RLI CORP 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ ​ ​ Index to Financial Statements Page Consolidated Balance Sheets ​ 54 Consolidated Statements of Earnings and Comprehensive Earnings ​ 55 Consolidated Statements of Shareholders’ Equity ​ 56 Consolidated Statements of Cash Flows ​ 57 Notes to Consolidated Financial Statements ​ 58 Reports of Independent Registered Public Accounting Firms ​ 91 ​ ​ ​ 53 Table of Contents RLI Corp. Consolidated Balance Sheets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, (in thousands, except per share data) 2022 2021 ASSETS ​ ​ ​ ​ ​ ​ Investments and cash: ​ ​ ​ ​ ​ ​ Fixed income: ​ ​ ​ ​ ​ ​ Available-for-sale, at fair value ​ $ 2,666,950 ​ $ 2,409,887 (amortized cost of $ 2,945,273 and allowance for credit losses of $ 339 in 2022) ​ ​ ​ ​ ​ ​ (amortized cost of $ 2,346,267 and allowance for credit losses of $ 441 in 2021) ​ ​ ​ ​ ​ ​ Equity securities, at fair value (cost - $ 328,019 in 2022 and $ 324,501 in 2021) ​ ​ 498,382 ​ ​ 613,776 Short-term investments, at cost which approximates fair value ​ ​ 36,229 ​ ​ — Other invested assets ​ ​ 47,922 ​ ​ 50,501 Cash ​ ​ 22,818 ​ ​ 88,804 Total investments and cash ​ $ 3,272,301 ​ $ 3,162,968 Accrued investment income ​ ​ 21,259 ​ ​ 17,505 Premiums and reinsurance balances receivable, net of allowances for uncollectible amounts of $ 18,696 in 2022 and $ 18,067 in 2021 ​ ​ 189,501 ​ ​ 167,279 Ceded unearned premiums ​ ​ 138,457 ​ ​ 130,916 Reinsurance balances recoverable on unpaid losses and settlement expenses, net of allowances for uncollectible amounts of $ 11,250 in 2022 and $ 11,188 in 2021 ​ ​ 740,089 ​ ​ 608,086 Deferred policy acquisition costs ​ ​ 127,859 ​ ​ 103,553 Property and equipment, at cost, net of accumulated depreciation of $ 68,633 in 2022 and $ 75,236 in 2021 ​ ​ 49,573 ​ ​ 52,161 Investment in unconsolidated investees ​ ​ 58,275 ​ ​ 171,311 Goodwill and intangibles ​ ​ 53,562 ​ ​ 53,562 Income taxes - deferred ​ ​ 40,269 ​ ​ — Other assets ​ ​ 75,923 ​ ​ 40,961 TOTAL ASSETS ​ $ 4,767,068 ​ $ 4,508,302 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ ​ ​ ​ ​ Unpaid losses and settlement expenses ​ $ 2,315,637 ​ $ 2,043,555 Unearned premiums ​ ​ 785,085 ​ ​ 680,444 Reinsurance balances payable ​ ​ 61,100 ​ ​ 42,851 Funds held ​ ​ 101,144 ​ ​ 89,773 Income taxes - deferred ​ ​ — ​ ​ 83,509 Current portion of long-term debt ​ ​ 199,863 ​ ​ — Long-term debt ​ ​ — ​ ​ 199,676 Accrued expenses ​ ​ 94,869 ​ ​ 98,274 Other liabilities ​ ​ 32,029 ​ ​ 40,859 TOTAL LIABILITIES ​ $ 3,589,727 ​ $ 3,278,941 ​ ​ ​ ​ ​ ​ ​ SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Common stock ($ 0.01 par value) ​ ​ ​ ​ ​ ​ (Shares authorized - 200,000,000 ) ​ ​ ​ ​ ​ ​ ( 68,399,966 shares issued and 45,469,752 shares outstanding in 2022) ​ ​ ​ ​ ​ ​ ( 68,219,551 shares issued and 45,289,337 shares outstanding in 2021) ​ $ 684 ​ $ 682 Paid-in capital ​ ​ 352,391 ​ ​ 343,742 Accumulated other comprehensive earnings ​ ​ ( 229,076 ) ​ ​ 49,826 Retained earnings ​ ​ 1,446,341 ​ ​ 1,228,110 Deferred compensation ​ ​ 12,015 ​ ​ 9,642 Treasury stock, at cost ( 22,930,214 shares in 2022 and 2021) ​ ​ ( 405,014 ) ​ ​ ( 402,641 ) TOTAL SHAREHOLDERS' EQUITY ​ $ 1,177,341 ​ $ 1,229,361 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ​ $ 4,767,068 ​ $ 4,508,302 ​ See accompanying notes to consolidated financial statements. ​ 54 Table of Contents RLI Corp. Consolidated Statements of Earnings and Comprehensive Earnings ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, (in thousands, except per share data) 2022 2021 2020 Net premiums earned ​ $ 1,144,436 ​ $ 980,903 ​ $ 865,747 Net investment income ​ ​ 86,078 ​ ​ 68,862 ​ ​ 67,893 Net realized gains ​ ​ 588,515 ​ ​ 64,222 ​ ​ 17,885 Net unrealized gains (losses) on equity securities ​ ​ ( 121,037 ) ​ ​ 65,258 ​ ​ 32,101 Consolidated revenue ​ $ 1,697,992 ​ $ 1,179,245 ​ $ 983,626 Losses and settlement expenses ​ ​ 514,376 ​ ​ 456,602 ​ ​ 442,884 Policy acquisition costs ​ ​ 369,632 ​ ​ 317,468 ​ ​ 286,438 Insurance operating expenses ​ ​ 82,212 ​ ​ 76,907 ​ ​ 66,828 Interest expense on debt ​ ​ 8,047 ​ ​ 7,677 ​ ​ 7,603 General corporate expenses ​ ​ 12,900 ​ ​ 13,330 ​ ​ 10,265 Total expenses ​ $ 987,167 ​ $ 871,984 ​ $ 814,018 Equity in earnings of unconsolidated investees ​ ​ 9,853 ​ ​ 37,060 ​ ​ 20,233 Earnings before income taxes ​ $ 720,678 ​ $ 344,321 ​ $ 189,841 Income tax expense (benefit): ​ ​ ​ ​ ​ ​ ​ ​ ​ Current ​ ​ 186,906 ​ ​ 46,040 ​ ​ 24,174 Deferred ​ ​ ( 49,639 ) ​ ​ 18,927 ​ ​ 8,576 Income tax expense ​ $ 137,267 ​ $ 64,967 ​ $ 32,750 Net earnings ​ $ 583,411 ​ $ 279,354 ​ $ 157,091 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive earnings (loss), net of tax ​ ​ ( 278,902 ) ​ ​ ( 58,888 ) ​ ​ 56,219 Comprehensive earnings ​ $ 304,509 ​ $ 220,466 ​ $ 213,310 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net earnings per share ​ $ 12.86 ​ $ 6.18 ​ $ 3.49 Diluted net earnings per share ​ $ 12.74 ​ $ 6.11 ​ $ 3.46 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 45,368 ​ ​ 45,230 ​ ​ 45,000 Diluted ​ ​ 45,794 ​ ​ 45,712 ​ ​ 45,376 ​ See accompanying notes to consolidated financial statements. ​ 55 Table of Contents RLI Corp. Consolidated Statements of Shareholders’ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ Accumulated Other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Shareholders’ ​ Common ​ Paid-in ​ Comprehensive ​ Retained ​ Deferred ​ Treasury Stock (in thousands, except per share data) Shares Equity Stock Capital Earnings (Loss) Earnings Compensation at Cost Balance, January 1, 2020 44,869,015 ​ $ 995,388 ​ $ 678 ​ $ 321,190 ​ $ 52,473 ​ $ 1,014,046 ​ $ 7,980 ​ $ ( 400,979 ) Cumulative-effect adjustment from ASU 2016-13 ​ — ​ ​ 1,095 ​ ​ — ​ ​ — ​ ​ 22 ​ ​ 1,073 ​ ​ — ​ ​ — Net earnings — ​ ​ 157,091 ​ ​ — ​ ​ — ​ ​ — ​ ​ 157,091 ​ ​ — ​ ​ — Other comprehensive earnings (loss), net of tax — ​ ​ 56,219 ​ ​ — ​ ​ — ​ ​ 56,219 ​ ​ — ​ ​ — ​ ​ — Deferred compensation — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 312 ​ ​ ( 312 ) Share-based compensation 273,565 ​ ​ 14,178 ​ ​ 3 ​ ​ 14,175 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dividends and dividend equivalents ($ 1.95 per share) — ​ ​ ( 87,993 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 87,993 ) ​ ​ — ​ ​ — Balance, December 31, 2020 45,142,580 ​ $ 1,135,978 ​ $ 681 ​ $ 335,365 ​ $ 108,714 ​ $ 1,084,217 ​ $ 8,292 ​ $ ( 401,291 ) Net earnings — ​ ​ 279,354 ​ ​ — ​ ​ — ​ ​ — ​ ​ 279,354 ​ ​ — ​ ​ — Other comprehensive earnings (loss), net of tax — ​ ​ ( 58,888 ) ​ ​ — ​ ​ — ​ ​ ( 58,888 ) ​ ​ — ​ ​ — ​ ​ — Deferred compensation — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,350 ​ ​ ( 1,350 ) Share-based compensation 146,757 ​ ​ 8,378 ​ ​ 1 ​ ​ 8,377 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Dividends and dividend equivalents ($ 2.99 per share) — ​ ​ ( 135,461 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 135,461 ) ​ ​ — ​ ​ — Balance, December 31, 2021 45,289,337 ​ $ 1,229,361 ​ $ 682 ​ $ 343,742 ​ $ 49,826 ​ $ 1,228,110 ​ $ 9,642 ​ $ ( 402,641 ) Net earnings — ​ ​ 583,411 ​ ​ — ​ ​ — ​ ​ — ​ ​ 583,411 ​ ​ — ​ ​ — Other comprehensive earnings (loss), net of tax — ​ ​ ( 278,902 ) ​ ​ — ​ ​ — ​ ​ ( 278,902 ) ​ ​ — ​ ​ — ​ ​ — Deferred compensation — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,373 ​ ​ ( 2,373 ) Share-based compensation 180,415 ​ ​ 8,651 ​ ​ 2 ​ ​ 8,649 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Dividends and dividend equivalents ($ 8.03 per share) — ​ ​ ( 365,180 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 365,180 ) ​ ​ — ​ ​ — Balance, December 31, 2022 45,469,752 ​ $ 1,177,341 ​ $ 684 ​ $ 352,391 ​ $ ( 229,076 ) ​ $ 1,446,341 ​ $ 12,015 ​ $ ( 405,014 ) ​ See accompanying notes to consolidated financial statements. ​ 56 Table of Contents RLI Corp. Consolidated Statements of Cash Flows ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, (in thousands) 2022 2021 2020 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net earnings ​ $ 583,411 ​ $ 279,354 ​ $ 157,091 Adjustments to reconcile net earnings to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains ​ ( 588,515 ) ​ ( 64,222 ) ​ ( 17,885 ) Net unrealized (gains) losses on equity securities ​ ​ 121,037 ​ ​ ( 65,258 ) ​ ​ ( 32,101 ) Depreciation ​ 7,981 ​ 7,394 ​ 7,432 Deferred income tax expense (benefit) ​ ( 49,639 ) ​ 18,927 ​ 8,576 Other items, net ​ ( 20,467 ) ​ 14,141 ​ 10,460 Change in: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued investment income ​ ( 3,754 ) ​ ( 1,379 ) ​ ( 1,539 ) Premiums and reinsurance balances receivable (net of direct write-offs and commutations) ​ ( 22,222 ) ​ 7,349 ​ ( 14,259 ) Reinsurance balances payable ​ 18,249 ​ 586 ​ 16,574 Funds held ​ 11,371 ​ 8,026 ​ ( 1,611 ) Ceded unearned premiums ​ ( 7,541 ) ​ ( 17,428 ) ​ ( 19,832 ) Reinsurance balances recoverable on unpaid losses and settlement expenses ​ ( 132,003 ) ​ ( 164,357 ) ​ ( 59,212 ) Deferred policy acquisition costs ​ ( 24,306 ) ​ ( 15,128 ) ​ ( 3,381 ) Accrued expenses ​ ( 3,405 ) ​ 22,349 ​ 9,299 Unpaid losses and settlement expenses ​ 272,082 ​ 293,506 ​ 175,697 Unearned premiums ​ 104,641 ​ 94,058 ​ 46,173 Current income taxes payable ​ ( 6,619 ) ​ 4,047 ​ ( 2,665 ) Changes in investment in unconsolidated investees: ​ ​ ​ ​ ​ ​ ​ ​ ​ Undistributed earnings ​ ( 9,853 ) ​ ( 37,060 ) ​ ( 20,233 ) Dividends received ​ — ​ — ​ 4,675 Net cash provided by operating activities ​ $ 250,448 ​ $ 384,905 ​ $ 263,259 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase of: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities, available-for-sale ​ $ ( 2,053,359 ) ​ $ ( 733,811 ) ​ $ ( 518,362 ) Equity securities ​ ( 45,007 ) ​ ( 140,721 ) ​ ( 77,863 ) Property and equipment ​ ( 5,889 ) ​ ( 8,310 ) ​ ( 5,768 ) Equity method investee ​ ​ ( 3,819 ) ​ ​ ( 8,978 ) ​ ​ ( 4,533 ) Other ​ ( 5,704 ) ​ ( 11,428 ) ​ ( 12,851 ) Proceeds from sale of: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income securities, available-for-sale ​ 53,300 ​ 63,811 ​ 84,587 Equity securities ​ 62,212 ​ 180,256 ​ 79,368 Equity method investee ​ ​ 686,666 ​ ​ — ​ ​ — Property and equipment ​ 375 ​ — ​ — Other ​ 2,659 ​ 7,605 ​ 4,328 Proceeds from call or maturity of: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income, available-for-sale ​ 1,393,674 ​ 376,750 ​ 283,107 Net purchase of short-term investments ​ ​ ( 36,229 ) ​ ​ — ​ ​ — Net cash provided by (used in) investing activities ​ $ 48,879 ​ $ ( 274,826 ) ​ $ ( 167,987 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from issuance of long-term debt ​ $ — ​ $ 50,000 ​ $ — Proceeds from stock option exercises ​ ( 465 ) ​ 1,838 ​ 8,648 Cash dividends paid ​ ( 364,848 ) ​ ( 135,330 ) ​ ( 87,906 ) Net cash used in financing activities ​ $ ( 365,313 ) ​ $ ( 83,492 ) ​ $ ( 79,258 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net increase (decrease) in cash ​ $ ( 65,986 ) ​ $ 26,587 ​ $ 16,014 Cash at beginning of year ​ ​ 88,804 ​ ​ 62,217 ​ ​ 46,203 Cash at end of year ​ $ 22,818 ​ $ 88,804 ​ $ 62,217 ​ See accompanying notes to consolidated financial statements. ​ 57 Table of Contents Notes to Consolidated Financial Statements ​ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ A. DESCRIPTION OF BUSINESS ​ RLI Corp. is an insurance holding company. References to “the Company,” “we,” “our,” “us” or like terms refer to the business of RLI Corp. and its subsidiaries. We underwrite select property and casualty insurance coverages through major subsidiaries collectively known as RLI Insurance Group. We conduct operations principally through three insurance companies. RLI Insurance Company (RLI Ins.), a subsidiary of RLI Corp. and our principal insurance subsidiary, writes multiple lines of insurance on an admitted basis in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. Mt. Hawley Insurance Company (Mt. Hawley), a subsidiary of RLI Ins., writes excess and surplus lines insurance on a non-admitted basis in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. Contractors Bonding and Insurance Company (CBIC), a subsidiary of RLI Ins., writes multiple lines of insurance on an admitted basis in all 50 states and the District of Columbia. ​ B. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION ​ The accompanying consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States of America (GAAP), which differ in some respects from those followed in reports to insurance regulatory authorities. The consolidated financial statements include the accounts of our holding company and our subsidiaries. Intercompany balances and transactions have been eliminated. Certain reclassifications were made to 2021 and 2020 to conform to the classifications used in the current year. The Company has evaluated subsequent events through the date these consolidated financial statements were issued. There were no subsequent events requiring adjustment to the financial statements or disclosure. ​ C. ADOPTED ACCOUNTING STANDARDS ​ No new accounting standards applicable in 2022 materially impacted our financial statements. ​ D. PROSPECTIVE ACCOUNTING STANDARDS ​ There are no prospective accounting standards which would have a material impact on our financial statements as of December 31, 2022. ​ E. INVESTMENTS ​ Equity securities are carried at fair value with unrealized gains and losses recorded within net earnings. Investments in fixed income securities are classified into one of three categories: trading, held-to-maturity or available-for-sale. All of our fixed income securities are classified as available-for-sale and reported at fair value. Unrealized gains and losses on these securities are excluded from net earnings but are recorded as a separate component of comprehensive earnings and shareholders’ equity, net of deferred income taxes. ​ Interest on fixed maturities and short-term investments is credited to earnings on an accrual basis. Premiums and discounts are amortized or accreted over the lives of the related fixed maturities. Dividends on equity securities are credited to earnings on the ex-dividend date. Realized gains and losses on disposition of investments are based on specific identification of the investments sold on the settlement date. ​ F. CASH, SHORT-TERM INVESTMENTS AND OTHER INVESTED ASSETS ​ Cash consists of uninvested balances in bank accounts. Short-term investments consist of investments with original maturities of 90 days or less, primarily AAA-rated government money market funds. Short-term investments are carried at cost. Other invested assets include investments in low-income housing tax credit partnerships (LIHTC), membership in the Federal Home Loan Bank of Chicago (FHLBC) and investments in private funds. Our LIHTC investments are carried at amortized cost, and our investment in FHLBC stock is carried at cost. Due to the nature of cash, the LIHTCs and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investment’s net asset value. ​ 58 Table of Contents G. REINSURANCE ​ Ceded unearned premiums and reinsurance balances recoverable on unpaid losses and settlement expenses are reported separately as an asset, rather than being netted with the related liability, since reinsurance does not relieve the Company of our liability to policyholders. Such balances are subject to the credit risk associated with the individual reinsurer. We continually monitor the financial condition of our reinsurers and actively follow up on any past due or disputed amounts. As part of our monitoring efforts, we review reinsurers’ annual financial statements and SEC filings for those that are publicly traded. We also review insurance industry developments that may impact the financial condition of our reinsurers. We analyze the credit risk associated with our reinsurance balances recoverable by monitoring the AM Best and S&P ratings of our reinsurers. In addition, we subject our reinsurance recoverables to detailed recoverability tests, including a segment-based analysis using the average default rating percentage by S&P rating, which assists the Company in assessing the sufficiency of its allowance. Additionally, we perform an in-depth reinsurer financial condition analysis prior to the renewal of our reinsurance placements. ​ Our policy is to charge to earnings, in the form of an allowance, an estimate of unrecoverable amounts from reinsurers. This allowance is reviewed on an ongoing basis to ensure that the amount makes a reasonable provision for reinsurance balances that we may be unable to recover. Once regulatory action (such as receivership, finding of insolvency, order of conservation or order of liquidation) is taken against a reinsurer, the paid and unpaid recoverable for the reinsurer are specifically identified and written off through the use of our allowance for estimated unrecoverable amounts from reinsurers. When we write-off such a balance, it is done in full. We then re-evaluate the remaining allowance and determine whether the balance is sufficient and, if needed, an additional allowance is recognized. ​ H. POLICY ACQUISITION COSTS ​ We defer incremental direct costs that relate to the successful acquisition of new or renewal insurance contracts, including commissions and premium taxes. Acquisition-related costs may be deemed ineligible for deferral when they are based on contingent or performance criteria beyond the basic acquisition of the insurance contract or when efforts to obtain or renew the insurance contract are unsuccessful. All eligible costs are capitalized and charged to expense in proportion to premium revenue recognized. The method followed in computing deferred policy acquisition costs limits the amount of such deferred costs to their estimated realizable value. This process contemplates the premiums to be earned, anticipated losses and settlement expenses and certain other costs expected to be incurred, but does not consider investment income. Judgments as to the ultimate recoverability of such deferred costs are reviewed on a segment basis and are highly dependent upon estimated future loss costs associated with the premiums written. This deferral methodology applies to both gross and ceded premiums and acquisition costs. ​ I. PROPERTY AND EQUIPMENT ​ Property and equipment are presented at cost less accumulated depreciation and are depreciated on a straight-line basis for financial statement purposes over periods ranging from 3 to 10 years for equipment and up to 30 years for buildings and improvements. ​ J. INVESTMENTS IN UNCONSOLIDATED INVESTEES ​ Our investments accounted for under the equity method are primarily related to Maui Jim, Inc. (Maui Jim) and Prime Holdings Insurance Services, Inc. (Prime). We owned 40 percent interest in the equity and earnings of Maui Jim, a manufacturer of high-quality sunglasses, but sold our interest in 2022. See note 13 for more information on the sale. We carried this investment at the holding company level as it was not core to our insurance operations. Our investment in Maui Jim was $ 113.1 million at December 31, 2021. In 2022, we recorded $ 0.4 million in investee earnings for Maui Jim, compared to $ 22.8 million in 2021 and $ 10.4 million in 2020. ​ As of December 31, 2022, we had a 23 percent interest in the equity and earnings of Prime. Prime writes business through two Illinois domiciled insurance carriers, Prime Insurance Company, an excess and surplus lines company, and Prime Property and Casualty Insurance Inc., an admitted insurance company. Our investment in Prime was $ 46.9 million at December 31, 2022 and $ 47.2 million at December 31, 2021. The decrease was due to the recognition of our share of Prime’s other comprehensive losses, brought on by the impact of rising interest rates on Prime’s fixed income portfolio. In 2022, we recorded $ 13.0 million in investee earnings for Prime, compared to $ 17.0 million in 2021 and $ 10.8 million in 2020. Additionally, we maintain a quota share reinsurance treaty with Prime, which contributed $ 20.6 million of gross premiums written and $ 22.6 million of net premiums earned during 2022, compared to $ 22.2 million of gross premiums written and $ 19.1 million of net premiums earned during 2021 and $ 15.7 million of gross premiums written and $ 14.3 million of net premiums earned during 2020. The increase in net premiums earned reflected growth in written premium from Prime. ​ 59 Table of Contents Our equity method investments recorded net income of $ 58.8 million in 2022, $ 125.3 million in 2021 and $ 70.4 million in 2020. Additional summarized financial information for our equity method investments as of 2022 and 2021 is outlined in the following table: ​ ​ ​ ​ ​ ​ ​ ​ (in millions) 2022 2021 Total assets ​ $ 906.4 ​ $ 1,172.6 Total liabilities ​ ​ 689.9 ​ ​ 687.8 Total equity ​ ​ 216.5 ​ ​ 484.8 ​ Approximately $ 51.6 million of undistributed earnings from our equity method investees were included in our retained earnings as of December 31, 2022. We did no t receive any dividends from our equity method investees during 2022 or 2021, while $ 4.7 million of dividends were received in 2020. ​ We perform annual impairment reviews of our investments in unconsolidated investees, which take into consideration current valuation and operating results. Based upon the most recent reviews, the assets were not impaired. ​ K. GOODWILL AND INTANGIBLE ASSETS ​ The composition of goodwill and intangibles at December 31, 2022 and 2021, is detailed in the following table: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Goodwill ​ ​ ​ ​ ​ ​ Surety ​ $ 40,816 ​ $ 40,816 Casualty ​ ​ 5,246 ​ ​ 5,246 Total goodwill ​ $ 46,062 ​ $ 46,062 Indefinite-lived intangibles ​ $ 7,500 ​ $ 7,500 Total goodwill and intangibles ​ $ 53,562 ​ $ 53,562 ​ As the amortization of goodwill and indefinite-lived intangible assets is not permitted, the assets are tested for impairment on an annual basis, or earlier if there is reason to suspect that their values may have been diminished or impaired. Annual impairment testing was performed on each of our goodwill and indefinite-lived intangible assets during 2022. Based upon these reviews, our goodwill and state insurance license indefinite-lived intangible asset were not impaired. In addition, as of December 31, 2022, there were no triggering events on goodwill and intangible assets that would suggest an updated review was necessary. ​ L. UNPAID LOSSES AND SETTLEMENT EXPENSES ​ The liability for unpaid losses and settlement expenses represents estimates of amounts needed to pay reported and unreported claims and related expenses. The estimates are based on certain actuarial and other assumptions related to the ultimate cost to settle such claims. Such assumptions are subject to occasional changes due to evolving economic, social and political conditions. All estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the results of operations in the period in which they are determined. Due to the inherent uncertainty in estimating reserves for losses and settlement expenses, there can be no assurance that the ultimate liability will not exceed recorded amounts. If actual liabilities do exceed recorded amounts, there will be an adverse effect. Furthermore, we may determine that recorded reserves are more than adequate to cover expected losses, which would lead to a reduction in our reserves. ​ M. INSURANCE REVENUE RECOGNITION ​ Insurance premiums are recognized ratably over the term of the contracts, net of ceded reinsurance. Our policies are short-term in nature and premium is generally earned over a one-year period. Unearned premiums are calculated on a monthly pro rata basis. ​ N. INCOME TAXES ​ We file a consolidated federal income tax return. Federal income taxes are accounted for using the asset and liability method under which deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, operating losses and tax credit carry forwards. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some of the deferred tax assets will not be realized. 60 Table of Contents ​ We consider uncertainties in income taxes and recognize those in our financial statements as required. As it relates to uncertainties in income taxes, our unrecognized tax benefits, including interest and penalty accruals, are not considered material to the consolidated financial statements. Also, no tax uncertainties are expected to result in significant increases or decreases to unrecognized tax benefits within the next 12-month period. Penalties and interest related to income tax uncertainties, should they occur, would be included in income tax expense in the period in which they are incurred. ​ As an insurance company, we are subject to minimal state income tax liabilities. Since the majority of our income on a state basis is from insurance operations, we pay premium taxes, which are calculated as a percentage of gross premiums written in lieu of state income taxes. Premium taxes are a component of policy acquisition costs. ​ O. EARNINGS PER SHARE ​ Basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock or common stock equivalents were exercised or converted into common stock. When inclusion of these items increases the earnings per share or reduces the loss per share, the effect on earnings is anti-dilutive. Under these circumstances, the diluted net earnings or net loss per share is computed excluding these items. The following represents a reconciliation of the numerator and denominator of the basic and diluted EPS computations contained in the consolidated financial statements: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ ​ ​ Income ​ Shares ​ Per Share (in thousands, except per share data) (Numerator) (Denominator) Amount For the year ended December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Basic EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders ​ $ 583,411 45,368 ​ $ 12.86 Stock options ​ ​ — 426 ​ ​ ​ Diluted EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders and assumed conversions ​ $ 583,411 45,794 ​ $ 12.74 Anti-dilutive options excluded from diluted EPS ​ ​ ​ ​ 295 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Basic EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders ​ $ 279,354 45,230 ​ $ 6.18 Stock options ​ ​ — 482 ​ ​ ​ Diluted EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders and assumed conversions ​ $ 279,354 45,712 ​ $ 6.11 Anti-dilutive options excluded from diluted EPS ​ ​ ​ ​ 214 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, 2020 ​ ​ ​ ​ ​ ​ ​ ​ Basic EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders ​ $ 157,091 45,000 ​ $ 3.49 Stock options ​ ​ — 376 ​ ​ ​ Diluted EPS ​ ​ ​ ​ ​ ​ ​ ​ Income available to common shareholders and assumed conversions ​ $ 157,091 45,376 ​ $ 3.46 Anti-dilutive options excluded from diluted EPS ​ ​ ​ ​ 384 ​ ​ ​ ​ P. COMPREHENSIVE EARNINGS ​ Our comprehensive earnings include net earnings plus after-tax unrealized gains and losses on our available-for-sale fixed income portfolio. In reporting the components of comprehensive earnings, we used the federal statutory tax rate of 21 percent. Other comprehensive income (loss), as shown in the consolidated statements of earnings and comprehensive earnings, is net of tax expense (benefit) of $( 74.1 ) million, $( 15.7 ) million and $ 14.9 million for 2022, 2021 and 2020, respectively. ​ The table below illustrates the changes in the balance of each component of accumulated other comprehensive earnings for each period presented in the consolidated financial statements. The changes in accumulated other comprehensive earnings also reflect adjustments from the adoption of accounting standards. The adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, necessitated a cumulative-effect adjustment in the beginning of 2020, 61 Table of Contents which moved less than $ 0.1 million of net unrealized losses on fixed income securities from accumulated other comprehensive earnings to retained earnings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized Gains/Losses on Available-for-Sale Securities ​ For the Year Ended December 31, (in thousands) 2022 2021 2020 Beginning balance ​ $ 49,826 $ 108,714 $ 52,473 Cumulative-effect adjustment of ASU 2016-13 ​ ​ — ​ ​ — ​ ​ 22 Adjusted beginning balance ​ $ 49,826 ​ $ 108,714 ​ $ 52,495 Other comprehensive earnings before reclassifications ​ ​ ( 281,189 ) ​ ( 57,454 ) ​ 58,986 Amounts reclassified from accumulated other comprehensive earnings ​ ​ 2,287 ​ ( 1,434 ) ​ ( 2,767 ) Net current period other comprehensive earnings (loss) ​ $ ( 278,902 ) $ ( 58,888 ) $ 56,219 Ending balance ​ $ ( 229,076 ) $ 49,826 $ 108,714 Balance of securities for which an allowance for credit losses has not been recognized in net earnings ​ $ 1,693 ​ $ 124 ​ $ 470 ​ Credit losses or the sale of an available-for-sale security resulted in amounts being reclassified from accumulated other comprehensive earnings to current period net earnings. The effects of reclassifications out of accumulated other comprehensive earnings by the respective line items of net earnings are presented in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount Reclassified from Accumulated Other Comprehensive Earnings (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Component of Accumulated ​ ​ For the Year Ended December 31, ​ Affected line item in the Other Comprehensive Earnings 2022 2021 2020 Consolidated Statement of Earnings Unrealized gains and losses on available-for-sale securities ​ $ ( 2,997 ) $ 1,859 $ 3,872 Net realized gains ​ ​ ​ 102 ​ ​ ( 44 ) ​ ​ ( 369 ) ​ Credit losses presented within net realized gains ​ ​ $ ( 2,895 ) $ 1,815 $ 3,503 Earnings before income taxes ​ ​ ​ 608 ​ ( 381 ) ​ ( 736 ) Income tax expense ​ ​ $ ( 2,287 ) $ 1,434 $ 2,767 Net earnings ​ Q. FAIR VALUE DISCLOSURES ​ Fair value is defined as the price in the principal market that would be received for an asset to facilitate an orderly transaction between market participants on the measurement date. We determined the fair value of certain financial instruments based on their underlying characteristics and relevant transactions in the marketplace. We maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ​ The following are the levels of the fair value hierarchy and a brief description of the type of valuation inputs that are used to establish each level. Financial assets are classified based upon the lowest level of significant input that is used to determine fair value. ​ Level 1 is applied to valuations based on readily available, unadjusted quoted prices in active markets for identical assets. ​ Level 2 is applied to valuations based upon quoted prices for similar assets in active markets, quoted prices for identical or similar assets in inactive markets; or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data. ​ Level 3 is applied to valuations that are derived from techniques in which one or more of the significant inputs are unobservable. ​ As a part of management’s process to determine fair value, we utilize widely recognized, third-party pricing sources to determine our fair values. We have obtained an understanding of the third-party pricing sources’ valuation methodologies and inputs. The following is a description of the valuation techniques used for financial assets that are measured at fair value, including the general classification of such assets pursuant to the fair value hierarchy. ​ Corporate, Agencies, Government and Municipal Bonds: The pricing vendor employs a multi-dimensional model which uses standard inputs including (listed in approximate order of priority for use) benchmark yields, reported trades, broker/dealer quotes, 62 Table of Contents issuer spreads, two-sided markets, benchmark securities, market bids/offers and other reference data. The pricing vendor also monitors market indicators, as well as industry and economic events. All bonds valued using these techniques are classified as Level 2. All Corporate, Agencies, Government and Municipal securities are deemed Level 2. ​ Mortgage-backed Securities (MBS)/Collateralized Mortgage-backed Securities (CMBS) and Asset-backed Securities (ABS): The pricing vendor evaluation methodology includes principally interest rate movements and new issue data. Evaluation of the tranches (nonvolatile, volatile or credit sensitivity) is based on the pricing vendors’ interpretation of accepted modeling and pricing conventions. This information is then used to determine the cash flows for each tranche, benchmark yields, pre-payment assumptions and to incorporate collateral performance. To evaluate MBS and CMBS volatility, an option adjusted spread model is used in combination with models that simulate interest rate paths to determine market price information. This process allows the pricing vendor to obtain evaluations of a broad universe of securities in a way that reflects changes in yield curve, index rates, implied volatility, mortgage rates and recent trade activity. MBS/CMBS and ABS with corroborated, observable inputs are classified as Level 2. All of our MBS/CMBS and ABS are deemed Level 2. ​ Regulation D Private Placement Securities: All Regulation D privately placed bonds are classified as corporate securities and deemed Level 3. The pricing vendor evaluation methodology for these securities includes a combination of observable and unobservable inputs. Observable inputs include public corporate spread matrices classified by sector, rating and average life, as well as investment and non-investment grade matrices created from fixed income indices. Unobservable inputs include a liquidity spread premium calculated based on public corporate spread and private corporate spread matrices. The quantitative detail of the liquidity spread premium is neither provided nor reasonably available to the Company. ​ For all of our fixed income securities classified as Level 2, we periodically conduct a review to assess the reasonableness of the fair values provided by our pricing services. Our review consists of a two-pronged approach. First, we compare prices provided by our pricing services to those provided by an additional source. In some cases, we obtain prices from securities brokers and compare them to the prices provided by our pricing services. If discrepancies are found in our comparisons, we compare our prices to actual reported trade data for like securities. No changes to the fair values supplied by our pricing services have occurred as a result of our reviews. Based on these assessments, we have determined that the fair values of our Level 2 fixed income securities provided by our pricing services are reasonable. ​ Equity Securities: As of December 31, 2022, nearly all of our equity holdings were traded on an exchange. Exchange traded equities have readily observable price levels and are classified as Level 1 (fair value based on quoted market prices). Equity securities not traded on an exchange, for which pricing is provided by a third-party pricing source using observable inputs, are classified as Level 2. Equity securities not traded on an exchange and that rely on one or more unobservable inputs in pricing are classified as Level 3. ​ Due to the relatively short-term nature of cash, short-term investments, accounts receivable and accounts payable, their carrying amounts are reasonable estimates of fair value. Our investments in private funds, classified as other invested assets, are measured using the investments’ net asset value per share and are not categorized within the fair value hierarchy. The fair value of our long-term debt is discussed further in note 4. ​ R. SHARE-BASED COMPENSATION ​ We expense the estimated fair value of employee stock options and similar awards. We measure compensation cost for awards of equity instruments to employees based on the grant-date fair value of those awards and recognize compensation expense over the service period that the awards are expected to vest. The tax effects related to share-based payments are made through net earnings. See note 8 for further discussion and related disclosures regarding stock options. ​ S. RISKS AND UNCERTAINTIES ​ Certain risks and uncertainties are inherent in our day-to-day operations and in the process of preparing our consolidated financial statements. The more significant risks and uncertainties, as well as our attempt to mitigate, quantify and minimize such risks, are presented below and throughout the notes to the consolidated financial statements. ​ Insurance Risks ​ We compete with a large number of other companies in our selected lines of business. During periods of intense competition for premium, we are vulnerable to the actions of other companies who may seek to write business without the appropriate regard for risk and profitability. The insurance industry is often highly competitive, which can make it difficult to grow or maintain premium volume 63 Table of Contents without sacrificing underwriting discipline and income. Our profitability can be significantly affected by the ability of our underwriters to accurately select and price risk and our claim personnel to appropriately deliver fair outcomes. We attempt to mitigate this risk by incentivizing our underwriters to maximize underwriting profit and remain disciplined in pricing and selecting risks. If we are unable to compete effectively in the markets in which we operate or expand our operations into new markets, our underwriting revenues may decline, as well as overall business results. ​ Our loss reserves are based on estimates and may be inadequate to cover our actual insured losses, which would negatively impact our profitability. As of December 31, 2022, we had $ 2.3 billion of gross loss and LAE reserves. Significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss to the Company and our payment of that loss. As part of the reserving process, we review historical data and consider the impact of various factors such as trends in claim frequency and severity, emerging economic and social trends, inflation and changes in the regulatory and litigation environments. If the actual amount of insured losses is greater than the amount we have reserved for these losses, our profitability would suffer. ​ Catastrophe Exposures ​ Our insurance coverages include exposure to catastrophic events. We monitor all catastrophe exposures by quantifying our exposed policy limits in each region and by using computer-assisted modeling techniques. Additionally, we limit our risk to such catastrophes through restraining the total policy limits written in each region and by purchasing reinsurance. Our major catastrophe exposure is to losses caused by earthquakes, primarily on the West Coast, and windstorms to commercial properties throughout the Gulf and East Coast, as well as to homes we insure in Hawaii. Our catastrophe reinsurance treaty renewed on January 1, 2022. We purchased limits of $ 600 million in excess of $ 25 million first-dollar retention for earthquakes in California, $ 625 million in excess of a $ 25 million first-dollar retention for earthquakes outside of California and $ 475 million in excess of a $ 25 million first-dollar retention for all other perils, including wind. These amounts were subject to certain co-participations by the Company on losses in excess of the $ 25 million retentions. On May 1, 2022, we purchased $ 150 million of additional catastrophe reinsurance protection on top of the previously described coverage, to support growth in our catastrophe-exposed business. This increased the limits to $ 750 million for earthquakes in California, $ 775 million for earthquakes outside of California and $ 625 million for all other perils, including wind, all of which were still subject to $ 25 million first-dollar retentions and certain co-participations in excess of the retentions. ​ Our catastrophe reinsurance treaty renewed on January 1, 2023. We purchased reinsurance protections of $ 700 million in excess of $ 25 million first-dollar retention for earthquakes in California and $ 700 million in excess of a $ 50 million first-dollar retention for earthquakes outside of California. For other catastrophe events, such as hurricanes, we purchased reinsurance protection of $ 600 million in excess of a $ 50 million first dollar retention. These amounts are subject to certain co-participations by the Company on losses in excess of the retentions. We actively manage our catastrophe program to keep our net retention in line with risk tolerances and to optimize the risk/return trade off. ​ Environmental Exposures ​ We are subject to environmental claims and exposures primarily through our commercial excess, general liability and discontinued assumed casualty reinsurance lines of business. Although exposure to environmental claims exists in these lines of business, we seek to mitigate or control the extent of this exposure on the vast majority of this business. Our policies include pollution exclusions that have been continually updated to further strengthen them and our policies primarily cover moderate hazard risks. ​ We offer coverage for low to moderate environmental liability exposures for small contractors and asbestos and mold remediation specialists. We also provide limited coverage for individually underwritten underground storage tanks. The overall exposure is mitigated by focusing on smaller risks with low to moderate exposures. Risks that have large-scale exposures are avoided including petrochemical, chemical, mining, manufacturers and other risks that might be exposed to superfund sites. This business is covered under our casualty ceded reinsurance treaties. ​ We made loss and settlement expense payments on environmental liability claims and have loss and settlement expense reserves for others. We include this historical environmental loss experience with the remaining loss experience in the applicable line of business to project ultimate incurred losses and settlement expenses as well as related incurred but not reported (IBNR) loss and settlement expense reserves. ​ Although historical experience on environmental claims may not accurately reflect future environmental exposures, we used this experience to record loss and settlement expense reserves in the exposed lines of business. See further discussion of environmental exposures in note 6. ​ 64 Table of Contents Reinsurance ​ Reinsurance does not discharge the Company from our primary liability to policyholders, and to the extent that a reinsurer is unable to meet its obligations, we would be liable. We continuously monitor the financial condition of prospective and existing reinsurers. As a result, we purchase reinsurance from a number of financially strong reinsurers. We provide an allowance for reinsurance balances deemed uncollectible. See further discussion of reinsurance exposures in note 5. ​ Investment Risk ​ Our investment portfolio is subject to market, credit and interest rate risks. The equity portfolio will fluctuate with movements in the overall stock market. While the equity portfolio has been constructed to have lower downside risk than the market, the portfolio is positively correlated with movements in domestic stocks. The bond portfolio is affected by interest rate changes and movement in credit spreads. We attempt to mitigate our interest rate and credit risks by constructing a well-diversified portfolio with high-quality securities with varied maturities. Downturns in the financial markets could have a negative effect on our portfolio. However, we attempt to manage this risk through asset allocation, duration and security selection. ​ Liquidity Risk ​ Liquidity is essential to our business and a key component of our concept of asset-liability matching. Our liquidity may be impaired by an inability to collect premium receivable or reinsurance recoverable balances in a timely manner, an inability to sell assets or redeem our investments, an inability to access funds from our insurance subsidiaries, unforeseen outflows of cash or large claim payments or an inability to access debt or equity capital markets. This situation may arise due to circumstances that we may be unable to control, such as a general market disruption, an operational problem that affects third parties or the Company, or even by the perception among market participants that we, or other market participants, are experiencing greater liquidity risk. ​ Our credit ratings are important to our liquidity. A reduction in our credit ratings could adversely affect our liquidity and competitive position by increasing our borrowing costs or limiting our access to the capital markets. ​ Financial Statements ​ The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. The most significant of these amounts is the liability for unpaid losses and settlement expenses. Other estimates include investment valuation, the allowance for credit losses on fixed income securities, the collectability of reinsurance balances, recoverability of deferred tax assets and deferred policy acquisition costs. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. Although recorded estimates are supported by actuarial computations and other supportive data, the estimates are ultimately based on our expectations of future events. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. ​ External Factors ​ Our insurance subsidiaries are highly regulated by the state in which they are incorporated and by the states in which they do business. Such regulations, among other things, limit the amount of dividends, impose restrictions on the amount and types of investments and regulate rates and forms insurers may charge for various coverages. We are also subject to insolvency and guaranty fund assessments for various programs designed to ensure policyholder indemnification. We generally accrue an assessment during the period in which it becomes probable that a liability has been incurred from an insolvency and the amount of the related assessment can be reasonably estimated. ​ The National Association of Insurance Commissioners (NAIC) has developed Property and Casualty Risk-Based Capital (RBC) standards that relate an insurer’s reported statutory surplus to the risks inherent in its overall operations. The RBC formula uses the statutory annual statement to calculate the minimum indicated capital level to support investment and underwriting risk. The NAIC model law calls for various levels of regulatory action based on the magnitude of an indicated RBC capital deficiency, if any. We regularly monitor our subsidiaries’ internal capital requirements and the NAIC’s RBC developments. As of December 31, 2022, we 65 Table of Contents determined that our capital levels are well in excess of the minimum capital requirements for all RBC action levels and that our capital levels are sufficient to support the level of risk inherent in our operations. See note 9 for further discussion of statutory information and related insurance regulatory restrictions. ​ In addition, ratings are a critical factor in establishing the competitive position of insurance companies. Our insurance companies are rated by AM Best, S&P and Moody’s. Their ratings reflect their opinions of an insurance company’s and an insurance holding company’s financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. ​ 2. INVESTMENTS ​ Our investments are primarily composed of fixed income debt securities and common stock equity securities. All of our debt securities are classified as available-for-sale, which are carried at fair value. Our equity portfolio consists of common stocks and exchange traded funds (ETF), which are carried at fair value. ​ A summary of net investment income is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Interest on fixed income securities $ 77,164 $ 60,624 $ 59,755 Dividends on equity securities ​ ​ 11,912 ​ ​ 11,787 ​ ​ 9,728 Interest on cash, short-term investments and other invested assets ​ ​ 2,467 ​ ​ 2,639 ​ ​ 3,379 Gross investment income ​ $ 91,543 ​ $ 75,050 ​ $ 72,862 Less investment expenses ​ ​ ( 5,465 ) ​ ​ ( 6,188 ) ​ ​ ( 4,969 ) Net investment income $ 86,078 ​ $ 68,862 ​ $ 67,893 ​ Pretax net realized gains (losses) and net changes in unrealized gains (losses) on investments for the years ended December 31 are summarized below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Net realized gains (losses): ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ ( 2,997 ) ​ $ 1,859 ​ $ 3,872 Equity securities ​ ​ 20,287 ​ ​ 62,512 ​ ​ 15,796 Investment in unconsolidated investees ​ ​ 570,952 ​ ​ ( 61 ) ​ ​ ( 187 ) Other ​ ​ 273 ​ ​ ( 88 ) ​ ​ ( 1,596 ) Total net realized gains (losses) ​ $ 588,515 ​ $ 64,222 ​ $ 17,885 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net changes in unrealized gains (losses) on investments: ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity securities ​ $ ( 118,912 ) ​ $ 58,459 ​ $ 32,317 Other invested assets ​ ​ ( 2,125 ) ​ ​ 6,799 ​ ​ ( 216 ) Total unrealized gains (losses) on equity securities recognized in net earnings ​ $ ( 121,037 ) ​ $ 65,258 ​ $ 32,101 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fixed income: ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ ( 341,944 ) ​ $ ( 71,538 ) ​ $ 67,350 Investment in unconsolidated investees ​ ​ ( 10,994 ) ​ ​ ( 3,047 ) ​ ​ 3,444 Other ​ ​ ( 102 ) ​ ​ 44 ​ ​ 369 Total unrealized gains (losses) recognized in other comprehensive earnings ​ $ ( 353,040 ) ​ $ ( 74,541 ) ​ $ 71,163 Net realized gains (losses) and changes in unrealized gains (losses) on investments ​ $ 114,438 ​ $ 54,939 ​ $ 121,149 ​ The change in unrealized gain (loss) position was due to an increase in interest rates, decreasing the fair value of fixed income securities, as well as a decline in equity market returns during the year. ​ 66 Table of Contents The following is a summary of the disposition of fixed income securities and equities for the years ended December 31, with separate presentations for sales and calls/maturities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SALES ​ ​ ​ ​ Gross Realized ​ Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 51,355 ​ $ 287 ​ $ ( 2,849 ) ​ $ ( 2,562 ) Equities ​ ​ 62,212 ​ ​ 21,623 ​ ​ ( 1,336 ) ​ ​ 20,287 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 65,262 ​ $ 2,161 ​ $ ( 815 ) ​ $ 1,346 Equities ​ ​ 180,256 ​ ​ 64,298 ​ ​ ( 1,786 ) ​ ​ 62,512 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 84,697 ​ $ 5,454 ​ $ ( 1,777 ) ​ $ 3,677 Equities ​ ​ 79,368 ​ ​ 25,338 ​ ​ ( 9,542 ) ​ ​ 15,796 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CALLS/MATURITIES ​ ​ ​ ​ Gross Realized ​ Net Realized (in thousands) Proceeds Gains Losses Gain (Loss) 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 1,393,704 ​ $ 196 ​ $ ( 55 ) ​ $ 141 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 376,751 ​ $ 638 ​ $ ( 125 ) ​ $ 513 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale ​ $ 283,107 ​ $ 821 ​ $ ( 27 ) ​ $ 794 ​ FAIR VALUE MEASUREMENTS ​ Assets measured at fair value on a recurring basis as of December 31, 2022 and 2021, are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ Quoted in Active ​ Significant Other ​ Significant ​ ​ ​ ​ ​ Markets for ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ ​ (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government ​ $ — ​ $ 454,021 ​ $ — ​ $ 454,021 U.S. agency ​ ​ — ​ ​ 73,063 ​ ​ — ​ ​ 73,063 Non-U.S. government & agency ​ ​ — ​ ​ 5,847 ​ ​ — ​ ​ 5,847 Agency MBS ​ ​ — ​ ​ 331,806 ​ ​ — ​ ​ 331,806 ABS/CMBS/MBS* ​ ​ — ​ ​ 240,736 ​ ​ — ​ ​ 240,736 Corporate ​ ​ — ​ ​ 980,676 ​ ​ 53,654 ​ ​ 1,034,330 Municipal ​ ​ — ​ ​ 527,147 ​ ​ — ​ ​ 527,147 Total fixed income securities - available-for-sale ​ $ — ​ $ 2,613,296 ​ $ 53,654 ​ $ 2,666,950 Equity securities ​ ​ 496,731 ​ ​ 39 ​ ​ 1,612 ​ ​ 498,382 Total ​ $ 496,731 ​ $ 2,613,335 ​ $ 55,266 ​ $ 3,165,332 * Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities ​ 67 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ ​ Quoted in Active ​ Significant Other ​ Significant ​ ​ ​ ​ ​ Markets for ​ Observable ​ Unobservable ​ ​ ​ ​ ​ Identical Assets ​ Inputs ​ Inputs ​ ​ ​ (in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities - available-for-sale ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government ​ $ — ​ $ 134,554 ​ $ — ​ $ 134,554 U.S. agency ​ ​ — ​ ​ 32,760 ​ ​ — ​ ​ 32,760 Non-U.S. government & agency ​ ​ — ​ ​ 8,481 ​ ​ — ​ ​ 8,481 Agency MBS ​ ​ — ​ ​ 367,187 ​ ​ — ​ ​ 367,187 ABS/CMBS/MBS* ​ ​ — ​ ​ 264,054 ​ ​ — ​ ​ 264,054 Corporate ​ ​ — ​ ​ 913,577 ​ ​ 43,518 ​ ​ 957,095 Municipal ​ ​ — ​ ​ 645,756 ​ ​ — ​ ​ 645,756 Total fixed income securities - available-for-sale ​ $ — ​ $ 2,366,369 ​ $ 43,518 ​ $ 2,409,887 Equity securities ​ ​ 613,712 ​ ​ 64 ​ ​ — ​ ​ 613,776 Total ​ $ 613,712 ​ $ 2,366,433 ​ $ 43,518 ​ $ 3,023,663 * Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities ​ The following table summarizes changes in the balance of Regulation D private placement securities whose fair value was measured using significant unobservable inputs (Level 3). ​ ​ ​ ​ ​ (in thousands) Level 3 Securities Balance as of January 1, 2022 ​ $ 43,518 Net realized and unrealized gains (losses) ​ ​ ​ Included in net earnings as a part of: ​ ​ ​ Net investment income ​ ​ ( 693 ) Net realized gains ​ ​ ( 432 ) Included in other comprehensive earnings ​ ​ ( 7,291 ) Total net realized and unrealized gains (losses) ​ $ ( 8,416 ) Purchases ​ ​ 21,261 Transfers out of Level 3 ​ ​ ( 1,097 ) Balance as of December 31, 2022 ​ $ 55,266 Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in net realized gains ​ $ ( 432 ) Change in unrealized gains (losses) during the period for Level 3 assets held at period-end - included in other comprehensive earnings ​ $ ( 7,291 ) ​ The amortized cost and estimated fair value of fixed income securities at December 31, 2022, by contractual maturity, are shown as follows: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) Amortized Cost Fair Value Due in one year or less ​ $ 332,951 ​ $ 331,761 Due after one year through five years ​ ​ 916,676 ​ ​ 873,530 Due after five years through 10 years ​ ​ 522,104 ​ ​ 474,025 Due after 10 years ​ ​ 523,729 ​ ​ 415,092 ABS/CMBS/MBS* ​ ​ 649,813 ​ ​ 572,542 Total available-for-sale ​ $ 2,945,273 ​ $ 2,666,950 * Asset-backed, commercial mortgage-backed and mortgage-backed securities ​ Expected maturities may differ from contractual maturities due to call provisions on some existing securities. ​ The amortized cost and fair value of available-for-sale securities at December 31, 2022 and 2021 are presented in the tables below. Amortized cost does not include the $ 20.2 million and $ 16.4 million of accrued interest receivable as of December 31, 2022 and 2021, respectively. ​ 68 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ Allowance Gross Gross ​ ​ ​ ​ ​ Amortized ​ for Credit ​ Unrealized ​ Unrealized ​ ​ ​ (in thousands) Cost Losses Gains Losses Fair Value U.S. government ​ $ 462,884 ​ $ — ​ $ 8 ​ $ ( 8,871 ) ​ $ 454,021 U.S. agency ​ ​ 75,074 ​ ​ — ​ ​ 26 ​ ​ ( 2,037 ) ​ ​ 73,063 Non-U.S. government & agency ​ ​ 6,798 ​ ​ — ​ ​ — ​ ​ ( 951 ) ​ ​ 5,847 Agency MBS ​ ​ 373,687 ​ ​ — ​ ​ 336 ​ ​ ( 42,217 ) ​ ​ 331,806 ABS/CMBS/MBS* ​ ​ 276,126 ​ ​ ( 8 ) ​ ​ 62 ​ ​ ( 35,444 ) ​ ​ 240,736 Corporate ​ ​ 1,122,097 ​ ​ ( 331 ) ​ ​ 541 ​ ​ ( 87,977 ) ​ ​ 1,034,330 Municipal ​ ​ 628,607 ​ ​ — ​ ​ 1,265 ​ ​ ( 102,725 ) ​ ​ 527,147 Total fixed income ​ $ 2,945,273 ​ $ ( 339 ) ​ $ 2,238 ​ $ ( 280,222 ) ​ $ 2,666,950 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ Allowance Gross Gross ​ ​ ​ ​ ​ Amortized ​ for Credit ​ Unrealized ​ Unrealized ​ ​ ​ (in thousands) Cost Losses Gains Losses Fair Value U.S. government ​ $ 127,752 ​ $ — ​ $ 6,846 ​ $ ( 44 ) ​ $ 134,554 U.S. agency ​ ​ 30,403 ​ ​ — ​ ​ 2,374 ​ ​ ( 17 ) ​ ​ 32,760 Non-U.S. government & agency ​ ​ 8,297 ​ ​ — ​ ​ 338 ​ ​ ( 154 ) ​ ​ 8,481 Agency MBS ​ ​ 362,861 ​ ​ — ​ ​ 9,277 ​ ​ ( 4,951 ) ​ ​ 367,187 ABS/CMBS/MBS* ​ ​ 264,273 ​ ​ — ​ ​ 2,120 ​ ​ ( 2,339 ) ​ ​ 264,054 Corporate ​ ​ 925,394 ​ ​ ( 441 ) ​ ​ 37,247 ​ ​ ( 5,105 ) ​ ​ 957,095 Municipal ​ ​ 627,287 ​ ​ — ​ ​ 22,750 ​ ​ ( 4,281 ) ​ ​ 645,756 Total fixed income ​ $ 2,346,267 ​ $ ( 441 ) ​ $ 80,952 ​ $ ( 16,891 ) ​ $ 2,409,887 * Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities ​ Asset-Backed, Commercial Mortgage-Backed and Mortgage-Backed Securities ​ Eighty-three percent of our collateralized securities carry the highest credit rating by one or more major rating agencies and continue to pay according to contractual terms. ​ For all fixed income securities at an unrealized loss at December 31, 2022, we believe it is probable that we will receive all contractual payments in the form of principal and interest. In addition, we are not required to, nor do we intend to, sell these investments prior to recovering the entire amortized cost basis of each security, which may be at maturity. ​ Municipal Bonds ​ As of December 31, 2022, approximately 46 percent of the municipal fixed income securities in the investment portfolio were general obligations of state and local governments and the remaining 54 percent were revenue based. Eighty-eight percent of our municipal fixed income securities were rated AA or better while 99 percent were rated A or better. ​ ALLOWANCE FOR CREDIT LOSSES AND UNREALIZED LOSSES ON FIXED INCOME SECURITIES ​ A reversible allowance for credit losses is required to be recognized on available-for-sale fixed income securities. Available-for-sale securities in the fixed income portfolio are subjected to several criteria to determine if those securities should be included in the allowance for expected credit loss evaluation, including: ​ ● Changes in technology that may impair the earnings potential of the investment, ​ ● The discontinuance of a segment of business that may affect future earnings potential, ​ ● Reduction of or non-payment of interest and/or principal, ​ ● Specific concerns related to the issuer’s industry or geographic area of operation, ​ ● Significant or recurring operating losses, poor cash flows and/or deteriorating liquidity ratios and 69 Table of Contents ​ ● Downgrades in credit quality by a major rating agency. ​ If changes in interest rates and credit spreads do not reasonably explain the unrealized loss for an available-for-sale security, or if any of the criteria above indicate a potential credit loss, the security is subjected to a discounted cash flow analysis. Inputs into the discounted cash flow analysis include prepayment assumptions for structured securities, default rates and recoverability rates based on credit rating. The allowance for any security is limited to the amount that the fair value is below amortized cost. As of December 31, 2022, the discounted cash flow analysis resulted in an allowance for credit losses on 14 securities. The following table presents changes in the allowance for expected credit losses on available-for-sale securities: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Beginning balance ​ $ 441 ​ $ 397 Increase to allowance from securities for which credit losses were not previously recorded ​ ​ 337 ​ ​ 4 Reduction from securities sold during the period ​ ​ ( 671 ) ​ ​ ( 4 ) Net increase (decrease) from securities that had an allowance at the beginning of the period ​ ​ 232 ​ ​ 44 Ending balance ​ $ 339 ​ $ 441 ​ Net realized gains included $ 0.1 million of losses on fixed income securities for which we no longer had the intent to hold until recovery and for which the cost basis was written down to fair value. No such losses were recognized in 2021. All fixed income securities continue to pay the expected coupon payments. We believe we will recover the amortized cost basis of available-for-sale securities that remain in an unrealized loss position. ​ As of December 31, 2022, in addition to the securities included in the allowance for credit losses, the fixed income portfolio contained 1,473 securities with an unrealized loss position for which an allowance for credit losses had not been recorded. The $ 280.2 million in associated unrealized losses represents 9.5 percent of the fixed income portfolio’s cost basis and 8.6 percent of total invested assets. Isolated to these securities, unrealized losses at the end of 2022 increased compared to the previous year due to increasing interest rates which reduce the fair value of fixed income securities. Of the total 1,473 securities, 518 have been in an unrealized loss position for 12 consecutive months or longer. The following table illustrates the total value of fixed income securities that were in an unrealized loss position as of December 31, 2022 and 2021. All fixed income securities continue to pay the expected coupon payments and we believe we will recover the amortized cost basis of available-for-sale securities that remain in an unrealized loss position. ​ 70 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ 12 Mos. ​ ​ ​ ​ ​ 12 Mos. ​ ​ (in thousands) < 12 Mos. & Greater Total < 12 Mos. & Greater Total U.S. government ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 399,361 ​ $ 8,828 ​ $ 408,189 ​ $ 2,942 ​ $ — ​ $ 2,942 Amortized cost ​ ​ 407,340 ​ ​ 9,720 ​ ​ 417,060 ​ ​ 2,986 ​ ​ — ​ ​ 2,986 Unrealized loss ​ $ ( 7,979 ) ​ $ ( 892 ) ​ $ ( 8,871 ) ​ $ ( 44 ) ​ $ — ​ $ ( 44 ) U.S. agency ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 32,987 ​ $ 2,170 ​ $ 35,157 ​ $ 1,498 ​ $ — ​ $ 1,498 Amortized cost ​ ​ 34,627 ​ ​ 2,567 ​ ​ 37,194 ​ ​ 1,515 ​ ​ — ​ ​ 1,515 Unrealized loss ​ $ ( 1,640 ) ​ $ ( 397 ) ​ $ ( 2,037 ) ​ $ ( 17 ) ​ $ — ​ $ ( 17 ) Non-U.S. government & agency ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 3,626 ​ $ 2,221 ​ $ 5,847 ​ $ 4,346 ​ $ — ​ $ 4,346 Amortized cost ​ ​ 3,798 ​ ​ 3,000 ​ ​ 6,798 ​ ​ 4,500 ​ ​ — ​ ​ 4,500 Unrealized loss ​ $ ( 172 ) ​ $ ( 779 ) ​ $ ( 951 ) ​ $ ( 154 ) ​ $ — ​ $ ( 154 ) Agency MBS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 197,252 ​ $ 117,851 ​ $ 315,103 ​ $ 102,145 ​ $ 62,669 ​ $ 164,814 Amortized cost ​ ​ 212,776 ​ ​ 144,544 ​ ​ 357,320 ​ ​ 104,336 ​ ​ 65,429 ​ ​ 169,765 Unrealized loss ​ $ ( 15,524 ) ​ $ ( 26,693 ) ​ $ ( 42,217 ) ​ $ ( 2,191 ) ​ $ ( 2,760 ) ​ $ ( 4,951 ) ABS/CMBS/MBS* ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 96,754 ​ $ 136,149 ​ $ 232,903 ​ $ 150,997 ​ $ 3,935 ​ $ 154,932 Amortized cost ​ ​ 104,724 ​ ​ 163,623 ​ ​ 268,347 ​ ​ 153,235 ​ ​ 4,036 ​ ​ 157,271 Unrealized loss ​ $ ( 7,970 ) ​ $ ( 27,474 ) ​ $ ( 35,444 ) ​ $ ( 2,238 ) ​ $ ( 101 ) ​ $ ( 2,339 ) Corporate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 660,830 ​ $ 323,337 ​ $ 984,167 ​ $ 217,791 ​ $ 53,818 ​ $ 271,609 Amortized cost ​ ​ 697,437 ​ ​ 374,707 ​ ​ 1,072,144 ​ ​ 221,010 ​ ​ 55,704 ​ ​ 276,714 Unrealized loss ​ $ ( 36,607 ) ​ $ ( 51,370 ) ​ $ ( 87,977 ) ​ $ ( 3,219 ) ​ $ ( 1,886 ) ​ $ ( 5,105 ) Municipal ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 228,827 ​ $ 204,324 ​ $ 433,151 ​ $ 162,998 ​ $ 15,037 ​ $ 178,035 Amortized cost ​ ​ 255,240 ​ ​ 280,636 ​ ​ 535,876 ​ ​ 166,602 ​ ​ 15,714 ​ ​ 182,316 Unrealized loss ​ $ ( 26,413 ) ​ $ ( 76,312 ) ​ $ ( 102,725 ) ​ $ ( 3,604 ) ​ $ ( 677 ) ​ $ ( 4,281 ) Total fixed income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value ​ $ 1,619,637 ​ $ 794,880 ​ $ 2,414,517 ​ $ 642,717 ​ $ 135,459 ​ $ 778,176 Amortized cost ​ ​ 1,715,942 ​ ​ 978,797 ​ ​ 2,694,739 ​ ​ 654,184 ​ ​ 140,883 ​ ​ 795,067 Unrealized loss ​ $ ( 96,305 ) ​ $ ( 183,917 ) ​ $ ( 280,222 ) ​ $ ( 11,467 ) ​ $ ( 5,424 ) ​ $ ( 16,891 ) * Non-agency asset-backed, commercial mortgage-backed and mortgage-backed securities ​ OTHER INVESTED ASSETS ​ We had $ 47.9 million of other invested assets at December 31, 2022, compared to $ 50.5 million at the end of 2021. Other invested assets include investments in low-income housing tax credit (LIHTC) partnerships, membership stock in the Federal Home Loan Bank of Chicago (FHLBC) and investments in private funds. Our LIHTC investments are carried at amortized cost and our investment in FHLBC stock is carried at cost. Due to the nature of the LIHTC and our membership in the FHLBC, their carrying amounts approximate fair value. The private funds are carried at fair value, using each investments’ net asset value. ​ Our LIHTC interests had a balance of $ 13.5 million at December 31, 2022, compared to $ 16.6 million at December 31, 2021, and recognized a total tax benefit of $ 3.4 million during 2022, compared to $ 3.6 million during 2021 and $ 3.5 million during 2020. Our unfunded commitment for our LIHTC investments totaled $ 1.3 million at December 31, 2022 and will be paid out in installments through 2035. ​ Our investments in private funds totaled $ 28.4 million at December 31, 2022, compared to $ 28.6 million at December 31, 2021, and we had $ 4.9 million of associated unfunded commitments at December 31, 2022. Our interest in private funds is generally restricted from being transferred or otherwise redeemed without prior consent by the respective entities and the timed dissolution of the partnerships would trigger redemption. ​ 71 Table of Contents Restricted Assets ​ As of December 31, 2022, $ 57.3 million of investments were pledged as collateral with the FHLBC to ensure timely access to the secured lending facility that ownership of the FHLBC stock provides. On November 10, 2021 RLI Insurance Company borrowed $ 50.0 million from the FHLBC, which was outstanding as of December 31, 2022. ​ As of December 31, 2022, fixed income securities with a carrying value of $ 88.6 million were on deposit with regulatory authorities as required by law. ​ 3. POLICY ACQUISITION COSTS ​ Policy acquisition costs deferred and amortized to income for the years ended December 31 are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Deferred policy acquisition costs (DAC), beginning of year ​ $ 103,553 ​ $ 88,425 ​ $ 85,044 Deferred: ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct commissions ​ $ 277,553 ​ $ 236,145 ​ $ 200,917 Premium taxes ​ ​ 18,616 ​ ​ 17,012 ​ ​ 14,783 Ceding commissions ​ ​ ( 39,458 ) ​ ​ ( 47,592 ) ​ ​ ( 42,115 ) Net deferred ​ $ 256,711 ​ $ 205,565 ​ $ 173,585 Amortized ​ ​ 232,405 ​ ​ 190,437 ​ ​ 170,204 DAC, end of year ​ $ 127,859 ​ $ 103,553 ​ $ 88,425 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Policy acquisition costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized to expense - DAC ​ $ 232,405 ​ $ 190,437 ​ $ 170,204 Period costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Ceding commission - contingent ​ ​ ( 5,882 ) ​ ​ ( 4,303 ) ​ ​ ( 4,053 ) Other underwriting expenses ​ ​ 143,109 ​ ​ 131,334 ​ ​ 120,287 Total policy acquisition costs ​ $ 369,632 ​ $ 317,468 ​ $ 286,438 ​ ​ 4. DEBT ​ As of December 31, 2022, outstanding debt balances totaled $ 199.9 million, net of unamortized discount and debt issuance costs. ​ On October 2, 2013, we completed a public debt offering, issuing $ 150.0 million in senior notes maturing September 15, 2023 , and paying interest semi-annually at the rate of 4.875 percent. The notes were issued at a discount resulting in proceeds, net of discount and commission, of $ 148.6 million. The amount of the discount is being charged to income over the life of the debt on an effective yield basis. The carrying value of the senior note was $ 149.9 million and the estimated fair value was $ 149.9 million as of December 31, 2022. The fair value of our long-term debt is based on the limited observable prices that reflect thinly traded securities and is therefore classified as a Level 2 liability within the fair value hierarchy. ​ On November 10, 2021, RLI Ins. borrowed $ 50.0 million from the Federal Home Loan Bank of Chicago. The borrowing matures on November 10, 2023 and has an option to pay off the debt early beginning on November 10, 2022. Interest is paid monthly at an annualized rate of 0.84 percent. ​ We paid $ 7.7 million of interest on our debt in 2022 and $ 7.3 million in 2021 and 2020. The average rate on debt was 3.89 in 2022, 4.77 percent in 2021 and 4.91 percent in 2020. ​ We maintain a revolving line of credit with Bank of Montreal, Chicago Branch, which permits the Company to borrow up to an aggregate principal amount of $ 60.0 million. This facility was entered into during 2020 and replaced the previous $ 50.0 million facility with JP Morgan Chase Bank N.A. Under certain conditions, the line may be increased up to an aggregate principal amount of $ 120.0 million. This facility has a three-year term that expires on March 27, 2023 . As of and during the years ended December 31, 2022, 2021 and 2020, no amounts were outstanding on these facilities. ​ 72 Table of Contents 5. REINSURANCE ​ In the ordinary course of business, our insurance subsidiaries assume and cede premiums and selected insured risks with other insurance companies, known as reinsurance. A large portion of the reinsurance is put into effect under contracts known as treaties and, in some instances, by negotiation on each individual risk known as facultative reinsurance. In addition, there are several types of treaties including quota share, excess of loss and catastrophe reinsurance contracts that protect against losses over stipulated amounts arising from any one occurrence or event. The arrangements allow the Company to pursue greater diversification of business and serve to limit the maximum net loss to a single event, such as a catastrophe. Through the quantification of exposed policy limits in each region and the extensive use of computer-assisted modeling techniques, we monitor the concentration of risks exposed to catastrophic events. ​ Through the purchase of reinsurance, we also limit our net loss on any individual risk to a maximum of $ 9.7 million, although retentions can vary. ​ Premiums written and earned along with losses and settlement expenses incurred for the years ended December 31 are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 WRITTEN ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct $ 1,531,656 $ 1,313,093 $ 1,107,303 Reinsurance assumed ​ 33,830 ​ 34,261 ​ 29,129 Reinsurance ceded ​ ( 323,950 ) ​ ( 289,821 ) ​ ( 244,344 ) Net ​ $ 1,241,536 ​ $ 1,057,533 ​ $ 892,088 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ EARNED ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct ​ $ 1,425,165 ​ $ 1,222,346 ​ $ 1,062,608 Reinsurance assumed ​ ​ 35,680 ​ ​ 30,950 ​ ​ 27,651 Reinsurance ceded ​ ​ ( 316,409 ) ​ ​ ( 272,393 ) ​ ​ ( 224,512 ) Net ​ $ 1,144,436 ​ $ 980,903 ​ $ 865,747 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LOSSES AND SETTLEMENT EXPENSES INCURRED ​ ​ ​ ​ ​ ​ ​ ​ ​ Direct ​ $ 776,448 ​ $ 703,903 ​ $ 608,638 Reinsurance assumed ​ ​ 22,813 ​ ​ 18,087 ​ ​ 18,783 Reinsurance ceded ​ ​ ( 284,885 ) ​ ​ ( 265,388 ) ​ ​ ( 184,537 ) Net ​ $ 514,376 ​ $ 456,602 ​ $ 442,884 ​ More than 93 percent of our reinsurance recoverables are due from companies with financial strength ratings of A or better by AM Best and S&P rating services. The following table displays net reinsurance balances recoverable, after consideration of collateral, from our top reinsurers as of December 31, 2022. These reinsurers all have financial strength ratings of A or better by AM Best and S&P’s ratings services. Also shown are the amounts of written premium ceded to these reinsurers during the calendar year 2022. ​ 73 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Reinsurer ​ Ceded ​ ​ ​ AM Best ​ S&P ​ Exposure as of ​ Percent of ​ Premiums ​ Percent of ​ (dollars in thousands) Rating Rating 12/31/2022 Total Written Total ​ Munich Re / HSB A+, Superior AA-, Very Strong ​ $ 110,142 13.6 % $ 35,040 10.8 % Renaissance Re ​ A+, Superior A+, Strong ​ ​ 82,929 10.3 % ​ 22,865 7.1 % Nationwide Mutual A+, Superior A+, Strong ​ ​ 45,492 5.6 % ​ 21,493 6.6 % Aspen UK Ltd. A, Excellent A-, Strong ​ ​ 43,632 ​ 5.4 % ​ 11,021 ​ 3.4 % Safety National A++, Superior A+, Strong ​ ​ 42,218 5.2 % ​ 14,971 4.6 % Endurance Re A+, Superior A+, Strong ​ ​ 40,979 5.1 % ​ 5,570 1.7 % Berkley Insurance Co. A+, Superior A+, Strong ​ ​ 36,105 4.5 % ​ 8,931 2.8 % Lloyds of London ​ A, Excellent ​ A+, Strong ​ ​ 34,737 4.3 % ​ 26,677 8.2 % Partner Re ​ A+, Superior ​ A+, Strong ​ ​ 34,322 ​ 4.3 % ​ 15,363 ​ 4.7 % Hannover Ruckversicherung A+, Superior AA-, Very Strong ​ ​ 33,507 4.2 % ​ 16,746 5.2 % Scor Re ​ A+, Superior A+, Strong ​ ​ 32,153 4.0 % ​ 6,048 1.9 % Toa Re ​ A, Excellent ​ A+, Strong ​ ​ 27,278 ​ 3.4 % ​ 13,092 ​ 4.0 % Liberty Mutual A, Excellent A, Strong ​ ​ 24,665 ​ 3.1 % ​ 6,140 ​ 1.9 % Odyssey America Re ​ A, Excellent A, Strong ​ ​ 23,945 ​ 3.0 % ​ 9,049 ​ 2.8 % All other reinsurers* ​ ​ ​ ​ ​ ​ 194,683 24.0 % ​ 110,944 34.3 % Total ceded exposure ​ ​ ​ ​ ​ $ 806,787 100.0 % $ 323,950 100.0 % * All other reinsurance balances recoverable, when considered by individual reinsurer, are less than 2 percent of shareholders’ equity. ​ The allowances for uncollectible amounts on paid and unpaid recoverables were $ 16.1 million and $ 11.3 million, respectively, at December 31, 2022. At December 31, 2021, the amounts were $ 16.1 million and $ 11.2 million, respectively. Changes in the allowances during 2022 were due to changes in the amount of reinsurance balances outstanding, the composition of reinsurers from whom the balances were recoverable and their associated S&P default ratings. No write-offs were applied to the allowances in 2022 and less than $ 0.1 million was recovered. We have no receivables with a due date that extends beyond one year that are not included in our allowance for uncollectible amounts. ​ 6. HISTORICAL LOSS AND LAE DEVELOPMENT ​ The following table is a reconciliation of our unpaid losses and settlement expenses (LAE) for the years 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Unpaid losses and LAE at beginning of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ $ 2,043,555 ​ $ 1,750,049 ​ $ 1,574,352 Ceded ​ ​ ( 608,086 ) ​ ​ ( 443,729 ) ​ ​ ( 384,517 ) Net ​ $ 1,435,469 ​ $ 1,306,320 ​ $ 1,189,835 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adoption impact of ASU 2016-13 on reinsurance balances recoverable ​ $ — ​ $ — ​ $ ( 1,345 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Increase (decrease) in incurred losses and LAE: ​ ​ ​ ​ ​ ​ ​ ​ ​ Current accident year ​ $ 636,955 ​ $ 582,065 ​ $ 543,937 Prior accident years ​ ​ ( 122,579 ) ​ ​ ( 125,463 ) ​ ​ ( 101,053 ) Total incurred ​ $ 514,376 ​ $ 456,602 ​ $ 442,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss and LAE payments for claims incurred: ​ ​ ​ ​ ​ ​ ​ ​ ​ Current accident year ​ $ ( 97,525 ) ​ $ ( 101,590 ) ​ $ ( 93,077 ) Prior accident year ​ ​ ( 276,772 ) ​ ​ ( 225,863 ) ​ ​ ( 231,977 ) Total paid ​ $ ( 374,297 ) ​ $ ( 327,453 ) ​ $ ( 325,054 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unpaid losses and LAE at end of year ​ $ 1,575,548 ​ $ 1,435,469 ​ $ 1,306,320 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid losses and LAE at end of year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ $ 2,315,637 ​ $ 2,043,555 ​ $ 1,750,049 Ceded ​ ​ ( 740,089 ) ​ ​ ( 608,086 ) ​ ​ ( 443,729 ) Net ​ $ 1,575,548 ​ $ 1,435,469 ​ $ 1,306,320 ​ 74 Table of Contents We adopted ASU 2016-13, Financial Instruments – Credit Losses, on January 1, 2020, which required financial assets, including reinsurance balances recoverable, to be presented at the net amount expected to be collected. We previously maintained an allowance for uncollectible reinsurance balances prior to the adoption of this update. However, in order to comply with the updated requirements, we released $ 1.3 million of the allowance on uncollectible reinsurance balances upon adoption. The implementation guidance required the cumulative-effect adjustment be made to the beginning balance of retained earnings, rather than through net earnings like historical changes have and ongoing modifications will continue to be recorded. ​ Loss development occurs when our current estimate of ultimate losses, established through our reserve analysis processes, differs from the initial reserve estimate. The recognition of the changes in initial reserve estimates occurred over time as claims were reported, initial case reserves were established, initial reserves were reviewed in light of additional information and ultimate payments were made on the collective set of claims incurred as of that evaluation date. The new information on the ultimate settlement value of claims is continually updated until all claims in a defined set are settled. As a small specialty insurer with a diversified product portfolio, our experience will ordinarily exhibit fluctuations from period to period. While we attempt to identify and react to changes in the loss environment, we also must consider the volume of claim experience directly available to the Company and interpret any particular period’s indications with a realistic technical understanding of the reliability of those observations. ​ The following is information about incurred and paid loss development as of December 31, 2022, net of reinsurance, as well as cumulative claim frequency, the total of IBNR liabilities included within the net incurred loss amounts and average historical claims duration as of December 31, 2022. The loss information has been disaggregated so that only losses that are expected to develop in a similar manner are grouped together. This has resulted in the presentation of loss information for our property and surety segments at the segment level, while information for our casualty segment has been separated in four groupings: primary occurrence, excess occurrence, claims made and transportation. Primary occurrence includes select lines within the professional services product along with general liability, small commercial and other casualty products. Excess occurrence encompasses commercial excess and personal umbrella, while claims made includes select lines within the professional services product, executive products and other casualty. Reported claim counts represent claim events on a specified policy rather than individual claimants and includes claims that did not or are not expected to result in an incurred loss. The information about incurred and paid claims development for the years ended December 31, 2013 to 2021 is presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty - Primary Occurrence ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance ​ As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 80,823 ​ $ 67,297 ​ $ 62,882 ​ $ 60,329 ​ $ 60,162 ​ $ 59,556 ​ $ 59,116 ​ $ 57,106 ​ $ 57,519 ​ $ 58,434 ​ $ 1,690 ​ 4,326 2014 ​ ​ ​ ​ ​ 88,092 ​ ​ 79,497 ​ ​ 71,592 ​ ​ 67,237 ​ ​ 66,389 ​ ​ 66,702 ​ ​ 65,636 ​ ​ 63,727 ​ ​ 64,449 ​ ​ 2,623 ​ 4,298 2015 ​ ​ ​ ​ ​ ​ ​ ​ 94,835 ​ ​ 84,975 ​ ​ 83,579 ​ ​ 78,675 ​ ​ 76,398 ​ ​ 75,470 ​ ​ 75,438 ​ ​ 77,110 ​ ​ 4,022 ​ 4,408 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 101,950 ​ ​ 96,753 ​ ​ 90,611 ​ ​ 85,449 ​ ​ 83,374 ​ ​ 79,440 ​ ​ 77,729 ​ ​ 6,700 ​ 4,332 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 119,741 ​ ​ 111,391 ​ ​ 102,583 ​ ​ 95,513 ​ ​ 90,759 ​ ​ 90,344 ​ ​ 10,770 ​ 4,529 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 141,513 ​ ​ 130,281 ​ ​ 125,731 ​ ​ 115,076 ​ ​ 114,414 ​ ​ 21,681 ​ 4,873 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 146,011 ​ ​ 135,209 ​ ​ 120,570 ​ ​ 109,051 ​ ​ 38,075 ​ 5,273 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 145,171 ​ ​ 137,439 ​ ​ 122,785 ​ ​ 60,440 ​ 4,603 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 142,797 ​ ​ 128,483 ​ ​ 81,085 ​ 4,368 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 155,203 ​ ​ 119,846 ​ 3,856 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 998,002 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 6,334 ​ $ 13,021 ​ $ 22,366 ​ $ 34,786 ​ $ 40,609 ​ $ 45,753 ​ $ 47,783 ​ $ 49,411 ​ $ 50,597 ​ $ 53,375 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 11,436 ​ ​ 18,771 ​ ​ 29,545 ​ ​ 40,270 ​ ​ 47,343 ​ ​ 52,387 ​ ​ 55,965 ​ ​ 56,784 ​ ​ 58,361 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 10,157 ​ ​ 19,902 ​ ​ 33,020 ​ ​ 45,056 ​ ​ 54,270 ​ ​ 58,866 ​ ​ 62,997 ​ ​ 68,650 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10,142 ​ ​ 24,186 ​ ​ 35,764 ​ ​ 48,042 ​ ​ 56,152 ​ ​ 60,349 ​ ​ 65,517 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13,154 ​ ​ 25,933 ​ ​ 38,783 ​ ​ 52,823 ​ ​ 62,236 ​ ​ 71,419 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15,066 ​ ​ 32,365 ​ ​ 48,424 ​ ​ 63,980 ​ ​ 78,103 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15,698 ​ ​ 30,673 ​ ​ 41,911 ​ ​ 57,750 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,096 ​ ​ 30,596 ​ ​ 45,267 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 14,428 ​ ​ 29,633 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,714 ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 545,789 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ 9,314 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 461,527 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 13.3 % ​ ​ 13.3 % ​ ​ 14.4 % ​ ​ 16.1 % ​ ​ 11.0 % ​ ​ 7.6 % ​ ​ 5.3 % ​ ​ 3.8 % ​ ​ 2.2 % ​ ​ 4.8 % ​ ​ ​ ​ ​ ​ ​ 75 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty - Excess Occurrence ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance ​ As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 39,984 ​ $ 34,824 ​ $ 26,857 ​ $ 25,425 ​ $ 25,599 ​ $ 24,922 ​ $ 25,496 ​ $ 25,073 ​ $ 24,836 ​ $ 24,306 ​ $ 1,155 ​ 950 2014 ​ ​ ​ ​ ​ 50,889 ​ ​ 39,095 ​ ​ 35,119 ​ ​ 32,274 ​ ​ 33,372 ​ ​ 33,458 ​ ​ 35,128 ​ ​ 35,683 ​ ​ 35,918 ​ ​ 2,367 ​ 928 2015 ​ ​ ​ ​ ​ ​ ​ ​ 53,672 ​ ​ 50,857 ​ ​ 47,392 ​ ​ 42,840 ​ ​ 43,328 ​ ​ 42,446 ​ ​ 41,690 ​ ​ 41,471 ​ ​ 3,017 ​ 702 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 56,341 ​ ​ 49,385 ​ ​ 37,676 ​ ​ 33,125 ​ ​ 30,251 ​ ​ 29,671 ​ ​ 29,940 ​ ​ 6,349 ​ 651 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 62,863 ​ ​ 55,868 ​ ​ 48,363 ​ ​ 44,737 ​ ​ 43,249 ​ ​ 41,620 ​ ​ 13,877 ​ 646 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 69,362 ​ ​ 62,646 ​ ​ 54,626 ​ ​ 51,023 ​ ​ 49,861 ​ ​ 22,833 ​ 612 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 88,078 ​ ​ 89,691 ​ ​ 79,083 ​ ​ 80,147 ​ ​ 38,161 ​ 659 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 107,579 ​ ​ 98,409 ​ ​ 90,274 ​ ​ 61,116 ​ 558 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 136,433 ​ ​ 136,354 ​ ​ 81,568 ​ 656 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 153,895 ​ ​ 107,953 ​ 447 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 683,786 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 1,060 ​ $ 5,701 ​ $ 10,967 ​ $ 14,545 ​ $ 16,967 ​ $ 17,956 ​ $ 18,524 ​ $ 21,229 ​ $ 22,154 ​ $ 22,505 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 1,899 ​ ​ 4,006 ​ ​ 11,002 ​ ​ 18,852 ​ ​ 22,541 ​ ​ 23,376 ​ ​ 26,068 ​ ​ 28,963 ​ ​ 30,484 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 2,048 ​ ​ 10,127 ​ ​ 19,571 ​ ​ 23,184 ​ ​ 28,756 ​ ​ 31,352 ​ ​ 32,752 ​ ​ 35,958 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,068 ​ ​ 3,396 ​ ​ 7,441 ​ ​ 10,054 ​ ​ 12,703 ​ ​ 14,400 ​ ​ 17,807 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17 ​ ​ 5,679 ​ ​ 9,275 ​ ​ 15,441 ​ ​ 18,470 ​ ​ 22,835 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,506 ​ ​ 5,823 ​ ​ 10,801 ​ ​ 17,294 ​ ​ 22,016 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 4,213 ​ ​ 19,044 ​ ​ 25,389 ​ ​ 33,375 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,901 ​ ​ 13,856 ​ ​ 20,988 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,317 ​ ​ 23,841 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,479 ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 237,288 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ 21,094 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 467,592 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 4.0 % ​ ​ 13.0 % ​ ​ 14.0 % ​ ​ 13.1 % ​ ​ 9.9 % ​ ​ 5.8 % ​ ​ 6.1 % ​ ​ 9.0 % ​ ​ 4.0 % ​ ​ 1.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty - Claims Made ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance ​ As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 40,095 ​ $ 41,488 ​ $ 44,054 ​ $ 40,288 ​ $ 38,473 ​ $ 37,959 ​ $ 38,352 ​ $ 37,974 ​ $ 37,950 ​ $ 37,817 ​ $ 463 ​ 1,042 2014 ​ ​ ​ ​ ​ 53,929 ​ ​ 55,386 ​ ​ 58,152 ​ ​ 55,350 ​ ​ 51,554 ​ ​ 53,841 ​ ​ 53,783 ​ ​ 52,619 ​ ​ 52,796 ​ ​ 1,584 ​ 1,305 2015 ​ ​ ​ ​ ​ ​ ​ ​ 55,006 ​ ​ 47,831 ​ ​ 42,206 ​ ​ 39,906 ​ ​ 39,653 ​ ​ 39,619 ​ ​ 38,609 ​ ​ 37,578 ​ ​ 1,248 ​ 1,338 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 59,992 ​ ​ 67,760 ​ ​ 69,493 ​ ​ 67,728 ​ ​ 64,730 ​ ​ 65,078 ​ ​ 61,876 ​ ​ 2,451 ​ 1,507 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 60,572 ​ ​ 62,450 ​ ​ 62,714 ​ ​ 57,450 ​ ​ 59,907 ​ ​ 61,546 ​ ​ 4,455 ​ 1,647 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 66,128 ​ ​ 62,416 ​ ​ 56,468 ​ ​ 48,457 ​ ​ 47,692 ​ ​ 10,412 ​ 1,394 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 62,918 ​ ​ 61,712 ​ ​ 52,224 ​ ​ 46,500 ​ ​ 16,958 ​ 1,512 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 60,278 ​ ​ 56,785 ​ ​ 46,853 ​ ​ 29,739 ​ 1,294 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 51,219 ​ ​ 45,854 ​ ​ 32,103 ​ 1,216 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 58,289 ​ ​ 43,827 ​ 1,005 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 496,801 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 792 ​ $ 7,073 ​ $ 18,425 ​ $ 26,121 ​ $ 29,678 ​ $ 32,789 ​ $ 34,535 ​ $ 35,476 ​ $ 36,078 $ ​ 36,800 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 1,705 ​ ​ 9,775 ​ ​ 27,923 ​ ​ 35,755 ​ ​ 40,080 ​ ​ 44,127 ​ ​ 46,122 ​ ​ 50,714 ​ ​ 51,063 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 2,215 ​ ​ 10,738 ​ ​ 16,774 ​ ​ 20,920 ​ ​ 28,795 ​ ​ 32,241 ​ ​ 33,529 ​ ​ 34,671 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,060 ​ ​ 14,558 ​ ​ 27,465 ​ ​ 39,370 ​ ​ 47,999 ​ ​ 52,846 ​ ​ 53,737 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,455 ​ ​ 11,350 ​ ​ 22,728 ​ ​ 36,522 ​ ​ 42,918 ​ ​ 47,087 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,964 ​ ​ 11,965 ​ ​ 18,840 ​ ​ 24,918 ​ ​ 27,351 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,839 ​ ​ 8,123 ​ ​ 14,117 ​ ​ 19,930 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,488 ​ ​ 5,687 ​ ​ 10,412 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 999 ​ ​ 5,615 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,088 ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 288,754 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ 3,249 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 211,296 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 3.6 % ​ ​ 15.9 % ​ ​ 19.6 % ​ ​ 16.2 % ​ ​ 11.3 % ​ ​ 7.9 % ​ ​ 3.3 % ​ ​ 4.7 % ​ ​ 1.1 % ​ ​ 1.9 % ​ ​ ​ ​ ​ ​ 76 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty - Transportation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance ​ As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 32,742 ​ $ 32,853 ​ $ 32,989 ​ $ 37,673 ​ $ 38,811 ​ $ 39,974 ​ $ 39,309 ​ $ 39,183 ​ $ 39,586 ​ $ 39,598 ​ $ 103 ​ 2,853 2014 ​ ​ ​ ​ ​ 38,361 ​ ​ 33,015 ​ ​ 36,452 ​ ​ 38,590 ​ ​ 40,202 ​ ​ 40,508 ​ ​ 41,156 ​ ​ 41,974 ​ ​ 42,067 ​ ​ 412 ​ 3,099 2015 ​ ​ ​ ​ ​ ​ ​ ​ 38,561 ​ ​ 46,258 ​ ​ 47,021 ​ ​ 46,395 ​ ​ 45,162 ​ ​ 45,525 ​ ​ 45,807 ​ ​ 46,685 ​ ​ 684 ​ 3,187 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 50,430 ​ ​ 53,519 ​ ​ 54,105 ​ ​ 52,277 ​ ​ 52,818 ​ ​ 53,915 ​ ​ 55,718 ​ ​ 1,152 ​ 3,943 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 55,640 ​ ​ 53,641 ​ ​ 45,017 ​ ​ 43,764 ​ ​ 45,351 ​ ​ 46,742 ​ ​ 1,480 ​ 3,640 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 57,597 ​ ​ 54,592 ​ ​ 38,719 ​ ​ 36,468 ​ ​ 35,442 ​ ​ 2,428 ​ 3,404 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 58,297 ​ ​ 56,129 ​ ​ 43,976 ​ ​ 41,925 ​ ​ 4,182 ​ 3,317 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43,573 ​ ​ 35,524 ​ ​ 27,665 ​ ​ 5,844 ​ 1,647 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 51,322 ​ ​ 51,581 ​ ​ 14,902 ​ 2,307 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 60,862 ​ ​ 14,645 ​ 2,520 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 448,285 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 5,306 ​ $ 11,978 ​ $ 19,761 ​ $ 28,220 ​ $ 33,480 ​ $ 35,923 ​ $ 37,327 ​ $ 37,915 ​ $ 38,172 ​ $ 38,531 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 7,125 ​ ​ 13,933 ​ ​ 19,676 ​ ​ 27,457 ​ ​ 33,190 ​ ​ 38,282 ​ ​ 40,006 ​ ​ 40,427 ​ ​ 41,528 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 6,984 ​ ​ 20,709 ​ ​ 29,554 ​ ​ 37,222 ​ ​ 39,339 ​ ​ 41,345 ​ ​ 42,626 ​ ​ 45,002 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,923 ​ ​ 18,354 ​ ​ 30,354 ​ ​ 38,001 ​ ​ 43,564 ​ ​ 47,488 ​ ​ 52,555 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,979 ​ ​ 17,070 ​ ​ 24,090 ​ ​ 30,260 ​ ​ 36,141 ​ ​ 41,064 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6,980 ​ ​ 12,827 ​ ​ 19,216 ​ ​ 24,503 ​ ​ 28,844 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 7,148 ​ ​ 15,852 ​ ​ 21,120 ​ ​ 26,422 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,986 ​ ​ 7,876 ​ ​ 12,035 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5,341 ​ ​ 15,345 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6,442 ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 307,768 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ 1,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 141,737 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 15.0 % ​ ​ 18.8 % ​ ​ 16.8 % ​ ​ 15.8 % ​ ​ 11.0 % ​ ​ 8.0 % ​ ​ 4.9 % ​ ​ 2.5 % ​ ​ 1.6 % ​ ​ 0.9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance ​ As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 63,864 ​ $ 62,090 ​ $ 62,173 ​ $ 62,114 ​ $ 61,914 ​ $ 61,834 ​ $ 61,776 ​ $ 61,623 ​ $ 61,400 ​ $ 61,371 ​ $ 7 ​ 2,996 2014 ​ ​ ​ ​ ​ 56,587 ​ ​ 49,441 ​ ​ 48,801 ​ ​ 48,761 ​ ​ 49,217 ​ ​ 49,444 ​ ​ 49,479 ​ ​ 49,520 ​ ​ 49,468 ​ ​ 15 ​ 4,564 2015 ​ ​ ​ ​ ​ ​ ​ ​ 59,863 ​ ​ 56,103 ​ ​ 53,958 ​ ​ 52,720 ​ ​ 53,111 ​ ​ 52,781 ​ ​ 52,878 ​ ​ 53,359 ​ ​ 25 ​ 4,076 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 62,900 ​ ​ 55,594 ​ ​ 55,384 ​ ​ 55,930 ​ ​ 55,424 ​ ​ 55,383 ​ ​ 55,536 ​ ​ 150 ​ 3,377 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 90,803 ​ ​ 83,273 ​ ​ 84,961 ​ ​ 82,671 ​ ​ 82,319 ​ ​ 81,912 ​ ​ 801 ​ 2,893 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 89,091 ​ ​ 83,457 ​ ​ 79,961 ​ ​ 80,470 ​ ​ 79,093 ​ ​ 1,443 ​ 2,337 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 71,232 ​ ​ 65,189 ​ ​ 61,116 ​ ​ 59,901 ​ ​ 1,141 ​ 2,453 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 118,247 ​ ​ 110,466 ​ ​ 108,546 ​ ​ 12,532 ​ 2,855 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 135,447 ​ ​ 116,424 ​ ​ 16,900 ​ 3,071 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 138,756 ​ ​ 53,549 ​ 2,505 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 804,366 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 32,208 ​ $ 50,840 ​ $ 57,407 ​ $ 59,259 ​ $ 60,520 ​ $ 61,195 ​ $ 61,325 ​ $ 61,335 ​ $ 61,188 ​ $ 61,188 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 30,550 ​ ​ 43,380 ​ ​ 46,148 ​ ​ 46,528 ​ ​ 47,799 ​ ​ 49,027 ​ ​ 49,259 ​ ​ 49,317 ​ ​ 49,339 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 32,184 ​ ​ 49,348 ​ ​ 50,197 ​ ​ 51,290 ​ ​ 52,078 ​ ​ 52,342 ​ ​ 52,400 ​ ​ 53,208 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 33,134 ​ ​ 46,921 ​ ​ 51,371 ​ ​ 53,006 ​ ​ 54,328 ​ ​ 54,747 ​ ​ 55,215 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 41,314 ​ ​ 66,818 ​ ​ 74,415 ​ ​ 78,360 ​ ​ 80,581 ​ ​ 80,958 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 37,048 ​ ​ 68,264 ​ ​ 72,357 ​ ​ 75,253 ​ ​ 76,378 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30,703 ​ ​ 51,740 ​ ​ 55,092 ​ ​ 57,038 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 43,192 ​ ​ 79,660 ​ ​ 88,401 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 57,272 ​ ​ 89,174 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 44,667 ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 655,566 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ 1,101 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 149,901 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 50.4 % ​ ​ 31.1 % ​ ​ 6.7 % ​ ​ 2.9 % ​ ​ 2.1 % ​ ​ 1.1 % ​ ​ 0.4 % ​ ​ 0.5 % ​ ​ ( 0.1 )% ​ ​ 0.0 % ​ ​ ​ ​ ​ ​ ​ 77 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Surety ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands, except number of claims) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Incurred Losses and Loss Adjustment Expenses, Net of Reinsurance As of December 31, 2022 ​ ​ For the Years Ended December 31, ​ ​ ​ ​ Cumulative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 Total IBNR Claims 2013 ​ $ 16,080 ​ $ 7,516 ​ $ 6,170 ​ $ 5,399 ​ $ 5,271 ​ $ 5,231 ​ $ 5,209 ​ $ 5,107 ​ $ 5,046 ​ $ 5,139 ​ $ 3 ​ 1,411 2014 ​ ​ ​ ​ ​ 16,450 ​ ​ 8,106 ​ ​ 5,225 ​ ​ 4,427 ​ ​ 4,267 ​ ​ 4,319 ​ ​ 4,266 ​ ​ 4,227 ​ ​ 4,230 ​ ​ 5 ​ 1,357 2015 ​ ​ ​ ​ ​ ​ ​ ​ 16,958 ​ ​ 12,957 ​ ​ 11,113 ​ ​ 10,456 ​ ​ 9,792 ​ ​ 9,521 ​ ​ 9,275 ​ ​ 8,580 ​ ​ 21 ​ 1,244 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 18,928 ​ ​ 11,062 ​ ​ 9,351 ​ ​ 8,895 ​ ​ 8,391 ​ ​ 7,948 ​ ​ 8,134 ​ ​ 81 ​ 1,389 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 16,127 ​ ​ 8,641 ​ ​ 8,798 ​ ​ 8,116 ​ ​ 8,034 ​ ​ 7,769 ​ ​ 158 ​ 1,826 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 16,765 ​ ​ 7,227 ​ ​ 4,564 ​ ​ 3,947 ​ ​ 3,996 ​ ​ 244 ​ 1,362 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 14,785 ​ ​ 7,205 ​ ​ 5,053 ​ ​ 4,062 ​ ​ 860 ​ 1,178 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 19,241 ​ ​ 14,840 ​ ​ 12,378 ​ ​ 4,214 ​ 895 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 18,540 ​ ​ 11,724 ​ ​ 7,826 ​ 767 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 20,185 ​ ​ 18,683 ​ 527 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 86,197 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance ​ ​ ​ ​ ​ ​ ​ For the Years Ended December 31, ​ ​ ​ ​ ​ AY 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022 ​ ​ ​ ​ ​ 2013 ​ $ 1,116 ​ $ 2,856 ​ $ 4,701 ​ $ 4,911 ​ $ 5,098 ​ $ 5,150 ​ $ 5,128 ​ $ 5,061 ​ $ 5,029 ​ $ 5,131 ​ ​ ​ ​ ​ 2014 ​ ​ ​ ​ ​ 722 ​ ​ 4,283 ​ ​ 4,166 ​ ​ 4,059 ​ ​ 4,131 ​ ​ 4,234 ​ ​ 4,214 ​ ​ 4,197 ​ ​ 4,218 ​ ​ ​ ​ ​ 2015 ​ ​ ​ ​ ​ ​ ​ ​ 3,192 ​ ​ 6,719 ​ ​ 7,695 ​ ​ 9,436 ​ ​ 9,183 ​ ​ 9,186 ​ ​ 9,168 ​ ​ 8,462 ​ ​ ​ ​ ​ 2016 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,087 ​ ​ 5,817 ​ ​ 6,299 ​ ​ 7,640 ​ ​ 8,086 ​ ​ 7,673 ​ ​ 7,946 ​ ​ ​ ​ ​ 2017 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 979 ​ ​ 2,862 ​ ​ 7,062 ​ ​ 7,221 ​ ​ 7,362 ​ ​ 7,372 ​ ​ ​ ​ ​ 2018 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,835 ​ ​ 2,588 ​ ​ 2,368 ​ ​ 2,536 ​ ​ 3,020 ​ ​ ​ ​ ​ 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 336 ​ ​ 2,433 ​ ​ 2,765 ​ ​ 3,039 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 835 ​ ​ 2,719 ​ ​ 3,828 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,197 ​ ​ 3,229 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 241 ) ​ ​ ​ ​ ​ ​ ​ ​ * Presented as unaudited required supplementary information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 46,004 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All outstanding liabilities before 2013, net of reinsurance ​ ​ ( 77 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities for losses and loss adjustment expenses, net of reinsurance ​ $ 40,116 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average Annual Percentage Payout of Incurred Losses by Age, Net of Reinsurance* ​ ​ ​ ​ ​ Years 1 2 3 4 5 6 7 8 9 10 ​ ​ ​ ​ ​ ​ ​ ​ 19.6 % ​ ​ 35.6 % ​ ​ 14.5 % ​ ​ 7.3 % ​ ​ 3.6 % ​ ​ ( 0.3 )% ​ ​ 0.6 % ​ ​ ( 3.3 )% ​ ​ ( 0.1 )% ​ ​ 2.0 % ​ ​ ​ ​ ​ ​ 78 Table of Contents The following is a reconciliation of the net incurred and paid loss development tables to the liability for unpaid losses and settlement expenses in the consolidated balance sheet: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) December 31, 2022 December 31, 2021 Net outstanding liabilities: ​ ​ ​ ​ ​ ​ Casualty - Primary Occurrence ​ $ 461,527 ​ $ 453,142 Casualty - Excess Occurrence ​ ​ 467,592 ​ ​ 384,579 Casualty - Claims Made ​ ​ 211,296 ​ ​ 209,705 Casualty - Transportation ​ ​ 141,737 ​ ​ 131,531 Property ​ ​ 149,901 ​ ​ 124,652 Surety ​ ​ 40,116 ​ ​ 34,244 Unallocated loss adjustment expenses ​ ​ 61,752 ​ ​ 59,391 Allowance for uncollectible reinsurance balances recoverable on unpaid losses and settlement expenses ​ ​ 11,250 ​ ​ 11,188 Other ​ ​ 30,377 ​ ​ 27,037 Liabilities for unpaid loss and settlement expenses, net of reinsurance ​ $ 1,575,548 ​ $ 1,435,469 ​ ​ ​ ​ ​ ​ ​ Reinsurance recoverable on unpaid claims: ​ ​ ​ ​ ​ ​ Casualty - Primary Occurrence ​ $ 46,674 ​ $ 43,688 Casualty - Excess Occurrence ​ ​ 138,822 ​ ​ 122,092 Casualty - Claims Made ​ ​ 298,930 ​ ​ 271,259 Casualty - Transportation ​ ​ 78,456 ​ ​ 66,283 Property ​ ​ 137,613 ​ ​ 65,098 Surety ​ ​ 50,737 ​ ​ 50,743 Allowance for uncollectible reinsurance balances recoverable on unpaid losses and settlement expenses ​ ​ ( 11,250 ) ​ ​ ( 11,188 ) Other ​ ​ 107 ​ ​ 111 Total reinsurance balances recoverable on unpaid losses and settlement expenses ​ $ 740,089 ​ $ 608,086 ​ ​ ​ ​ ​ ​ ​ Total gross liability for unpaid loss and settlement expenses ​ $ 2,315,637 ​ $ 2,043,555 ​ DETERMINATION OF IBNR ​ Initial carried IBNR reserves are determined through a reserve estimation process. For most casualty and surety products, this process involves the use of an initial loss and allocated loss adjustment expense (ALAE) ratio that is applied to the earned premium for a given period. Payments and case reserves are subtracted from this initial estimate of ultimate loss and ALAE to determine a carried IBNR reserve. For most property products, the IBNR reserves are determined by IBNR percentages applied to premium earned. The percentages are determined based on historical reporting patterns and are updated periodically. No deductions for paid or case reserves are made. Shortly after natural or man-made catastrophes, we review insured locations exposed to the event and model losses based on our own exposures and industry loss estimates of the event. We also consider our knowledge of frequency and severity from early claim reports to determine an appropriate reserve for the catastrophe. Adjustments to the initial loss ratio by product and segment are made where necessary and reflect updated assumptions regarding loss experience, loss trends, price changes and prevailing risk factors. ​ Actuaries perform a ground-up reserve study of the expected value of the unpaid loss and LAE derived using multiple standard actuarial methodologies on a quarterly basis. Each method produces an estimate of ultimate loss by accident year. We review all of these various estimates and assign weights to each based on the characteristics of the product being reviewed. These estimates are then compared to the carried loss reserves to determine the appropriateness of the current reserve balance. In addition, an emergence analysis is completed quarterly to determine if further adjustments are necessary. ​ Upon completion of our loss and LAE estimation analysis, a review of the resulting variance between the indicated reserves and the carried reserves takes place. Our actuaries make a recommendation to management in regards to booked reserves that reflect their analytical assessment and view of estimation risk. After discussion of these analyses and all relevant risk factors, the Loss Reserve Committee, a panel of management including the lead reserving actuary, chief executive officer, chief operating officer, chief financial officer and other executives, confirms the appropriateness of the reserve balances. ​ Actuarial models base future loss emergence on historical experience, with adjustments for current trends. We expect the timing of loss emergence and ultimate loss ratios for certain coverages we underwrite will be affected as a result of COVID-19 and the 79 Table of Contents related economic impact. The industry is experiencing new issues, including the postponement of civil court cases, the extension of various statutes of limitations, claim uncertainty due to supply shortages and changes in settlement trends. Our recorded reserves include consideration of these factors, but the duration and degree to which these issues persist, along with potential legislative, regulatory or judicial actions, could result in loss reserve deficiencies and reduce earnings in future periods. ​ DEVELOPMENT OF IBNR RESERVES ​ The following table summarizes our prior accident years’ loss reserve development by segment for 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Casualty ​ $ ( 87,225 ) ​ $ ( 108,632 ) ​ $ ( 75,075 ) Property ​ ( 24,927 ) ​ ( 10,981 ) ​ ( 13,019 ) Surety ​ ( 10,427 ) ​ ( 5,850 ) ​ ( 12,959 ) Total ​ $ ( 122,579 ) ​ $ ( 125,463 ) ​ $ ( 101,053 ) ​ A discussion of significant components of reserve development for the three most recent calendar years follows: ​ 2022. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2022. The casualty segment contributed $ 87.2 million in favorable development. Accident years 2016 and 2018 through 2021 contributed the majority of the favorable development, with earlier years developing favorably in aggregate to a lesser extent. Risk selection by our underwriters continued to provide better results than estimated in our reserving process. Within the primary occurrence grouping, the general liability product contributed $ 28.3 million to our favorable development. Small commercial products were favorable by $ 4.6 million. Within the excess occurrence grouping, commercial excess was favorable by $ 6.3 million and our personal umbrella product developed favorably by $ 3.8 million. Within the claims made grouping, professional services coverages developed favorably by $ 18.8 million and executive products developed favorably by $ 4.1 million. Transportation experienced favorable development of $ 6.4 million. ​ Marine contributed $ 17.0 million of the $ 24.9 million total favorable property development. Accident years 2019 through 2021 contributed to the marine products’ favorable development. Hawaii homeowners contributed $ 2.3 million of favorable development. ​ The surety segment experienced favorable development of $ 10.4 million. The majority of the favorable development was from accident years 2019 through 2021. Contract surety had favorable development of $ 4.9 million and commercial surety had favorable development of $ 4.2 million. ​ 2021. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2021. Development from the casualty segment totaled $ 108.6 million. Favorable development was experienced across accident years 2014 through 2020, with the largest amounts attributable to accident years 2018 through 2020. We continued to experience emergence that was generally better than previously estimated. We attribute the favorable emergence to loss trends in most lines outperforming our long-term expectations, our underwriters’ ability to select risk and an increasing rate environment. Within the primary occurrence grouping, the general liability product contributed $ 25.3 million to our favorable development and small commercial was favorable by $ 7.5 million. Within the excess occurrence grouping, commercial excess was favorable by $ 10.5 million and personal umbrella developed favorably by $ 10.4 million. Within the claims made grouping, professional services coverages developed favorably by $ 14.2 million and executive products developed favorably by $ 5.9 million. Transportation had $ 20.1 million of favorable development. ​ Our marine product was the predominant driver of the favorable development in the property segment, accounting for $ 6.6 million of the $ 11.0 million total favorable development for the segment. Accident years 2019 and 2020 made the largest contribution. Commercial property was favorable by $ 2.0 million. ​ The surety segment experienced $ 5.9 million of favorable development. The majority of the favorable development came from the 2019 and 2020 accident years. Contract surety was the main contributor with favorable development of $ 4.6 million. ​ 2020. We experienced favorable emergence relative to prior years’ reserve estimates in all of our segments during 2020. The casualty segment contributed $ 75.1 million in favorable development. Accident years 2017 through 2019 contributed significantly to the favorable development. This was predominantly caused by favorable frequency and severity trends that continued to be better than our long-term expectations. In addition, we believe this to be the result of our underwriters’ ability to select risk as well as an increasing rate environment within many of our casualty sublines. Nearly all of our casualty products contributed to the favorable development. Transportation contributed $ 19.1 million for the year. Within the primary occurrence grouping, the general liability 80 Table of Contents product contributed $ 17.9 million to our favorable development. Within the excess occurrence grouping, commercial excess developed favorably by $ 12.5 million. Within the claims made grouping, professional services coverages developed favorably by $ 7.8 million and medical professional liability had $ 6.1 million of favorable development. ​ The marine product was the primary driver of the favorable development in the property segment. Marine contributed $ 6.5 million of the $ 13.0 million total favorable property development, primarily in accident years 2017 and 2018. Commercial property was favorable by $ 5.2 million. ​ The surety segment experienced favorable development of $ 13.0 million. The majority of the favorable development was from accident year 2019. Contract and commercial surety products were the main contributors with favorable development of $ 5.9 million and $ 3.8 million, respectively. ​ ENVIRONMENTAL, ASBESTOS AND MASS TORT EXPOSURES ​ We are subject to environmental site cleanup, asbestos removal and mass tort claims and exposures through our commercial excess, general liability and discontinued assumed casualty reinsurance lines of business. The majority of the exposure is in the excess layers of our commercial excess and assumed reinsurance books of business. ​ The following table represents paid and unpaid environmental, asbestos and mass tort claims data (including incurred but not reported losses) as of December 31, 2022, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Loss and LAE Payments (Cumulative): ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ $ 142,377 ​ $ 141,768 ​ $ 139,804 Ceded ​ ( 69,696 ) ​ ( 69,576 ) ​ ( 69,219 ) Net ​ $ 72,681 ​ $ 72,192 ​ $ 70,585 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unpaid Losses and LAE at End of Year: ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ $ 26,871 ​ $ 25,747 ​ $ 22,485 Ceded ​ ( 5,786 ) ​ ( 5,718 ) ​ ( 4,619 ) Net ​ $ 21,085 ​ $ 20,029 ​ $ 17,866 ​ Our environmental, asbestos and mass tort exposure is limited, relative to other insurers, as a result of entering the affected liability lines after the insurance industry had already recognized environmental and asbestos exposure as a problem and adopted appropriate coverage exclusions. The majority of our reserves are associated with products that went into runoff at least two decades ago. Some are for assumed reinsurance, some are for excess liability business and some followed from the acquisition of Underwriters Indemnity Company in 1999. ​ During 2022, we increased our IBNR reserves for asbestos, environmental and mass tort exposures, as we experienced modest emergence and an increase in open claims. ​ While our environmental exposure is limited, the ultimate liability for this exposure is difficult to assess because of the extensive and complicated litigation involved in the settlement of claims and evolving legislation on issues such as joint and several liability, retroactive liability and standards of cleanup. Additionally, we participate primarily in the excess layers of coverage, where accurate estimates of ultimate loss are more difficult to derive than for primary coverage. ​ 7. INCOME TAXES ​ The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are summarized below. ​ 81 Table of Contents ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 Deferred tax assets: ​ ​ ​ ​ ​ ​ Tax discounting of unpaid losses and settlement expenses ​ $ 23,788 ​ $ 22,637 Unearned premium offset ​ 27,158 ​ 23,080 Net unrealized depreciation of securities ​ ​ 19,839 ​ ​ — Deferred compensation ​ 4,058 ​ 3,469 Share-based compensation expense ​ 3,202 ​ 3,089 Capitalized research and development costs ​ ​ 2,544 ​ ​ — Lease liability ​ 3,026 ​ 3,796 Other ​ 938 ​ 367 Deferred tax assets before allowance ​ $ 84,553 ​ $ 56,438 Less valuation allowance ​ — ​ — Total deferred tax assets ​ $ 84,553 ​ $ 56,438 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Net unrealized appreciation of securities ​ $ — ​ $ 76,533 Deferred policy acquisition costs ​ 26,850 ​ 21,746 Lease asset ​ ​ 2,681 ​ ​ 3,101 Discounting of unpaid losses and settlement expenses - Tax Cuts and Jobs Act (TCJA) implementation offset ​ ​ 1,909 ​ ​ 2,545 Fixed assets ​ 3,083 ​ 3,518 Intangible assets ​ 1,543 ​ 1,537 Undistributed earnings of unconsolidated investees ​ 7,399 ​ 29,515 Other ​ 819 ​ 1,452 Total deferred tax liabilities ​ $ 44,284 ​ $ 139,947 Net deferred tax asset (liability) ​ $ 40,269 ​ $ ( 83,509 ) ​ Income tax expense (benefit) attributable to income from operations for the years ended December 31, 2022, 2021 and 2020, differed from the amounts computed by applying the U.S. federal tax rate of 21 percent to pretax income from continuing operations as demonstrated in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 ​ Provision for income taxes at the statutory federal tax rates ​ $ 151,342 ​ 21.0 % $ 72,307 ​ 21.0 % $ 39,867 ​ 21.0 % Increase (reduction) in taxes resulting from: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Excess tax benefit on share-based compensation ​ ​ ( 4,491 ) ​ ( 0.6 ) % ​ ( 3,090 ) ​ ( 0.9 ) % ​ ( 3,537 ) ​ ( 1.8 ) % Tax-exempt interest income ​ ​ ( 1,143 ) ​ ( 0.2 ) % ​ ( 1,219 ) ​ ( 0.3 ) % ​ ( 1,293 ) ​ ( 0.7 ) % Dividends received deduction ​ ​ ( 912 ) ​ ( 0.1 ) % ​ ( 891 ) ​ ( 0.3 ) % ​ ( 883 ) ​ ( 0.5 ) % Investment tax credit ​ ​ ( 5,053 ) ​ ( 0.7 ) % ​ ( 3,491 ) ​ ( 1.0 ) % ​ ( 2,435 ) ​ ( 1.3 ) % ESOP dividends paid deduction ​ ​ ( 4,171 ) ​ ( 0.6 ) % ​ ( 1,566 ) ​ ( 0.5 ) % ​ ( 1,083 ) ​ ( 0.6 ) % Unconsolidated investee dividends ​ ​ — ​ — % ​ — ​ — % ​ ( 479 ) ​ ( 0.2 ) % Nondeductible expenses ​ ​ 1,263 ​ 0.2 % ​ 3,834 ​ 1.1 % ​ 1,878 ​ 1.0 % Other items, net ​ ​ 432 ​ 0.0 % ​ ( 917 ) ​ ( 0.2 ) % ​ 715 ​ 0.4 % Total ​ $ 137,267    ​ 19.0 % $ 64,967    ​ 18.9 % $ 32,750    ​ 17.3 % ​ Effective rates are dependent upon components of pretax earnings and the related tax effects. The effective rate was higher in 2022 due to higher levels of pretax income, which decreased the impact of tax-favored adjustments on a percentage basis. ​ Our net earnings include equity in earnings of unconsolidated investees, Maui Jim and Prime. The investees do not have a policy or pattern of paying dividends. As a result, we record a deferred tax liability on the earnings at the corporate capital gains rate of 21 percent in anticipation of recovering our investments through means other than through the receipt of dividends, such as a sale. We received a $ 4.7 million dividend from Prime in 2020 and recognized a $ 0.5 million tax benefit from applying the lower tax rate applicable to affiliated dividends paid to insurance companies ( 10.8 percent in 2020), as compared to the corporate capital gains rate on which the deferred tax liabilities were based. Standing alone, the dividends resulted in a 0.2 percent reduction to the 2020 effective tax rate. No dividends were declared from unconsolidated investees in 2022 or 2021, therefore having no impact to the 2022 or 2021 effective tax rates. ​ 82 Table of Contents Dividends paid to our Employee Stock Ownership Plan (ESOP) also result in a tax deduction. Dividends paid to the ESOP in 2022, 2021 and 2020 resulted in tax benefits of $ 4.2 million, $ 1.6 million and $ 1.1 million, respectively. These tax benefits reduced the effective tax rate for 2022, 2021 and 2020 by 0.6 percent, 0.5 percent and 0.6 percent and, respectively. ​ We have recorded our deferred tax assets and liabilities using the statutory federal tax rate of 21 percent. We believe it is more likely than not that all deferred tax assets will be recovered, given the carry back availability as well as the projected results of future operations, which will generate sufficient taxable income to realize the deferred tax asset. In addition, we believe when these deferred items reverse in future years, our taxable income will be taxed at an effective rate of 21 percent. ​ Federal and state income taxes paid in 2022, 2021 and 2020 amounted to $ 190.3 million, $ 38.6 million and $ 23.7 million, respectively. The increase in 2022 is the result of taxes paid on the sale of our investment in Maui Jim. See note 13 for more information on the sale. ​ Although we are not currently under audit by the IRS, tax years 2019 through 2022 remain open and are subject to examination. ​ 8. EMPLOYEE BENEFITS ​ EMPLOYEE STOCK OWNERSHIP, 401(K) AND INCENTIVE PLANS ​ We maintain ESOP, 401(k) and incentive plans covering executives, managers and associates. Funding of these plans is primarily dependent upon reaching predetermined levels of operating return on equity, combined ratio and Market Value Potential (MVP). MVP is a compensation model that measures components of comprehensive earnings against a minimum required return on our capital. Bonuses are earned as we generate earnings in excess of this required return. While some management incentive plans may be affected somewhat by other performance factors, the larger influence of corporate performance ensures that the interests of our executives, managers and associates align with those of our shareholders. ​ Our 401(k) plan allows voluntary contributions by employees and permits ESOP diversification transfers for employees meeting certain age and service requirements. We provide a basic 401(k) contribution of 3 percent of eligible compensation. Participants are 100 percent vested in both voluntary and basic contributions. Additionally, an annual discretionary profit-sharing contribution may be made to the ESOP and 401(k), subject to the achievement of certain overall financial goals and board approval. Profit-sharing contributions vest after three years of plan service. ​ Our ESOP and 401(k) cover all employees meeting eligibility requirements. ESOP and 401(k) profit-sharing contributions are approved annually by our board of directors and are expensed in the year earned. ESOP and 401(k)-related expenses (basic and profit-sharing) were $ 18.4 million, $ 18.0 million and $ 14.4 million for 2022, 2021 and 2020, respectively. ​ During 2022, the ESOP purchased 87,367 shares of RLI Corp. stock on the open market at an average price of $ 103.01 ($ 9.0 million) relating to the contribution for plan year 2021. Shares held by the ESOP as of December 31, 2022, totaled 2,534,646 and are treated as outstanding in computing our earnings per share. During 2021, the ESOP purchased 65,815 shares of RLI Corp. stock on the open market at an average price of $ 107.95 ($ 7.1 million) relating to the contribution for plan year 2020. During 2020, the ESOP purchased 94,194 shares of RLI Corp. stock on the open market at an average price of $ 82.67 ($ 7.8 million) relating to the contribution for plan year 2019. The above-mentioned ESOP purchases relate only to our annual contributions to the plan and do not include amounts or shares resulting from the reinvestment of dividends. ​ Annual awards are provided to executives, managers and associates through our incentive plans, provided certain strategic and financial goals are met. Annual expenses for these incentive plans totaled $ 23.9 million, $ 39.1 million and $ 26.6 million for 2022, 2021 and 2020, respectively. ​ DEFERRED COMPENSATION ​ We maintain rabbi trusts for deferred compensation plans for directors, key employees and executive officers through which contributions can be invested in RLI Corp. stock or mutual funds. The employer stock in the plan cannot be diversified and is accounted for as equity, in a manner consistent with the accounting for treasury stock. At December 31, 2022, the trusts’ assets were valued at $ 55.9 million. ​ 83 Table of Contents STOCK PLANS ​ Our RLI Corp. Long-Term Incentive Plan (2010 LTIP) was in place from 2010 to 2015. The 2010 LTIP provided for equity-based compensation, including stock options, up to a maximum of 4,000,000 shares of common stock (subject to adjustment for changes in our capitalization and other events). Between 2010 and 2015, we granted 2,878,000 stock options under the 2010 LTIP. The 2010 LTIP was replaced in 2015. ​ In 2015, our shareholders approved the 2015 RLI Corp. Long-Term Incentive Plan (2015 LTIP), which provides for equity-based compensation and replaced the 2010 LTIP. In conjunction with the adoption of the 2015 LTIP, effective May 7, 2015, options were no longer granted under the 2010 LTIP. Awards under the 2015 LTIP may be in the form of restricted stock, restricted stock units, stock options (non-qualified only), stock appreciation rights, performance units as well as other stock-based awards. Eligibility under the 2015 LTIP is limited to employees and directors of the Company or any affiliate. The granting of awards under the 2015 LTIP is solely at the discretion of the board of directors. The maximum number of shares of common stock available for distribution under the 2015 LTIP is 4,000,000 shares (subject to adjustment for changes in our capitalization and other events). Since the plan’s approval in 2015, we have granted 3,263,788 awards under the 2015 LTIP, including 363,368 in 2022. ​ Compensation expense is based on the probable number of awards expected to vest. The total compensation expense related to equity awards was $ 8.8 million, $ 6.4 million and $ 5.4 million for 2022, 2021 and 2020, respectively. The total income tax benefit was $ 1.4 million for 2022, $ 1.0 million for 2021 and $ 0.9 million for 2020. Total unrecognized compensation expense relating to outstanding and unvested awards was $ 6.6 million, which will be recognized over the weighted average vesting period of 2.32 years. ​ Stock Options ​ Under the 2015 LTIP, as under the 2010 LTIP, we grant stock options for shares with an exercise price equal to the fair market value of the shares at the date of grant (subject to adjustments for changes in our capitalization, including special dividends and other events as set forth in such plans). Options generally vest and become exercisable ratably over a five-year period and expire eight years after grant. ​ For most participants, the requisite service period and vesting period will be the same. For participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75 , the requisite service period is deemed to be met and options are immediately expensed on the date of grant. For participants who will become retirement eligible during the vesting period, the requisite service period over which expense is recognized is the period between the grant date and the attainment of retirement eligibility. Shares issued upon option exercise are newly issued shares. ​ On November 10, 2022, the board of directors declared a $ 7.00 special cash dividend to be paid on December 20, 2022, the shareholders of record at the close of business on November 30, 2022. To preserve the intrinsic value of the options, the board also approved, pursuant to the terms of our various stock option plans, a proportional adjustment to the exercise price (equivalent to the special dividend) for all outstanding non-qualified options in relation to the special dividend. These adjustments did not result in any incremental compensation expense as the aggregate fair value, aggregate intrinsic value and the ratio of the exercise price to the market price were approximately equal immediately before and after the adjustments. ​ The following table summarize option activity in 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Aggregate ​ ​ ​ ​ Weighted ​ Average ​ Intrinsic ​ ​ ​ ​ Average ​ Remaining ​ Value ​ Options Exercise Price Contractual Life (in 000’s) Outstanding as of January 1, 2022 ​ 1,669,325 ​ $ 78.63 ​ ​ ​ ​ ​ Granted ​ 344,100 ​ ​ 109.50 ​ ​ ​ ​ ​ Exercised ​ ( 308,280 ) ​ ​ 54.42 ​ ​ ​ ​ ​ Cancelled or forfeited ​ ( 9,485 ) ​ ​ 86.40 ​ ​ ​ ​ ​ Outstanding as of December 31, 2022 ​ 1,695,660 ​ $ 82.42 4.90 ​ $ 82,835 Exercisable at December 31, 2022 ​ 782,067 ​ $ 67.54 3.47 ​ $ 49,839 ​ The intrinsic value, which is the difference between the fair value and the exercise price, of options exercised was $ 21.8 million, $ 12.2 million and $ 15.5 million during 2022, 2021 and 2020, respectively. ​ 84 Table of Contents The fair value of options were estimated using a Black-Scholes based option pricing model with the following weighted-average grant-date assumptions and weighted-average fair values as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 2020 Weighted-average fair value of grants ​ $ 21.43 ​ $ 17.11 ​ $ 13.24 ​ Risk-free interest rates ​ ​ 2.95 % ​ 0.75 % ​ 0.39 % Dividend yield ​ ​ 2.50 % ​ 2.06 % ​ 2.30 % Expected volatility ​ ​ 22.89 % ​ 22.73 % ​ 22.67 % Expected option life ​ ​ 5.05 years ​ 4.97 years ​ 4.96 years ​ The risk-free rate was determined based on U.S. treasury yields that most closely approximated the option’s expected life. The dividend yield was determined based on the average annualized quarterly dividends paid during the most recent five-year period and incorporated a consideration for special dividends paid in recent history. The expected volatility was calculated based on the median of the rolling volatilities for the expected life of the options. The expected option life was determined based on historical exercise behavior and the assumption that all outstanding options will be exercised at the midpoint of the current date and remaining contractual term, adjusted for the demographics of the current year’s grant. ​ Restricted Stock Units ​ In addition to stock options, restricted stock units (RSUs) are granted with a value equal to the closing stock price of the Company’s stock on the dates the units are granted. For employees, these units generally have a three-year cliff vesting, but have an accelerated vesting feature for participants who are retirement eligible, defined by the plan as those individuals whose age and years of service equals 75 . For directors, these units vest on the earlier of one year from the date of grant or the next annual shareholders meeting. In addition, the RSUs have dividend participation, which accrue as additional units and are settled with granted stock units at the end of the vesting period. The total fair value of restricted stock units that vested was $ 2.5 million, $ 2.2 million and $ 1.5 million during 2022, 2021 and 2020, respectively. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ ​ Grant Date ​ RSUs Fair Value Nonvested at January 1, 2022 ​ 45,068 ​ $ 97.67 Granted ​ 19,268 ​ ​ 115.71 Reinvested ​ 2,632 ​ ​ 127.48 Vested ​ ( 21,380 ) ​ ​ 93.07 Forfeited ​ ( 1,380 ) ​ ​ 77.92 Nonvested at December 31, 2022 ​ 44,208 ​ $ 109.51 ​ ​ 9. STATUTORY INFORMATION AND DIVIDEND RESTRICTIONS ​ The statutory financial statements of our three insurance companies are presented on the basis of accounting practices prescribed or permitted by the Illinois Department of Insurance (IDOI), which has adopted the NAIC’s statutory accounting principles (SAP). We do not use any permitted SAP that differ from NAIC prescribed SAP. In converting from SAP to GAAP, typical adjustments include deferral of policy acquisition costs, the inclusion of statutory non-admitted assets and the inclusion of net unrealized holding gains or losses in shareholders’ equity relating to fixed income securities. ​ The NAIC has risk-based capital (RBC) requirements for insurance companies to calculate and report information under a risk-based formula, which measures statutory capital and surplus needs based upon a regulatory definition of risk relative to the company’s balance sheet and mix of products. As of December 31, 2022, each of our insurance subsidiaries had an RBC amount in excess of the authorized control level RBC, as defined by the NAIC. RLI Insurance Company (RLI Ins.), our principal insurance company subsidiary, had an authorized control level RBC of $ 249.7 million, $ 225.1 million and $ 203.9 million as of December 31, 2022, 2021 and 2020, respectively, compared to actual statutory capital and surplus of $ 1.4 billion, $ 1.2 billion and $ 1.1 billion, respectively, for these same periods. ​ Year-end statutory surplus for 2022 presented in the table below includes $ 327.4 million of RLI Corp. stock (cost basis of $ 64.6 million) held by Mt. Hawley Insurance Company, compared to $ 271.2 million and $ 238.0 million in 2021 and 2020, respectively. The Securities Valuation Office provides specific guidance for valuing this investment, which is eliminated in our GAAP consolidated financial statements. 85 Table of Contents ​ The following table includes selected information for our insurance subsidiaries for the year ended and as of December 31: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Consolidated net income, statutory basis ​ $ 229,111 ​ $ 207,550 ​ $ 120,329 Consolidated surplus, statutory basis ​ $ 1,407,925 ​ $ 1,240,649 ​ $ 1,121,592 ​ As discussed in note 1.A., our three insurance companies are subsidiaries of RLI Corp., with RLI Ins. as the first-level, or principal, insurance subsidiary. At the holding company (RLI Corp.) level, we rely largely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt, corporate expenses and dividends to RLI Corp. shareholders. As discussed further below, dividend payments to RLI Corp. from our principal insurance subsidiary are restricted by state insurance laws as to the amount that may be paid without prior approval of the insurance regulatory authorities of Illinois. As a result, we may not be able to receive dividends from such subsidiary at times and in amounts necessary to pay desired dividends to RLI Corp. shareholders. On a GAAP basis, as of December 31, 2022, our holding company had $ 1.2 billion in equity. This includes amounts related to the equity of our insurance subsidiaries, which is subject to regulatory restrictions under state insurance laws. The unrestricted portion of holding company net assets is comprised primarily of investments and cash, including $ 240.6 million in liquid assets, which was elevated by the cash proceeds received from the sale of Maui Jim. Unrestricted funds at the holding company are available to fund debt interest, general corporate obligations and regular dividend payments to our shareholders. If necessary, the holding company also has other potential sources of liquidity that could provide for additional funding to meet corporate obligations or pay shareholder dividends, which include a revolving line of credit, as well as access to capital markets. ​ Ordinary dividends, which may be paid by our principal insurance subsidiary without prior regulatory approval, are subject to certain limitations based upon statutory income, surplus and earned surplus. The maximum ordinary dividend distribution from our principal insurance subsidiary in a rolling 12-month period is limited by Illinois law to the greater of 10 percent of RLI Ins. policyholder surplus, as of December 31 of the preceding year, or the net income of RLI Ins. for the 12-month period ending December 31 of the preceding year. Ordinary dividends are further restricted by the requirement that they be paid from earned surplus. In 2022, 2021 and 2020, our principal insurance subsidiary paid ordinary dividends totaling $ 13.0 million, $ 70.0 million and $ 110.0 million, respectively, to RLI Corp. Any dividend distribution in excess of the ordinary dividend limits is deemed extraordinary and requires prior approval from the IDOI. In 2021, our principal insurance subsidiary sought and received regulatory approval prior to the payment of extraordinary dividends totaling $ 110.0 million. No extraordinary dividends were paid in 2022 or 2020. As of December 31, 2022, $ 136.9 million of the net assets of our principal insurance subsidiary are not restricted and could be distributed to RLI Corp. as ordinary dividends. Because the limitations are based upon a rolling 12-month period, the amount and impact of these restrictions vary over time. In addition to restrictions from our principal subsidiary’s insurance regulator, we also consider internal models and how capital adequacy is defined by our rating agencies in determining amounts available for distribution. ​ 10. COMMITMENTS AND CONTINGENT LIABILITIES ​ COMMITMENTS ​ As of December 31, 2022, we had $ 13.5 million of unfunded commitments related to our investments in private funds, low-income housing tax credit investments and equity method investees. See note 2 for more information on our investments in private funds and low-income housing tax credits. ​ LITIGATION ​ We are party to numerous claims, loss and litigation matters that arise in the normal course of our business. Many of such claims, loss or litigation matters involve claims under policies that we underwrite as an insurer. We believe that the resolution of these claims and losses is not reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows. From time to time, we are also involved in various other legal proceedings and litigation unrelated to our insurance business that arise in the ordinary course of business operations. Management believes that any liabilities that may arise as a result of these legal matters is not reasonably likely to have a material adverse effect on our financial condition, results of operations or cash flows. ​ 11. LEASES ​ Right-of-use (ROU) assets are included in the other assets line item and lease liabilities are included in the other liabilities line item of the consolidated balance sheet. We determine if a contract contains a lease at inception and recognize operating lease ROU assets and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the 86 Table of Contents commencement date in determining the present value of future payments. Lease agreements may include options to extend or terminate. The options are exercised at our discretion and are included in operating lease liabilities if it is reasonably certain the option will be exercised. Lease agreements have lease and non-lease components, which are accounted for as a single lease component. Operating lease cost for future minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease cost is expensed in the period in which the obligation is incurred. Sublease income is recognized on a straight-line basis over the sublease term. ​ The components of lease expense and other lease information as of and during the years ended December 31, 2022, 2021 and 2020 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Operating lease cost ​ $ 4,957 ​ $ 5,131 ​ $ 5,504 Variable lease cost ​ ​ 1,423 ​ ​ 1,433 ​ ​ 1,346 Sublease income ​ ​ ( 555 ) ​ ​ ( 508 ) ​ ​ ( 262 ) Total lease cost ​ $ 5,825 ​ $ 6,056 ​ $ 6,588 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for amounts included in measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows from operating leases ​ $ 5,435 ​ $ 5,738 ​ $ 5,963 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ROU assets obtained in exchange for new operating lease liabilities ​ $ 2,694 ​ $ 4,828 ​ $ 81 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reduction to ROU assets resulting from reduction to lease liabilities ​ $ 2 ​ $ 1,042 ​ $ 18 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other non-cash reductions to ROU assets ​ $ 73 ​ $ 48 ​ $ 1,192 ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 ​ Operating lease ROU assets ​ $ 12,766 ​ $ 14,765 ​ Operating lease liabilities ​ $ 14,499 ​ $ 16,905 ​ Weighted-average remaining lease term - operating leases ​ ​ 4.21 years ​ 4.52 years Weighted-average discount rate - operating leases ​ ​ 2.11 % ​ 2.02 % ​ Future minimum lease payments under non-cancellable leases as of December 31, 2022 were as follows: ​ ​ ​ ​ ​ (in thousands) 2022 2023 ​ $ 5,578 2024 ​ ​ 3,628 2025 ​ ​ 2,216 2026 ​ ​ 1,311 2027 ​ ​ 826 Thereafter ​ ​ 1,587 Total future minimum lease payments ​ $ 15,146 Less imputed interest ​ ​ ( 647 ) Total operating lease liability ​ $ 14,499 ​ ​ 12. OPERATING SEGMENT INFORMATION ​ The segments of our insurance operations include casualty, property and surety. The casualty portion of our business consists largely of commercial excess, personal umbrella, general liability, transportation and executive products coverages, as well as package business and other specialty coverages, such as professional liability and workers’ compensation for office-based professionals. We also assume a limited amount of hard-to-place risks through a quota share reinsurance agreement. The casualty business is subject to the risk of estimating losses and related loss reserves because the ultimate settlement of a casualty claim may take several years to fully develop. The casualty segment is also subject to inflation risk and may be affected by evolving legislation and court decisions that define the extent of coverage and the amount of compensation due for injuries or losses. ​ Our property segment is comprised primarily of commercial fire, earthquake, difference in conditions and marine coverages. We also offer select personal lines policies, including homeowners’ coverages. Property insurance results are subject to the variability introduced by perils such as earthquakes, fires and hurricanes. Our major catastrophe exposure is to losses caused by earthquakes, 87 Table of Contents primarily on the West Coast, and windstorms to commercial properties throughout the Gulf and East Coast, as well as to homes we insure in Hawaii. We limit our net aggregate exposure to a catastrophic event by minimizing the total policy limits written in a particular region, purchasing reinsurance and maintaining policy terms and conditions throughout insurance cycles. We also use computer-assisted modeling techniques to provide estimates that help the Company carefully manage the concentration of risks exposed to catastrophic events. ​ The surety segment specializes in writing small to medium-sized contract surety coverages, including payment and performance bonds. We offer a variety of commercial surety bonds for medium to large-sized businesses across a broad spectrum of industries, including the financial, healthcare as well as on and offshore energy, petrochemical and refining industries. We also offer miscellaneous bonds including license and permit, notary and court bonds. Often, our surety coverages involve a statutory requirement for bonds. While these bonds typically maintain a relatively low loss ratio, losses may fluctuate due to adverse economic conditions affecting the financial viability of our insureds. The contract surety product guarantees the construction work of a commercial contractor for a specific project. Generally, losses occur due to the deterioration of a contractor’s financial condition. This line has historically produced marginally higher loss ratios than other surety lines during economic downturns. ​ Net investment income consists of the interest and dividend income streams from our investments in fixed income and equity securities. Interest and general corporate expenses include the cost of debt, other director and shareholder relations costs and other compensation-related expenses incurred for the benefit of the corporation, but not attributable to the operations of our insurance segments. Investee earnings represent our share in Maui Jim and Prime earnings. We owned 40 percent of Maui Jim, a privately held company which operates in the sunglass and optical goods industries, which we sold in the third quarter of 2022. See note 13 for more information on the sale. Our investment in Maui Jim was carried at the holding company, as it was unrelated to our core insurance operations. Additionally, we own 23 percent of Prime Holdings Insurance Services, Inc., a privately held insurance company which specializes in hard-to-place risks. ​ The following table summarizes our segment data based on the internal structure and reporting of information as it is used by management. The net earnings of each segment are before taxes and include revenues (if applicable), direct product or segment costs (such as commissions and claims costs), as well as allocated costs from various support departments. Assets are not managed at the segment level and therefore are not allocated to segments. ​ REVENUES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Casualty ​ $ 711,832 ​ $ 633,639 ​ $ 569,521 Property ​ ​ 307,886 ​ ​ 231,837 ​ ​ 183,720 Surety ​ ​ 124,718 ​ ​ 115,427 ​ ​ 112,506 Net premiums earned ​ $ 1,144,436 ​ $ 980,903 ​ $ 865,747 Net investment income ​ ​ 86,078 ​ ​ 68,862 ​ ​ 67,893 Net realized gains ​ ​ 588,515 ​ ​ 64,222 ​ ​ 17,885 Net unrealized gains (losses) on equity securities ​ ​ ( 121,037 ) ​ ​ 65,258 ​ ​ 32,101 Total ​ $ 1,697,992 ​ $ 1,179,245 ​ $ 983,626 ​ 88 Table of Contents INSURANCE EXPENSES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Loss and settlement expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty ​ $ 381,436 ​ $ 311,627 ​ $ 322,099 Property ​ ​ 120,745 ​ ​ 129,924 ​ ​ 111,356 Surety ​ ​ 12,195 ​ ​ 15,051 ​ ​ 9,429 Total loss and settlement expenses ​ $ 514,376 ​ $ 456,602 ​ $ 442,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Policy acquisition costs: ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty ​ $ 204,397 ​ $ 179,354 ​ $ 162,058 Property ​ ​ 95,203 ​ ​ 72,008 ​ ​ 59,926 Surety ​ ​ 70,032 ​ ​ 66,106 ​ ​ 64,454 Total policy acquisition costs ​ $ 369,632 ​ $ 317,468 ​ $ 286,438 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other insurance expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Casualty ​ $ 52,210 ​ $ 47,139 ​ $ 40,937 Property ​ ​ 19,416 ​ ​ 18,605 ​ ​ 15,620 Surety ​ ​ 10,586 ​ ​ 11,163 ​ ​ 10,271 Total other insurance expenses ​ $ 82,212 ​ $ 76,907 ​ $ 66,828 Total ​ $ 966,220 ​ $ 850,977 ​ $ 796,150 ​ NET EARNINGS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2022 2021 2020 Casualty ​ $ 73,789 ​ $ 95,519 ​ $ 44,427 Property ​ ​ 72,522 ​ ​ 11,300 ​ ​ ( 3,182 ) Surety ​ ​ 31,905 ​ ​ 23,107 ​ ​ 28,352 Net underwriting income ​ $ 178,216 ​ $ 129,926 ​ $ 69,597 Net investment income ​ ​ 86,078 ​ ​ 68,862 ​ ​ 67,893 Net realized gains ​ ​ 588,515 ​ ​ 64,222 ​ ​ 17,885 Net unrealized gains (losses) on equity securities ​ ​ ( 121,037 ) ​ ​ 65,258 ​ ​ 32,101 Interest on debt ​ ​ ( 8,047 ) ​ ​ ( 7,677 ) ​ ​ ( 7,603 ) General corporate expense ​ ​ ( 12,900 ) ​ ​ ( 13,330 ) ​ ​ ( 10,265 ) Equity in earnings of unconsolidated investees ​ ​ 9,853 ​ ​ 37,060 ​ ​ 20,233 Total earnings before incomes taxes ​ $ 720,678 ​ $ 344,321 ​ $ 189,841 Income tax expense ​ ​ 137,267 ​ ​ 64,967 ​ ​ 32,750 Net earnings ​ $ 583,411 ​ $ 279,354 ​ $ 157,091 ​ 89 Table of Contents The following table further summarizes revenues by major product type within each segment: ​ NET PREMIUMS EARNED ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, (in thousands) 2022 2021 2020 CASUALTY ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial excess and personal umbrella ​ $ 253,921 ​ $ 219,437 ​ $ 178,214 General liability ​ ​ 100,374 ​ ​ 90,853 ​ ​ 91,653 Commercial transportation ​ ​ 96,992 ​ ​ 83,352 ​ ​ 64,624 Professional services ​ ​ 95,187 ​ ​ 88,855 ​ ​ 85,196 Small commercial ​ ​ 67,673 ​ ​ 64,660 ​ ​ 63,357 Executive products ​ ​ 26,606 ​ ​ 21,873 ​ ​ 26,509 Other casualty ​ ​ 71,079 ​ ​ 64,609 ​ ​ 59,968 Total ​ $ 711,832 ​ $ 633,639 ​ $ 569,521 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ PROPERTY ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial property ​ $ 163,078 ​ $ 107,941 ​ $ 79,406 Marine ​ ​ 113,208 ​ ​ 97,745 ​ ​ 81,852 Other property ​ ​ 31,600 ​ ​ 26,151 ​ ​ 22,462 Total ​ $ 307,886 ​ $ 231,837 ​ $ 183,720 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SURETY ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 47,652 ​ $ 43,738 ​ $ 42,872 Miscellaneous ​ ​ 45,826 ​ ​ 43,982 ​ ​ 42,292 Contract ​ ​ 31,240 ​ ​ 27,707 ​ ​ 27,342 Total ​ $ 124,718 ​ $ 115,427 ​ $ 112,506 Grand total ​ $ 1,144,436 ​ $ 980,903 ​ $ 865,747 ​ ​ 13. ACQUISITONS AND DISPOSITIONS ​ On September 30, 2022, RLI Corp. completed the sale of its equity method investment in Maui Jim to Kering Eyewear for cash proceeds of $ 686.6 million. The sale was part of a larger transaction whereby Kering Eyewear acquired all of the shares of common stock of Maui Jim, consistent with our prior commitments under the terms of a shareholders agreement between RLI and the majority owner of Maui Jim. We recognized a net realized gain of $ 571.0 million as a result of the sale, which was recorded in the net realized gain line item of the statement of earnings. In addition, we have the right to receive additional consideration based on customary post-closing working capital and other adjustments. Any gain related to the additional consideration will be recognized when received. ​ ​ ​ ​ 90 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the shareholders and the Board of Directors of RLI Corp. ​ Opinions on the Financial Statements and Internal Control over Financial Reporting ​ We have audited the accompanying consolidated balance sheets of RLI Corp. and subsidiaries (the &quot;Company&quot;) as of December 31, 2022 and 2021, the related consolidated statements of earnings and comprehensive earnings, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the &quot;financial statements&quot;). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ​ In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the results of its operations and its cash flow for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. ​ Basis for Opinions ​ The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. ​ Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. ​ Definition and Limitations of Internal Control over Financial Reporting ​ A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ 91 Table of Contents Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. ​ Unpaid losses and settlement expenses — Refer to Notes 1 and 6 to the financial statements ​ Critical Audit Matter Description ​ The liability for unpaid losses and settlement expenses represents estimates of amounts needed to pay reported and unreported claims and related expenses. The estimates are based on certain actuarial and other assumptions related to the ultimate cost to settle such claims. ​ We identified the assessment of the Company’s estimate of unpaid losses and settlement expenses as a critical audit matter. Specialized actuarial skills and knowledge were required to assess the methodologies and assumptions used to estimate unpaid losses and settlement expenses. The assumptions used by the Company to estimate unpaid losses and settlement expenses included expected loss ratios, loss development patterns, qualitative factors, and the weighting of actuarial methodologies. These assumptions included a range of potential inputs and changes to these assumptions could affect the estimate of unpaid losses and settlement expenses recorded by the Company. ​ How the Critical Audit Matter Was Addressed in the Audit ​ Our audit procedures related to unpaid losses and settlement expenses included the following, among others: ​ ● We tested the effectiveness of controls related to unpaid losses and settlement expenses, including those controls over the inputs, methods, and assumptions used in the Company’s estimation processes. ​ ● We tested the underlying data, including historical claims, that served as the basis for the actuarial analyses, to test that the inputs to the actuarial estimates were accurate and complete. ​ ● With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by the Company to estimate the unpaid losses and settlement expenses by: ​ o Developing a range of independent estimates of unpaid losses and settlement expenses for certain lines of business and comparing our estimates to the recorded reserves. ​ o We compared our prior year estimates of expected incurred losses to actual experience during the current year to identify potential management bias in the determination of the unpaid losses and settlement expenses. ​ ​ /s/ Deloitte & Touche LLP ​ Chicago, Illinois February 24, 2023 ​ We have served as the Company’s auditor since 2020. ​ ​ 92 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ​ There were no changes in accountants or disagreements with accountants on any matters of accounting principles or practices or financial statement disclosure. ​