<PAGE>
Schedule 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
RLI CORP.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
<PAGE>
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION .............................................
Proxy Solicitation......................................
Voting Via Telephone or the Internet....................
Electronic Access to Proxy Materials
and Annual Report..............................
Shareholder Proposals...................................
Shareholders Entitled to Vote...........................
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.....................
Principal Shareholders..................................
Directors and Officers..................................
Section 16(a) Beneficial Ownership
Reporting Compliance...........................
PROPOSAL ONE: ELECTION OF DIRECTORS.............................
Nominees................................................
Voting of Proxies.......................................
Substitute Nominees.....................................
Director and Nominee Information........................
BOARD COMMITTEES.................................................
Audit Committee.........................................
Executive Resources Committee...........................
Nominating Committee....................................
BOARD MEETINGS AND COMPENSATION..................................
Meetings................................................
Director Compensation...................................
Stock Option Plan for Outside Directors.................
Director Deferred Compensation Plan.....................
EXECUTIVE RESOURCES COMMITTEE REPORT.............................
General.................................................
Base Salary.............................................
MVP Bonus...............................................
Incentive Stock Options.................................
<PAGE>
ESOP....................................................
Chief Executive Officer.................................
Internal Revenue Code Section 162(m)....................
Members of the Executive Resources Committee............
EXECUTIVE MANAGEMENT COMPENSATION................................
Executive Officers......................................
Summary Compensation Table..............................
Option Grants in Last Fiscal Year.......................
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values.........................
Long-Term Incentive Plan................................
Pension Plan............................................
COMMON STOCK PERFORMANCE CHART...................................
INDEPENDENT PUBLIC ACCOUNTANTS...................................
OTHER BUSINESS...................................................
<PAGE>
(LOGO)
RLI CORP.
9025 North Lindbergh Drive
Peoria, Illinois 61615
-------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
-------------------------------------------------------
To the Shareholders of RLI Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
RLI Corp. ("Company") will be held at 9025 North Lindbergh Drive, Peoria,
Illinois, 61615, on Thursday, May 6, 1999, at 2:00 P.M. Central Daylight Time
to:
1. Elect three (3) directors for a three-year term expiring in
2002 or until their successors are elected and qualified; and
2. Transact such other business as may properly be brought before the
meeting.
Only holders of Common Stock of the Company, of record at the
close of business on March 8, 1999, are entitled to notice of and to vote at
the Annual Meeting.
By Order of the Board of Directors
Camille J. Hensey
Vice President/Corporate Secretary
Peoria, Illinois
March 26, 1999
It is important, regardless of the number of shares you hold, that
you personally be present or be represented by proxy at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please provide your
proxy by either calling the toll-free telephone number, using the Internet,
or mark, sign, date and promptly return the enclosed proxy card in the
postage-paid envelope provided. If you attend the Annual Meeting, your proxy
may be withdrawn upon request.
<PAGE>
(LOGO)
RLI CORP.
9025 NORTH LINDBERGH DRIVE
PEORIA, ILLINOIS 61615
March 26, 1999
Dear Shareholder:
Please consider this letter your personal invitation to attend the 1999 RLI
Corp. Annual Shareholders Meeting. It will be held at 9025 North Lindbergh
Drive, Peoria, Illinois, 61615, the Company's principal office, on May 6,
1999, at 2:00 P.M. CDT.
Business scheduled to be considered at the meeting is the election of Class
III directors.
In addition, we will review significant events of 1998 and their impact on
you and your Company. Directors, officers and representatives of KPMG will be
available before and after the meeting to talk with you and answer any
questions you may have.
We were pleased with the response of our shareholders at the 1998 Annual
Meeting, at which 88% of the Common Stock was represented in person or by
proxy. We hope that participation by our shareholders in the affairs of the
Company will continue.
YOUR VOTE IS IMPORTANT TO US, NO MATTER HOW MANY SHARES YOU OWN. This year,
shareholders will have a choice of voting over the Internet, by telephone or
by using a traditional proxy card. Check the proxy card forwarded by your
bank, broker, other holder of record or our proxy administrators to see the
options available to you. If you do attend the Annual Meeting and desire to
vote in person, you may do so even though you have previously voted your
proxy.
Thank you for your interest in your Company as well as your confidence and
support in our future.
Sincerely,
Gerald D. Stephens, CPCU
President
<PAGE>
RLI CORP.
9025 NORTH LINDBERGH DRIVE
PEORIA, ILLINOIS 61615
-----------------------------------
PROXY STATEMENT
-----------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 6, 1999
-----------------------------------
<PAGE>
GENERAL INFORMATION
This Proxy Statement is furnished to the shareholders of RLI Corp.
("Company") in connection with the solicitation, by the Board of Directors of
the Company, of proxies to be used at the Annual Meeting of Shareholders to be
held at 2:00 P.M. Central Daylight Time on Thursday, May 6, 1999, at 9025 North
Lindbergh Drive, Peoria, Illinois, 61615, and at any adjournments of the
Meeting.
PROXY SOLICITATION. The Company will bear the cost of solicitation of
proxies. In addition to the use of the mail, proxies may be solicited in
person or by telephone, facsimile or other electronic means, by directors,
officers or employees of the Company. No additional compensation will be paid
to such persons for their services. In accordance with the regulations of the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
("NYSE"), the Company will reimburse banks, brokerage firms, investment
advisors and other custodians, nominees, fiduciaries and service bureaus for
their reasonable out-of-pocket expenses for forwarding soliciting material to
beneficial owners of the Company's Common Stock and obtaining their proxies
or voting instructions.
VOTING. As many shareholders cannot attend the Annual Meeting in person, it is
necessary that a large number be represented by proxy. Shareholders have a
choice of voting over the Internet, by using a toll-free telephone number or by
completing a proxy card and mailing it in the postage-paid envelope provided.
Each proxy will be voted in accordance with the shareholder's specifications. If
there are no such specifications, it will be voted in favor of the election of
directors. All proxies delivered pursuant to this solicitation are revocable at
any time at the option of the shareholder either by giving written notice to the
Corporate Secretary at 9025 North Lindbergh Drive, Peoria, Illinois, 61615, or
by timely delivery of a properly executed proxy, including an Internet or
telephone vote, bearing a later date, or by voting in person at the Annual
Meeting. All shares represented by valid, unrevoked proxies will be voted at the
Annual Meeting.
Assuming the presence of a quorum, the election of directors requires the
affirmative vote of a plurality of the votes cast by the holders of the
outstanding shares of Common Stock. With respect to the election of directors,
shareholders may vote in favor of all nominees, or withhold their votes as to
all nominees, or withhold their votes as to specific nominees. Brokers who hold
1
<PAGE>
shares for the accounts of their clients may vote such shares either as
directed by their clients or in their own discretion if permitted by the
Stock Exchange or other organization of which they are members. Members of
the NYSE are permitted to vote their client's proxies in their own discretion
as to the election of directors if the clients have not furnished voting
instructions within ten days of the meeting. If an executed proxy is returned
by a broker holding shares in street name which indicates that the broker
does not have discretionary authority as to certain shares to vote on one or
more matters (a "broker non-vote"), such shares will be considered present at
the Annual Meeting for purposes of determining a quorum but will not be
considered to be represented at the Annual Meeting for purposes of
calculating the vote.
MAILING. This Proxy Statement and enclosed Proxy are first being mailed or
electronically delivered to shareholders entitled to notice of and to vote at
the Annual Meeting on or about March 26, 1999.
VOTING VIA TELEPHONE OR THE INTERNET. Shareholders can save the Company expense
by voting their shares over the telephone, toll-free from the United States or
Canada, or by voting through the Internet. The voting procedures are designed to
authenticate each shareholder by use of a control number, to allow shareholders
to vote their shares, and to confirm that their instructions have been properly
recorded. Specific instructions to be followed by any shareholder interested in
voting by telephone or the Internet are set forth on the proxy card.
The method of voting will not limit a shareholder's right to attend the Annual
Meeting.
ELECTRONIC ACCESS TO PROXY MATERIALS AND ANNUAL REPORT. This notice of Annual
Meeting and Proxy Statement and the 1998 Annual Report are available on RLI
Corp.'s Internet site at www.rlicorp.com. Shareholders can elect to view future
proxy statements and annual reports over the Internet instead of receiving paper
copies in the mail. You can choose this option and save the Company the cost of
producing and mailing these documents by following the instructions provided if
you vote over the Internet or by telephone. Should you choose to view future
proxy statements and annual reports over the Internet, you will receive an
e-mail next year with voting instructions and the Internet address of those
materials.
SHAREHOLDER PROPOSALS. To be included in the Board of Directors' Proxy
Statement for the 2000 Annual Meeting of Shareholders, a shareholder proposal
must be received by the Company on or before
2
<PAGE>
November 29, 1999. Proposals should be directed to the attention of the
Corporate Secretary at 9025 North Lindbergh Drive, Peoria, Illinois, 61615.
SHAREHOLDERS ENTITLED TO VOTE. At the close of business on March 8, 1999, the
record date for the determination of shareholders entitled to vote at the Annual
Meeting, the Company had 10,405,369 shares of Common Stock outstanding and
entitled to vote. Common share ownership entitles the holder to one vote per
share upon each matter to be voted at the Annual Meeting.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
PRINCIPAL SHAREHOLDERS. The only persons known to the Company who beneficially
own more than five percent of the Company's Common Stock as of January 31, 1999,
are as follows:
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Oak Value Capital Management, Inc. 1,551,078 14.9%
3100 Tower Boulevard
Suite 800
Durham, North Carolina 27707
(1)
RLI Corp. 1,325,250 12.7%
Employee Stock Ownership Plan &
Trust
c/o Michael A. Price
9025 N. Lindbergh Drive
Peoria, Illinois 61615
(2)
Gerald D. Stephens 864,465 8.3%
493 East High Point Drive
Peoria, Illinois 61614
(3)
(1) Oak Value Capital Management, Inc., ("Oak Value"), has informed the
Company that, as of January 31, 1999, Oak Value had shared voting and
shared dispositive power with respect to 1,402,449 shares, and no voting
and no dispositive power with respect to 148,629 shares.
(2) Each Employee Stock Ownership Plan ("ESOP") participant or beneficiary
may direct the ESOP trustee as to the manner in which the shares allocated
to each under the ESOP are to be voted. The ESOP Administrative Committee
("Committee"), comprised of outside
3
<PAGE>
members of the Board of Directors, may direct the ESOP trustee as to the
manner in which unallocated shares are to be voted. The Committee has sole
investment power as to all allocated and unallocated shares, except as to
those shares which are the subject of a participant's diversification
election.
(3) Includes 254,190 shares allocated to Mr. Stephens under the ESOP over
which Mr. Stephens has sole voting power and no investment power; 44,210
shares allocated under the RLI Corp. Key Employee Excess Benefit Plan
("Key Plan") over which Mr. Stephens has no voting or investment power;
35,178 shares owned by Mr. Stephens' spouse, over which Mr. Stephens has
no voting or investment power; 12,067 shares held in custodian accounts
for the benefit of Mr. Stephens' grandchildren, over which Mr. Stephens
has sole voting and investment power; 1,706 shares in the H. O. Stephens
Trust for the benefit of Mr. Stephens' mother, over which Mr. Stephens, as
trustee, has sole voting and investment power; 26,031 shares owned by the
Gerald D. and Helen M. Stephens Foundation, over which Mr. Stephens, as
President, has sole voting and investment power; 39,682 exercisable stock
options, and 2,337 shares held by a bank, as trustee, under an irrevocable
trust established by the Company pursuant to the RLI Corp. Executive
Deferred Compensation Agreement.
DIRECTORS AND OFFICERS. The following information is furnished as to the
beneficial ownership of the shares of the Company's Common Stock by each current
director, nominee for director and named executive officer, and the directors
and executive officers of the Company as a group, as of February 15, 1999:
<TABLE>
<CAPTION>
Amount and
Name of Individual or Nature of Percent
Number of Persons in Beneficial of
Group Ownership (1) Class
- ---------------------- ------------- ---------
<S> <C> <C>
Bernard J. Daenzer (2) (9) 103,416 1.0%
Joseph E. Dondanville (7) (10) (11) 28,886 *
Richard J. Haayen (8) (9) 11,105 *
William R. Keane (3) (8) (9) 94,843 *
Gerald I. Lenrow (4) (8) (9) 14,195 *
Jonathan E. Michael (5) (7) (10) (11) 58,533 *
Edwin S. Overman (8) (9) 30,713 *
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Amount and
Name of Individual or Nature of Percent
Number of Persons in Beneficial of
Group Ownership (1) Class
- ---------------------- ------------- ---------
<S> <C> <C>
Gerald D. Stephens (6) (7) (10) (11) 865,166 8.3%
Michael J. Stone (7) (10) (11) 12,093 *
Edward F. Sutkowski (8) (9) 101,525 *
Gregory J. Tiemeier (7) (10) (11) 39,243 *
Robert O. Viets (8) (9) 12,342 *
Directors and executive
officers as a group
(15 persons) (7) (10) (11) 1,401,557 13.5%
</TABLE>
*Less than 1% of Class.
(1) Unless otherwise noted, each person has sole voting power and sole
investment power with respect to the shares reported.
(2) Includes 27,588 shares owned by Mr. Daenzer's spouse, and 26,703 shares held
in a trust for the benefit of Mr. Daenzer's adult children and grandchildren, of
which a bank and Mr. Daenzer's spouse act as co-trustees, as to which Mr.
Daenzer disclaims any beneficial interest.
(3) Includes 20,700 shares owned by Mr. Keane's spouse, Evelyn Corral, an
honorary Vice President of the Company, as to which Mr. Keane claims beneficial
interest.
(4) Includes 424 shares held by Mr. Lenrow's spouse in a custodian account for
the benefit of their minor daughter, as to which Mr. Lenrow disclaims any
beneficial interest.
(5) Includes 34,032 shares allocated to Mr. Michael under the ESOP, and
7,496 shares allocated under the Key Plan, over which Mr. Michael has no
voting or investment power.
(6) Includes 254,190 shares allocated to Mr. Stephens under the ESOP, over
which Mr. Stephens has sole voting power and no investment power; 44,210
shares allocated under the Key Plan, over which Mr. Stephens has no voting or
investment power; 35,178 shares owned by Mr. Stephens' spouse, over which Mr.
Stephens has no voting or investment power; 12,071 shares held in custodian
accounts for the benefit of Mr. Stephens' grandchildren, over which Mr.
Stephens has sole voting and investment power; 1,706 shares in the H. O.
Stephens Trust for the benefit
5
<PAGE>
of Mr. Stephens' mother, over which Mr. Stephens, as trustee, has sole voting
and investment power; and 26,031 shares owned by the Gerald D. and Helen M.
Stephens Foundation, over which Mr. Stephens, as President, has sole voting
and investment power.
(7) Includes shares allocated to the executive officers under the ESOP with
respect to which such officers have sole voting power and no investment
power, except during the period in which any such executive officer may
diversify a percentage, not to exceed 50%, of such officer's ESOP benefit.
During 1998, one of the executive officers was eligible to elect to diversify
shares owned by the ESOP. As of February 15, 1999, the following shares were
allocated under the ESOP: Mr. Dondanville 19,402 shares; Mr. Michael 34,032
shares; Mr. Stephens 254,190 shares; Mr. Stone 2,196 shares; and Mr. Tiemeier
32,094 shares.
(8) Includes shares held by a bank trustee under an irrevocable trust
established by the Company pursuant to the RLI Corp. Director Deferred
Compensation Plan for the benefit of the following: Mr. Haayen 7,543 shares;
Mr. Keane 50,193 shares; Mr. Lenrow 10,821 shares; Dr. Overman 27,463 shares;
Mr. Sutkowski 29,042 shares; and Mr. Viets 8,311 shares. Each participating
director has no voting or investment power with respect to such shares and
disclaims beneficial ownership of such shares for purposes of Section 13(d)
of the Securities Exchange Act of 1934.
(9) Includes shares which may be acquired within 60 days of February 15,
1999, under the Directors' Stock Option Plan for Outside Directors, upon the
exercise of outstanding stock options as follows: Mr. Daenzer 3,250 shares;
Mr. Haayen 3,250 shares; Mr. Keane 3,250 shares; Mr. Lenrow 2,950 shares; Dr.
Overman 3,250 shares; Mr. Sutkowski 3,250 shares; and Mr. Viets 3,250 shares.
(10) Includes shares which may be acquired by the executive officers within
60 days of February 15, 1999, under the Incentive Stock Option Plan upon the
exercise of outstanding stock options as follows: Mr. Dondanville 3,662
shares; Mr. Michael 7,581 shares; Mr. Stephens 39,682 shares; Mr. Stone 4,550
shares; and Mr. Tiemeier 3,043 shares.
(11) Includes shares allocated to the executive officers which shares are
held by a bank trustee under an irrevocable trust established by the Company
pursuant to the RLI Corp. Executive Deferred Compensation Agreement for the
benefit of the following: Mr. Dondanville 3,235 shares; Mr. Michael 3,799
shares; Mr. Stephens 3,034 shares; Mr. Stone 2,352 shares; and Mr. Tiemeier
3,020 shares. Each participating executive officer has no voting or
investment power with respect to such shares and disclaims beneficial
ownership of such shares for purposes of Section 13(d) of the Securities
Exchange Act of 1934.
6
<PAGE>
The information with respect to beneficial ownership of Common Stock of
the Company is based on information furnished to the Company by each individual
included in the table.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. The Company notes
Michael J. Stone, Executive Vice President, was late in filing a Form 4
reporting the purchase in October 1998 of 250 shares of the Company's Common
Stock.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES. At the Annual Meeting, three (3) directors are to be elected,
each to hold office for a three-year term or until a successor is elected and
qualified. Messrs. William R. Keane, Gerald I. Lenrow and Edwin S.
Overman are Class III directors who were elected by the shareholders in
1996 for three-year terms expiring in 1999.
VOTING OF PROXIES. Unless otherwise instructed, the shares represented by a
Proxy will be voted for the election of the three nominees named above. The
affirmative vote of a plurality of the shares present in person or
represented by Proxy at the Annual Meeting and entitled to vote is required
for the election of directors. Votes will be tabulated by an Inspector of
Election appointed at the Annual Meeting. Shares may be voted for, or
withheld from, each nominee. Shares that are withheld and broker non-votes
have no effect on determinations of plurality except to the extent that they
affect the total votes received by any particular nominee. There is no
cumulative voting for the directors under the Company's Articles of
Incorporation.
SUBSTITUTE NOMINEES. The Board of Directors has no reason to believe that any
nominee will be unable to serve if elected. In the event that any nominee shall
become unavailable for election, the shares represented by a Proxy will be voted
for the election of a substitute nominee selected by the persons appointed as
proxies unless the Board of Directors should determine to reduce the number of
directors pursuant to the Company's By-Laws.
DIRECTOR AND NOMINEE INFORMATION. The following includes certain information
with respect to the current directors and nominees to the Board of Directors
furnished to the Company by such individuals:
7
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL
NAME AGE SINCE OCCUPATION
---- --- -------- ----------
<S> <C> <C> <C>
William R. Keane 82 1966 Former Vice President, Contacts,
(term expiring in 1999) Inc. (contact lens laboratory)
in Chicago, Ill., until
retirement in 1983.
PICTURE
Gerald I. Lenrow 71 1993 Consultant to General
(term expiring in 1999) Reinsurance Corporation until
December 31, 1998. Former partner in the
international accounting firm of Coopers & Lybrand
LLP until 1990, following which he served as its
consultant until 1996.
PICTURE
Edwin S. Overman 76 1987 President Emeritus of the
(term expiring in 1999) Insurance Institute of America,
a national educational
organization in Malvern, Pa.,
since his retirement as
President of the Institute in 1987.
PICTURE
Certain information concerning the remaining directors, whose terms expire
either in 2000 or 2001, is set forth as follows based upon information furnished
to the Company by such individuals:
Bernard J. Daenzer 83 1972 Owner of Daenzer Associates, Key
Largo, Fla., an insurance
(term expiring in 2000) consulting services firm since
1980. Formerly President and
Chairman of Wolhreich and
Anderson Insurance Companies
and the Howden Swan
Insurance Agencies until
his retirement in 1980.
PICTURE
Richard J. Haayen(1) 74 1993 Chairman and CEO of Allstate
(term expiring in 2001) Insurance Company in Northbrook,
Ill., until his retirement in
1989. Currently Executive-In-
Residence at Southern Methodist
University in Dallas, Texas.
PICTURE
Jonathan E. Michael 45 1997 Executive Vice President of the
(term expiring in 2000) Company; President, Chief
Operating Officer of RLI
Insurance Company and Mt. Hawley
Insurance Company, the Company's
wholly-owned subsidiaries.
Mr. Michael commenced employment
with the Company as Chief Accountant
in 1982.
PICTURE
Gerald D. Stephens 66 1965 Mr. Stephens founded the Company
(term expiring in 2001) in 1965 and has been President
since 1972.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL
NAME AGE SINCE OCCUPATION
---- --- -------- ----------
<S> <C> <C> <C>
PICTURE
PICTURE
Edward F. Sutkowski (2) 60 1975 President of the law firm of
Sutkowski & Washkuhn Ltd. in
(term expiring in 2000) Peoria, Ill., since 1965.
Robert O. Viets (3) 55 1993 President and CEO since 1988 of
(term expiring in 2001) Cilcorp Inc., a holding company
in Peoria, Ill., whose principal
business subsidiary is Central
Illinois Light Company ("CILCO").
Mr. Viets joined CILCO in 1973 and
held various managerial and officer
positions until his promotion to
President and CEO.
</TABLE>
PICTURE
(1) Mr. Haayen notified the Company he will retire as a member of the Board
effective May 6, 1999. No decision has been made at this time to fill the
resulting vacancy, nor have any candidates been considered and approved by the
Board of Directors.
(2) Mr. Sutkowski is President of the law firm of Sutkowski & Washkuhn Ltd.,
which has provided legal services to the Company prior to and during 1998. It is
expected that the Company's relationship with Sutkowski & Washkuhn Ltd. will
continue in the future.
(3) Mr. Viets is a director of Cilcorp Inc. in Peoria, Illinois, and Consumers
Water Company in Portland, Maine, whose securities are registered pursuant to
Section 12 or subject to the requirements of Section 15(d) of the Securities
Exchange Act of 1934.
BOARD COMMITTEES
AUDIT COMMITTEE. The Company's Audit Committee, comprised of outside directors
Messrs. Haayen, Keane, Lenrow and Viets, met two times in 1998 to consider an
outside audit firm and to discuss the planning of the Company's annual outside
audit and its results. The Audit Committee also monitored the Company's
management of its exposures to risk of financial loss, assessed the auditors'
performance, reviewed the adequacy of the Company's internal controls, and the
extent and scope of audit coverage, monitored selected financial reports, and
made audit and auditor engagement recommendations to the Board of Directors.
9
<PAGE>
EXECUTIVE RESOURCES COMMITTEE. The Company's Executive Resources Committee,
comprised of outside directors Messrs. Daenzer, Haayen, Lenrow and Overman, met
one time in 1998 to review and recommend the compensation of the executive
officers and other officers of the Company. The Committee also evaluated
executive performance, executive back-up plans, examined the officer development
program, and was responsible for searching, enlisting and maintaining a file of
prospective new Board members and potential executive officers. The Company's
Stock Option Plans were administered by the Stock Option Committee comprised of
outside directors Messrs. Daenzer, Haayen, Keane, Overman and Viets. On March 3,
1999, the Committee disbanded the Stock Option Committee and assumed the
responsibilities of administering the Company's Stock Option Plans.
NOMINATING COMMITTEE. The Company does not have a standing nominating
committee.
BOARD MEETINGS AND COMPENSATION
MEETINGS. During the year 1998, four meetings of the Board of Directors were
held. No director attended fewer than 75% of the aggregate number of meetings
of the Board and Board committees on which he served.
DIRECTOR COMPENSATION. During 1998, all directors of the Company (other than
officers of the Company) were compensated at the rate of $20,000 per year and
paid $1,100 for each Board meeting attended, $1,100 for each Committee
meeting of the Board attended, and $1,100 for each Committee meeting of the
Board chaired. Directors are also reimbursed for actual travel and related
expenses incurred and are provided a travel accident policy funded by the
Company.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS. The Stock Option Plan for Outside
Directors ("Director Plan") provides for the grant of an option to purchase
3,000 shares of the Company's Common Stock to each newly elected or appointed
outside director exercisable at fair market value on the date of grant. In
addition, if the Company earns more than its cost of capital and the ESOP
contribution as provided under its Market Value Potential Plan in each
respective year, each outside director is granted an option to purchase 1,500
additional shares of the Company's Common Stock under the Director Plan
effective the first business day in February of the succeeding year
exercisable at fair market value on the date of grant. Effective May 6, 1999,
retroactive to January 1, 1999, the amount of options to be granted to the
10
<PAGE>
outside directors under the Director Plan was increased from 1,500 to 1,800
shares of the Company's Common Stock.
DIRECTOR DEFERRED COMPENSATION PLAN. Prior to the beginning of each year, an
outside director may elect to defer the compensation otherwise payable to the
director during the succeeding year pursuant to the Director Deferred
Compensation Plan ("Deferred Plan"). Under the Deferred Plan, the Company must
transfer to a bank trustee, under an irrevocable trust established by the
Company, such number of shares as are equal to the compensation deferred at the
close of the referent year. Dividends on these shares are reinvested quarterly
under the Company's Dividend Reinvestment Plan. In general, Deferred Plan
benefits are distributable beginning when the director's status terminates.
EXECUTIVE RESOURCES COMMITTEE REPORT
The following report by the Executive Resources Committee is
required by the rules of the Securities and Exchange Commission to be
included in this Proxy Statement and shall not be considered incorporated by
reference in other filings by the Company with the Securities and Exchange
Commission.
GENERAL. The Executive Resources Committee is responsible for determining
specific compensation levels of its executive officers. The Company aims to
offer total compensation packages that attract, retain and motivate high
quality executives and that reward executives for Company profitability and
the enhancement of shareholder value. The following components of executive
compensation have been designed to meet these objectives.
BASE SALARY. The Executive Resources Committee sets base salary ranges for each
executive officer position based on executive compensation data from nationally
recognized surveys from a group of comparable insurance companies prepared by
Watson Wyatt, an independent actuarial firm. Actual salaries, which consider
individual performance and job content in the context of these ranges, are
targeted to fall at or near the 75th percentile of salaries offered in the
Company's competitive market.
MVP BONUS. Prior to 1996, the Company paid annual cash bonuses to its
executive officers based upon achievement of the Company's annual business
plan. Since the adoption of the Market Value Potential Plan ("MVP Plan") in
1996, the Company has paid bonuses pursuant to the MVP Plan, which rewards
executive officers for earnings in excess of the Company's cost of capital.
The MVP Plan
11
<PAGE>
thus encourages executive officers to manage and allocate Company capital to
products that produce income in excess of the cost of capital, thereby
enhancing the potential for appreciation of the Company's stock.
Under the MVP Plan, the total annual bonus pool for the Company, if any, is
based upon a Committee-specified percentage of the Company's return on capital
in excess of its cost of capital. The Executive Resources Committee awards
individual bonuses out of the pool taking into account Watson Wyatt studies of
bonus compensation in the Company's competitive market and the executive
officer's job content. A memo account is established for each participant in the
MVP Plan and the participant's allocated percentage of the MVP Bonus Pool for
each year (whether a positive or negative amount) is annually credited to
participants' accounts without limitation. Once a year, an interest factor is
credited to positive balances and fifty percent of each participant's positive
account balance is paid out. The remaining positive balance or any negative
balance is rolled into the next year and is subject to subsequent MVP Plan
results.
INCENTIVE STOCK OPTIONS. Stock options awarded pursuant to the Incentive Stock
Option Plan are another important element of the Company's compensation
philosophy. The Company believes options serve as incentives to executives to
maximize the long-term growth and profitability of the Company, which will be
reflected in the Company's stock price. Under the Incentive Stock Option Plan,
options may not be granted for less than fair market value of the Company's
Common Stock on the date of grant, so that recipients will recognize value from
the grants only if the Common Stock price increases in the future. Furthermore,
all options granted provide for twenty percent annual vesting over a period of
five years.
ESOP. The Company's ESOP also offers a valuable way of aligning the interests of
its employees, including its executive officers, with those of its shareholders
on a long-term basis. Pursuant to the ESOP, the Company makes annual cash
contributions, based on the Company achieving positive MVP, that are used to
purchase Company Common Stock on behalf of the Company's employees, including
its executive officers. All employees, including executive officers, may have an
annual contribution of fifteen percent of wages (limited to $24,000). The ESOP
vests twenty percent per year to 100% at the end of five years. Mr. Michael is
eligible to participate in an individualized Key Employee Excess Benefit Plan
("Key Plan"). Under the Key Plan, the Company makes annual cash contributions
which are used to purchase stock held in a trust it maintains for Mr. Michael's
benefit in an amount equal in value to the excess of the contribution allowable
to him under
12
<PAGE>
the ESOP (determined without regard to any limitations on compensation
imposed by the Internal Revenue Code), over the contribution actually made
for him under the ESOP (determined with regard to such limitations).
CHIEF EXECUTIVE OFFICER. Policies with respect to the Chief Executive Officer
are the same as those discussed for executive officers generally, except
that, in addition to the ESOP, Mr. Stephens is eligible to participate in an
individualized Key Employee Excess Benefit Plan ("Key Plan"). Under the Key
Plan, the Company makes annual cash contributions which are used to purchase
stock held in a trust it maintains for Mr. Stephens' benefit in an amount
equal in value to the excess of the contribution allowable to him under the
ESOP (determined without regard to any limitations on compensation imposed by
the Internal Revenue Code), over the contribution actually made for him under
the ESOP (determined with regard to such limitations).
INTERNAL REVENUE CODE SECTION 162(m). The Company intends that bonuses awarded
pursuant to the MVP Plan will satisfy the conditions necessary for deductibility
by the Company under Section 162(m) of the Internal Revenue Code, which limits
the ability of the Company to deduct any compensation in excess of $1,000,000
per year for federal income tax purposes unless such conditions are met.
MEMBERS OF THE EXECUTIVE RESOURCES COMMITTEE
Edwin S. Overman, Chairman
Bernard J. Daenzer
Richard J. Haayen
Gerald I. Lenrow
EXECUTIVE MANAGEMENT COMPENSATION
EXECUTIVE OFFICERS. The following information is provided as to each current
executive officer of the Company:
<TABLE>
<CAPTION>
EXECUTIVE
POSITION OFFICER
NAME AND AGE WITH COMPANY SINCE
- --------------------- ------------- -----------
<S> <C> <C>
Joseph E. Dondanville Vice President, 1992
Age 42 Chief Financial
Officer
Camille J. Hensey Vice President and 1987
Age 57 Corporate Secretary
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE
POSITION OFFICER
NAME AND AGE WITH COMPANY SINCE
- --------------------- ------------- -----------
<S> <C> <C>
Jonathan E. Michael Executive Vice 1985
Age 45 President; President,
Chief Operating Officer
of RLI Insurance
Company and Mt. Hawley
Insurance Company, the
Company's wholly-owned
insurance subsidiaries
Mary Beth Nebel Vice President 1994
Age 42 and General
Counsel
Michael A. Price Treasurer 1998
Age 35 (1)
Gerald D. Stephens President 1965
Age 66 and Director
Michael J. Stone Executive Vice President 1997
Age 50 (2) of RLI Insurance
Company and Mt. Hawley
Insurance Company, the
Company's wholly-owned
insurance subsidiaries
Gregory J. Tiemeier Assistant Secretary; 1992
Age 41 Senior Vice President,
Chief Information Officer
and Assistant Secretary
of RLI Insurance Company
and Mt. Hawley Insurance
Company, the Company's
wholly-owned insurance
subsidiaries
</TABLE>
(1) Mr. Price joined the Company as Treasurer in June of 1996. As Mr.
Price's duties and responsibilities in connection with his position currently
meet the "Executive Officer" definition of the SEC rules for disclosure
purposes, the Board of Directors classified him as an executive officer of
the Company effective December 3, 1998.
(2) Mr. Stone joined the Company as Vice President of Claims in May of 1996
after having served in various positions for Travelers Insurance Group of
Hartford, Conn. since 1977, including Vice President of Claims. As Mr. Stone
assumed significant policy-making functions during his first year as an officer
of the Company's wholly-owned insurance subsidiaries,
14
<PAGE>
the Board of Directors classified him as an executive officer of the Company
effective August 7, 1997. He was promoted to Senior Vice President of Claims
in May of 1998 and Executive Vice President in December of 1998.
SUMMARY COMPENSATION TABLE. The aggregate compensation earned from the
Company and its subsidiaries during the 1998 fiscal year is expressed below for
the Company's President and five other most highly-compensated executive
officers:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
OTHER SECURITIES
NAME and PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION(2) OPTIONS (#)(3) COMPENSATION ($)(4)
- ----------------- ---- ---------- ------------ --------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Stephens 1998 462,792 743,932(5) 41,250 240,670
President 1997 458,296 1,020,291 41,500 158,862
1996 438,208 477,178 27,125 69,743
Jonathan E. Michael 1998 288,080(5) 520,753(5) 19,251 158,295
Executive Vice President 1997 261,680 714,204 10,500 99,517
1996 257,056 334,025 3,625 40,064
Michael J. Stone (6) 1998 195,967(5) 249,976(5) 12,500 25,377
Senior Vice President, 1997 183,600 327,585 5,250 25,798
RLI Insurance Company and 1996 - - - -
Mt. Hawley Insurance Company
Terry L. Younghanz (7) 1998 167,539 330,489 12,500 0
Senior Vice President, 1997 182,400 566,838 69,706 5,250 25,798
Underwriting, RLI 1996 165,588 258,193 58,789 5,000 23,275
Insurance Company
and Mt. Hawley
Insurance Company
Joseph E. Dondanville 1998 153,000(5) 267,508(5) 9,376 25,377
Vice President, Chief 1997 144,166 377,342 5,375 25,798
Financial Officer 1996 132,760 214,730 2,250 20,600
Gregory J. Tiemeier 1998 143,862(5) 191,332(5) 3,125 25,377
Senior Vice President, 1997 136,200 374,217 2,375 25,798
Chief Information Officer 1996 135,317 155,083 1,500 20,997
</TABLE>
(1) 1998 amounts represent compensation accrued during fiscal year 1998 and
paid in 1999 pursuant to the Company's MVP Plan, exclusive of the following
additional amounts which may be payable to such individuals in future years
under the MVP Plan: Gerald D. Stephens $743,932; Jonathan E. Michael
$520,752; Michael J. Stone $249,976; Terry L. Younghanz $399,962; Joseph E.
Dondanville $267,507; and Gregory J. Tiemeier $191,331. In the case of Mr.
Younghanz, $160,769 of the 1996 amount, $239,253 of the 1997 amount and
$230,498 of the 1998 amount represent underwriting bonuses earned in such
years, based upon a percentage of earned premiums, less developed losses and
expenses, for his area of responsibility for the seven years preceding the
year in which the bonus was earned. The remainder of the bonus for 1996,
1997 and 1998 was paid to Mr. Younghanz pursuant to the MVP Plan.
(2) The amount of perquisites and other personal benefits did not exceed the
lesser of $50,000 or 10% of the total of the named executive officer's
annual salary and bonus, with the exception of Mr. Younghanz. The amounts
include $50,839 in 1996 and $43,664 in 1997 paid for the relocation of Mr.
Younghanz from Shawnee, Kansas, to the Company's Home Office in Peoria,
Illinois. Also includes $24,718 in 1997 for spousal travel required for
business- related Company activities and certain personal travel. These
amounts include reimbursement for federal, state and FICA tax liability
resulting from the income imputed to Mr. Younghanz.
15
<PAGE>
(3) Twenty percent of each option grant becomes exercisable one year after the
date of the grant and each year thereafter in 20% increments. Such options
lapse at the end of the ten-year period beginning on the grant date. Amounts
shown have been adjusted for the June 19, 1998, 5-for-4 stock split.
(4) Represents the value of Company contributions to the ESOP on behalf of the
named executive officers. In the case of Messrs. Stephens and Michael, the
amounts include shares allocated to them under their respective Key Plans as
follows: Mr. Stephens 10,630 shares (adjusted for June 19, 1998, 5-for-4
stock split) in respect of 1998, 2,056 shares in respect of 1997 and 2,180
shares in respect of 1996. Mr. Michael 2,246 shares (adjusted for June 19,
1998, 5-for-4 stock split) in respect of 1998, 506 shares in respect of
1997, and 665 shares in respect of 1996. In general, benefits are
distributable to Messrs. Stephens and Michael when their employment
terminates. Under the Key Plan, the Company must transfer to the trustee
under an irrevocable trust maintained by the Company for the benefit of
Messrs. Stephens and Michael such number of shares as are equal in value to
the excess of (a) the contribution allocable to them under the ESOP
determined without regard to any limitation on compensation imposed by the
Internal Revenue Code, over (b) the contribution actually allocable to them
under the ESOP determined with regard to any limitation on compensation
imposed by the Internal Revenue Code. The total value of their Key Plan
benefits as of December 31, 1998, was: Mr. Stephens $1,461,396 and
Mr. Michael $246,538.
(5) Includes amounts voluntarily deferred under the Company's Executive Deferred
Compensation Agreement ("Agreement"). The Agreement allows executive
officers to defer portions of current base salary and bonus compensation
otherwise payable during the year.
(6) Mr. Stone joined the Company in 1996 and became an executive officer in
1997.
(7) Mr. Younghanz terminated his employment with the Company on November 12,
1998.
OPTION GRANTS IN LAST FISCAL YEAR. The following table shows information
regarding grants of stock options made to the named executive officers under
the Company's Incentive Stock Option Plan during the fiscal year ended
December 31, 1998. The amounts shown for each of the named executive officers
as potential realizable values are based on arbitrarily assumed annualized
rates of stock price appreciation of five percent and ten percent over the
full ten-year term of the options, which would result in stock prices of
approximately $68.74 and $109.46, respectively. The amounts shown as
potential realizable values for all shareholders represent the corresponding
increases in the market value of 10,335,292 outstanding shares of the
Company's Common Stock held by all shareholders as of December 31, 1998,
which would total approximately $593,513,036 and $945,070,317, respectively.
No gain to the optionees is possible without an increase in stock price,
which will benefit all shareholders proportionately. These potential
realizable values are based solely on arbitrarily assumed rates of
appreciation required by applicable Securities and Exchange Commission
regulations. Actual gains, if any, on option exercises and common
stockholdings are dependent on the future performance of the Company's Common
Stock. There can be no assurance that the potential realizable values shown
in this table will be achieved.
16
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
- ------------------------------------------------------------------------ -----------------------------------
IF STOCK AT IF STOCK AT
$68.74 $109.46
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH)(2) DATE 5%(3) 10%(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALL SHAREHOLDERS' $593,513,036 $945,070,317
STOCK APPRECIATION
Gerald D. Stephens 41,250 31.98% $42.20 05/07/98 $ 1,094,748 $ 2,774,307
Jonathan E. Michael 19,251 14.92% $42.20 05/07/98 $ 510,909 $ 1,294,744
Michael J. Stone 12,500 9.69% $42.20 05/07/98 $ 331,742 $ 840,699
Joseph E. Dondanville 9,376 7.27% $42.20 05/07/98 $ 165,871 $ 420,350
Gregory J. Tiemeier 3,125 2.42% $42.20 05/07/98 $ 82,935 $ 210,175
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each option grant becomes exercisable in 20% increments on the
first five anniversaries of the grant date. Such options lapse
on the tenth anniversary of the grant date. These numbers have
been adjusted for the June 19, 1998, 5-for-4 stock split.
(2) The exercise price is the fair market value on the date of grant
and has been adjusted for the June 19, 1998, 5-for-4 stock
split.
(3) The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates dictated by the
Securities and Exchange Commission when the "Potential
Realizable Value" alternative is used. These are not intended
to be a forecast of the Company's stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES(1). The following table sets forth information with respect to the
named executive officers concerning the exercise of options during the
last fiscal year and unexercised options held December 31, 1998. Value
realized upon exercise is the excess of the fair market value of the
underlying stock on the exercise date over the exercise price under the
option. Value of unexercised, in-the-money options at fiscal year-end is
the difference between its exercise price and the fair market value of the
underlying stock on December 31, 1998, which was $33.25 per share. These
values, unlike the amounts set forth in the column headed "Value
Realized," have not been, and may never be, realized. The underlying
options have not been, and may never be, exercised; actual gains on
exercise, if any, will depend on the value of the Company's Common Stock
on the date of exercise. There can be no assurance that these values will
be realized.
17
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END
------------------------ -----------------------
SHARES
ACQUIRED
ON VALUE
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Stephens 0 $0.00 39,682 104,414 $566,704 $ 713,564
Jonathan E. Michael 0 $0.00 7,581 32,514 $104,502 $ 138,494
Michael J. Stone 0 $0.00 4,550 21,950 $ 58,187 $ 106,312
Joseph E. Dondanville 0 $0.00 3,662 16,152 $ 49,540 $ 70,241
Gregory J. Tiemeier 0 $0.00 3,043 7,238 $ 45,417 $ 49,249
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The share numbers, market and exercise prices have been
adjusted, as necessary, for the 5-for-4 stock splits that
occurred on June 21, 1995 and June 19, 1998.
LONG-TERM INCENTIVE PLAN. No long-term incentive plan awards were made
during 1998.
PENSION PLAN. The following table illustrates the estimated annual benefits
which are not subject to any deduction for social security or other offset
amount (based on a straight-life annuity payable beginning at age 65, but in
no event less than 120 monthly payments) under the Company's pension plan for
specified compensation and service levels assuming a participant retired on
July 1, 1999, at age 65 after selected years of service:
<TABLE>
<CAPTION>
AVERAGE ANNUAL ESTIMATED ANNUAL PENSION BENEFIT UPON RETIREMENT AT
COMPENSATION JULY 1, 1999, WITH YEARS OF SERVICE INDICATED
- ------------ ---------------------------------------------
15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS.
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$115,000 $23,270 $31,027 $38,784 $46,541 $54,298
130,000 26,668 35,557 44,447 53,336 62,225
145,000 30,065 40,087 50,109 60,131 70,153
160,000* 33,463 44,617 55,772 66,926 78,080
</TABLE>
*Generally, a participant's annual benefit payable beginning at his social
security retirement age (determined on the basis of his year of birth) must
not exceed the lesser of $90,000 (as adjusted for cost-of-living
increases--$130,000 for 1998) or 100% of his average compensation for his
high three years. In addition, effective beginning in 1994, the Internal
Revenue Code reduced the level of a participant's compensation which may be
considered in determining benefits under all types of tax-qualified plans
from the 1993 level of $235,840 to $150,000 (as adjusted for cost-of-living
increases - $160,000).
Mr. Stephens' current compensation covered by the pension plan is
$160,000 with 32 years of plan participation; Mr. Michael's current covered
compensation is $160,000 with 15 years of plan participation; Mr. Stone's
current covered compensation is
18
<PAGE>
$160,000 with two years of plan participation; Mr. Dondanville's current
covered compensation is $160,000 with 14 years of plan participation; and Mr.
Tiemeier's current covered compensation is $160,000 with 17 years of plan
participation.
COMMON STOCK PERFORMANCE CHART
A line graph comparing the percentage change in the cumulative total
shareholder return, including the reinvestment of dividends, on the Company's
Common Stock with a cumulative total return of the S&P Composite 500 Stock
Index and the S&P Property and Casualty Index for the period beginning
December 31, 1993, through December 31, 1998 has been omitted from this
electronic filing. The table below contains the data used to create the
omitted line graph:
TOTAL RETURN
COMPARISON OF FIVE YEAR CUMULATIVE
RLI, S&P 500, S&P P/C INS INDEX
Compounded Total Return
RLI - 18.31%
S&P 500 - 18.8%
S&P P/C Ins - 16.3%
Assumes $100 invested on December 31, 1993 in RLI, S&P 500
Index, and S&P P/C Ins Index
Total Return assumes reinvestment of dividends
<TABLE>
<CAPTION>
Measurement Period S&P 500 S&P P/C Ins
(Fiscal Year Covered) RLI Corp. Index Index
- --------------------- --------- ------- ------------
<S> <C> <C> <C>
Measurement Pt - 12/31/93 $100 $100 $100
FYE 12/31/94 85 101 103
FYE 12/31/95 133 139 137
FYE 12/31/96 181 171 163
FYE 12/31/97 274 220 232
FYE 12/31/98 232 272 213
</TABLE>
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends. The Company will
neither make nor endorse any predictions as to future stock performance.
The foregoing line graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference and shall not otherwise be deemed
filed under such Acts.
19
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit
Committee, has selected KPMG LLP ("KPMG"), the Company's independent public
accountants since 1983, to serve as the Company's independent public
accountants of the Company for the current fiscal year. Representatives of
KPMG are expected to be present at the Annual Meeting with the opportunity to
make a statement, if they desire, and will be available to respond to
appropriate questions from the shareholders.
OTHER BUSINESS
The Board of Directors knows of no other business to be presented at
the Annual Meeting; however, if any other matters do properly come before the
meeting, it is intended that the persons appointed as proxies will vote in
accordance with their best judgment.
It is important that proxies be voted promptly so that the presence
of a quorum may be assured well in advance of the Annual Meeting, thus
avoiding the expense of follow-up solicitations. Accordingly, even if you
expect to attend the Annual Meeting, you are requested to date, execute and
return the enclosed proxy in the stamped, self-addressed envelope provided.
If possible, vote your proxy over the Internet or by telephone using the
instructions on your proxy card.
By Order of the Board of Directors
Camille J. Hensey
Vice President/Corporate Secretary
Peoria, Illinois
March 26, 1999
20
<PAGE>
Page 1 of 2
(LOGO)
IF YOU WISH TO VOTE BY TELEPHONE OR INTERNET,
PLEASE READ THE INSTRUCTIONS BELOW
RLI Corp. encourages you to take advantage of new and convenient ways to vote
your shares for matters to be covered at the 1999 Annual Meeting of
Stockholders. Please take the opportunity to use one of the three voting
methods below to cast your ballot. We've made it easier than ever.
VOTE BY TELEPHONE - 1-800-690-6903
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week. Have your proxy card in hand when you call. You will be prompted to
enter your 12-digit Control Number, which is located below, and then
following the simple instructions the Vote Voice provides you.
VOTE BY INTERNET - WWW.PROXYVOTE.COM
Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your
proxy card in hand when you access the web site. You will be prompted to
enter your 12-digit Control Number, which is located below, to obtain your
records and create an electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to RLI Corp., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
[CONTROL NUMBER]
IF YOU VOTE BY PHONE OR VOTE USING THE INTERNET, PLEASE DO NOT
MAIL YOUR PROXY.
THANK YOU FOR VOTING.
21
<PAGE>
To vote, mark blocks below in blue or black ink as follows:
..................................................................
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
(LOGO)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:
1. ELECTION OF CLASS III DIRECTORS
(mark one):
NOMINEES: WILLIAM R. KEANE, GERALD I. LENROW AND EDWIN S. OVERMAN
----
FOR ALL /___/
----
WITHHOLD ALL /___/
To withhold authority to vote for any individual nominee, write that nominee's
name on the line below.
- ----------------------------------------------
Please sign exactly as your name(s) appear(s). Executors, trustees, and others
signing in a representative capacity should include their name and the capacity
in which they sign.
- ----------------------------------------------
Signature Date
- ----------------------------------------------
Signature (Joint Owners) Date
22
<PAGE>
Page 2 of 2
(LOGO)
RLI CORP.
9025 North Lindbergh Drive
Peoria, Illinois 61615
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William R. Keane and Gerald D.
Stephens, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them, or either one of them, to represent and to vote, as
designated below, the shares of Common Stock of RLI Corp. held of record by
the undersigned on March 8, 1999, at the Annual Meeting of Shareholders to be
held on May 6, 1999 or any adjournments thereof.
If no other indication is made on the reverse side of this form, the
proxies shall vote for each of the nominees listed on the reverse side of
this form and, in their discretion, upon such other business as may properly
come before the meeting.
23
