UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the period ended September 30, 1996
-------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
--------------- ---------------
Commission File Number: 0-6612
-----------------------------------------
RLI Corp.
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(Exact name of registrant as specified in its charter)
ILLINOIS 37-0889946
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9025 North Lindbergh Drive, Peoria, IL 61615
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(Address of principal executive offices) (Zip Code)
(309) 692-1000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 1996, the number of shares outstanding of the registrant's
Common Stock was 7,842,076.
Page 1 of 14
<PAGE>
PART I
Item 1. Financial Statements
RLI Corp. and Subsidiaries
Condensed Consolidated Statement Of Earnings
(Unaudited)
For the Three-Month Period
Ended September 30,
1995 1996
------------ -----------
Net premiums earned $32,170,742 $32,294,530
RLI Vision Corp. revenue 8,964,995 9,302,737
Net investment income 5,642,431 5,819,777
Net realized investment gains (losses) 11,297 37,671
----------- -----------
46,789,465 47,454,715
----------- -----------
Losses and settlement expenses 39,630,041 16,305,490
Policy acquisition costs 10,163,948 7,445,513
Insurance operating expenses 3,060,261 3,944,794
RLI Vision Corp. operating expenses 8,465,758 8,760,805
Interest expense on debt 843,109 696,860
General corporate expenses 388,988 706,744
----------- -----------
62,552,105 37,860,206
----------- -----------
Earnings (loss) before income taxes (15,762,640) 9,594,509
Income tax expense (benefit) ( 6,201,970) 2,795,831
----------- -----------
Net earnings (loss) $( 9,560,670) $ 6,798,678
============ ===========
Net earnings (loss) per share:
Primary ($1.22) $ .86
Fully diluted ($1.22) $ .75
Weighted average number of
common shares outstanding
Primary 7,849,434 7,902,507
Fully diluted 7,849,434 9,671,738
Cash dividends declared per common share $0.13 $0.14
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
RLI Corp. and Subsidiaries
Condensed Consolidated Statement Of Earnings (Continued)
(Unaudited)
For the Nine-Month Period
Ended September 30,
1995 1996
------------ ------------
Net premiums earned $100,960,184 $ 96,851,771
RLI Vision Corp. revenue 26,708,811 27,278,240
Net investment income 16,308,281 17,639,076
Net realized investment gains 118,448 142,791
------------ ------------
144,095,724 141,911,878
------------ ------------
Losses and settlement expenses 71,980,952 51,243,514
Policy acquisition costs 33,255,043 22,952,519
Insurance operating expenses 10,111,087 11,143,020
RLI Vision Corp. operating expenses 25,425,402 26,151,793
Interest expense on debt 2,529,383 2,108,774
General corporate expenses 1,684,669 2,295,309
------------ ------------
144,986,536 115,894,929
------------ ------------
Earnings (loss) before income taxes ( 890,812) 26,016,949
Income tax (benefit) expense ( 2,146,892) 7,321,712
------------ ------------
Net earnings $ 1,256,080 $ 18,695,237
============ ============
Net earnings per share:
Primary $0.16 $2.36
Fully diluted $0.16 $2.08
Weighted average number of
common shares outstanding
Primary 7,849,434 7,915,000
Fully diluted 7,849,434 9,684,231
Cash dividends declared per common share $0.38 $0.41
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
RLI Corp. and Subsidiaries
Condensed Consolidated Balance Sheet
(Unaudited)
December 31, September 30,
ASSETS 1995 1996
Investments ------------ -------------
Fixed maturities
Held-to-maturity, at amortized cost $251,637,536 $262,239,923
Available-for-sale, at fair value 45,119,811 46,395,288
Equity securities, at fair value 153,957,535 175,340,070
Short-term investments, at cost which
approximates fair value 23,874,732 11,286,752
------------ -------------
Total investments 474,589,614 495,262,033
Cash 1,196,926 0
Accrued investment income 5,854,731 5,511,508
Premiums and reinsurance balances receivable 36,447,284 63,858,436
Ceded unearned premiums 50,189,740 52,023,356
Reinsurance balances recoverable on unpaid losses 197,337,466 172,241,240
Deferred policy acquisition costs 15,806,911 16,564,708
Property and equipment 13,950,559 13,882,924
Income taxes - current 2,619,811 0
Other assets 16,654,099 17,296,043
------------ ------------
TOTAL ASSETS $814,647,141 $836,640,248
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and settlement expenses $418,985,960 $410,325,194
Unearned premiums 126,013,957 129,844,228
Reinsurance balances payable 37,744,456 31,393,288
Short-term debt 2,800,000 1,600,000
Long-term debt:
Convertible debentures 46,000,000 46,000,000
Income taxes-current 0 2,540,348
Income taxes-deferred 4,904,394 10,357,421
Other liabilities 19,590,658 22,346,199
------------ ------------
TOTAL LIABILITIES 656,039,425 654,406,678
------------ ------------
Shareholders' Equity:
Common stock (8,453,449 shares issued
and outstanding) 8,453,449 8,453,449
Other shareholders' equity 153,544,590 178,967,668
Less: Treasury shares at cost
(602,567 shares at 12/31/95)
(611,373 shares at 9/30/96) (3,390,323) ( 5,187,547)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 158,607,716 182,233,570
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $814,647,141 $836,640,248
============ ============
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RLI Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Nine-Month Period
Ended September 30,
---------------------------
1995 1996
------------ ------------
Net cash from operating activities $ 7,474,127 $ 13,932,462
------------ ------------
Cash Flows from Investing Activities
Investments purchased ( 96,061,490) ( 40,284,926)
Investments sold 0 5,391,924
Investments called or matured 31,612,374 13,850,750
Net decrease in
short-term investments 52,329,819 12,588,029
Net property and equipment purchased ( 1,247,768) ( 2,082,744)
------------ ------------
Net cash used in investing activities (13,367,065) ( 10,536,967)
------------ ------------
Cash Flows from Financing Activities
Cash dividends paid ( 2,945,187) ( 3,240,690)
Payments on debt 0 ( 1,200,000)
Change in contributed capital ( 4,010) 0
Treasury shares reissued 0 2,194,653
Treasury shares purchased 0 ( 2,346,384)
------------ -------------
Net cash used in
financing activities ( 2,949,197) ( 4,592,421)
------------ ------------
Net decrease in cash ( 8,842,135) ( 1,196,926)
------------ ------------
Cash at the beginning of the year 8,185,806 1,196,926
------------ ------------
Cash (overdraft) as of September 30 $ ( 656,329) $ 0
============= =============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The financial information is
prepared in conformity with generally accepted accounting principles and
such principles are applied on a basis consistent with those reflected in
the 1995 annual report filed with the Securities and Exchange Commission.
The financial information included herein has been prepared by management
without audit by independent certified public accountants who do not
express an opinion thereon. The condensed consolidated balance sheet as
of December 31, 1995 has been derived from, and does not include all the
disclosures contained in the audited consolidated financial statements for
the year ended December 31, 1995.
The information furnished includes all adjustments and normal recurring
accrual adjustments which are, in the opinion of management, necessary for
a fair statement of results for the interim periods. Results of
operations for the nine month periods ended September 30, 1995 and 1996
are not necessarily indicative of the results of a full year.
Primary earnings per share are computed using the weighted average number
of shares of common stock outstanding during the period.
Fully diluted earnings per share calculations are based on the weighted
average number of shares of common stock outstanding for the period,
assuming full conversion of all Convertible Debentures into common stock.
Net earnings are adjusted for purposes of this calculation to eliminate
interest and amortization of debt issuance costs on the Convertible
Debentures net of related taxes. When the conversion of Convertible
Debentures increases the earnings per share or reduces the loss per share,
the effect on earnings is antidilutive. Under these circumstances, the
fully diluted net earnings or net loss per share is computed assuming no
conversion of the Convertible Debentures.
The accompanying financial data should be read in conjunction with the
notes to the financial statements contained in the 1995 10-K Annual
Report.
2. SIGNIFICANT DEVELOPMENT - During the third quarter of 1996, the Company
initiated a plan to repurchase up to $10 million of outstanding shares of
RLI Corp. common stock. To date, the Company has repurchased 95,400
shares at a cost of $2.3 million.
3. SUBSEQUENT EVENT - On October 8, 1996, RLI announced an innovative
addition to its Catastrophic Reinsurance and Loss Financing Program. The
program, developed for the Company by Aon Corporation's reinsurance
intermediary, Aon Re Inc., and underwritten by Centre Reinsurance augments
the Company's traditional reinsurance by integrating the Company's loss
financing needs with a pre-negotiated sale of securities linked to
exchange-traded shares. Called Catastrophe Equity Puts, or CatEPuts, the
program allows RLI Corp. to put up to $50 million of its convertible
preferred shares to Centre Re at a pre-negotiated rate in the event of a
catastrophic loss. CatEPuts is intended to be a three-year program and is
designed to enable RLI to continue operating after a loss of such
magnitude that its reinsurance capacity is exhausted.
6
<PAGE>
4. INDUSTRY SEGMENT INFORMATION - Selected information by industry segment
for the nine months ended September 30, 1995 and 1996 is presented below.
SEGMENT DATA - (in thousands) EARNINGS
(LOSS)
BEFORE
REV. TAXES ASSETS
1995 ------- --------- --------
RLI Insurance Group $100,960 $(14,387) $769,494
RLI Vision Corp. 26,709 1,283 14,897
Net investment income 16,308 16,308
Net realized investment gains 118 118
General corporate & interest expense - (4,213) 14,738
-------- ---------- --------
Consolidated $144,095 $( 891) $799,129
======== ========== ========
1996
RLI Insurance Group $ 96,852 $ 11,513 $807,398
RLI Vision Corp. 27,278 1,126 14,438
Net investment income 17,639 17,639
Net realized investment gains 143 143
General corporate & interest expense - (4,404) 14,804
--------- --------- --------
Consolidated $141,912 $ 26,017 $836,640
========= ========= ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
RLI Corp. (the Company) is a holding company that, through its subsidiaries,
underwrites specialty property and casualty insurance and provides a wide
range of services and products to the ophthalmic industry.
The most significant segment is the RLI Insurance Group (the Group), which
provides specialty property and casualty coverages for primarily commercial
risks. This segment accounted for 68% of the Company's total revenue for the
nine months ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Consolidated gross sales, which consist of gross premiums written, non-
insurance sales revenue, net investment income and realized investment gains
(losses) totaled $253.1 million for the first nine months of 1996, up 1.6%
from the same period in 1995. This slight increase was due in part to a 1.0%
increase in gross sales of the insurance group, as detailed in the discussion
of RLI Insurance Group that follows. Additionally, net investment income for
the first nine months of 1996 increased 8.2% and sales of RLI Vision Corp.
improved by 1.7%. Consolidated revenue for the first nine months of 1996
decreased $2.2 million, or 1.5%, from the same period in 1995. Net premiums
7
<PAGE>
earned in the first nine months of 1996 were down 4.1% compared to the first
nine months of 1995 as property writings were down most of last year.
The net after-tax earnings for the first nine months of 1996 totaled $18.7
million, $2.36 per share, compared to $1.3 million, $.16 per share, for the
same period in 1995. The increase in net earnings is attributable to
continued strong underwriting results and increased net investment income
through the first nine months of 1996. Earnings in 1995 were affected by the
strengthening of Northridge Earthquake reserves which resulted in an after-tax
charge of $16 million ($2.05 per share).
RLI INSURANCE GROUP
Gross premiums written for the first nine months of 1996 totaled $208.1
million, compared to $206.0 million reported for the first nine months of
1995. Property premiums increased to $105.0 million for the period, up 9.8%
from the 1995 level of $95.6 million. This increase was offset by declines in
the casualty lines due to discontinuation of the Aviation business as well as
declines on other products such as Employer's Excess Indemnity and General
Liability related to unfavorable pricing and market conditions. Gross
premiums written from continuing operations for the first nine months of 1996
improved 4.6% over 1995 levels. Included in this improvement were gains
posted on the Company's Commercial Umbrella, Personal Umbrella, and Surety
books which improved 8.1%, 11.8%, and 130.6%, respectively. Property writings
during 1995 were lower partly due to the Group's efforts towards reducing
catastrophe exposure and re-underwriting the fire book of business.
Net premiums written for the first nine months of 1996 increased $1.6 million
or 1.7% from the same period in 1995. Of this increase, $1.2 million was
related to property business where a portfolio change resulted in premiums
being ceded on an earned rather than written basis.
Net premiums earned of $96.9 million in the first nine months of 1996
represent a $4.1 million or 4.1% decrease from the same period in 1995. This
decrease is primarily the result of the $3.2 million decline in property
premiums earned as a result of reduced writings throughout most of 1995.
Additionally, earned premiums on casualty business declined $900,000 for the
period compared to 1995 levels. Modest premium increases realized on the
Company's Personal Umbrella, Commercial Umbrella, and Surety books were offset
by declines on Employer's Excess Indemnification and Directors and Officers
Liability, as well as the discontinuation of some smaller and unprofitable
lines of business.
The Group's pretax earnings totaled $11.5 million for the first nine months of
1996 compared to a pretax loss of $20.7 million for the same period in 1995.
Earnings for the first nine months of 1996 included losses of $2.2 million
from winter storms on the east coast and $500,000 for Proposition 103
settlement. Pre-tax earnings for the same period in 1995 included losses of
$1.8 million from flooding in California and $28.6 million from Northridge
Earthquake development and reserve strengthening.
8
<PAGE>
The GAAP combined ratio through the first nine months of 1996 was 88.1
compared to 114.3 for the same period in 1995. The loss ratio decreased to
52.9 in 1996 from 71.3 in 1995. Additionally, the expense ratio showed
improvement declining to 35.2 in 1996 compared to 43.0 for the same period in
1995. This improvement was largely the result of accruing contingent ceding
commissions from reinsurers based on favorable loss results on the Group's
California Property Programs.
RLI VISION CORP.
RLI Vision Corp., the Company's wholly-owned subsidiary that distributes a
variety of vision care products reported revenue of $27.3 million for the
year, up slightly from 1995. Ophthalmic product revenue grew by $1.3 million
or 6.6%. This improvement included an increase in contact lens and other
distributed products of $1.2 million or 7.2% and an increase of $121,000 or
12.3% in the manufacturing of RGP lenses. In addition, Vision's practice
management software, RLISYS, generated an increase of $193,000 or 15.5% from
1995. These increases were partially offset by a decrease in third party
administration products of $951,000 or 18% from 1995 reflecting the continued
downward trend of these services throughout the ophthalmic industry.
RLI Vision's pre-tax earnings for the year decreased by $157,000 or 12.2%.
The gross margin decreased by $786,000 or 6.6% from 1995, as the product shift
towards the lower margin distributed products continues. Partially offsetting
the decrease in gross margin were operating expense reductions of $880,000 or
8.2%, not including restructuring charges of $201,000 for the year which will
not be re-occurring. In particular, cost reductions were realized in salaries
and commissions, postage, contracted services, and collection/bad debt
expenses. These savings were partially offset by increased printing costs.
INVESTMENT INCOME
The Company's investment portfolio generated net dividends and interest income
of $17.6 million during the first nine months of 1996, an increase of 8.2%
over that reported for the same period in 1995. This increase is the result
of a higher invested asset base from the prior year coupled with a decline in
investment expenses during 1996.
Invested assets at September 30, 1996 increased by $20.7 million from
December 31, 1995. Cash and other short-term investments declined by $13.8
million from December 31, 1995 due primarily to the funding of reinsurance
obligations and other 1996 operating needs. In addition, the Company's
investment gains increased slightly to $143,000 through the first nine months
of 1996 compared to $118,000 for the same period in 1995.
The Company's fixed income portfolio consisted entirely of securities rated A
or better and 99% were rated AA or better. The year-to-date yields on the
Company's fixed income investments for the nine month periods ended September
30, 1995 and 1996 are as follows:
9
<PAGE>
1995 1996
---- ----
Taxable 6.83% 6.94%
Non-taxable 5.02% 4.98%
Yields on taxable securities increased through the first nine months of 1996
due to the maturity of lower yielding securities from the portfolio. Yields
on the tax-exempt portfolio are lower due to securities purchased in a lower
interest rate environment during the second half of 1995.
The Company's available-for-sale portfolio of debt and equity securities had
net unrealized gains before tax of $12.8 million through the first nine months
of 1996 compared to net unrealized gains before tax of $26.5 million for the
same period in 1995. Lower interest rates and a strong rally in the stock
market during the first nine months of 1995 caused the Company to record
significant unrealized gains on its debt and equity holdings. During the
first nine months of 1996, the Company's equity securities continued to
perform well posting net unrealized gains before taxes of $14.0 million, while
debt securities were adversely impacted by higher interest rates. Unrealized
appreciation on securities, net of tax is reflected in a separate component of
shareholders' equity. The Company's net unrealized gain before tax was $65.3
million and $52.5 million at September 30, 1996 and December 31, 1995,
respectively.
Interest expense on debt obligations decreased to $2.1 million for the first
nine months of 1996, a $400,000 drop from the same period in 1995. This
reduction is due to the December 1, 1995 repayment of $5.4 million on the City
of Peoria industrial development bonds, a part of which was refinanced through
short-term borrowings of $2.8 million. This short-term debt was repaid during
the first quarter of 1996.
INCOME TAXES
The Company's effective tax rate for the first nine months of 1996 was 28%
compared to 241% for the same period in 1995. Income tax expense attributable
to income from operations differed from the amounts computed by applying the
U.S. federal tax rate of 35% to pretax income for the first nine months of
1995 and 1996 as a result of the following:
1995 1996
Amount % Amount %
------ --- ------ ---
Provision for income taxes at
the statutory rate of 35% $( 311,787) 35% $ 9,105,931 35%
Increase (reduction) in taxes
resulting from:
Tax exempt interest income (1,030,621) 116% (1,145,440) ( 4%)
Dividends received deduction ( 865,151) 97% ( 901,518) ( 4%)
Dividends paid deduction ( 199,562) 22% ( 193,687) ( 1%)
Other items, net 260,229 ( 29%) 456,426 2%
------------ ------ ----------- ----
Total tax (benefit) expense $(2,146,892) 241% $ 7,321,712 28%
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, the primary sources of the Company's liquidity have been funds
generated from insurance premiums (operating activities) and investment income
and maturing investments (investing activities). In addition, the Company has
occasionally received proceeds from financing activities such as the sale of
common stock to the employee stock ownership plan, sale of convertible
debentures, and small, short-term borrowings.
At September 30, 1996 the Company had short-term investments, cash and other
investments maturing within one year, of approximately $33.5 million and
additional investments of $121.5 million maturing within five years. The
Company maintains two major sources of credit from two financial institutions:
one $10.0 million secured line of credit and one $30.0 million line of credit.
During the second quarter of 1996, the Company drew on the $10.0 million
secured line of credit. This $1.6 million draw-down remained as short-term
debt outstanding at September 30, 1996.
Management believes that cash generated by operations, cash generated by
investments and cash available from financing activities will provide
sufficient sources of liquidity to meet its anticipated needs over the next
twelve to twenty-four months, including settlement of accrued but unpaid costs
related to the Northridge Earthquake.
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
Consolidated gross sales increased $1.2 million, or 1.5%, to $85.4 million for
the third quarter of 1996, compared to the same period in 1995. Gross sales
of the insurance group remained relatively flat at $70.3 million, a .8%
increase compared to the same period in 1995. During this same period, net
investment income improved 3.2% over 1995 levels. Consolidated revenue for
the third quarter 1996 increased $600,000 from the same period in 1995. Net
earnings for the third quarter of 1996 totaled $6.8 million, $.86 per share,
compared to a net loss of $9.6 million, $1.22 per share, for the same period
in 1995. The 1996 increase is primarily the result of strong property
underwriting profits and increased investment income. Third quarter 1995
earnings were negatively impacted by Northridge Earthquake reserve
strengthening, which resulted in an after-tax charge of $16 million or $2.05
per share.
RLI INSURANCE GROUP
Gross premiums written in the third quarter of 1996 totaled $70.3 million, a
$600,000 increase from the third quarter of 1995. Both Property and Casualty
premiums remained relatively flat, posting gains of $100,000 and $500,000,
respectively. Declines on the Casualty book due to the discontinuation of the
Aviation business and continued soft market conditions in the General
Liability and Employer's Excess Indemnity markets were offset by significant
improvements in the Commercial Umbrella and Surety books, which were up a
11
<PAGE>
combined $3.8 million for the quarter. Net premiums written for the third
quarter of 1996 declined 8.9% from 1995 levels. This decline is primarily
attributable to the restructuring of the Company's reinsurance program in
1996. Increased reinsurance coverage purchased on the Company's Property book
has resulted in additional cessions to the Company's Difference-In-Condition
and other Property Surplus treaties.
Premiums earned remained relatively flat at $32.3 million for the quarter, a
.4% increase from the third quarter of 1995. The group's pre-tax earnings
were $4.6 million for the third quarter of 1996 compared to a pre-tax loss of
$20.7 million for the same period in 1995. The GAAP combined ratio decreased
to 85.8 from 164.3 in the third quarter of 1995. The loss and settlement
expense component of the combined ratio decreased to 50.5 from 123.2. The
1995 ratio was affected by Northridge reserve strengthening as mentioned
previously. The operating expense component of the combined ratio decreased
to 35.3 from 41.1, primarily due to the accruing of contingent ceding
commissions from reinsurers based on favorable loss results on the group's
California Property programs.
RLI VISION CORP.
For the third quarter 1996, RLI Vision posted revenue of $9.3 million, which
was up 3.8% from the third quarter 1995. Revenues from ophthalmic products
increased $829,000 or 12.4% from 1995. This improvement was primarily
attributable to an increase of $734,000 or 15.0% in contact lens distribution
revenue. In addition, RGP manufacturing revenue increased $41,000 or 12.8%.
Revenues from third party administration products, including Total Lens Care
(TLC) and Clear Advantage decreased $510,000 or 28%.
RLI Vision's pre-tax earnings for the third quarter 1996 increased $42,000 or
8.4% from 1995. This increase was primarily due to continued operating cost
reductions which resulted in a decrease in operating expenses of $545,000 or
15.0% from third quarter 1995 levels. Total gross margin decreased by
$449,000 or 11.0% from 1995 due to a product mix shift towards the lower
margin distributed products.
INVESTMENT INCOME
The Company's investment portfolio generated net dividends and interest income
of $5.8 million during the third quarter of 1996, an increase of 3.2% over
that reported for the same period in 1995. This increase is primarily
attributable to the higher invested asset base from the prior year, as
previously discussed. The Company also recognized realized gains of $38,000
during the third quarter of 1996 compared to realized gains of $11,000 in the
third quarter of 1995.
Interest expense on debt obligations totaled $697,000 for the third quarter of
1996 compared to $843,000 for the same period in 1995. This reduction is due
to the December 1, 1995 principal repayment of $5.4 million on the City of
Peoria industrial development bonds.
12
<PAGE>
INCOME TAXES
The difference between the effective rates and the statutory federal tax rate
of 35% applied to pre-tax income from continuing operations for the third
quarter of 1995 and 1996 is as follows:
1995 1996
Amount % Amount %
------ --- ------ ---
Provision for income taxes at
the statutory rate of 35% $(5,516,927) 35% $ 3,358,077 35%
Increase (reduction) in taxes
resulting from:
Tax exempt interest income ( 368,724) 2% ( 394,982) ( 4%)
Dividends received deduction ( 301,303) 2% ( 308,525) ( 3%)
Dividends paid deduction ( 67,307) 1% ( 64,843) ( 1%)
Other items, net 52,291 ( 1%) 206,104 2%
------------ ------ ----------- ----
Total tax expense (benefit) $(6,201,970) 39% $ 2,795,831 29%
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable
Item 2. Change in Securities - Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Not Applicable
(b) The Company did not file any reports on Form 8-K during the nine
months ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RLI Corp.
/s/Joseph E. Dondanville
Joseph E. Dondanville
Vice President, Chief Financial Officer
(Duly authorized and Principal
Financial and Accounting Officer)
Date: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS IN THE RLI CORP. FORM 10Q FOR THE PERIOD
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
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0
0
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96,852
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</TABLE>
