RLI CORP, DEF 14A, 2000-03-27

RLI CORP
DEF 14A, 2000-03-27
FIRE, MARINE & CASUALTY INSURANCE

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Schedule 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a party other than the Registrant //

Check the appropriate box:

/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12

RLI CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

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/ / 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>

(LOGO)

RLI CORP.

9025 NORTH LINDBERGH DRIVE
PEORIA, ILLINOIS 61615

March 27, 2000

Dear Shareholder:

Please consider this letter your personal invitation to attend the 2000 RLI
Corp. Annual Shareholders Meeting. It will be held at 9025 North Lindbergh
Drive, Peoria, Illinois, 61615, the Company's principal office, on May 4, 2000,
at 2:00 P.M. CDT.

Business scheduled to be considered at the meeting is the election of Class I
directors.

In addition, we will review significant events of 1999 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.

YOUR VOTE IS IMPORTANT TO US, NO MATTER HOW MANY SHARES YOU OWN. 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>

(LOGO)

RLI CORP.

9025 North Lindbergh Drive
Peoria, Illinois 61615

-------------------------------------------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

MAY 4, 2000

-------------------------------------------------------

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 4, 2000, at 2:00 P.M. Central Daylight Time
to:

1. Elect three (3) directors for a three-year term expiring in
2003 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 6, 2000, 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 27, 2000

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 expect to attend, it is important that you complete the enclosed
proxy card, and sign, date and return it as promptly as possible in the envelope
enclosed for that purpose or vote your shares by telephone or on the Internet by
following the instructions on your proxy card. You have the right to revoke your
proxy at any time prior to its use by filing a written notice of revocation with
the Secretary of the Company prior to the convening of the Annual Meeting, or by
presenting another proxy card with a later date. If you attend the Annual
Meeting and desire to vote in person, your proxy may be withdrawn upon request.

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TABLE OF CONTENTS

Page
----
<S> <C>
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..................................
Certain Relationships and Related Transactions..........
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.................................
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.........................
Pension Plan............................................
COMMON STOCK PERFORMANCE CHART...................................
INDEPENDENT PUBLIC ACCOUNTANTS...................................
OTHER BUSINESS...................................................

</TABLE>

<PAGE>

RLI CORP.
9025 NORTH LINDBERGH DRIVE
PEORIA, ILLINOIS 61615

-----------------------------------

PROXY STATEMENT

-----------------------------------

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 4, 2000

-----------------------------------

<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 4, 2000, 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. Whether or
not you expect to attend, it is important that you complete the enclosed proxy
card, and sign, date and return it as promptly as possible in the envelope
enclosed for that purpose or vote your shares by telephone or on the Internet by
following the instructions on your proxy card. You have the right to revoke your
proxy at any time prior to its use by filing a written notice of revocation with
the Secretary of the Company prior to the convening of the Annual Meeting, or by
presenting another proxy card with a later date. If you attend the Annual
Meeting and desire to vote in person, your proxy may be withdrawn upon request.

Each proxy will be voted in accordance with the shareholder's
specifications. If there are no such specifications, it will be voted as
recommended by the Board 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

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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
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 27, 2000.

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 1999 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

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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 2001 Annual Meeting of Shareholders, a shareholder proposal
must be received by the Company on or before November 27, 2000. Proposals should
be directed to the attention of the Corporate Secretary at 9025 North Lindbergh
Drive, Peoria, Illinois, 61615. With respect to any shareholder proposal
received by the Company after February 9, 2001, the proxies solicited on behalf
of the Board of Directors may exercise discretionary voting power.

SHAREHOLDERS ENTITLED TO VOTE. At the close of business on March 6,
2000, the record date for the determination of shareholders entitled to vote at
the Annual Meeting, the Company had 9,831,571 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 entities known to the Company who
beneficially own more than five percent of the Company's Common Stock as of
December 31, 1999, are as follows:

Name and Address Amount and Nature of Percent
Of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Oak Value Capital Management, Inc. 1,441,053 14.5%
3100 Tower Boulevard
Suite 800
Durham, North Carolina 27707
(1)

Dimensional Fund Advisors Inc. 512,147 5.2%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
(2)

RLI Corp. 1,255,670 12.7%
Employee Stock Ownership Plan &
Trust
c/o Michael A. Price
9025 N. Lindbergh Drive

</TABLE>

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<TABLE>
<S> <C> <C>
Peoria, Illinois 61615
(3)

Gerald D. Stephens 894,976 9.1%
493 East High Point Drive
Peoria, Illinois 61614
(4)

</TABLE>

(1) The information shown is based solely on a Schedule 13G dated February 3,
2000, filed by Oak Value Capital Management, Inc., ("Oak Value"). Oak Value
possesses shared voting and shared dispositive power with respect to the
shares.

(2) The information shown is based solely on a Schedule 13G dated February 4,
2000, filed by Dimensional Fund Advisors Inc. ("Dimensional"), an investment
advisor for four investment companies and investment manager to certain
other commingled group trusts and separate accounts. Dimensional possesses
sole voting and sole dispositive power with respect to the shares.

(3) 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 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.

(4) Includes 254,255 shares allocated to Mr. Stephens under the ESOP over which
Mr. Stephens has sole voting power and no investment power; 44,786 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; 12,927 shares held in custodian accounts for the benefit
of Mr. Stephens' grandchildren, over which Mr. Stephens has sole voting and
investment power; 1,728 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; 68,502 exercisable stock options, and 3,083
shares held by a bank, as trustee, under an irrevocable trust

<PAGE>

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 December 31,
1999:

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) (10) 81,666 *

Joseph E. Dondanville (7) (8) (11) (12) 34,015 *

William R. Keane (3) (9) (10) 94,896 1.0%

Gerald I. Lenrow (4) (9) (10) 17,765 *

Jonathan E. Michael (5) (7) (11) (12) 71,636 *

Edwin S. Overman (9) (10) 34,329 *

Gerald D. Stephens (6) (7) (11) (12) 894,976 9.1%

Michael J. Stone (7) (11) (12) 16,618 *

Edward F. Sutkowski (9) (10) 108,267 1.1%

Gregory J. Tiemeier (7) (11) (12) 41,563 *

Robert O. Viets (9) (10) 21,510 *

Directors and executive
officers as a group
(14 persons) (7) (11) (12) 1,449,953 14.7%

</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.

<PAGE>

(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 19,280 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 429 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 34,096 shares allocated to Mr. Michael under the ESOP, over which
Mr. Michael has sole voting power and no investment power; and 7,598 shares
allocated under the Key Plan, over which Mr. Michael has no voting or
investment power.

(6) Includes 254,255 shares allocated to Mr. Stephens under the ESOP, over
which Mr. Stephens has sole voting power and no investment power; 44,786
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; 12,927 shares held in
custodian accounts for the benefit of Mr. Stephens' grandchildren, over
which Mr. Stephens has sole voting and investment power; 1,728 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; 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 1999, one of the executive officers was eligible to elect to
diversify shares owned by the ESOP. As of December 31, 1999, the following
shares were allocated under the ESOP: Mr. Dondanville 19,466 shares; Mr.
Michael 34,096 shares; Mr. Stephens 254,255 shares; Mr. Stone 2,260 shares;
and Mr. Tiemeier 32,158 shares.

<PAGE>

(8) Includes 300 shares held by Mr. Dondanville's spouse in a custodian account
for the benefit of their minor children, as to which Mr. Dondanville
disclaims any beneficial interest.

(9) 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. Keane 50,836
shares; Mr. Lenrow 12,136 shares; Dr. Overman 28,829 shares; Mr. Sutkowski
30,331 shares; and Mr. Viets 9,529 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.

(10) Includes shares which may be acquired within 60 days of December 31, 1999,
under the Directors' Stock Option Plan for Outside Directors, upon the
exercise of outstanding stock options as follows: Mr. Daenzer 5,500 shares;
Mr. Keane 5,500 shares; Mr. Lenrow 5,200 shares; Dr. Overman 5,500 shares;
Mr. Sutkowski 5,500 shares; and Mr. Viets 5,500 shares.

(11) Includes shares which may be acquired by the executive officers within 60
days of December 31, 1999, under the Incentive Stock Option Plan upon the
exercise of outstanding stock options as follows: Mr. Dondanville 7,628
shares; Mr. Michael 15,602 shares; Mr. Stephens 68,502 shares; Mr. Stone
9,851 shares; and Mr. Tiemeier 5,099 shares.

(12) 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 3,285 shares; Mr. Michael 4,512
shares; Mr. Stephens 3,083 shares; Mr. Stone 3,209 shares; and Mr. Tiemeier
3,064 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.

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.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During 1999, the Company licensed software from SS&C Technologies, Inc.
("SSC") of which Executive Vice President, Michael J. Stone is a shareholder and
his brother is the

<PAGE>

President, Chairman, CEO and a shareholder. The Company paid SSC $169,473 for
software licensing and maintenance fees and believes that such fees were made on
terms at least as favorable as would have been available from other parties. The
Company expects to continue its dealings with SSC in 2000.

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 disposition in November 1999 of 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. Bernard J. Daenzer, Jonathan E. Michael and Edward F.
Sutkowski are Class I directors who were elected by the shareholders in 1997 for
three-year terms expiring in 2000.

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:

<PAGE>

<S> <C> <C> <C>
Bernard J. Daenzer 84 1972 Owner of Daenzer Associates, Key Largo, Florida, an
insurance 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.

(term expiring in 2000)

PICTURE

Jonathan E. Michael 46 1997 Executive Vice President of the Company; President, Chief
Operating Officer of RLI Insurance Company and Mt. Hawley
Insurance Company, the Company's wholly-owned
subsidiaries.

(term expiring in 2000)

PICTURE

Edward F. Sutkowski (1) 61 1975 President of the law firm of Sutkowski & Washkuhn Ltd. in
Peoria, Illinois, since 1965.

(term expiring in 2000)

PICTURE

</TABLE>

Certain information concerning the remaining directors, whose terms expire
either in 2001 or 2002, is set forth as follows based upon information furnished
to the Company by such individuals:

<TABLE>
<S> <C> <C> <C>
William R. Keane 83 1966 Former Vice President, Contacts, Inc. (contact lens
laboratory) in Chicago, Illinois, until retirement in
1983.

(term expiring in 2002)

PICTURE

Gerald I. Lenrow 72 1993 Consultant to General 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.

(term expiring in 2002)

PICTURE

Edwin S. Overman 77 1987 President Emeritus of the Insurance Institute of America,
a national educational organization in Malvern,
Pennsylvania, since his retirement as President of the
Institute in 1987.

</TABLE>

<PAGE>

<TABLE>
<S> <C> <C> <C>
(term expiring in 2002)

PICTURE

Gerald D. Stephens 67 1965 Mr. Stephens founded the Company in 1965 and has been
President since 1972.

(term expiring in 2001)

PICTURE

Robert O. Viets (2) 56 1993 Since 1999, President of ROV Consultants, LLC which provides
consulting services to AES Corporation, a global power company.
Former President, CEO and Director from 1988 until 1999 of
CILCORP Inc., a holding company in Peoria, Illinois, whose
principal business subsidiary is Central Illinois Light
Company.

(term expiring in 2001)

PICTURE

</TABLE>

(1) Mr. Sutkowski is President of the law firm of Sutkowski & Washkuhn Ltd.,
which has provided legal services to the Company prior to and during 1999.
It is expected that the Company's relationship with Sutkowski & Washkuhn
Ltd. will continue in the future.

(2) Mr. Viets is a director of Philadelphia Suburban Corporation, 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. Keane, Lenrow and Viets, met three times in 1999 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.
Modifications were made to the Audit Committee's Charter to conform with the
Blue Ribbon Committee's Report and Recommendations on improving the
effectiveness of corporate audit committees.

<PAGE>

EXECUTIVE RESOURCES COMMITTEE. The Company's Executive Resources
Committee, comprised of outside directors Messrs. Daenzer, Lenrow and Overman,
met one time in 1999 to review and recommend the compensation and incentive
stock option grants 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 Committee reviews and evaluates the compensation and
stock options of the outside directors of the Company.

NOMINATING COMMITTEE. The Company does not have a standing nominating
committee.

BOARD MEETINGS AND COMPENSATION

MEETINGS. During the year 1999, 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 1999, 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 1,800
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.

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

<PAGE>

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
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.

<PAGE>

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 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 20% 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 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).

<PAGE>

CHIEF EXECUTIVE OFFICER. Policies with respect to the Chief Executive
Officer and Chief Operating Officer are the same as those discussed for
executive officers generally, except that, in addition to the ESOP, Mr. Stephens
and Mr. Michael are eligible to participate in individualized Key Employee
Excess Benefit Plans ("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' and Mr. Michael's benefit in an amount equal in value to the
excess of the contribution allowable to them under the ESOP (determined without
regard to any limitations on compensation imposed by the Internal Revenue Code),
over the contribution actually made for them 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
Gerald I. Lenrow

EXECUTIVE MANAGEMENT COMPENSATION

EXECUTIVE OFFICERS. The following information is provided as to each
current executive officer of the Company:

Executive
Position Officer
Name and Age With Company Since
- ------------ ------------- ---------
<S> <C> <C>
Joseph E. Dondanville Vice President, 1992
Age 43 Chief Financial
Officer

Camille J. Hensey Vice President and 1987
Age 58 Corporate Secretary

Jonathan E. Michael Executive Vice 1985
Age 46 President and Director;
President, Chief Operating
Officer of RLI Insurance
Company and Mt. Hawley

</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
Insurance Company, the
Company's wholly owned
insurance subsidiaries

Mary Beth Nebel Vice President 1994
Age 43 and General
Counsel

Michael A. Price Treasurer 1998
Age 36 (1)

Gerald D. Stephens President 1965
Age 67 and Director

Michael J. Stone Executive Vice President 1997
Age 51 (2) of RLI Insurance
Company and Mt. Hawley
Insurance Company, the
Company's wholly owned
insurance subsidiaries

Gregory J. Tiemeier Senior Vice President, 1992
Age 42 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, 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.

<PAGE>

SUMMARY COMPENSATION TABLE. The aggregate compensation earned from the
Company and its subsidiaries during the 1999 fiscal year is expressed below for
the Company's President and five other most highly compensated executive
officers:

LONG-TERM
COMPENSATION
--------------
AWARDS PAYOUTS
ANNUAL COMPENSATION SECURITIES LTIP
NAME AND PRINCIPAL ---------------------------------- UNDERLYING PAYOUTS ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#)(2) ($)(3) COMPENSATION ($)(4)
- ---------------- ---- ---------- ------------ ------------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Gerald D. Stephens 1999 462,792 0 30,700 246,715 201,334
President 1998 462,792 743,932(5) 41,250 240,670
1997 458,296 1,020,291 41,500 158,862

Jonathan E. Michael 1999 300,000(5) 0 28,900 172,700 134,274
Executive Vice President 1998 288,080(5) 520,753(5) 19,251 158,295
1997 261,680 714,204 10,500 99,517

Michael J. Stone 1999 215,600(5) 0 15,000 63,085 26,291
Executive Vice 1998 195,967(5) 249,976(5) 12,500 25,377
President, RLI Insurance 1997 183,600 327,585 5,250 25,798
Company and Mt. Hawley
Insurance Company

Joseph E. Dondanville 1999 157,590 0 10,500 90,082 26,291
Vice President, Chief 1998 153,000(5) 267,508(5) 9,376 25,377
Financial Officer 1997 144,166 377,342 5,375 25,798

Gregory J. Tiemeier 1999 157,080 0 10,500 50,219 26,291
Senior Vice President, 1998 143,862(5) 191,332(5) 3,125 25,377
Chief Information Officer, 1997 136,200 374,217 2,375 25,798
RLI Insurance Company
and Mt. Hawley
Insurance Company

</TABLE>

(1) No executive bonuses were earned during fiscal year 1999 and paid in 2000
pursuant to the Company's MVP Plan. The following additional amounts may be
payable to such individuals in future years under the MVP Plan: Gerald D.
Stephens $246,714; Jonathan E. Michael $172,700; Michael J. Stone $63,084;
Joseph E. Dondanville $90,081; and Gregory J. Tiemeier $50,219.

(2) 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.

(3) Amounts represent payment of 50% of the executive officers' remaining
positive balance in the MVP bonus pool earned in years 1996 through 1998.

(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 7,310 shares in respect of 1999; 10,630 shares in
respect of 1998 and 2,056 shares in respect of 1997. Mr. Michael 4,181
shares in respect of 1999, 2,246 shares in respect of 1998 and 506 shares
in respect of 1997. 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

<PAGE>

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, 1999, was: Mr. Stephens $1,697,792 and Mr. Michael $366,336.

(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.

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, 1999. 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 $51.82 and $82.51, respectively. The amounts shown as potential
realizable values for all shareholders represent the corresponding increases in
the market value of 9,873,346 outstanding shares of the Company's Common Stock
held by all shareholders as of December 31, 1999, which would total
approximately $511,628,993 and $814,683,664, 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.

POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
------------------------------------------------ -----------------------------------
IF STOCK AT IF STOCK AT

$51.82 $82.51
NUMBER OF %OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH)(2) DATE 5%(3) 10%(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALL SHAREHOLDERS' $511,628,993 $814,683,664
STOCK APPRECIATION

Gerald D. Stephens 30,700 20.24% $31.8125 05/06/09 $614,206 $ 1,556,519

Jonathan E. Michael 28,900 19.05% $31.8125 05/06/09 $578,194 $ 1,465,257

Michael J. Stone 15,000 9.89% $31.8125 05/06/09 $300,101 $ 760,514

Joseph E. Dondanville 10,500 6.92% $31.8125 05/06/09 $210,070 $ 532,360

Gregory J. Tiemeier 10,500 6.92% $31.8125 05/06/09 $210,070 $ 532,360

</TABLE>

<PAGE>

- --------------------------------------------------------------------------------

(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.

(2) The exercise price is the fair market value on the date of grant.

(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. 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, 1999. 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, 1999,
which was $34.00 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.

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 68,502 106,294 $867,943 $556,616

Jonathan E. Michael 0 $0.00 15,602 53,393 $161,917 $159,930

Michael J. Stone 0 $0.00 9,851 31,649 $ 96,600 $111,212

Joseph E. Dondanville 0 $0.00 7,628 22,686 $ 77,815 $ 72,762

Gregory J. Tiemeier 0 $0.00 5,099 15,682 $ 67,702 $ 55,299

- --------------------------------------------------------------------------------------------------------------------

</TABLE>

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

<PAGE>

and service levels assuming a participant retired on July
1, 2000, at age 65 after selected years of service:

AVERAGE ANNUAL ESTIMATED ANNUAL PENSION BENEFIT UPON RETIREMENT AT
COMPENSATION JULY 1, 2000, WITH YEARS OF SERVICE INDICATED
- ------------ ---------------------------------------------
15 YRS. 20 YRS. 25 YRS. 30 YRS. 35 YRS.
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$115,000 $23,099 $30,799 $38,499 $46,198 $53,898

130,000 26,497 35,329 44,161 52,993 61,825

145,000 29,894 39,859 49,824 59,788 69,753

160,000* 33,292 44,389 55,486 66,583 77,680

</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 -
$135,000 for 2000) 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 - $170,000).

Mr. Stephens' current compensation covered by the pension plan is
$160,000 with 33 years of plan participation; Mr. Michael's current covered
compensation is $160,000 with 16 years of plan participation; Mr. Stone's
current covered compensation is $160,000 with three years of plan participation;
Mr. Dondanville's current covered compensation is $160,000 with 15 years of plan
participation; and Mr. Tiemeier's current covered compensation is $160,000 with
18 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,
1994, through December 31, 1999 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 - 23.21%
S&P 500 - 26.61%
S&P P/C Ins - 7.76%

Assumes $100 invested on December 31, 1994 in
RLI, S&P 500 Index, and S&P P/C Ins Index
Total Return assumes reinvestment of dividends

<PAGE>

Measurement Period S&P 500 S&P P/C Ins
(Fiscal Year Covered) RLI Corp. Index Index
- --------------------- --------- ------ -----------
<S> <C> <C> <C>
Measurement Pt - 12/31/94 $100 $100 $100

FYE 12/31/95 156 138 133
FYE 12/31/96 213 169 159
FYE 12/31/97 323 217 226
FYE 12/31/98 273 269 207
FYE 12/31/99 284 325 145

</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 table 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.

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 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 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.

20
<PAGE>

By Order of the Board of Directors

Camille J. Hensey
Vice President/Corporate Secretary

Peoria, Illinois

March 27, 2000

<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 2000 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, then follow 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 TELEPHONE OR VOTE USING THE INTERNET, PLEASE DO NOT
MAIL YOUR PROXY.
THANK YOU FOR VOTING.

To vote, mark blocks below in blue or black ink as follows:
- --------------------------------------------------------------------------------

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

<PAGE>

(LOGO)

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL:

1. ELECTION OF CLASS I DIRECTORS
(mark one):

NOMINEES: BERNARD J. DAENZER, JONATHAN E. MICHAEL AND EDWARD F. SUTKOWSKI
-----
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

<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 6, 2000, at the Annual Meeting of Shareholders to be held on May 4,
2000 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.