed income securities and equity method investees from accumulated other comprehensive earnings to retained earnings. The entire unrealized balance on equity securities was reclassified from AOCI into retained earnings from the adoption of ASU 2016-01 on January 1, 2018 and was therefore unaffected by this ASU. As there was no impact to net earnings and the balance sheet effect is limited to a reclassification within the equity section, there was not a material impact on our financial statements.
PROSPECTIVE ACCOUNTING STANDARDS	C. PROSPECTIVE ACCOUNTING STANDARDS 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 do not have any financing leases. Approximately $31 million of undiscounted future lease liabilities would have to be discounted to present value and added to our balance sheet with a corresponding right-of-use asset if the guidance were applicable on March 31, 2018. We have approximately $7 million of annual operating lease expenses and 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, including reinsurance balances recoverable, to be presented at the net amount expected to be collected by means of an allowance for credit losses that runs through net earnings. 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 accounting standards update. Additionally, as our fixed income portfolio is weighted towards higher rated bonds (84 percent rated A or better at March 31, 2018) and we purchase reinsurance from financially strong reinsurers, we do not expect that credit loss will be material.
INTANGIBLE ASSETS	D. INTANGIBLE ASSETS Goodwill and intangible assets totaled $54.8 million and $59.3 million at March 31, 2018 and December 31, 2017, respectively, as detailed in the following table. Goodwill and Intangible Assets March 31, December 31, (in thousands) 2018 2017 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 Total goodwill $ 46,062 $ 49,657 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $2,763 at 3/31/18 and $5,678 at 12/31/17 1,231 2,145 Total intangibles $ 8,731 $ 9,645 Total goodwill and intangibles $ 54,793 $ 59,302 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $12.4 million and $8.8 million as of March 31, 2018 and December 31, 2017, respectively. All definite-lived intangible assets are amortized against future operating results based on their estimated useful lives. Amortization of intangible assets was $0.1 million for the first quarter of 2018, compared to $0.2 million for the first quarter of 2017. 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 2017. Based upon these reviews, none of the assets were impaired. In addition, as of March 31, 2018, there were no triggering events that would suggest an updated review was necessary on the above mentioned goodwill and intangible assets. In contrast, the medical professional liability reporting unit had adverse loss experience during the first quarter of 2018, which triggered the need to review the reporting unit for impairment. Testing of the reporting unit resulted in a $4.4 million non-cash impairment charge. The 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 $0.8 million non-cash impairment charge. The 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 model implied the reporting unit had no value, resulting in a $3.6 million non-cash impairment charge. Subsequent to this impairment, the medical professional liability reporting unit had no remaining goodwill or intangible assets. All impairment charges were recorded as net realized losses in the 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 March 31, 2018 Ended March 31, 2017 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 $ 12,216 44,221 $ 0.28 $ 19,828 43,961 $ 0.45 Effect of Dilutive Securities Stock options - 429 - 541 Diluted EPS Income available to common shareholders $ 12,216 44,650 $ 0.27 $ 19,828 44,502 $ 0.45
COMPREHENSIVE EARNINGS	F. COMPREHENSIVE EARNINGS Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our fixed income portfolio in 2018. In 2017, after-tax unrealized gains and losses on our fixed income and equity portfolios were also included. With the adoption of ASU 2016-01 on January 1, 2018, we began recognizing unrealized gains and losses on the equity portfolio through net income. See note 1.B to the unaudited condensed consolidated interim financial statements for more information. In reporting comprehensive earnings on a net basis in the statement of earnings, we used the federal statutory tax rate of 21 percent in 2018 and 35 percent in 2017. Unrealized losses, net of tax, on the fixed income portfolio for the first three months of 2018 were $26.4 million, compared to $11.8 million of unrealized gains, net of tax, on the fixed income and equity portfolios during the same period last year. Unrealized losses in the first three months of 2018 were mainly attributable to rising interest rates, which decreased the fair value of securities held in the fixed income portfolio. In 2017, unrealized gains were the result of strong equity market returns for the quarter and a slight decline in interest rates. 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. The 2017 activity and balances include the net unrealized gain and loss activity on both fixed income and equity securities, while the 2018 activity and ending balance reflect only the net unrealized gain and loss activity on fixed income securities due to the aforementioned adoption of ASU 2016-01. (in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2018 2017 Beginning balance $ 157,919 $ 122,610 Cumulative effect adjustment of ASU 2016-01 (142,219) - Adjusted beginning balance $ 15,700 $ 122,610 Other comprehensive earnings before reclassifications (26,410) 12,172 Amounts reclassified from accumulated other comprehensive earnings 12 (403) Net current-period other comprehensive earnings (loss) $ (26,398) $ 11,769 Reclassification of stranded tax effect per ASU 2018-02 3,725 - Ending balance $ (6,973) $ 134,379 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. As previously mentioned, 2018 activity is reflective of activity on fixed income securities classified as available-for-sale, while 2017 also includes activity from the equity portfolio. Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2018 2017 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 41 $ 2,710 Net realized gains (56) (2,090) Other-than-temporary impairment (OTTI) losses on investments $ (15) $ 620 Earnings before income taxes 3 (217) Income tax expense $ (12) $ 403 Net earnings

SUMMARY OF SIGNIFICANT ACCOUN14

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	3 Months Ended
	Mar. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schedule of goodwill and intangible assets	Goodwill and Intangible Assets March 31, December 31, (in thousands) 2018 2017 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 Total goodwill $ 46,062 $ 49,657 Intangibles State insurance licenses $ 7,500 $ 7,500 Definite-lived intangibles, net of accumulated amortization of $2,763 at 3/31/18 and $5,678 at 12/31/17 1,231 2,145 Total intangibles $ 8,731 $ 9,645 Total goodwill and intangibles $ 54,793 $ 59,302 * The medical professional liability goodwill balance reflects a cumulative non-cash impairment charge of $12.4 million and $8.8 million as of March 31, 2018 and December 31, 2017, 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 March 31, 2018 Ended March 31, 2017 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 $ 12,216 44,221 $ 0.28 $ 19,828 43,961 $ 0.45 Effect of Dilutive Securities Stock options - 429 - 541 Diluted EPS Income available to common shareholders $ 12,216 44,650 $ 0.27 $ 19,828 44,502 $ 0.45
Schedule of changes in the balance of each component of accumulated other comprehensive earnings	(in thousands) For the Three-Month Periods Ended March 31, Unrealized Gains/Losses on Available-for-Sale Securities 2018 2017 Beginning balance $ 157,919 $ 122,610 Cumulative effect adjustment of ASU 2016-01 (142,219) - Adjusted beginning balance $ 15,700 $ 122,610 Other comprehensive earnings before reclassifications (26,410) 12,172 Amounts reclassified from accumulated other comprehensive earnings 12 (403) Net current-period other comprehensive earnings (loss) $ (26,398) $ 11,769 Reclassification of stranded tax effect per ASU 2018-02 3,725 - Ending balance $ (6,973) $ 134,379
Schedule of effects of reclassifications out of accumulated other comprehensive earnings	Amount Reclassified from Accumulated Other (in thousands) Comprehensive Earnings For the Three-Month Component of Accumulated Periods Ended March 31, Affected line item in the Other Comprehensive Earnings 2018 2017 Statement of Earnings Unrealized gains and losses on available-for-sale securities $ 41 $ 2,710 Net realized gains (56) (2,090) Other-than-temporary impairment (OTTI) losses on investments $ (15) $ 620 Earnings before income taxes 3 (217) Income tax expense $ (12) $ 403 Net earnings

INVESTMENTS (Tables)

INVESTMENTS (Tables)	3 Months Ended
	Mar. 31, 2018
Schedule of amortized cost and fair value of available-for-sale securities	Available-for-sale (in thousands) March 31, 2018 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 119,660 $ 54 $ (2,179) $ 117,535 U.S. agency 18,541 208 (408) 18,341 Non-U.S. govt. & agency 8,193 35 (145) 8,083 Agency MBS 359,232 2,148 (9,896) 351,484 ABS/CMBS* 91,073 199 (774) 90,498 Corporate 527,845 5,331 (7,184) 525,992 Municipal 536,946 8,629 (3,834) 541,741 Total Fixed Income $ 1,661,490 $ 16,604 $ (24,420) $ 1,653,674 Available-for-sale (in thousands) December 31, 2017 Cost or Gross Gross Amortized Unrealized Unrealized Fair Asset Class Cost Gains Losses Value U.S. government $ 92,561 $ 23 $ (895) $ 91,689 U.S. agency 18,541 347 (110) 18,778 Non-U.S. govt. & agency 7,501 143 (56) 7,588 Agency MBS 329,129 3,420 (4,078) 328,471 ABS/CMBS* 70,405 436 (315) 70,526 Corporate 508,128 12,575 (1,681) 519,022 Municipal 620,146 17,272 (1,253) 636,165 Total Fixed Income $ 1,646,411 $ 34,216 $ (8,388) $ 1,672,239 *Non-agency asset-backed and commercial mortgage-backed
Schedule of securities in an unrealized loss position segregated by type and length of time in an unrealized loss position	March 31, 2018 December 31, 2017 (in thousands) < 12 Mos. 12 Mos. & Total < 12 Mos. 12 Mos. & Total U.S. Government Fair value $ 64,861 $ 31,191 $ 96,052 $ 58,009 $ 30,888 $ 88,897 Cost or amortized cost 66,407 31,824 98,231 58,443 31,349 89,792 Unrealized Loss $ (1,546) $ (633) $ (2,179) $ (434) $ (461) $ (895) U.S. Agency Fair value $ 12,655 $ — $ 12,655 $ 10,917 $ — $ 10,917 Cost or amortized cost 13,063 — 13,063 11,027 — 11,027 Unrealized Loss $ (408) $ — $ (408) $ (110) $ — $ (110) Non-U.S. government Fair value $ 2,768 $ 1,781 $ 4,549 $ — $ 1,840 $ 1,840 Cost or amortized cost 2,797 1,897 4,694 — 1,896 1,896 Unrealized Loss $ (29) $ (116) $ (145) $ — $ (56) $ (56) Agency MBS Fair value $ 190,033 $ 110,400 $ 300,433 $ 122,130 $ 111,306 $ 233,436 Cost or amortized cost 195,213 115,116 310,329 123,559 113,955 237,514 Unrealized Loss $ (5,180) $ (4,716) $ (9,896) $ (1,429) $ (2,649) $ (4,078) ABS/CMBS* Fair value $ 48,135 $ 18,248 $ 66,383 $ 23,406 $ 21,587 $ 44,993 Cost or amortized cost 48,635 18,522 67,157 23,491 21,817 45,308 Unrealized Loss $ (500) $ (274) $ (774) $ (85) $ (230) $ (315) Corporate Fair value $ 248,217 $ 27,617 $ 275,834 $ 86,946 $ 28,600 $ 115,546 Cost or amortized cost 253,724 29,294 283,018 87,736 29,491 117,227 Unrealized Loss $ (5,507) $ (1,677) $ (7,184) $ (790) $ (891) $ (1,681) Municipal Fair value $ 117,781 $ 48,961 $ 166,742 $ 71,059 $ 60,049 $ 131,108 Cost or amortized cost 119,784 50,792 170,576 71,534 60,827 132,361 Unrealized Loss $ (2,003) $ (1,831) $ (3,834) $ (475) $ (778) $ (1,253) Total fixed income Fair value $ 684,450 $ 238,198 $ 922,648 $ 372,467 $ 254,270 $ 626,737 Cost or amortized cost 699,623 247,445 947,068 375,790 259,335 635,125 Unrealized Loss $ (15,173) $ (9,247) $ (24,420) $ (3,323) $ (5,065) $ (8,388) * 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 $ 821,528 $ 800,794 $ (20,734) % 2 BBB Baa 95,823 93,384 (2,439) % 3 BB Ba 18,431 17,862 (569) % 4 B B 9,281 8,787 (494) % 5 CCC Caa 1,389 1,250 (139) % 6 CC or lower Ca or lower 616 571 (45) 0.2 % Total $ 947,068 $ 922,648 $ (24,420) %
Available for sale securities
Schedule of contractual maturity of securities	March 31, 2018 Available-for-sale Amortized Fair (in thousands) Cost Value Due in one year or less $ 35,667 $ 35,502 Due after one year through five years 328,700 330,089 Due after five years through 10 years 553,968 552,243 Due after 10 years 292,850 293,858 Mtge/ABS/CMBS* 450,305 441,982 Total available-for-sale $ 1,661,490 $ 1,653,674 *Mortgage-backed, asset-backed and commercial mortgage-backed

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	3 Months Ended
	Mar. 31, 2018
FAIR VALUE MEASUREMENTS
Schedule of assets measured at fair value on recurring basis	As of March 31, 2018 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 Fixed income securities - available-for-sale U.S. government $ — $ 117,535 $ — $ 117,535 U.S. agency — 18,341 — 18,341 Non-U.S. govt. & agency — 8,083 — 8,083 Agency MBS — 351,484 — 351,484 ABS/CMBS* — 90,498 — 90,498 Corporate — 525,992 — 525,992 Municipal — 541,741 — 541,741 Total fixed income securities - available-for-sale $ — $ 1,653,674 $ — $ 1,653,674 Equity securities 378,253 — — 378,253 Total $ 378,253 $ 1,653,674 $ — $ 2,031,927 As of December 31, 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 Fixed income securities - available-for-sale U.S. government $ — $ 91,689 $ — $ 91,689 U.S. agency — 18,778 — 18,778 Non-U.S. govt. & agency — 7,588 — 7,588 Agency MBS — 328,471 — 328,471 ABS/CMBS* — 70,526 — 70,526 Corporate — 519,022 — 519,022 Municipal — 636,165 — 636,165 Total fixed income securities - available-for-sale $ — $ 1,672,239 $ — $ 1,672,239 Equity securities 400,492 — — 400,492 Total $ 400,492 $ 1,672,239 $ — $ 2,072,731 * Non-agency asset-backed and commercial mortgage-backed

HISTORICAL LOSS AND LAE DEVEL17

HISTORICAL LOSS AND LAE DEVELOPMENT (Tables)	3 Months Ended
	Mar. 31, 2018
HISTORICAL LOSS AND LAE DEVELOPMENT
Schedule of reconciliation of unpaid losses and settlement expenses (LAE)	For the Three-Month Periods Ended March 31, (in thousands) 2018 2017 Unpaid losses and LAE at beginning of year Gross $ 1,271,503 $ 1,139,337 Ceded (301,991) (288,224) Net $ 969,512 $ 851,113 Increase (decrease) in incurred losses and LAE Current accident year $ 107,011 $ 99,249 Prior accident years (14,590) (5,859) Total incurred $ 92,421 $ 93,390 Loss and LAE payments for claims incurred Current accident year $ (3,384) $ (3,395) Prior accident year (64,121) (60,427) Total paid $ (67,505) $ (63,822) Net unpaid losses and LAE at March 31, $ 994,428 $ 880,681 Unpaid losses and LAE at March 31, Gross $ 1,303,131 $ 1,152,027 Ceded (308,703) (271,346) Net $ 994,428 $ 880,681

INCOME TAXES (Tables)

INCOME TAXES (Tables)	3 Months Ended
	Mar. 31, 2018
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 March 31, 2018 2017 (in thousands) Amount % Amount % Provision for income taxes at the statutory rate of 21% in 2018 and 35% in 2017 $ 3,019 % $ 9,255 % Increase (reduction) in taxes resulting from: Excess tax benefit on share-based compensation (1,143) % (443) % Tax exempt interest income (581) % (1,179) % Dividends received deduction (196) % (530) % ESOP dividends paid deduction (139) % (233) % Other items, net 1,202 % (255) % Total tax expense $ 2,162 % $ 6,615 %

STOCK BASED COMPENSATION (Table

STOCK BASED COMPENSATION (Tables)	3 Months Ended
	Mar. 31, 2018
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, 2018 2,257,015 $ 46.80 Options granted 36,750 $ 64.42 Options exercised (147,370) $ 30.01 $ 5,001 Options canceled/forfeited (4,800) $ 62.55 Outstanding options at March 31, 2018 2,141,595 $ 48.22 4.90 $ 32,883 Exercisable options at March 31, 2018 853,835 $ 40.27 3.32 $ 19,834 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 $ 40.90 Options granted 23,125 $ 59.77 Options exercised (32,960) $ 33.05 $ 891 Options canceled/forfeited — $ 0.00 Outstanding options at March 31, 2017 2,197,275 $ 41.22 4.73 $ 42,954 Exercisable options at March 31, 2017 891,235 $ 31.89 3.12 $ 25,118
Schedule of stock option assumptions for fair value estimate	2018 2017 Weighted-average fair value of grants $ 9.16 $ Risk-free interest rates % % Dividend yield % % Expected volatility % % Expected option life 5.13 years years

OPERATING SEGMENT INFORMATION (

OPERATING SEGMENT INFORMATION (Tables)	3 Months Ended
	Mar. 31, 2018
OPERATING SEGMENT INFORMATION
Schedule of revenues and net earnings by segment	For the Three-Month Periods REVENUES Ended March 31, (in thousands) 2018 2017 Casualty $ 125,850 $ 116,984 Property 35,182 35,805 Surety 28,995 30,496 Net premiums earned $ 190,027 $ 183,285 Net investment income 14,232 13,005 Net realized gains 8,404 624 Net unrealized losses on equity securities (26,772) - Total consolidated revenue $ 185,891 $ 196,914 NET EARNINGS (in thousands) 2018 2017 Casualty $ 1,561 $ (6,881) Property 5,882 8,804 Surety 10,044 11,134 Net underwriting income $ 17,487 $ 13,057 Net investment income 14,232 13,005 Net realized gains 8,404 624 Net unrealized losses on equity securities (26,772) - General corporate expense and interest on debt (4,139) (5,181) Equity in earnings of unconsolidated investees 5,166 4,938 Total earnings before income taxes $ 14,378 $ 26,443 Income tax expense 2,162 6,615 Total net earnings $ 12,216 $ 19,828
Schedule of net premiums earned by major product type	For the Three-Month Periods NET PREMIUMS EARNED Ended March 31, (in thousands) 2018 2017 Casualty Commercial and personal umbrella $ 29,952 $ 28,577 General liability 23,165 21,583 Professional services 19,823 19,226 Commercial transportation 19,175 21,101 Small commercial 12,890 12,287 Executive products 5,052 4,412 Medical professional liability 4,472 4,291 Other casualty 11,321 5,507 Total $ 125,850 $ 116,984 Property Commercial property $ 16,951 $ 15,718 Marine 13,857 12,286 Specialty personal 4,142 6,018 Property reinsurance 12 1,783 Other property 220 - Total $ 35,182 $ 35,805 Surety Miscellaneous $ 11,642 $ 11,857 Commercial 6,713 7,143 Contract 6,346 7,084 Energy 4,294 4,412 Total $ 28,995 $ 30,496 Grand Total $ 190,027 $ 183,285

SUMMARY OF SIGNIFICANT ACCOUN21

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounting Standards (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017	Jan. 01, 2018
Accumulated other comprehensive earnings	$ (6,973)		$ 157,919
Retained earnings	930,028		$ 788,522
Net unrealized losses on equity securities	(26,772)
Expected Value Of Asset And Liability Addition From Adoption Of ASU 2016-02	$ 31,000
Percentage Of Fixed Income Portfolio Rated A Or Better	84.00%
Tax rate used (as a percent)	21.00%	35.00%
Accounting Standards Update 2014-09
Percent of Revenue Out of Scope of ASU 2014-09	99.00%
Accounting Standards Update 2016-01
Accumulated other comprehensive earnings				$ (142,200)
Retained earnings				$ 142,200
Net unrealized losses on equity securities	$ (26,800)
Unrealized Gain (Loss) Net Of Tax On Equity Securities Recognized in Other Comprehensive Income		$ 6,500
Reduction to income tax expense	5,600
Accounting Standards Update 2018-02
Accumulated other comprehensive earnings	3,700
Retained earnings	$ (3,700)
Tax rate used (as a percent)	21.00%		35.00%

SUMMARY OF SIGNIFICANT ACCOUN22

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets and EPS (Details) - USD ($) $ / shares in Units, shares in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
PENDING ACCOUNTING STANDARDS
Expected Value Of Asset And Liability Addition From Adoption Of ASU 2016-02	$ 31,000,000
Expense associated with operating leases			$ 7,000,000
Percentage Of Fixed Income Portfolio Rated A Or Better	84.00%
Goodwill	$ 46,062,000		49,657,000
State insurance licenses	7,500,000		7,500,000
Definite-lived intangibles, net of accumulated amortization of $2,763 at 3/31/18 and $5,678 at 12/31/17	1,231,000		2,145,000
Total intangibles	8,731,000		9,645,000
Goodwill and intangibles	54,793,000		59,302,000
Amortization of intangible assets	100,000	$ 200,000
Basic EPS, Income (Numerator)
Income available to common shareholders	12,216,000	19,828,000
Diluted EPS, Income (Numerator)
Income available to common shareholders	$ 12,216,000	$ 19,828,000
Basic EPS, Weighted Average Shares (Denominator)
Number of shares outstanding	44,221	43,961
Effect of Dilutive Securities, Shares (Denominator)
Stock options (in shares)	429	541
Diluted EPS, Weighted Average Shares (Denominator)
Number of shares outstanding	44,650	44,502
Basic EPS, Per Share Amount
Basic net earnings per share (in dollars per share)	$ 0.28	$ 0.45
Diluted EPS, Per Share Amount
Diluted earnings per share (in dollars per share)	$ 0.27	$ 0.45
Contractors Bonding and Insurance Company
PENDING ACCOUNTING STANDARDS
Impairment of indefinite-lived intangible assets			0
Energy Surety
PENDING ACCOUNTING STANDARDS
Goodwill	$ 25,706,000		25,706,000
Goodwill, Impairment Loss			0
Miscellaneous and Contract Surety
PENDING ACCOUNTING STANDARDS
Goodwill	15,110,000		15,110,000
Goodwill, Impairment Loss			0
Small commercial
PENDING ACCOUNTING STANDARDS
Goodwill	5,246,000		5,246,000
Goodwill, Impairment Loss			0
Medical professional liability
PENDING ACCOUNTING STANDARDS
Goodwill			3,595,000
Goodwill and Intangible Asset Impairment	4,400,000
Goodwill, Impairment Loss	3,600,000
Goodwill, Impaired, Accumulated Impairment Loss	12,400,000		$ 8,800,000
Impairment of Intangible Assets, Finite-lived	$ 800,000

SUMMARY OF SIGNIFICANT ACCOUN23

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Changes in Accumulated Other Comprehensive Earnings (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
COMPREHENSIVE EARNINGS
Tax rate used (as a percent)	21.00%	35.00%
Changes in the balance of each component of accumulated other comprehensive earnings
Beginning balance	$ 157,919
Net current-period other comprehensive earnings (loss)	(26,398)	$ 11,769
Ending balance	(6,973)		$ 157,919
Reclassification Adjustment Out of Accumulated Other Comprehensive Income Abstract
Net realized gains	8,460	2,714
Earnings before income taxes	14,378	26,443
Income tax expense	(2,162)	(6,615)
Net earnings	12,216	19,828
Unrealized Gains and Losses on Available-for-Sale Securities
Changes in the balance of each component of accumulated other comprehensive earnings
Beginning balance	157,919	122,610	122,610
Cumulative Effect Of New Accounting Principle In Period Of Adoption On Accululated Other Comprehensive Earnings Loss	(142,219)
Accumulated Other Comprehensive Income Loss Net Of Tax Adjusted Balance	15,700	122,610	122,610
Other comprehensive earnings before reclassifications	(26,410)	12,172
Amounts reclassified from accumulated other comprehensive earnings	12	(403)
Net current-period other comprehensive earnings (loss)	(26,398)	11,769
Tax Cuts And Jobs Act Of 2017 Reclassification From Aoci To Retained Earnings Tax Effect	3,725
Ending balance	(6,973)	134,379	$ 157,919
Reclassifications out of accumulated other comprehensive earnings | Unrealized Gains and Losses on Available-for-Sale Securities
Reclassification Adjustment Out of Accumulated Other Comprehensive Income Abstract
Net realized gains	41	2,710
Other-than-temporary impairment (OTTI) losses on investments	(56)	(2,090)
Earnings before income taxes	(15)	620
Income tax expense	3	(217)
Net earnings	$ (12)	$ 403

INVESTMENTS - Amortized Cost an

INVESTMENTS - Amortized Cost and Fair Value (Details) - USD ($) $ in Thousands		Mar. 31, 2018	Dec. 31, 2017
Available-for-sale
Total amortized cost		$ 1,661,490	$ 1,646,411
Available-for-sale Securities, Debt Securities		1,653,674	1,672,239
Amortized Cost
Due in one year or less		35,667
Due after one year through five years		328,700
Due after five years through 10 years		553,968
Due after 10 years		292,850
Mtge/ABS/CMBS	[1]	450,305
Total amortized cost		1,661,490	1,646,411
Fair Value
Due in one year or less		35,502
Due after one year through five years		330,089
Due after five years through 10 years		552,243
Due after 10 years		293,858
Mtge/ABS/CMBS	[1]	441,982
Total fair value		1,653,674	1,672,239
Fair value measured on recurring basis
Available-for-sale
Available-for-sale Securities, Debt Securities		1,653,674	1,672,239
Fair Value
Total fair value		1,653,674	1,672,239
Fair value measured on recurring basis | Significant Unobservable Inputs (Level 3)
INVESTMENTS
Total assets at fair value		0
Debt securities
Available-for-sale
Total amortized cost		1,661,490	1,646,411
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		16,604	34,216
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		24,420	8,388
Available-for-sale Securities, Debt Securities		1,653,674	1,672,239
Amortized Cost
Total amortized cost		1,661,490	1,646,411
Fair Value
Total fair value		1,653,674	1,672,239
U.S. government
Available-for-sale
Total amortized cost		119,660	92,561
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		54	23
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		2,179	895
Available-for-sale Securities, Debt Securities		117,535	91,689
Amortized Cost
Total amortized cost		119,660	92,561
Fair Value
Total fair value		117,535	91,689
U.S. Agency
Available-for-sale
Total amortized cost		18,541	18,541
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		208	347
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		408	110
Available-for-sale Securities, Debt Securities		18,341	18,778
Amortized Cost
Total amortized cost		18,541	18,541
Fair Value
Total fair value		18,341	18,778
Non-U.S. govt. & agency
Available-for-sale
Total amortized cost		8,193	7,501
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		35	143
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		145	56
Available-for-sale Securities, Debt Securities		8,083	7,588
Amortized Cost
Total amortized cost		8,193	7,501
Fair Value
Total fair value		8,083	7,588
Mortgage-backed
Available-for-sale
Total amortized cost		359,232	329,129
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		2,148	3,420
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		9,896	4,078
Available-for-sale Securities, Debt Securities		351,484	328,471
Amortized Cost
Total amortized cost		359,232	329,129
Fair Value
Total fair value		351,484	328,471
ABS/CMBS
Available-for-sale
Total amortized cost	[2]	91,073	70,405
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax	[2]	199	436
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax	[2]	774	315
Available-for-sale Securities, Debt Securities	[2]	90,498	70,526
Amortized Cost
Total amortized cost	[2]	91,073	70,405
Fair Value
Total fair value	[2]	90,498	70,526
Corporate Debt
Available-for-sale
Total amortized cost		527,845	508,128
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		5,331	12,575
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		7,184	1,681
Available-for-sale Securities, Debt Securities		525,992	519,022
Amortized Cost
Total amortized cost		527,845	508,128
Fair Value
Total fair value		525,992	519,022
Municipal
Available-for-sale
Total amortized cost		536,946	620,146
Available-for-sale Debt Securities, Accumulated Gross Unrealized Gain, before Tax		8,629	17,272
Available-for-sale Debt Securities, Accumulated Gross Unrealized Loss, before Tax		3,834	1,253
Available-for-sale Securities, Debt Securities		541,741	636,165
Amortized Cost
Total amortized cost		536,946	620,146
Fair Value
Total fair value		$ 541,741	$ 636,165
[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		Mar. 31, 2018	Dec. 31, 2017
Investment positions with unrealized losses
Unrealized losses relative to total invested assets (as a percent)		1.20%
Debt securities
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		$ 684,450	$ 372,467
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		238,198	254,270
Debt Securities, Available-for-sale, Unrealized Loss Position		922,648	626,737
Cost or amortized Cost
Less than 12 months		699,623	375,790
12 months and greater		247,445	259,335
Total Cost or Amortized Cost		947,068	635,125
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		15,173	3,323
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		9,247	5,065
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 24,420	8,388
Percent to Total		100.00%
Debt securities | NAIC Rating 1 | AAA/AA/A | Aaa/Aa/A
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 800,794
Cost or amortized Cost
Total Cost or Amortized Cost		821,528
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 20,734
Percent to Total		84.90%
Debt securities | NAIC Rating 2 | BBB | Baa
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 93,384
Cost or amortized Cost
Total Cost or Amortized Cost		95,823
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 2,439
Percent to Total		10.00%
Debt securities | NAIC Rating 3 | BB | Ba
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 17,862
Cost or amortized Cost
Total Cost or Amortized Cost		18,431
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 569
Percent to Total		2.30%
Debt securities | NAIC Rating 4 | B | B
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 8,787
Cost or amortized Cost
Total Cost or Amortized Cost		9,281
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 494
Percent to Total		2.00%
Debt securities | NAIC Rating 5 | CCC | Caa
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 1,250
Cost or amortized Cost
Total Cost or Amortized Cost		1,389
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 139
Percent to Total		0.60%
Debt securities | NAIC Six Rating Member | Standard Poors CC Or Lower Member | Ca
Fair value
Debt Securities, Available-for-sale, Unrealized Loss Position		$ 571
Cost or amortized Cost
Total Cost or Amortized Cost		616
Unrealized Loss
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 45
Percent to Total		0.20%
U.S. government
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		$ 64,861	58,009
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		31,191	30,888
Debt Securities, Available-for-sale, Unrealized Loss Position		96,052	88,897
Cost or amortized Cost
Less than 12 months		66,407	58,443
12 months and greater		31,824	31,349
Total Cost or Amortized Cost		98,231	89,792
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		1,546	434
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		633	461
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		2,179	895
U.S. Agency
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		12,655	10,917
Debt Securities, Available-for-sale, Unrealized Loss Position		12,655	10,917
Cost or amortized Cost
Less than 12 months		13,063	11,027
Total Cost or Amortized Cost		13,063	11,027
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		408	110
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		408	110
Non-U.S. govt. & agency
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		2,768
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		1,781	1,840
Debt Securities, Available-for-sale, Unrealized Loss Position		4,549	1,840
Cost or amortized Cost
Less than 12 months		2,797
12 months and greater		1,897	1,896
Total Cost or Amortized Cost		4,694	1,896
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		29
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		116	56
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		145	56
Mortgage-backed
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		190,033	122,130
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		110,400	111,306
Debt Securities, Available-for-sale, Unrealized Loss Position		300,433	233,436
Cost or amortized Cost
Less than 12 months		195,213	123,559
12 months and greater		115,116	113,955
Total Cost or Amortized Cost		310,329	237,514
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		5,180	1,429
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		4,716	2,649
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		9,896	4,078
ABS/CMBS
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	[1]	48,135	23,406
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	[1]	18,248	21,587
Debt Securities, Available-for-sale, Unrealized Loss Position	[1]	66,383	44,993
Cost or amortized Cost
Less than 12 months	[1]	48,635	23,491
12 months and greater	[1]	18,522	21,817
Total Cost or Amortized Cost	[1]	67,157	45,308
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	[1]	500	85
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	[1]	274	230
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss	[1]	774	315
Corporate Debt
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		248,217	86,946
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		27,617	28,600
Debt Securities, Available-for-sale, Unrealized Loss Position		275,834	115,546
Cost or amortized Cost
Less than 12 months		253,724	87,736
12 months and greater		29,294	29,491
Total Cost or Amortized Cost		283,018	117,227
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		5,507	790
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		1,677	891
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		7,184	1,681
Municipal
Fair value
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months		117,781	71,059
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer		48,961	60,049
Debt Securities, Available-for-sale, Unrealized Loss Position		166,742	131,108
Cost or amortized Cost
Less than 12 months		119,784	71,534
12 months and greater		50,792	60,827
Total Cost or Amortized Cost		170,576	132,361
Unrealized Loss
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss		2,003	475
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss		1,831	778
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss		$ 3,834	$ 1,253
[1]	Non-agency asset-backed and commercial mortgage-backed

INVESTMENTS Debt Securities and

INVESTMENTS Debt Securities and Common Stock (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)securityposition	Mar. 31, 2017USD ($)security
Securities in unrealized loss positions
Other-than-temporary impairment (OTTI) losses	$ 56	$ 2,090
Equity Securities, FV-NI, Unrealized Gain (Loss)	$ 12,300
Debt securities
Securities in unrealized loss positions
Number of unrealized loss positions | position	551
Number of securities in unrealized loss positions for 12 months or longer | security	126
Unrealized losses as percentage of fixed income portfolio cost basis	1.50%
Number of securities with OTTI losses recognized in earnings | security	1	2
Other than Temporary Impairment Losses recognized in earnings	$ 100	$ 2,100
Other than Temporary Impairment Losses recognized in other comprehensive earnings	$ 0	$ 0

INVESTMENTS Debt and Short-term

INVESTMENTS Debt and Short-term Investments (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018USD ($)item	Mar. 31, 2017USD ($)	Dec. 31, 2017USD ($)	Dec. 31, 2016USD ($)
Other invested assets
Other investments	$ 35,065		$ 33,808
Cash and Short-term Investments
Cash	$ 28,927	$ 28,144	24,271	$ 18,269
Short-term investments, at cost which approximates fair value			9,980
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
Other investments	$ 15,000		15,500
Total tax benefit on investments in housing tax credit partnership	600	$ 600
Qualified Affordable Housing Project Investments, Commitment	2,500
Investment in Federal Home Loan Bank Stock [Member]
Other invested assets
Investment in FHLBC	1,000		1,000
Available-for-sale Securities Pledged as Collateral	18,200		18,900
Federal Home Loan Bank Borrowings, Fair Value Disclosure	0
Investment in Real Estate Fund
Other invested assets
Other investments			2,500
Other investments fair value	2,600		2,500
Investment in BDC
Other invested assets
Other investments fair value	9,200		7,300
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments	15,700
Investment In Global Credit Fund
Other invested assets
Other investments fair value	7,300		$ 7,500
Fair Value, Investments, Entities that Calculate Net Asset Value Per Share, Unfunded Commitments	$ 7,200

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands		Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Debt Securities		$ 1,653,674	$ 1,672,239
Equity Securities, at fair value (cost - $186,520 at 3/31/18 and $182,002 at 12/31/17)		378,253	400,492
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, Debt Securities		1,653,674	1,672,239
Equity Securities, at fair value (cost - $186,520 at 3/31/18 and $182,002 at 12/31/17)		378,253	400,492
Marketable Securities		2,031,927	2,072,731
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]
Equity Securities, at fair value (cost - $186,520 at 3/31/18 and $182,002 at 12/31/17)		378,253	400,492
Marketable Securities		378,253	400,492
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, Debt Securities		1,653,674	1,672,239
Marketable Securities		1,653,674	1,672,239
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, Debt Securities		117,535	91,689
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, Debt Securities		117,535	91,689
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, Debt Securities		18,341	18,778
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, Debt Securities		18,341	18,778
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, Debt Securities		8,083	7,588
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, Debt Securities		8,083	7,588
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, Debt Securities		351,484	328,471
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, Debt Securities		351,484	328,471
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, Debt Securities	[1]	90,498	70,526
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, Debt Securities	[1]	90,498	70,526
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, Debt Securities		525,992	519,022
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, Debt Securities		525,992	519,022
Municipal | Fair value measured on recurring basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale Securities, Debt Securities		541,741	636,165
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, Debt Securities		$ 541,741	$ 636,165
[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	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Unpaid losses and LAE at beginning of year:
Gross	$ 1,271,503	$ 1,139,337
Ceded	(301,991)	(288,224)
Net	969,512	851,113
Increase (decrease) in incurred losses and LAE:
Current accident year	107,011	99,249
Prior accident years	(14,590)	(5,859)
Total incurred	92,421	93,390
Loss and LAE payments for claims incurred:
Current accident year	(3,384)	(3,395)
Prior accident year	(64,121)	(60,427)
Total paid	(67,505)	(63,822)
Net	994,428	880,681
Unpaid losses and LAE at year end
Gross	1,303,131	1,152,027
Ceded	(308,703)	(271,346)
Net	$ 994,428	$ 880,681

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
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 21% in 2018 and 35% in 2017	$ 3,019	$ 9,255
Excess tax benefit on share-based compensation	(1,143)	(443)
Tax-exempt interest income	(581)	(1,179)
Dividends received deduction	(196)	(530)
ESOP dividends paid deduction	(139)	(233)
Other items, net	1,202	(255)
Total tax expense	$ 2,162	$ 6,615
Reconciliation of income tax expense rate to the U.S. federal tax rate
U.S. federal tax rate (as a percent)	21.00%	35.00%
Excess tax benefit on share-based compensation	(7.90%)	(1.70%)
Effective rate reduction due to tax exempt interest income (as a percent)	(4.00%)	(4.50%)
Effective rate reduction due to dividend received (as a percent)	(1.40%)	(2.00%)
Effective rate reduction due to dividend paid to ESOP (as a percent)	(1.00%)	(0.90%)
Effective rate reduction due to other items, net (as a percent)	8.30%	(0.90%)
Effective Income Tax Rate Reconciliation, Percent, Total	15.00%	25.00%
Net unrealized losses on equity securities	$ (26,772)

STOCK BASED COMPENSATION (Detai

STOCK BASED COMPENSATION (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		11 Months Ended	35 Months Ended	60 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2018	May 06, 2015	May 05, 2010
Weighted Number of Options Outstanding
Outstanding options at the beginning of the period (in shares)	2,257,015	2,207,110
Options granted (in shares)	36,750	23,125
Options exercised (in shares)	(147,370)	(32,960)
Options canceled/forfeited (in shares)	(4,800)
Outstanding options at the end of the period (in shares)	2,141,595	2,197,275	2,141,595	2,141,595
Exercisable options at the end of the period (in shares)	853,835	891,235	853,835	853,835
Weighted Average Exercise Price
Outstanding options at the beginning of the period (in dollars per share)	$ 46.80	$ 40.90
Options granted (in dollars per share)	64.42	59.77
Options exercised (in dollars per share)	30.01	33.05
Options canceled/forfeited (in dollars per share)	62.55	0
Outstanding options at the end of the period (in dollars per share)	48.22	41.22	$ 48.22	$ 48.22
Exercisable options at the end of the period (in dollars per share)	$ 40.27	$ 31.89	$ 40.27	$ 40.27
Weighted Average Remaining Contractual Life
Weighted-average remaining contractual term of options outstanding	4 years 10 months 24 days	4 years 8 months 23 days
Weighted-average remaining contractual term of exercisable options	3 years 3 months 26 days	3 years 1 month 13 days
Aggregate Intrinsic Value
Options exercised (in dollars)	$ 5,001	$ 891
Outstanding options at the end of the period (in dollars)	32,883	42,954	$ 32,883	$ 32,883
Exercisable options at the end of the period (in dollars)	$ 19,834	$ 25,118	19,834	19,834
Weighted-average fair value of grants (in dollars per share)	$ 9.16	$ 8.49
Stock-based compensation expenses (in dollars)	$ 1,000	$ 900
Income tax benefit from stock-based compensation (in dollars)	200	$ 300
Unrecognized stock-based compensation expense (in dollars)	$ 5,000		5,000	5,000
Weighted average grant date assumptions and weighted average fair value
Weighted-average fair value of grants (in dollars per share)	$ 9.16	$ 8.49
Risk-free interest rates (as a percent)	2.02%	1.95%
Dividend yield (as a percent)	3.60%	3.59%
Expected volatility (as a percent)	22.93%	22.99%
Expected option life	5 years 1 month 17 days	5 years 1 month 21 days
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)	$ 100
Unrecognized stock-based compensation expense (in dollars)	$ 400		$ 400	$ 400
Weighted average grant date assumptions and weighted average fair value
RSUs Granted			15,450
RSUs Outstanding	15,150		15,150	15,150
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 LTIP)
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)	36,750			1,485,325

OPERATING SEGMENT INFORMATION -

OPERATING SEGMENT INFORMATION - Reconciliation of Segment Totals to Total Earnings (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
REVENUES
Net premiums earned	$ 190,027	$ 183,285
Net investment income	14,232	13,005
Net realized gains	8,404	624
Net unrealized losses on equity securities	(26,772)
Consolidated revenue	185,891	196,914
NET EARNINGS
Net underwriting income	17,487	13,057
Net investment income	14,232	13,005
Net realized gains	8,404	624
Net unrealized losses on equity securities	(26,772)
General corporate expense and interest on debt	(4,139)	(5,181)
Equity in earnings of unconsolidated investees	5,166	4,938
Earnings before income taxes	14,378	26,443
Income tax expense	2,162	6,615
Net earnings	12,216	19,828
Casualty segment
REVENUES
Net premiums earned	125,850	116,984
NET EARNINGS
Net underwriting income	1,561	(6,881)
Property segment
REVENUES
Net premiums earned	35,182	35,805
NET EARNINGS
Net underwriting income	5,882	8,804
Surety segment
REVENUES
Net premiums earned	28,995	30,496
NET EARNINGS
Net underwriting income	$ 10,044	$ 11,134

OPERATING SEGMENT INFORMATION33

OPERATING SEGMENT INFORMATION - Major Products (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Revenue by major product
Net premiums earned	$ 190,027	$ 183,285
Casualty segment
Revenue by major product
Net premiums earned	125,850	116,984
Casualty segment | Commercial and personal umbrella
Revenue by major product
Net premiums earned	29,952	28,577
Casualty segment | General liability
Revenue by major product
Net premiums earned	23,165	21,583
Casualty segment | Professional services
Revenue by major product
Net premiums earned	19,823	19,226
Casualty segment | Transportation
Revenue by major product
Net premiums earned	19,175	21,101
Casualty segment | Small commercial
Revenue by major product
Net premiums earned	12,890	12,287
Casualty segment | Executive products
Revenue by major product
Net premiums earned	5,052	4,412
Casualty segment | Medical professional liability
Revenue by major product
Net premiums earned	4,472	4,291
Casualty segment | Other casualty
Revenue by major product
Net premiums earned	11,321	5,507
Property segment
Revenue by major product
Net premiums earned	35,182	35,805
Property segment | Commercial
Revenue by major product
Net premiums earned	16,951	15,718
Property segment | Marine
Revenue by major product
Net premiums earned	13,857	12,286
Property segment | Specialty Personal
Revenue by major product
Net premiums earned	4,142	6,018
Property segment | Property reinsurance
Revenue by major product
Net premiums earned	12	1,783
Property segment | Other property
Revenue by major product
Net premiums earned	220
Surety segment
Revenue by major product
Net premiums earned	28,995	30,496
Surety segment | Miscellaneous
Revenue by major product
Net premiums earned	11,642	11,857
Surety segment | Commercial surety product
Revenue by major product
Net premiums earned	6,713	7,143
Surety segment | Contract
Revenue by major product
Net premiums earned	6,346	7,084
Surety segment | Energy Surety
Revenue by major product
Net premiums earned	$ 4,294	$ 4,412